Union Pacific Reports Second Quarter 2023 Results

Earnings per diluted share of $2.57
Operating revenue down 5%
Reportable derailment rate improved 9%

OMAHA, Neb., July 26, 2023 /PRNewswire/ — Union Pacific Corporation (NYSE: UNP) today reported 2023 second quarter net income of $1.6 billion, or $2.57 per diluted share. These results include the previously disclosed $67 million labor expense and $73 million income tax benefit. This compares to 2022 second quarter net income of $1.8 billion, or $2.93 per diluted share.

“The results this quarter were impacted by softening consumer markets, inflation, a one-time labor expense, and increased workforce levels,” said Lance Fritz, Union Pacific chairman, president, and chief executive officer. “The entire team remains focused on maintaining a solid service product while taking steps to recapture lost productivity and lay a strong foundation for sustainable future success. We took actions throughout the second quarter to drive greater network fluidity and provide our customers with better service. We finished the quarter with resource levels more aligned with demand, as we stored excess locomotives, improved recrew rates, and reduced borrowed-out employees.”

Financial Results: Core Pricing Gains Offset by Reduced Fuel Surcharge Revenue, Lower Volumes, and an Unfavorable Business Mix Second Quarter 2023 Compared to Second Quarter 2022

Operating revenue of $6 billion was down 5% driven by reduced fuel surcharge revenue, lower volumes, and an unfavorable business mix, partially offset by core pricing gains.
Business volumes, as measured by total revenue carloads, were down 2%.
Operating ratio was 63.0%, up 280 basis points. This includes an unfavorable 110 basis point impact from a one-time labor agreement payment and a 200 basis point benefit from falling fuel prices.
Operating income of $2.2 billion declined 12%.
The company repurchased 600,000 shares in second quarter 2023 at an aggregate cost of $120 million.

Operating Performance: Improved Service Performance Supported by Larger Crew Base Second Quarter 2023 Compared to Second Quarter 2022

Quarterly freight car velocity was 202 daily miles per car, an 8% improvement.
Quarterly locomotive productivity was 126 gross ton-miles (GTMs) per horsepower day, a 2% improvement.
Average maximum train length was 9,316 feet, a 1% decline.
Quarterly workforce productivity decreased 5% to 983 car miles per employee.
Fuel consumption rate of 1.086, measured in gallons of fuel per thousand GTMs, deteriorated 1%.
Union Pacific’s first half reportable derailment rate improved 9% to 2.45 per million train miles compared to 2.68 for 2022.

2023 Outlook Pressured by Challenging Demand and Cost Environment

Consumer-related volumes likely drive full year volume expectations below Industrial Production (Current forecast: +0.1%)
Pricing dollars in excess of inflation dollars
Forecasting $50 to $70 million in labor expense from new agreements in second half of 2023
2023 Capital Allocation:

Capital plan of $3.6 billion
Maintain dividend of $1.30/quarter
No further 2023 share repurchases planned

Leadership and Board Updates

In separate press releases issued today, the Company appointed Jim Vena as chief executive officer, named Beth Whited as president, elected Mike McCarthy as chairman and appointed two new independent directors, Doyle Simons, and John Wiehoff, to the Board.

Second Quarter 2023 Earnings Conference Call

Union Pacific will webcast its second quarter 2023 earnings release presentation live at www.up.com/investor and via teleconference on Wednesday, July 26, 2023, at 8:45 a.m. Eastern Time. 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.

Supplemental financial information is attached.

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 potential impacts of public health crises, including pandemics, epidemics and the outbreak of other contagious diseases, such as the coronavirus and its variant strains (COVID); the Russia-Ukraine conflict and its impact on our business operations, financial results, liquidity, and financial position, and on the world economy (including customers, employees, and supply chains), including as a result of fluctuations in volume and carloadings; expectations as to general macroeconomic conditions, including slowdowns and recessions, domestically or internationally, and future volatility in interest rates and fuel prices; closing of customer manufacturing, distribution, or production facilities; expectations as to operational or service improvements; expectations as to hiring challenges; availability of employees; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications; expectations as to cost savings, revenue growth, and earnings; the time by which goals, targets, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as to business, financial, and operational results, future economic performance, and planned capital investments ; proposed new products and services; estimates of costs relating to environmental remediation and restoration; estimates and expectations regarding tax matters; expectations that claims, litigation, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, cyberattacks or other matters. 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 2022, which was filed with the SEC on February 10, 2023. 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 the Company’s 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 COMPANIESCondensed Consolidated Statements of Income (unaudited) 

Millions, Except Per Share Amounts and

2nd Quarter

Year-to-Date

Percentages, For the Periods Ended June 30,

2023

2022

%

2023

2022

%

Operating Revenues

Freight revenues

$

5,569

$

5,842

(5)

%

$

11,225

$

11,282

(1)

%

Other revenues

394

427

(8)

794

847

(6)

Total operating revenues

5,963

6,269

(5)

12,019

12,129

(1)

Operating Expenses

Compensation and benefits

1,269

1,092

16

2,448

2,193

12

Fuel

664

940

(29)

1,430

1,654

(14)

Purchased services and materials

650

622

5

1,303

1,183

10

Depreciation

577

559

3

1,149

1,114

3

Equipment and other rents

248

230

8

483

445

9

Other

351

331

6

708

668

6

Total operating expenses

3,759

3,774

7,521

7,257

4

Operating Income

2,204

2,495

(12)

4,498

4,872

(8)

Other income, net

93

163

(43)

277

210

32

Interest expense

(339)

(316)

7

(675)

(623)

8

Income before income taxes

1,958

2,342

(16)

4,100

4,459

(8)

Income tax expense

(389)

(507)

(23)

(901)

(994)

(9)

Net Income

$

1,569

$

1,835

(14)

%

$

3,199

$

3,465

(8)

%

Share and Per Share

Earnings per share – basic

$

2.58

$

2.93

(12)

%

$

5.25

$

5.51

(5)

%

Earnings per share – diluted

$

2.57

$

2.93

(12)

$

5.24

$

5.50

(5)

Weighted average number of shares – basic

608.7

625.6

(3)

609.6

628.9

(3)

Weighted average number of shares – diluted

609.5

626.8

(3)

610.5

630.2

(3)

Dividends declared per share

$

1.30

$

1.30

$

2.60

$

2.48

5

Operating Ratio

63.0

%

60.2

%

2.8

pts

62.6

%

59.8

%

2.8

pts

Effective Tax Rate

19.9

%

21.6

%

(1.7)

pts

22.0

%

22.3

%

(0.3)

pts

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESFreight Revenues Statistics (unaudited)

2nd Quarter

Year-to-Date

For the Periods Ended June 30,

2023

2022

%

2023

2022

%

Freight Revenues (Millions)

Grain & grain products

$

890

$

867

3

%

$

1,833

$

1,744

5

%

Fertilizer

183

183

369

363

2

Food & refrigerated

255

271

(6)

518

538

(4)

Coal & renewables

429

492

(13)

934

1,000

(7)

Bulk

1,757

1,813

(3)

3,654

3,645

Industrial chemicals & plastics

545

557

(2)

1,081

1,077

Metals & minerals

562

562

1,098

1,047

5

Forest products

347

386

(10)

679

750

(9)

Energy & specialized markets

632

586

8

1,245

1,138

9

Industrial

2,086

2,091

4,103

4,012

2

Automotive

625

561

11

1,212

1,062

14

Intermodal

1,101

1,377

(20)

2,256

2,563

(12)

Premium

1,726

1,938

(11)

3,468

3,625

(4)

Total

$

5,569

$

5,842

(5)

%

$

11,225

11,282

(1)

%

Revenue Carloads (Thousands)

Grain & grain products

197

195

1

%

399

400

%

Fertilizer

48

53

(9)

93

98

(5)

Food & refrigerated

44

48

(8)

88

95

(7)

Coal & renewables

203

202

419

427

(2)

Bulk

492

498

(1)

999

1,020

(2)

Industrial chemicals & plastics

164

161

2

321

321

Metals & minerals

210

205

2

398

387

3

Forest products

55

63

(13)

107

127

(16)

Energy & specialized markets

144

141

2

283

272

4

Industrial

573

570

1

1,109

1,107

Automotive

213

192

11

413

382

8

Intermodal [a]

749

805

(7)

1,483

1,562

(5)

Premium

962

997

(4)

1,896

1,944

(2)

Total

2,027

2,065

(2)

%

4,004

4,071

(2)

%

Average Revenue per Car

Grain & grain products

$

4,527

$

4,451

2

%

$

4,598

$

4,357

6

%

Fertilizer

3,830

3,437

11

3,978

3,701

7

Food & refrigerated

5,740

5,770

(1)

5,851

5,703

3

Coal & renewables

2,107

2,426

(13)

2,228

2,340

(5)

Bulk

3,568

3,642

(2)

3,657

3,574

2

Industrial chemicals & plastics

3,336

3,455

(3)

3,368

3,351

1

Metals & minerals

2,677

2,755

(3)

2,760

2,710

2

Forest products

6,337

6,128

3

6,360

5,898

8

Energy & specialized markets

4,388

4,161

5

4,398

4,189

5

Industrial

3,646

3,674

(1)

3,701

3,626

2

Automotive

2,928

2,919

2,935

2,780

6

Intermodal [a]

1,471

1,711

(14)

1,521

1,641

(7)

Premium

1,794

1,943

(8)

1,829

1,864

(2)

Average

$

2,748

$

2,830

(3)

%

$

2,804

$

2,771

1

%

[a]

For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESCondensed Consolidated Statements of Financial Position (unaudited)

Jun. 30,

Dec. 31,

Millions, Except Percentages

2023

2022

Assets

Cash and cash equivalents

$

830

$

973

Short-term investments

46

Other current assets

2,922

2,933

Investments

2,524

2,375

Properties, net

56,641

56,038

Operating lease assets

1,651

1,672

Other assets

1,465

1,412

Total assets

$

66,033

$

65,449

Liabilities and Common Shareholders’ Equity

Debt due within one year

$

1,745

$

1,678

Other current liabilities

3,504

3,842

Debt due after one year

31,557

31,648

Operating lease liabilities

1,217

1,300

Deferred income taxes

13,069

13,033

Other long-term liabilities

1,747

1,785

Total liabilities

52,839

53,286

Total common shareholders’ equity

13,194

12,163

Total liabilities and common shareholders’ equity

$

66,033

$

65,449

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESCondensed Consolidated Statements of Cash Flows (unaudited)

Year-to-Date

Millions, for the Periods Ended June 30,

2023

2022

Operating Activities

Net income

$

3,199

$

3,465

Depreciation

1,149

1,114

Deferred income taxes

36

93

Other – net

(526)

(505)

Cash provided by operating activities

3,858

4,167

Investing Activities

Capital investments*

(1,607)

(1,645)

Other – net

(67)

105

Cash used in investing activities

(1,674)

(1,540)

Financing Activities

Debt repaid

(1,664)

(1,664)

Debt issued

1,599

4,090

Dividends paid

(1,588)

(1,556)

Share repurchase programs

(705)

(3,473)

Net issued/(paid) of commercial paper

19

(151)

Other – net

11

(42)

Cash used in financing activities

(2,328)

(2,796)

Net change in cash, cash equivalents, and restricted cash

(144)

(169)

Cash, cash equivalents, and restricted cash at beginning of year

987

983

Cash, cash equivalents, and restricted cash at end of period

$

843

$

814

Free Cash Flow**

Cash provided by operating activities

$

3,858

$

4,167

Cash used in investing activities

(1,674)

(1,540)

Dividends paid

(1,588)

(1,556)

Free cash flow

$

596

$

1,071

*

Capital investments include locomotive and freight car early lease buyouts of $14 million in 2023 and $46 million in 2022.

**

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 COMPANIESOperating and Performance Statistics (unaudited)

2nd Quarter

Year-to-Date

For the Periods Ended June 30,

2023

2022

%

2023

2022

%

Operating/Performance Statistics

Freight car velocity (daily miles per car)*

202

187

8

%

199

192

4

%

Average train speed (miles per hour)*

24.1

23.6

2

24.1

23.9

1

Average terminal dwell time (hours)*

23.3

24.6

(5)

23.6

24.3

(3)

Locomotive productivity (GTMs per horsepower day)

126

123

2

125

126

(1)

Gross ton-miles (GTMs) (millions)

207,606

209,789

(1)

414,254

419,495

(1)

Train length (feet)

9,316

9,439

(1)

9,238

9,321

(1)

Intermodal car trip plan compliance (%)**

79

62

17

pts

76

67

9

pts

Manifest/Automotive car trip plan compliance (%)**

64

56

8

pts

63

59

4

pts

Workforce productivity (car miles per employee)

983

1,034

(5)

987

1,045

(6)

Total employees (average)

32,060

30,715

4

31,766

30,452

4

Locomotive Fuel Statistics

Average fuel price per gallon consumed

$

2.86

$

4.03

(29)

%

$

3.04

$

3.48

(13)

%

Fuel consumed in gallons (millions)

226

226

458

460

Fuel consumption rate***

1.086

1.076

1

1.105

1.096

1

Revenue Ton-Miles (Millions)

Grain & grain products

18,858

19,459

(3)

%

38,902

40,488

(4)

%

Fertilizer

2,953

3,115

(5)

6,089

6,266

(3)

Food & refrigerated

4,514

4,257

6

9,057

8,959

1

Coal & renewables

20,864

20,558

1

43,361

44,808

(3)

Bulk

47,189

47,389

97,409

100,521

(3)

Industrial chemicals & plastics

7,214

7,685

(6)

14,305

15,244

(6)

Metals & minerals

9,209

9,662

(5)

18,156

18,407

(1)

Forest products

5,815

6,694

(13)

11,364

13,319

(15)

Energy & specialized markets

9,817

9,105

8

19,316

18,171

6

Industrial

32,055

33,146

(3)

63,141

65,141

(3)

Automotive

4,687

4,140

13

9,087

8,287

10

Intermodal

17,567

18,710

(6)

35,687

36,628

(3)

Premium

22,254

22,850

(3)

44,774

44,915

Total

101,498

103,385

(2)

%

205,324

210,577

(2)

%

*

Surface Transportation Board (STB) reported performance measures.

**

Methodology used to report is not comparable with the reporting to the STB under docket number EP 770.

***

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

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESCondensed Consolidated Statements of Income (unaudited)

2023

Millions, Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

Year-to-Date

Operating Revenues

Freight revenues

$

5,656

$

5,569

$

11,225

Other revenues

400

394

794

Total operating revenues

6,056

5,963

12,019

Operating Expenses

Compensation and benefits

1,179

1,269

2,448

Fuel

766

664

1,430

Purchased services and materials

653

650

1,303

Depreciation

572

577

1,149

Equipment and other rents

235

248

483

Other

357

351

708

Total operating expenses

3,762

3,759

7,521

Operating Income

2,294

2,204

4,498

Other income, net

184

93

277

Interest expense

(336)

(339)

(675)

Income before income taxes

2,142

1,958

4,100

Income tax expense

(512)

(389)

(901)

Net Income

$

1,630

$

1,569

$

3,199

Share and Per Share

Earnings per share – basic

$

2.67

$

2.58

$

5.25

Earnings per share – diluted

$

2.67

$

2.57

$

5.24

Weighted average number of shares – basic

610.6

608.7

609.6

Weighted average number of shares – diluted

611.5

609.5

610.5

Dividends declared per share

$

1.30

$

1.30

$

2.60

Operating Ratio

62.1

%

63.0

%

62.6

%

Effective Tax Rate

23.9

%

19.9

%

22.0

%

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESFreight Revenues Statistics (unaudited)

2023

1st Qtr

2nd Qtr

Year-to-Date

Freight Revenues (Millions)

Grain & grain products

$

943

$

890

$

1,833

Fertilizer

186

183

369

Food & refrigerated

263

255

518

Coal & renewables

505

429

934

Bulk

1,897

1,757

3,654

Industrial chemicals & plastics

536

545

1,081

Metals & minerals

536

562

1,098

Forest products

332

347

679

Energy & specialized markets

613

632

1,245

Industrial

2,017

2,086

4,103

Automotive

587

625

1,212

Intermodal

1,155

1,101

2,256

Premium

1,742

1,726

3,468

Total

$

5,656

$

5,569

$

11,225

Revenue Carloads (Thousands)

Grain & grain products

202

197

399

Fertilizer

45

48

93

Food & refrigerated

44

44

88

Coal & renewables

216

203

419

Bulk

507

492

999

Industrial chemicals & plastics

157

164

321

Metals & minerals

188

210

398

Forest products

52

55

107

Energy & specialized markets

139

144

283

Industrial

536

573

1,109

Automotive

200

213

413

Intermodal [a]

734

749

1,483

Premium

934

962

1,896

Total

1,977

2,027

4,004

Average Revenue per Car

Grain & grain products

$

4,668

$

4,527

$

4,598

Fertilizer

4,135

3,830

3,978

Food & refrigerated

5,963

5,740

5,851

Coal & renewables

2,341

2,107

2,228

Bulk

3,743

3,568

3,657

Industrial chemicals & plastics

3,402

3,336

3,368

Metals & minerals

2,853

2,677

2,760

Forest products

6,384

6,337

6,360

Energy & specialized markets

4,408

4,388

4,398

Industrial

3,760

3,646

3,701

Automotive

2,944

2,928

2,935

Intermodal [a]

1,573

1,471

1,521

Premium

1,866

1,794

1,829

Average

$

2,861

$

2,748

$

2,804

[a]

For intermodal shipments each container or trailer equals one carload.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIESNon-GAAP Measures Reconciliation to GAAP 

Debt / Net Income

Millions, Except Ratios

Jun. 30,

Dec. 31,

for the Trailing Twelve Months Ended [a]

2023

2022

Debt

$

33,302

$

33,326

Net income

6,732

6,998

Debt / net income

4.9

4.8

Adjusted Debt / Adjusted EBITDA*

Millions, Except Ratios

Jun. 30,

Dec. 31,

for the Trailing Twelve Months Ended [a]

2023

2022

Net income

$

6,732

$

6,998

Add:

Income tax expense

1,981

2,074

Depreciation

2,281

2,246

Interest expense

1,323

1,271

EBITDA

$

12,317

$

12,589

Adjustments:

Other income, net

(493)

(426)

Interest on operating lease liabilities [b]

53

54

Adjusted EBITDA

$

11,877

$

12,217

Debt

$

33,302

$

33,326

Operating lease liabilities

1,563

1,631

Unfunded pension and OPEB, net of tax cost of $0 and $0

Adjusted debt

$

34,865

$

34,957

Adjusted debt / Adjusted EBITDA

2.9

2.9

[a]

The trailing twelve months income statement information ended June 30, 2023, is recalculated by taking the twelve months ended December 31, 2022, subtracting the six months ended June 30, 2022, and adding the six months ended June 30, 2023.

[b]

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.

*

Total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB (other postretirement benefit) obligations 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, and adjustments for other income and interest on operating lease liabilities) is considered 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, other information provided in accordance with GAAP. The most comparable GAAP measure is debt to net income ratio. The tables above provide a reconciliation from net income to adjusted EBITDA, debt to adjusted debt, and debt to net income to adjusted debt to adjusted EBITDA. At June 30, 2023, and December 31, 2022, the incremental borrowing rate on operating lease liabilities was 3.4% and 3.3%, respectively.

SOURCE Union Pacific Corporation


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