Union Pacific Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

Union Pacific Corporation (NYSE: UNP) reported a fourth quarter 2020 net income of $1.4 billion, or $2.05 per diluted share. Adjusted for a $278 million impairment charge, net income was $1.6 billion, reflecting a growth from $1.4 billion in Q4 2019. Operating revenue fell 1% to $5.1 billion, despite a 3% increase in total revenue carloads. The company improved its operating ratio to a record 55.6%. For 2020, net income totaled $5.3 billion, down from $5.9 billion in 2019, with a 10% decline in freight revenue. Union Pacific repurchased 22 million shares for $3.7 billion.

Positive

• Adjusted fourth quarter net income rose to $1.6 billion from $1.4 billion in Q4 2019.
• Record operating ratio of 55.6%, a 410 basis point improvement year-over-year.
• Freight car velocity improved by 1% to 223 daily miles per car.
• Locomotive productivity improved by 13% compared to Q4 2019.
• Average maximum train length increased by 12% compared to Q4 2019.
• Repurchased 3.8 million shares for $749 million in Q4.

Negative

• Operating revenue decreased by 1% year-over-year.
• Freight revenue fell by 10% for the full year 2020 compared to 2019.
• Carloadings decreased by 7% from 2019 due to COVID-19 economic impacts.

OMAHA, Neb., Jan. 21, 2021 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2020 fourth quarter net income of $1.4 billion, or $2.05 per diluted share. These results include a previously announced $278 million pre-tax, non-cash impairment charge.  Excluding the effects of that charge, adjusted fourth quarter net income was $1.6 billion, or $2.36 per diluted share. This compares to $1.4 billion, or $2.02 per diluted share, in the fourth quarter 2019.

"These outstanding results demonstrate the true potential of our franchise as we leveraged all three profitability drivers simultaneously – volume growth, productivity, and pricing – to produce record fourth quarter results," said Lance Fritz, Union Pacific chairman, president, and chief executive officer. "The women and men of Union Pacific persevered throughout the pandemic to provide our customers with a safe, reliable, and consistent service product."

Fourth Quarter Summary
Operating revenue of $5.1 billion was down 1% in fourth quarter 2020 compared to fourth quarter 2019. Fourth quarter business volumes, as measured by total revenue carloads, increased 3% compared to 2019. Premium volumes increased compared to 2019, while bulk was flat and industrial declined. In addition:

• Quarterly freight revenue declined 1% compared to fourth quarter 2019, as volume growth and core pricing gains were more than offset by decreased fuel surcharge revenue and a less favorable business mix.
• Union Pacific's 61.0% reported operating ratio when adjusted for the impairment charge is an all-time quarterly record of 55.6%, 410 basis points lower than fourth quarter 2019. Lower fuel prices positively impacted the operating ratio by 90 basis points.
• Quarterly freight car velocity was 223 daily miles per car, a 1% improvement compared to fourth quarter 2019.
• Quarterly locomotive productivity was 142 gross ton-miles per horsepower day, a 13% improvement compared to fourth quarter 2019.
• Quarterly workforce productivity was 1,032 car miles per employee, an 18% improvement compared to fourth quarter 2019.
• Average maximum train length was 9,154 feet, a 12% increase compared to fourth quarter 2019.
• The Company repurchased 3.8 million shares in fourth quarter 2020 at an aggregate cost of $749 million.

Summary of Fourth Quarter Freight Revenues

• Bulk up 1%
• Industrial down 7%
• Premium up 5%

2020 Full Year Summary
For the full year 2020, Union Pacific reported net income of $5.3 billion or $7.88 per diluted share.  Excluding the effects of the $278 million pre-tax, non-cash impairment charge, adjusted full year net income was $5.6 billion, or $8.19 per diluted share. This compares to $5.9 billion, or $8.38 per diluted share, in 2019.

Operating revenue totaled $19.5 billion compared to $21.7 billion in 2019.  Operating income totaled $7.8 billion, which decreased compared to 2019.  In addition:

• Freight revenue totaled $18.3 billion, a 10% decrease compared to 2019.  Carloadings were down 7% versus 2019, as all three business teams – bulk, industrial, and premium – declined due to the economic conditions brought on by the COVID-19 pandemic.
• Union Pacific's full year 59.9% reported operating ratio when adjusted for the impairment charge is a best ever 58.5%, 210 basis points lower than 2019. Lower fuel prices positively impacted the operating ratio by 130 basis points.
• Union Pacific's reportable personal injury rate of 0.90 incidents per 200,000 employee hours was flat compared to full year 2019. The Company's FRA reportable rail equipment incident rate of 3.54 per million train miles improved 17% compared to full year 2019.
• Through continued implementation of precision scheduled railroading principles, Union Pacific made year-over-year improvements in its key operating performance indicators:
• Freight car velocity – 6% improvement
• Average terminal dwell – 8% improvement
• Locomotive productivity – 14% improvement
• Workforce productivity – 11% improvement
• Train length – 14% improvement
• Intermodal car trip plan compliance – 6 pt. improvement
• Manifest/Autos car trip plan compliance – 6 pt. improvement
• Fuel consumption rate, measured in gallons of fuel per thousand gross ton miles, improved 2% in 2020 compared to 2019.
• Union Pacific's capital program in 2020 totaled $2.8 billion.
• Union Pacific repurchased 22 million shares in 2020 at an aggregate cost of $3.7 billion.

2021 Outlook
"While the economic outlook for 2021 remains uncertain, we will build off our solid 2020 performance to produce continued strong productivity through operational excellence.  We expect our enhanced service product will support both solid core pricing gains while also increasing our share of the freight transportation market," Fritz said. "Our confidence in our ability to drive value for all of our stakeholders has never been greater."

Fourth Quarter 2020 Earnings Conference Call
Union Pacific will webcast its fourth quarter 2020 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, January 21, 2021, 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 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 July 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. 

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,	2020		2019		%			2020		2019		%
Operating Revenues
Freight revenues	$	4,803	$	4,851	(1)	%		$	18,251	$	20,243	(10)	%
Other		338		361	(6)				1,282		1,465	(12)
Total operating revenues		5,141		5,212	(1)				19,533		21,708	(10)
Operating Expenses
Compensation and benefits		1,021		1,049	(3)				3,993		4,533	(12)
Depreciation		557		559	-				2,210		2,216	-
Purchased services and materials		492		531	(7)				1,962		2,254	(13)
Fuel		332		512	(35)				1,314		2,107	(38)
Equipment and other rents		220		230	(4)				875		984	(11)
Other		513		231	U				1,345		1,060	27
Total operating expenses		3,135		3,112	1				11,699		13,154	(11)
Operating Income		2,006		2,100	(4)				7,834		8,554	(8)
Other income		66		56	18				287		243	18
Interest expense		(279)		(278)	-				(1,141)		(1,050)	9
Income before income taxes		1,793		1,878	(5)				6,980		7,747	(10)
Income taxes		(413)		(475)	(13)				(1,631)		(1,828)	(11)
Net Income	$	1,380	$	1,403	(2)			$	5,349	$	5,919	(10)
Share and Per Share
Earnings per share - basic	$	2.05	$	2.03	1	%		$	7.90	$	8.41	(6)	%
Earnings per share - diluted	$	2.05	$	2.02	1			$	7.88	$	8.38	(6)
Weighted average number of shares - basic		672.2		692.2	(3)				677.3		703.5	(4)
Weighted average number of shares - diluted		674.1		694.9	(3)				679.1		706.1	(4)
Dividends declared per share	$	0.97	$	0.97	-			$	3.88	$	3.70	5
Operating Ratio		61.0%		59.7%	1.3	pts			59.9%		60.6%	(0.7)	pts
Effective Tax Rate		23.0%		25.3%	(2.3)				23.4%		23.6%	(0.2)

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Freight Revenues Statistics (unaudited)
	4th Quarter							Full Year
For the Periods Ended December 31,	2020		2019		%			2020		2019		%
Freight Revenues (Millions)
Grain & grain products	$	801	$	696	15	%		$	2,829	$	2,776	2	%
Fertilizer		161		161	-				660		653	1
Food & refrigerated		243		241	1				937		1,008	(7)
Coal & renewables		357		451	(21)				1,534		2,092	(27)
Bulk		1,562		1,549	1				5,960		6,529	(9)
Industrial chemicals & plastics		461		457	1				1,845		1,885	(2)
Metals & minerals		378		429	(12)				1,580		2,042	(23)
Forest products		307		282	9				1,160		1,160	-
Energy & specialized markets		515		626	(18)				2,037		2,385	(15)
Industrial		1,661		1,794	(7)				6,622		7,472	(11)
Automotive		486		507	(4)				1,680		2,123	(21)
Intermodal		1,094		1,001	9				3,989		4,119	(3)
Premium		1,580		1,508	5				5,669		6,242	(9)
Total	$	4,803	$	4,851	(1)	%		$	18,251	$	20,243	(10)	%
Revenue Carloads (Thousands)
Grain & grain products		216		180	20	%			745		708	5	%
Fertilizer		44		45	(2)				193		190	2
Food & refrigerated		48		45	7				185		192	(4)
Coal & renewables		190		226	(16)				797		997	(20)
Bulk		498		496	-				1,920		2,087	(8)
Industrial chemicals & plastics		148		148	-				587		611	(4)
Metals & minerals		154		165	(7)				646		744	(13)
Forest products		59		53	11				220		220	-
Energy & specialized markets		137		164	(16)				539		624	(14)
Industrial		498		530	(6)				1,992		2,199	(9)
Automotive		202		208	(3)				692		858	(19)
Intermodal [a]		853		759	12				3,149		3,202	(2)
Premium		1,055		967	9				3,841		4,060	(5)
Total		2,051		1,993	3	%			7,753		8,346	(7)	%
Average Revenue per Car
Grain & grain products	$	3,710	$	3,860	(4)	%		$	3,797	$	3,919	(3)	%
Fertilizer		3,647		3,636	-				3,427		3,448	(1)
Food & refrigerated		5,030		5,340	(6)				5,047		5,241	(4)
Coal & renewables		1,887		1,991	(5)				1,926		2,098	(8)
Bulk		3,139		3,121	1				3,104		3,128	(1)
Industrial chemicals & plastics		3,125		3,086	1				3,144		3,087	2
Metals & minerals		2,448		2,606	(6)				2,445		2,745	(11)
Forest products		5,184		5,313	(2)				5,269		5,264	-
Energy & specialized markets		3,747		3,818	(2)				3,780		3,821	(1)
Industrial		3,331		3,386	(2)				3,324		3,398	(2)
Automotive		2,399		2,441	(2)				2,427		2,474	(2)
Intermodal [a]		1,284		1,319	(3)				1,267		1,286	(1)
Premium		1,497		1,560	(4)				1,476		1,538	(4)
Average	$	2,341	$	2,435	(4)	%		$	2,354	$	2,425	(3)	%

[a]	For intermodal shipments, each 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	2020		2019
Assets
Cash and cash equivalents	$	1,799	$	831
Short-term investments		60		60
Other current assets		2,355		2,568
Investments		2,164		2,050
Net properties		54,161		53,916
Operating lease assets		1,610		1,812
Other assets		249		436
Total assets	$	62,398	$	61,673
Liabilities and Common Shareholders' Equity
Debt due within one year	$	1,069	$	1,257
Other current liabilities		3,104		3,094
Debt due after one year		25,660		23,943
Operating lease liabilities		1,283		1,471
Deferred income taxes		12,247		11,992
Other long-term liabilities		2,077		1,788
Total liabilities		45,440		43,545
Total common shareholders' equity		16,958		18,128
Total liabilities and common shareholders' equity	$	62,398	$	61,673
Return on Average Common Shareholders' Equity		30.5%		30.7%
Return on Invested Capital as Adjusted (ROIC)*		13.9%		15.0%

*	ROIC is a non-GAAP measure; however, management believes that it is an important measure in evaluating the efficiency and effectiveness of our long-term capital investments. See page 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,	2020		2019
Operating Activities
Net income	$	5,349	$	5,919
Depreciation		2,210		2,216
Deferred income taxes		340		566
Other - net		641		(92)
Cash provided by operating activities		8,540		8,609
Investing Activities
Capital investments*		(2,927)		(3,453)
Maturities of short-term investments		141		130
Purchases of short-term investments		(136)		(115)
Other - net		246		3
Cash used in investing activities		(2,676)		(3,435)
Financing Activities
Debt issued		4,004		3,986
Share repurchase programs		(3,705)		(5,804)
Dividends paid		(2,626)		(2,598)
Debt repaid		(2,053)		(817)
Debt exchange		(328)		(387)
Net issuance of commercial paper		(127)		(6)
Other - net		(67)		(20)
Cash used in financing activities		(4,902)		(5,646)
Net Change in Cash, Cash Equivalents, and Restricted Cash		962		(472)
Cash, cash equivalents, and restricted cash at beginning of year		856		1,328
Cash, Cash Equivalents, and Restricted Cash at End of Year	$	1,818	$	856
Free Cash Flow**
Cash provided by operating activities	$	8,540	$	8,609
Cash used in investing activities		(2,676)		(3,435)
Dividends paid		(2,626)		(2,598)
Free cash flow	$	3,238	$	2,576

*	Capital investments include locomotive and freight car early lease buyouts of $38 million in 2020 and $290 million in 2019.
**	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)
	4th Quarter						Full Year
For the Periods Ended December 31,	2020		2019	%			2020		2019	%
Operating/Performance Statistics
Freight car velocity (daily miles per car) [a]	223		220	1	%		221		209	6	%
Average train speed (miles per hour) [a] *	26.1		26.2	-			25.9		25.1	3
Average terminal dwell time (hours) [a] *	22.4		23.3	(4)			22.7		24.8	(8)
Locomotive productivity (GTMs per horsepower day)	142		126	13			137		120	14
Gross ton-miles (GTMs) (millions)	202,844		200,801	1			771,765		846,616	(9)
Train length (feet)	9,154		8,185	12			8,798		7,747	14
Intermodal car trip plan compliance (%)	83		84	(1)	pts		81		75	6	pts
Manifest/Automotive car trip plan compliance (%)	74		71	3	pts		71		65	6	pts
Workforce productivity (car miles per employee)	1,032		874	18			947		857	11
Total employees (average)	29,753		34,563	(14)			30,960		37,483	(17)
Locomotive Fuel Statistics
Average fuel price per gallon consumed	$1.45		$ 2.16	(33)	%		$ 1.50		$ 2.13	(30)	%
Fuel consumed in gallons (millions)	222		228	(3)			849		953	(11)
Fuel consumption rate**	1.092		1.140	(4)			1.100		1.126	(2)
Revenue Ton-Miles (Millions)
Grain & grain products	21,591		16,298	32	%		71,979		66,264	9	%
Fertilizer	2,932		2,809	4			12,024		11,531	4
Food & refrigerated	4,662		4,433	5			17,534		18,470	(5)
Coal & renewables	18,128		21,335	(15)			76,695		100,035	(23)
Bulk	47,313		44,875	5			178,232		196,300	(9)
Industrial chemicals & plastics	7,465		6,705	11			28,095		28,000	-
Metals & minerals	7,091		7,772	(9)			28,562		37,175	(23)
Forest products	6,206		5,734	8			23,527		23,445	-
Energy & specialized markets	9,200		12,194	(25)			36,527		45,367	(19)
Industrial	29,962		32,405	(8)			116,711		133,987	(13)
Automotive	4,337		4,395	(1)			14,835		18,349	(19)
Intermodal	19,854		18,257	9			75,198		74,797	1
Premium	24,191		22,652	7			90,033		93,146	(3)
Total	101,466		99,932	2	%		384,976		423,433	(9)	%

[a]	Prior years have been recast 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		3rd Qtr		4th Qtr		Full Year
Operating Revenues
Freight revenues	$	4,880	$	3,972	$	4,596	$	4,803	$	18,251
Other		349		272		323		338		1,282
Total operating revenues		5,229		4,244		4,919		5,141		19,533
Operating Expenses
Compensation and benefits		1,059		905		1,008		1,021		3,993
Depreciation		547		551		555		557		2,210
Purchased services and materials		521		441		508		492		1,962
Fuel		434		247		301		332		1,314
Equipment and other rents		227		211		217		220		875
Other		298		235		299		513		1,345
Total operating expenses		3,086		2,590		2,888		3,135		11,699
Operating Income		2,143		1,654		2,031		2,006		7,834
Other income		53		131		37		66		287
Interest expense		(278)		(289)		(295)		(279)		(1,141)
Income before income taxes		1,918		1,496		1,773		1,793		6,980
Income taxes		(444)		(364)		(410)		(413)		(1,631)
Net Income	$	1,474	$	1,132	$	1,363	$	1,380	$	5,349
Share and Per Share
Earnings per share - basic	$	2.15	$	1.67	$	2.02	$	2.05	$	7.90
Earnings per share - diluted	$	2.15	$	1.67	$	2.01	$	2.05	$	7.88
Weighted average number of shares - basic		684.3		677.7		675.0		672.2		677.3
Weighted average number of shares - diluted		686.2		679.2		676.8		674.1		679.1
Dividends declared per share	$	0.97	$	0.97	$	0.97	$	0.97	$	3.88
Operating Ratio		59.0%		61.0%		58.7%		61.0%		59.9%
Effective Tax Rate		23.1%		24.3%		23.1%		23.0%		23.4%

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Freight Revenues Statistics (unaudited)
	2020
	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Full Year
Freight Revenues (Millions)
Grain & grain products	$	689	$	644	$	695	$	801	$	2,829
Fertilizer		174		168		157		161		660
Food & refrigerated		250		205		239		243		937
Coal & renewables		421		369		387		357		1,534
Bulk		1,534		1,386		1,478		1,562		5,960
Industrial chemicals & plastics		495		435		454		461		1,845
Metals & minerals		469		368		365		378		1,580
Forest products		303		266		284		307		1,160
Energy & specialized markets		627		431		464		515		2,037
Industrial		1,894		1,500		1,567		1,661		6,622
Automotive		524		189		481		486		1,680
Intermodal		928		897		1,070		1,094		3,989
Premium		1,452		1,086		1,551		1,580		5,669
Total	$	4,880	$	3,972	$	4,596	$	4,803	$	18,251
Revenue Carloads (Thousands)
Grain & grain products		175		167		187		216		745
Fertilizer		46		53		50		44		193
Food & refrigerated		48		41		48		48		185
Coal & renewables		208		186		213		190		797
Bulk		477		447		498		498		1,920
Industrial chemicals & plastics		154		141		144		148		587
Metals & minerals		174		162		156		154		646
Forest products		56		50		55		59		220
Energy & specialized markets		162		115		125		137		539
Industrial		546		468		480		498		1,992
Automotive		208		79		203		202		692
Intermodal [a]		709		724		863		853		3,149
Premium		917		803		1,066		1,055		3,841
Total		1,940		1,718		2,044		2,051		7,753
Average Revenue per Car
Grain & grain products	$	3,940	$	3,861	$	3,705	$	3,710	$	3,797
Fertilizer		3,768		3,181		3,172		3,647		3,427
Food & refrigerated		5,277		4,986		4,891		5,030		5,047
Coal & renewables		2,022		1,979		1,820		1,887		1,926
Bulk		3,219		3,099		2,964		3,139		3,104
Industrial chemicals & plastics		3,205		3,086		3,154		3,125		3,144
Metals & minerals		2,697		2,276		2,337		2,448		2,445
Forest products		5,457		5,256		5,181		5,184		5,269
Energy & specialized markets		3,866		3,739		3,742		3,747		3,780
Industrial		3,469		3,201		3,271		3,331		3,324
Automotive		2,525		2,388		2,368		2,399		2,427
Intermodal [a]		1,307		1,241		1,238		1,284		1,267
Premium		1,583		1,354		1,454		1,497		1,476
Average	$	2,516	$	2,312	$	2,248	$	2,341	$	2,354

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

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Reconciliation of Non-GAAP Financial Measures
Adjusted Debt / Adjusted EBITDA*
Millions, Except Ratios	Dec. 31,		Dec. 31,		Dec. 31,
for the Twelve Months Ended	2020		2019		2018
Net income	$	5,349	$	5,919	$	5,966
Add:
Income tax expense/(benefit)		1,631		1,828		1,775
Depreciation		2,210		2,216		2,191
Interest expense		1,141		1,050		870
EBITDA	$	10,331	$	11,013	$	10,802
Adjustments:
Other income		(287)		(243)		(94)
Interest on operating lease liabilities**		59		68		84
Adjusted EBITDA	$	10,103	$	10,838	$	10,792
Debt	$	26,729	$	25,200	$	22,391
Operating lease liabilities***		1,604		1,833		2,271
Unfunded pension and OPEB,
net of taxes of $195, $124, and $135		637		400		456
Adjusted debt	$	28,970	$	27,433	$	25,118
Adjusted debt / Adjusted EBITDA		2.9		2.5		2.3
Comparable Adjusted Debt / Adjusted EBITDA*
	Dec. 31,		Dec. 31,		Dec. 31,
	2020		2019		2018
Adjusted debt / Adjusted EBITDA		2.9		2.5		2.3
Factors Affecting Comparability:
Brazos yard impairment [a]		(0.1)		N/A		N/A
Comparable Adjusted Debt / Adjusted EBITDA*	2.8		2.5		2.3

[a]	Adjustments remove the impact of $209 million from net income and $69 million from income tax expense for the year ended December 31, 2020. See page 10 for a reconciliation to GAAP.
*	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) and comparable adjusted debt to adjusted EBITDA are considered non-GAAP financial measures 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 these measures are 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 and comparable adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The tables above provide reconciliations from net income to adjusted debt to adjusted EBITDA and comparable adjusted debt to adjusted EBITDA. At December 31, 2020, 2019, and 2018, the incremental borrowing rate on operating leases 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.
***	Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases.  ASU 2016-02 requires companies to recognize lease assets and lease liabilities on the balance sheet.  Prior to adoption, the present value of operating leases was used in this calculation.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Reconciliation of Non-GAAP Financial Measures
Return on Average Common Shareholders' Equity
Millions, Except Percentages	2020		2019		2018
Net income	$	5,349	$	5,919	$	5,966
Average equity	$	17,543	$	19,276	$	22,640
Return on average common shareholders' equity		30.5%		30.7%		26.4%
Return on Invested Capital as Adjusted (ROIC)*
Millions, Except Percentages	2020		2019		2018
Net income	$	5,349	$	5,919	$	5,966
Interest expense		1,141		1,050		870
Interest on average operating lease liabilities		64		76		82
Taxes on interest		(282)		(266)		(218)
Net operating profit after taxes as adjusted	$	6,272	$	6,779	$	6,700
Average equity	$	17,543	$	19,276	$	22,640
Average debt		25,965		23,796		19,668
Average operating lease liabilities		1,719		2,052		2,206
Average invested capital as adjusted	$	45,227	$	45,124	$	44,514
Return on invested capital as adjusted		13.9%		15.0%		15.1%
Comparable Return on Invested Capital as Adjusted (Comparable ROIC)*
	2020		2019		2018
Return on invested capital as adjusted		13.9%		15.0%		15.1%
Factors Affecting Comparability:
Brazos yard impairment [a]		0.4		N/A		N/A
Comparable return on invested capital as adjusted	14.3%		15.0%		15.1%

[a]	Adjustments remove the impact of $209 million from both net income for the year ended and shareholders' equity as of December 31, 2020. See page 10 for a reconciliation to GAAP.
*	ROIC and comparable ROIC are considered non-GAAP financial measures 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 these measures are important to management and investors in evaluating the efficiency and effectiveness of our long-term capital investments. In addition, we currently use ROIC as a performance criteria in determining certain elements of equity compensation for our executives. ROIC and comparable 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. The tables above provide reconciliations from return on average common shareholders' equity to ROIC and comparable ROIC. At December 31, 2020, 2019, and 2018, the incremental borrowing rate on operating leases was 3.7%.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Reconciliation of Non-GAAP Financial Measures
Financial Performance*
Millions, Except Per Share Amounts and Percentages		Reported results			Brazos Yard			Adjusted results
For the Three Months Ended December 31, 2020	(GAAP)			Impairment			(non-GAAP)
Operating expense	$	3,135		$	(278)		$	2,857
Operating income		2,006			278			2,284
Income taxes		413			69			482
Net income	$	1,380		$	209		$	1,589
Diluted EPS	$	2.05		$	0.31		$	2.36
Operating ratio		61.0	%		(5.4)	pts		55.6	%
Millions, Except Per Share Amounts and Percentages		Reported results			Brazos Yard			Adjusted results
	(GAAP)			Impairment			(non-GAAP)
For the Year Ended December 31, 2020
Operating expense	$	11,699		$	(278)		$	11,421
Operating income		7,834			278			8,112
Income taxes		1,631			69			1,700
Net income	$	5,349		$	209		$	5,558
Diluted EPS	$	7.88		$	0.31		$	8.19
Operating ratio		59.9	%		(1.4)	pts		58.5	%
As of December 31, 2020
Shareholders' equity	$	16,958		$	209		$	17,167

*

The above tables reconcile our results for the three-months and year ended December 31, 2020, and as of December 31, 2020, to adjust results that exclude the impact of certain items identified as affecting comparability. We use adjusted operating expense, adjusted operating income, adjusted income taxes, adjusted net income, adjusted diluted earnings per share (EPS), adjusted operating ratio, and adjusted shareholders' equity, as applicable, among other measures, to evaluate our actual operating performance. We believe these non-GAAP financial measures provide valuable information regarding earnings and business trends by excluding specific items that we believe are not indicative of our ongoing operating results of our business, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry. Since these are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, operating expense, operating income, income taxes, net income, diluted EPS, operating ratio, and shareholders' equity as indicators of operating performance.

 

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SOURCE Union Pacific Corporation

FAQ

What were Union Pacific's fourth quarter earnings for 2020?

Union Pacific reported a net income of $1.4 billion, or $2.05 per diluted share for Q4 2020.

How did Union Pacific's adjusted net income for Q4 2020 compare to Q4 2019?

Adjusted net income for Q4 2020 was $1.6 billion, an increase from $1.4 billion in Q4 2019.

What was Union Pacific's operating revenue for Q4 2020?

Operating revenue for Q4 2020 was $5.1 billion, a 1% decrease compared to Q4 2019.

What is Union Pacific's operating ratio for Q4 2020?

The operating ratio for Q4 2020 was a record 55.6%, down 410 basis points from Q4 2019.

How did Union Pacific perform in terms of freight revenue in 2020?

Freight revenue for Union Pacific in 2020 decreased by 10% compared to 2019.