Union Pacific : Reports Second Quarter 2022 Results - Form 8-K

Union Pacific Reports Second Quarter 2022 Results

	●	Earnings per diluted share of $2.93
	●	Operating revenue up 14%
	●	Operating income up 1%

Omaha, Neb., July 21, 2022 - Union Pacific Corporation (NYSE: UNP) today reported 2022 second quarter net income of $1.8 billion, or $2.93 per diluted share. This compares to 2021 second quarter net income of $1.8 billion, or $2.72 per diluted share.

"As anticipated, the Second Quarter was a tough one as we limited carloadings and increased expenses to recover network fluidity," said Lance Fritz, Union Pacific chairman, president, and chief executive officer. "We also experienced record high fuel prices and increasing inflation, adding pressure to our total costs. Offsetting the cost pressures were higher fuel surcharge revenue, solid core pricing, a positive mix, and continued train size initiatives. The result was operating revenue and income growth. Our network fluidity improved through the quarter, and we are positioned to grow volumes in the back half of 2022 while continuing to improve our service product."

Financial Results: Topline Growth Produces Quarterly Records for Operating Revenue, Operating Income, Net Income, and Earnings Per Share

Second Quarter 2022 Compared to Second Quarter 2021

	●	Operating revenue of $6.3 billion was up 14% driven by higher fuel surcharge revenue, core pricing gains, and a positive business mix, offset slightly by volume declines.
	●	Business volumes, as measured by total revenue carloads, were down 1%.
	●	Union Pacific's 60.2% operating ratio deteriorated by 510 basis points. Higher fuel prices negatively impacted the operating ratio 130 basis points.
	●	Operating income of $2.5 billion was up 1%.
	●	The company repurchased 3.1 million shares in second quarter 2022 at an aggregate cost of $722 million.

Operating Performance: Service and Efficiency Measures Lag as Network Recovery Continues

Second Quarter 2022 Compared to Second Quarter 2021

	●	Quarterly freight car velocity of 187 daily miles per car, a 12% decline.
	●	Quarterly locomotive productivity was 123 gross ton-miles (GTMs) per horsepower day, a 12% decline.
	●	Average maximum train length was flat at 9,439 feet.
	●	Quarterly workforce productivity was 1,034 car miles per employee, a 2% decline.
	●	Fuel consumption rate of 1.076, measured in gallons of fuel per thousand GTMs, was flat.

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Union Pacific's first half reportable personal injury rate improved to 0.93 per 200,000 employee-hours compared to 0.95 for first half 2021.

2022 Guidance: First Half 2022 Results Challenge Previous Full Year Volume and Operating Ratio Targets

Updated

	●	Stronger second half volumes should produce full year carload growth of 4% to 5%
	●	Full year operating ratio around 58%
	●	Second half operating ratio improvement vs. 2021
	●	Second half incremental margins around 50%

Affirmed

	●	Pricing gains in excess of inflation dollars
	●	Capital spending of $3.3 billion
	●	Long term dividend payout target of 45% of earnings
	●	Share repurchases in line with 2021

Second Quarter 2022 Earnings Conference Call

Union Pacific will webcast its second quarter 2022 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, July 21, 2022, 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.

Union Pacific Investor contact: Brad Stock at 402-544-4227 or [e-mail]

Union Pacific Media contact: Clarissa Beyah at 402-957-4793 or [e-mail]

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 (including those in response to increased traffic), its results of operations, and potential impacts of the COVID-19 pandemic and the Russian-Ukraine conflict.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 2021, which was filed with the SEC on February 4, 2022. 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	2nd Quarter			Year-to-Date
Percentages, For the Periods Ended June 30,	2022			2021			%			2022			2021			%
Operating Revenues
Freight revenues		$	5,842			$	5,132				14	%		$	11,282			$	9,781				15	%
Other revenues			427				372				15				847				724				17
Total operating revenues			6,269				5,504				14				12,129				10,505				15
Operating Expenses
Compensation and benefits			1,092				1,022				7				2,193				2,048				7
Fuel			940				497				89				1,654				908				82
Purchased services and materials			622				478				30				1,183				968				22
Depreciation			559				550				2				1,114				1,099				1
Equipment and other rents			230				200				15				445				412				8
Other			331				284				17				668				604				11
Total operating expenses			3,774				3,031				25				7,257				6,039				20
Operating Income			2,495				2,473				1				4,872				4,466				9
Other income, net			163				125				30				210				176				19
Interest expense			(316	)			(282	)			12				(623	)			(572	)			9
Income before income taxes			2,342				2,316				1				4,459				4,070				10
Income taxes			(507	)			(518	)			(2	)			(994	)			(931	)			7
Net Income		$	1,835			$	1,798				2	%		$	3,465			$	3,139				10	%
Share and Per Share
Earnings per share - basic		$	2.93			$	2.73				7	%		$	5.51			$	4.73				16	%
Earnings per share - diluted		$	2.93			$	2.72				8			$	5.50			$	4.72				17
Weighted average number of shares - basic	625.6				658.5				(5	)			628.9				663.1				(5	)
Weighted average number of shares - diluted	626.8				660.1				(5	)			630.2				664.7				(5	)
Dividends declared per share		$	1.30			$	1.07				21			$	2.48			$	2.04				22
Operating Ratio			60.2	%			55.1	%			5.1	pts			59.8	%			57.5	%			2.3	pts
Effective Tax Rate			21.6	%			22.4	%			(0.8)	pts			22.3	%			22.9	%			(0.6)	pts

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

		2nd Quarter			Year-to-Date
For the Periods Ended June 30,		2022			2021			%			2022			2021			%
Freight Revenues (Millions)
Grain & grain products		$	867			$	795				9	%		$	1,744			$	1,561				12	%
Fertilizer			183				179				2				363				349				4
Food & refrigerated			271				251				8				538				486				11
Coal & renewables			492				423				16				1,000				764				31
Bulk			1,813				1,648				10				3,645				3,160				15
Industrial chemicals & plastics			557				498				12				1,077				933				15
Metals & minerals			562				467				20				1,047				842				24
Forest products			386				348				11				750				664				13
Energy & specialized markets			586				546				7				1,138				1,076				6
Industrial			2,091				1,859				12				4,012				3,515				14
Automotive			561				428				31				1,062				875				21
Intermodal			1,377				1,197				15				2,563				2,231				15
Premium			1,938				1,625				19				3,625				3,106				17
Total		$	5,842			$	5,132				14	%		$	11,282				9,781				15	%
Revenue Carloads (Thousands)
Grain & grain products			195				204				(4	%)			400				407				(2	%)
Fertilizer			53				54				(2	)			98				98				-
Food & refrigerated			48				48				-				95				93				2
Coal & renewables			202				198				2				427				372				15
Bulk			498				504				(1	)			1,020				970				5
Industrial chemicals & plastics			161				156				3				321				296				8
Metals & minerals			205				182				13				387				328				18
Forest products			63				64				(2	)			127				124				2
Energy & specialized markets			141				138				2				272				277				(2	)
Industrial			570				540				6				1,107				1,025				8
Automotive			192				173				11				382				353				8
Intermodal [a]			805				878				(8	)			1,562				1,674				(7	)
Premium			997				1,051				(5	)			1,944				2,027				(4	)
Total			2,065				2,095				(1	%)			4,071				4,022				1	%
Average Revenue per Car
Grain & grain products		$	4,451			$	3,894				14	%		$	4,357			$	3,838				14	%
Fertilizer			3,437				3,304				4				3,701				3,550				4
Food & refrigerated			5,770				5,226				10				5,703				5,230				9
Coal & renewables			2,426				2,134				14				2,340				2,051				14
Bulk			3,642				3,266				12				3,574				3,256				10
Industrial chemicals & plastics			3,455				3,189				8				3,351				3,153				6
Metals & minerals			2,755				2,569				7				2,710				2,567				6
Forest products			6,128				5,463				12				5,898				5,357				10
Energy & specialized markets			4,161				3,944				6				4,189				3,886				8
Industrial			3,674				3,442				7				3,626				3,430				6
Automotive			2,919				2,479				18				2,780				2,482				12
Intermodal [a]			1,711				1,363				26				1,641				1,332				23
Premium			1,943				1,547				26				1,864				1,532				22
Average		$	2,830			$	2,449				16	%		$	2,771			$	2,432				14	%

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

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Financial Position (unaudited)

	Jun. 30,	Dec. 31,
Millions, Except Percentages		2022			2021
Assets
Cash and cash equivalents		$	788			$	960
Short-term investments			46				46
Other current assets			3,142				2,545
Investments			2,287				2,241
Properties, net			55,315				54,871
Operating lease assets			1,706				1,787
Other assets			1,156				1,075
Total assets		$	64,440			$	63,525
Liabilities and Common Shareholders' Equity
Debt due within one year		$	2,334			$	2,166
Other current liabilities			3,668				3,578
Debt due after one year			29,673				27,563
Operating lease liabilities			1,295				1,429
Deferred income taxes			12,777				12,675
Other long-term liabilities			1,983				1,953
Total liabilities			51,730				49,364
Total common shareholders' equity			12,710				14,161
Total liabilities and common shareholders' equity		$	64,440			$	63,525

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows (unaudited)

Millions,		Year-to-Date
for the Periods Ended June 30,		2022			2021
Operating Activities
Net income		$	3,465			$	3,139
Depreciation			1,114				1,099
Deferred income taxes			93				128
Other - net			(505	)			(147	)
Cash provided by operating activities			4,167				4,219
Investing Activities
Capital investments*			(1,645	)			(1,190	)
Maturities of short-term investments			-				48
Purchases of short-term investments			-				(24	)
Other - net			105				95
Cash used in investing activities			(1,540	)			(1,071	)
Financing Activities
Debt issued			4,090				2,896
Share repurchase programs			(3,473	)			(4,085	)
Debt repaid			(1,664	)			(691	)
Dividends paid			(1,556	)			(1,350	)
Net issued/(paid) of commercial paper			(151	)			125
Accelerated share repurchase programs pending final settlement			-				(400	)
Debt exchange			-				(268	)
Other - net			(42	)			(34	)
Cash used in financing activities			(2,796	)			(3,807	)
Net Change in Cash, Cash Equivalents and Restricted Cash			(169	)			(659	)
Cash, cash equivalents, and restricted cash at beginning of year			983				1,818
Cash, cash equivalents, and restricted cash at end of period		$	814			$	1,159
Free Cash Flow**
Cash provided by operating activities		$	4,167			$	4,219
Cash used in investing activities			(1,540	)			(1,071	)
Dividends paid			(1,556	)			(1,350	)
Free cash flow		$	1,071			$	1,798

*	Capital investments include locomotive and freight car early lease buyouts of $46 million in 2022 and $23 million in 2021.
**	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.

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

		2nd Quarter			Year-to-Date
For the Periods Ended June 30,		2022			2021			%			2022			2021			%
Operating/Performance Statistics
Freight car velocity (daily miles per car)			187				213				(12	)%			192				211				(9	)%
Average train speed (miles per hour) *			23.6				25.0				(6	)			23.9				25.1				(5	)
Average terminal dwell time (hours) *			24.6				22.9				7				24.3				23.2				5
Locomotive productivity (GTMs per horsepower day)	123				140				(12	)			126				139				(9	)
Gross ton-miles (GTMs) (millions)			209,789				207,803				1				419,495				400,890				5
Train length (feet)			9,439				9,410				-				9,321				9,330				-
Intermodal car trip plan compliance (%)**	62				71				(9)	pts			67				74				(7)	pts
Manifest/Automotive car trip plan compliance (%)**	56				67				(11)	pts			59				68				(9)	pts
Workforce productivity (car miles per employee)			1,034				1,060				(2	)			1,045				1,031				1
Total employees (average)			30,715				30,066				2				30,452				29,910				2
Locomotive Fuel Statistics
Average fuel price per gallon consumed		$	4.03			$	2.16				87	%		$	3.48			$	2.01				73	%
Fuel consumed in gallons (millions)			226				223				1				460				439				5
Fuel consumption rate***			1.076				1.072				-				1.096				1.095				-
Revenue Ton-Miles (Millions)
Grain & grain products			19,459				20,190				(4	)%			40,488				40,538				-	%
Fertilizer			3,115				3,169				(2	)			6,266				6,164				2
Food & refrigerated			4,257				4,641				(8	)			8,959				9,139				(2	)
Coal & renewables			20,558				20,716				(1	)			44,808				38,252				17
Bulk			47,389				48,716				(3	)			100,521				94,093				7
Industrial chemicals & plastics			7,685				7,990				(4	)			15,244				15,045				1
Metals & minerals			9,662				8,584				13				18,407				15,460				19
Forest products			6,694				6,706				-				13,319				13,024				2
Energy & specialized markets			9,105				9,112				-				18,171				18,702				(3	)
Industrial			33,146				32,392				2				65,141				62,231				5
Automotive			4,140				3,769				10				8,287				7,542				10
Intermodal			18,710				19,878				(6	)			36,628				38,253				(4	)
Premium			22,850				23,647				(3	)			44,915				45,795				(2	)
Total			103,385				104,755				(1	)%			210,577				202,119				4	%

*	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.

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

		2022
Millions, Except Per Share Amounts and Percentages,		1st Qtr			2nd Qtr	Year-to-Date
Operating Revenues
Freight revenues		$	5,440			$	5,842			$	11,282
Other revenues			420				427				847
Total operating revenues			5,860				6,269				12,129
Operating Expenses
Compensation and benefits			1,101				1,092				2,193
Fuel			714				940				1,654
Purchased services and materials			561				622				1,183
Depreciation			555				559				1,114
Equipment and other rents			215				230				445
Other			337				331				668
Total operating expenses			3,483				3,774				7,257
Operating Income			2,377				2,495				4,872
Other income, net			47				163				210
Interest expense			(307	)			(316	)			(623	)
Income before income taxes			2,117				2,342				4,459
Income taxes			(487	)			(507	)			(994	)
Net Income		$	1,630			$	1,835			$	3,465
Share and Per Share
Earnings per share - basic		$	2.58			$	2.93			$	5.51
Earnings per share - diluted		$	2.57			$	2.93			$	5.50
Weighted average number of shares - basic			632.2				625.6				628.9
Weighted average number of shares - diluted			633.6				626.8				630.2
Dividends declared per share		$	1.18			$	1.30			$	2.48
Operating Ratio			59.4	%			60.2	%			59.8	%
Effective Tax Rate			23.0	%			21.6	%			22.3	%

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UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

		2022
		1st Qtr			2nd Qtr	Year-to-Date
Freight Revenues (Millions)
Grain & grain products		$	877			$	867			$	1,744
Fertilizer			180				183				363
Food & refrigerated			267				271				538
Coal & renewables			508				492				1,000
Bulk			1,832				1,813				3,645
Industrial chemicals & plastics			520				557				1,077
Metals & minerals			485				562				1,047
Forest products			364				386				750
Energy & specialized markets			552				586				1,138
Industrial			1,921				2,091				4,012
Automotive			501				561				1,062
Intermodal			1,186				1,377				2,563
Premium			1,687				1,938				3,625
Total		$	5,440			$	5,842			$	11,282
Revenue Carloads (Thousands)
Grain & grain products			205				195				400
Fertilizer			45				53				98
Food & refrigerated			47				48				95
Coal & renewables			225				202				427
Bulk			522				498				1,020
Industrial chemicals & plastics			160				161				321
Metals & minerals			182				205				387
Forest products			64				63				127
Energy & specialized markets			131				141				272
Industrial			537				570				1,107
Automotive			190				192				382
Intermodal [a]			757				805				1,562
Premium			947				997				1,944
Total			2,006				2,065				4,071
Average Revenue per Car
Grain & grain products		$	4,269			$	4,451			$	4,357
Fertilizer			4,016				3,437				3,701
Food & refrigerated			5,637				5,770				5,703
Coal & renewables			2,262				2,426				2,340
Bulk			3,508				3,642				3,574
Industrial chemicals & plastics			3,247				3,455				3,351
Metals & minerals			2,660				2,755				2,710
Forest products			5,672				6,128				5,898
Energy & specialized markets			4,219				4,161				4,189
Industrial			3,574				3,674				3,626
Automotive			2,640				2,919				2,780
Intermodal [a]			1,566				1,711				1,641
Premium			1,782				1,943				1,864
Average		$	2,711			$	2,830			$	2,771

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

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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]	2022			2021
Net income	$	6,849			$	6,523
Add:
Income tax expense		2,018				1,955
Depreciation		2,223				2,208
Interest expense		1,208				1,157
EBITDA	$	12,298			$	11,843
Adjustments:
Other income, net		(331)				(297)
Interest on operating lease liabilities [b]		51				56
Adjusted EBITDA	$	12,018			$	11,602
Debt	$	32,007			$	29,729
Operating lease liabilities		1,609				1,759
Unfunded/(funded) pension and OPEB, net of tax cost/(benefit) of ($33) and ($21)	(113	)			(72	)
Adjusted debt	$	33,503			$	31,416
Adjusted debt / Adjusted EBITDA		2.8				2.7

[a]	The trailing twelve months income statement information ended June 30, 2022, is recalculated by taking the twelve months ended December 31, 2021, subtracting the six months ended June 30, 2021, and adding the six months ended June 30, 2022.
[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 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 a reconciliation from net income to adjusted debt to adjusted EBITDA. At both June 30, 2022, and December 31, 2021, the incremental borrowing rate on operating lease liabilities was 3.2%.

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