Union Pacific Reports Fourth Quarter and Full Year 2020 Results
01/21/2021 - 08:00 AM
OMAHA, Neb. , Jan. 21, 2021 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2020 fourth quarter net income of $1.4 billion $2.05 $278 million $1.6 billion $2.36 $1.4 billion $2.02
"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 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 $7.88 $278 million $5.6 billion $8.19 $5.9 billion $8.38
Operating revenue totaled $19.5 billion $21.7 billion $7.8 billion
Freight revenue totaled $18.3 billion 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.
http://www.prnewswire.com/news-releases/union-pacific-reports-fourth-quarter-and-full-year-2020-results-301212169.html
SOURCE Union Pacific Corporation
