EX-99.1 2 ex_318217.htm EXHIBIT 99.1 ex_318217.htm

Exhibit 99.1

 

Union Pacific Reports Fourth Quarter and Full Year 2021 Results

 

Omaha, Neb., January 20, 2022 – Union Pacific Corporation (NYSE: UNP) today reported 2021 fourth quarter net income of $1.7 billion, or $2.66 per diluted share. This compares to adjusted 2020 fourth quarter net income of $1.6 billion, or $2.36 per diluted share. The 2020 adjusted results exclude a $278 million pre-tax, non-cash impairment charge.

 

Reported net income for the full year 2021 was $6.5 billion, or $9.95 per diluted share. These full year results compare to adjusted full year 2020 net income of $5.6 billion, or $8.19 per diluted share, which excludes the impairment charge.

 

“The Union Pacific team concluded its most profitable year ever in 2021. We produced double digit fourth quarter revenue growth by leveraging our great rail franchise to generate positive business mix and core pricing gains, despite ongoing global supply chain challenges that impacted volumes,” said Lance Fritz, Union Pacific chairman, president and chief executive officer. “For the third consecutive year we improved our fuel consumption rate, taking steps to reduce our carbon footprint and meet the goals of our 2021 Climate Action Plan. While our safety and operational performance in 2021 did not meet expectations, we look to convert recent progress into sustained improvement in 2022. Although uncertainty remains around COVID variants and supply chain disruptions, we see a positive demand environment in 2022 and continued traction from business development efforts driving growth as we deliver value to all our stakeholders.”

 

Fourth Quarter Summary

 

Financial Results: Strong Revenue Growth Drives Fourth Quarter Records for Operating Income, Net Income, and Earnings Per Share

Fourth Quarter 2021 Compared to Adjusted Fourth Quarter 2020*

 

●

Operating revenue of $5.7 billion was up 12% driven by higher fuel surcharge revenue, a positive business mix, and core pricing gains, partially offset by lower volumes.

●

Business volumes, as measured by total revenue carloads, were down 4%.

●

Union Pacific’s 57.4% operating ratio deteriorated 180 basis points. Higher fuel prices negatively impacted the operating ratio by 100 basis points.

●

Operating Income of $2.4 billion was up 7%.

●

The company repurchased 5.8 million shares in fourth quarter 2021 at an aggregate cost of $1.4 billion.

 

* 2020 results exclude the Brazos non-cash impairment charge. Please reference page 10 of the supplemental financial information for the reconciliation to GAAP.

 

 

Operating Performance: Network Recovery Efforts Slowed by COVID Impacts to Crew Availability

Fourth Quarter 2021 Compared to Fourth Quarter 2020

 

●

Quarterly freight car velocity of 197 daily miles per car, a 12% decline.

●

Quarterly locomotive productivity was 129 gross ton-miles (GTMs) per horsepower day, an 9% decline.

●

Average maximum train length was 9,319 feet, a 2% increase.

●

Quarterly workforce productivity was 1,046 car miles per employee, a 1% improvement

●

Fuel consumption rate, measured in gallons of fuel per thousand GTMs, was flat.

 

2021 Full Year Summary

 

Financial Results: Revenue Growth and Margin Improvement Drives Records for Operating Income, Operating Ratio, Net Income, and Earnings Per Share

Full Year 2021 Compared to Adjusted Full Year 2020*

 

●

Operating revenue of $21.8 billion was up 12% driven by volume growth, higher fuel surcharge revenue, core pricing gains, and a positive business mix.

●

Business volumes, as measured by total revenue carloads, were up 4%.

●

Union Pacific’s 57.2% operating ratio deteriorated 130 basis points. Higher fuel prices negatively impacted the operating ratio by 140 basis points.

	●	Operating Income of $9.3 billion was up 15%.
	●	Union Pacific's capital program in 2021 totaled $3.0 billion.

●

The company repurchased 33.3 million shares in 2021 at an aggregate cost of $7.3 billion.

 

* 2020 results exclude the Brazos non-cash impairment charge. Please reference page 10 of the supplemental financial information for the reconciliation to GAAP.

 

Operating Performance: Network Operations Challenged by Weather Events, Wildfires, COVID Impacted Crew Availability, and Supply Chain Disruptions

Full Year 2021 Compared to Full Year 2020

 

	●	Union Pacific’s reportable personal injury rate deteriorated to 0.98 per 200,000 employee-hours compared to 0.90 for full year 2020
	●	Freight car velocity of 203 daily miles per car, an 8% decline.

●

Locomotive productivity was 133 GTMs per horsepower day, a 3% decline.

●

Average maximum train length was 9,334 feet, a 6% increase.

●

Workforce productivity was 1,038 car miles per employee, a 10% improvement

●

Fuel consumption rate, measured in gallons of fuel per thousand GTMs, improved 1%.

 

 

Fourth Quarter 2021 Earnings Conference Call

 

Union Pacific will webcast its fourth quarter 2021 earnings release presentation live at www.up.com/investor and via teleconference on Thursday, January 20, 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 bkstock@up.com

Union Pacific Media contact: Clarissa Beyah at 402-957-4793 or cbeyah@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 2020, which was filed with the SEC on February 5, 2021. 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,		2021				2020				%				2021				2020				%
Operating Revenues
Freight revenues		$	5,297			$	4,803				10	%		$	20,244			$	18,251				11	%
Other			436				338				29				1,560				1,282				22
Total operating revenues			5,733				5,141				12				21,804				19,533				12
Operating Expenses
Compensation and benefits			1,070				1,021				5				4,158				3,993				4
Depreciation			556				557				-				2,208				2,210				-
Fuel			597				332				80				2,049				1,314				56
Purchased services and materials			538				492				9				2,016				1,962				3
Equipment and other rents			230				220				5				859				875				(2	)
Other			302				513				(41	)			1,176				1,345				(13	)
Total operating expenses			3,293				3,135				5				12,466				11,699				7
Operating Income			2,440				2,006				22				9,338				7,834				19
Other income			83				66				26				297				287				3
Interest expense			(295	)			(279	)			6				(1,157	)			(1,141	)			1
Income before income taxes			2,228				1,793				24				8,478				6,980				21
Income taxes			(517	)			(413	)			25				(1,955	)			(1,631	)			20
Net Income		$	1,711			$	1,380				24			$	6,523			$	5,349				22
Share and Per Share
Earnings per share - basic		$	2.67			$	2.05				30	%		$	9.98			$	7.90				26	%
Earnings per share - diluted		$	2.66			$	2.05				30			$	9.95			$	7.88				26
Weighted average number of shares - basic			640.4				672.2				(5	)			653.8				677.3				(3	)
Weighted average number of shares - diluted			642.1				674.1				(5	)			655.4				679.1				(3	)
Dividends declared per share		$	1.18			$	0.97				22			$	4.29			$	3.88				11
Operating Ratio			57.4	%			61.0	%			(3.6	)pts			57.2	%			59.9	%			(2.7	)pts
Effective Tax Rate			23.2	%			23.0	%			0.2				23.1	%			23.4	%			(0.3	)

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 

		4th Quarter												Full Year
For the Periods Ended December 31,		2021				2020				%				2021				2020				%
Freight Revenues (Millions)
Grain & grain products		$	889			$	801				11	%		$	3,181			$	2,829				12	%
Fertilizer			176				161				9				697				660				6
Food & refrigerated			259				243				7				998				937				7
Coal & renewables			485				357				36				1,780				1,534				16
Bulk			1,809				1,562				16				6,656				5,960				12
Industrial chemicals & plastics			507				461				10				1,943				1,845				5
Metals & minerals			481				378				27				1,811				1,580				15
Forest products			351				307				14				1,357				1,160				17
Energy & specialized markets			558				515				8				2,212				2,037				9
Industrial			1,897				1,661				14				7,323				6,622				11
Automotive			469				486				(3	)			1,761				1,680				5
Intermodal			1,122				1,094				3				4,504				3,989				13
Premium			1,591				1,580				1				6,265				5,669				11
Total		$	5,297			$	4,803				10	%		$	20,244			$	18,251				11	%
Revenue Carloads (Thousands)
Grain & grain products			213				216				(1	)%			805				745				8	%
Fertilizer			48				44				9				201				193				4
Food & refrigerated			48				48				-				189				185				2
Coal & renewables			215				190				13				819				797				3
Bulk			524				498				5				2,014				1,920				5
Industrial chemicals & plastics			157				148				6				606				587				3
Metals & minerals			181				154				18				697				646				8
Forest products			63				59				7				250				220				14
Energy & specialized markets			137				137				-				559				539				4
Industrial			538				498				8				2,112				1,992				6
Automotive			182				202				(10	)			701				692				1
Intermodal [a]			728				853				(15	)			3,211				3,149				2
Premium			910				1,055				(14	)			3,912				3,841				2
Total			1,972				2,051				(4	)%			8,038				7,753				4	%
Average Revenue per Car
Grain & grain products		$	4,187			$	3,710				13	%		$	3,953			$	3,797				4	%
Fertilizer			3,705				3,647				2				3,470				3,427				1
Food & refrigerated			5,409				5,030				8				5,279				5,047				5
Coal & renewables			2,251				1,887				19				2,173				1,926				13
Bulk			3,457				3,139				10				3,305				3,104				6
Industrial chemicals & plastics			3,242				3,125				4				3,207				3,144				2
Metals & minerals			2,659				2,448				9				2,598				2,445				6
Forest products			5,521				5,184				7				5,424				5,269				3
Energy & specialized markets			4,054				3,747				8				3,956				3,780				5
Industrial			3,522				3,331				6				3,467				3,324				4
Automotive			2,576				2,399				7				2,511				2,427				3
Intermodal [a]			1,541				1,284				20				1,403				1,267				11
Premium			1,748				1,497				17				1,601				1,476				8
Average		$	2,686			$	2,341				15	%		$	2,519			$	2,354				7	%

 

[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		2021				2020
Assets
Cash and cash equivalents		$	960			$	1,799
Short-term investments			46				60
Other current assets			2,545				2,355
Investments			2,241				2,164
Properties, net			54,871				54,161
Operating lease assets			1,787				1,610
Other assets			1,075				249
Total assets		$	63,525			$	62,398
Liabilities and Common Shareholders' Equity
Debt due within one year		$	2,166			$	1,069
Other current liabilities			3,578				3,104
Debt due after one year			27,563				25,660
Operating lease liabilities			1,429				1,283
Deferred income taxes			12,675				12,247
Other long-term liabilities			1,953				2,077
Total liabilities			49,364				45,440
Total common shareholders' equity			14,161				16,958
Total liabilities and common shareholders' equity		$	63,525			$	62,398
Return on Average Common Shareholders' Equity			41.9	%			30.5	%
Return on Invested Capital as Adjusted (ROIC)*			16.4	%			13.9	%

 

*	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,		2021				2020
Operating Activities
Net income		$	6,523			$	5,349
Depreciation			2,208				2,210
Deferred and other income taxes			154				340
Other - net			147				641
Cash provided by operating activities			9,032				8,540
Investing Activities
Capital investments*			(2,936	)			(2,927	)
Maturities of short-term investments			94				141
Purchases of short-term investments			(70	)			(136	)
Other - net			203				246
Cash used in investing activities			(2,709	)			(2,676	)
Financing Activities
Share repurchase programs			(7,291	)			(3,705	)
Debt issued			4,201				4,004
Dividends paid			(2,800	)			(2,626	)
Debt repaid			(1,299	)			(2,053	)
Net issuance of commercial paper			325				(127	)
Debt exchange			(270	)			(328	)
Other - net			(24	)			(67	)
Cash used in financing activities			(7,158	)			(4,902	)
Net Change in Cash, Cash Equivalents, and Restricted Cash			(835	)			962
Cash, cash equivalents, and restricted cash at beginning of year			1,818				856
Cash, Cash Equivalents, and Restricted Cash at End of Year		$	983			$	1,818
Free Cash Flow**
Cash provided by operating activities		$	9,032			$	8,540
Cash used in investing activities			(2,709	)			(2,676	)
Dividends paid			(2,800	)			(2,626	)
Free cash flow		$	3,523			$	3,238

 

*	Capital investments include locomotive and freight car early lease buyouts of $34 million in 2021 and $38 million in 2020.

 

**	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,		2021				2020				%				2021				2020				%
Operating/Performance Statistics
Freight car velocity (daily miles per car)			197				223				(12	)%			203				221				(8	)%
Average train speed (miles per hour) *			24.2				26.1				(7	)			24.6				25.9				(5	)
Average terminal dwell time (hours) *			24.4				22.4				9				23.7				22.7				4
Locomotive productivity (GTMs per horsepower day)			129				142				(9	)			133				137				(3	)
Gross ton-miles (GTMs) (millions)			209,970				202,844				4				817,919				771,765				6
Train length (feet)			9,319				9,154				2				9,334				8,798				6
Intermodal car trip plan compliance (%)			78				83				(5	)pts			73				81				(8	)pts
Manifest/Automotive car trip plan compliance (%)			58				74				(16	)pts			63				71				(8	)pts
Workforce productivity (car miles per employee)			1,046				1,032				1				1,038				947				10
Total employees (average)			29,989				29,753				1				29,905				30,960				(3	)
Locomotive Fuel Statistics
Average fuel price per gallon consumed		$	2.53			$	1.45				74	%		$	2.23			$	1.50				49	%
Fuel consumed in gallons (millions)			228				222				3				888				849				5
Fuel consumption rate**			1.088				1.092				-				1.086				1.100				(1	)
Revenue Ton-Miles (Millions)
Grain & grain products			21,656				21,591				-	%			79,520				71,979				10	%
Fertilizer			3,185				2,932				9				12,387				12,024				3
Food & refrigerated			4,651				4,662				-				18,475				17,534				5
Coal & renewables			22,795				18,128				26				85,586				76,695				12
Bulk			52,287				47,313				11				195,968				178,232				10
Industrial chemicals & plastics			7,257				7,465				(3	)			30,048				28,095				7
Metals & minerals			8,611				7,091				21				32,993				28,562				16
Forest products			6,458				6,206				4				25,863				23,527				10
Energy & specialized markets			9,420				9,200				2				37,902				36,527				4
Industrial			31,746				29,962				6				126,806				116,711				9
Automotive			3,830				4,337				(12	)			14,879				14,835				-
Intermodal			16,977				19,854				(14	)			73,620				75,198				(2	)
Premium			20,807				24,191				(14	)			88,499				90,033				(2	)
Total			104,840				101,466				3	%			411,273				384,976				7	%

 

*	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)

 

		2021
Millions, Except Per Share Amounts and Percentages,	1st Qtr			2nd Qtr				3rd Qtr				4th Qtr				Full Year
Operating Revenues
Freight revenues		$	4,649			$	5,132			$	5,166			$	5,297			$	20,244
Other			352				372				400				436				1,560
Total operating revenues			5,001				5,504				5,566				5,733				21,804
Operating Expenses
Compensation and benefits			1,026				1,022				1,040				1,070				4,158
Depreciation			549				550				553				556				2,208
Fuel			411				497				544				597				2,049
Purchased services and materials			490				478				510				538				2,016
Equipment and other rents			212				200				217				230				859
Other			320				284				270				302				1,176
Total operating expenses			3,008				3,031				3,134				3,293				12,466
Operating Income			1,993				2,473				2,432				2,440				9,338
Other income			51				125				38				83				297
Interest expense			(290	)			(282	)			(290	)			(295	)			(1,157	)
Income before income taxes			1,754				2,316				2,180				2,228				8,478
Income taxes			(413	)			(518	)			(507	)			(517	)			(1,955	)
Net Income		$	1,341			$	1,798			$	1,673			$	1,711			$	6,523
Share and Per Share
Earnings per share - basic		$	2.01			$	2.73			$	2.58			$	2.67			$	9.98
Earnings per share - diluted		$	2.00			$	2.72			$	2.57			$	2.66			$	9.95
Weighted average number of shares - basic			667.6				658.5				648.7				640.4				653.8
Weighted average number of shares - diluted			669.2				660.1				650.3				642.1				655.4
Dividends declared per share		$	0.97			$	1.07			$	1.07			$	1.18			$	4.29
Operating Ratio			60.1	%			55.1	%			56.3	%			57.4	%			57.2	%
Effective Tax Rate			23.5	%			22.4	%			23.3	%			23.2	%			23.1	%

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 

		2021
	1st Qtr			2nd Qtr				3rd Qtr				4th Qtr				Full Year
Freight Revenues (Millions)
Grain & grain products		$	766			$	795			$	731			$	889			$	3,181
Fertilizer			170				179				172				176				697
Food & refrigerated			235				251				253				259				998
Coal & renewables			341				423				531				485				1,780
Bulk			1,512				1,648				1,687				1,809				6,656
Industrial chemicals & plastics			435				498				503				507				1,943
Metals & minerals			375				467				488				481				1,811
Forest products			316				348				342				351				1,357
Energy & specialized markets			530				546				578				558				2,212
Industrial			1,656				1,859				1,911				1,897				7,323
Automotive			447				428				417				469				1,761
Intermodal			1,034				1,197				1,151				1,122				4,504
Premium			1,481				1,625				1,568				1,591				6,265
Total		$	4,649			$	5,132			$	5,166				5,297				20,244
Revenue Carloads (Thousands)
Grain & grain products			203				204				185				213				805
Fertilizer			44				54				55				48				201
Food & refrigerated			45				48				48				48				189
Coal & renewables			174				198				232				215				819
Bulk			466				504				520				524				2,014
Industrial chemicals & plastics			140				156				153				157				606
Metals & minerals			146				182				188				181				697
Forest products			60				64				63				63				250
Energy & specialized markets			139				138				145				137				559
Industrial			485				540				549				538				2,112
Automotive			180				173				166				182				701
Intermodal [a]			796				878				809				728				3,211
Premium			976				1,051				975				910				3,912
Total			1,927				2,095				2,044				1,972				8,038
Average Revenue per Car
Grain & grain products		$	3,782			$	3,894			$	3,937			$	4,187			$	3,953
Fertilizer			3,852				3,304				3,125				3,705				3,470
Food & refrigerated			5,234				5,226				5,246				5,409				5,279
Coal & renewables			1,958				2,134				2,298				2,251				2,173
Bulk			3,246				3,266				3,244				3,457				3,305
Industrial chemicals & plastics			3,113				3,189				3,277				3,242				3,207
Metals & minerals			2,563				2,569				2,596				2,659				2,598
Forest products			5,244				5,463				5,457				5,521				5,424
Energy & specialized markets			3,828				3,944				3,996				4,054				3,956
Industrial			3,417				3,442				3,482				3,522				3,467
Automotive			2,485				2,479				2,500				2,576				2,511
Intermodal [a]			1,299				1,363				1,424				1,541				1,403
Premium			1,517				1,547				1,608				1,748				1,601
Average		$	2,413			$	2,449			$	2,528			$	2,686			$	2,519

 

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

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

 

Adjusted Debt / Adjusted EBITDA*
Millions, Except Ratios	Dec. 31,			Dec. 31,				Dec. 31,
for the Twelve Months Ended		2021				2020				2019
Net income		$	6,523			$	5,349			$	5,919
Add:
Income tax expense/(benefit)			1,955				1,631				1,828
Depreciation			2,208				2,210				2,216
Interest expense			1,157				1,141				1,050
EBITDA		$	11,843			$	10,331			$	11,013
Adjustments:
Other income, net			(297	)			(287	)			(243	)
Interest on operating lease liabilities**			56				59				68
Adjusted EBITDA		$	11,602			$	10,103			$	10,838
Debt		$	29,729			$	26,729			$	25,200
Operating lease liabilities			1,759				1,604				1,833
Unfunded/(funded) pension and other postretirement benefits,
net of tax cost/(benefit) of ($21), $195, and $124			(72	)			637				400
Adjusted debt		$	31,416			$	28,970			$	27,433
Adjusted debt / Adjusted EBITDA			2.7				2.9				2.5

 

Comparable Adjusted Debt / Adjusted EBITDA*
	Dec. 31,			Dec. 31,				Dec. 31,
		2021				2020				2019
Adjusted debt / Adjusted EBITDA			2.7				2.9				2.5
Factors Affecting Comparability:
Brazos yard impairment [a]			N/A				(0.1	)			N/A
Comparable Adjusted Debt / Adjusted EBITDA*			2.7				2.8				2.5

 

[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 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) and comparable adjusted debt to adjusted EBITDA are 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 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 table above provides reconciliations from net income to adjusted debt to adjusted EBITDA and comparable adjusted debt to adjusted EBITDA. At December 31, 2021, 2020, and 2019, the incremental borrowing rate on operating lease liabilities was 3.2%, 3.7% and 3.7%, respectively.

 

**	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.

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

Return on Average Common Shareholders' Equity
Millions, Except Percentages	2021		2020		2019
Net income	$	6,523	$	5,349	$	5,919
Average equity	$	15,560	$	17,543	$	19,276
Return on average common shareholders' equity		41.9%		30.5%		30.7%

 

Return on Invested Capital as Adjusted (ROIC)*
Millions, Except Percentages	2021		2020		2019
Net income	$	6,523	$	5,349	$	5,919
Interest expense		1,157		1,141		1,050
Interest on average operating lease liabilities		54		64		76
Taxes on interest		(280)		(282)		(266)
Net operating profit after taxes as adjusted	$	7,454	$	6,272	$	6,779
Average equity	$	15,560	$	17,543	$	19,276
Average debt		28,229		25,965		23,796
Average operating lease liabilities		1,682		1,719		2,052
Average invested capital as adjusted	$	45,471	$	45,227	$	45,124
Return on invested capital as adjusted		16.4%		13.9%		15.0%

 

Comparable Return on Invested Capital as Adjusted (Comparable ROIC)*
	2021		2020		2019
Return on invested capital as adjusted		16.4%		13.9%		15.0%
Factors Affecting Comparability:
Brazos yard impairment [a]		N/A		0.4		N/A
Comparable return on invested capital as adjusted	16.4%		14.3%		15.0%

 

[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 criterion 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, 2021, 2020, and 2019, the incremental borrowing rate on operating leases was 3.2%, 3.7% and 3.7%, respectively.

 

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Non-GAAP Measures Reconciliation to GAAP

 

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	%
	Reported results				Brazos Yard					Adjusted results
Millions, Except Per Share Amounts and Percentages	(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.