10-KPeriod: FY2016

UNION PACIFIC CORP Annual Report, Year Ended Dec 31, 2016

Filed February 3, 2017For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported total operating revenues of $19.9 billion for the year ended December 30, 2016, a decrease of 9% from the prior year, primarily driven by a 7% decline in carloads and lower fuel surcharge revenue, partially offset by core pricing gains. Despite the volume decline, the company achieved its third-best earnings performance, with net income of $4.2 billion, or $5.07 per diluted share. The company maintained a strong focus on safety, achieving its best-ever reportable personal injury incidents rate. Operations saw improved metrics like increased average train speed and decreased terminal dwell time, partly due to lower volumes. Financially, UNP generated substantial operating cash flow of $7.5 billion, resulting in $2.3 billion in free cash flow after investments and dividends. The company continued its commitment to returning capital to shareholders through dividends and share repurchases, repurchasing approximately $3.1 billion worth of shares in 2016. Looking ahead to 2017, UNP anticipates modest volume growth and continued margin improvement driven by pricing, productivity, and operational leverage. Key investments will include approximately $3.1 billion in capital expenditures, with a significant portion allocated to Positive Train Control (PTC) and infrastructure improvements.

Financial Highlights

48 data points
Beta

Revenue

$19.94B

Net Income

$4.23B

21.2% Net Margin

EPS (Diluted)

$5.07

Total Assets

$55.72B

Cash & Equivalents

$1.28B

Free Cash Flow

$4.02B

Financial Statements
Beta
Revenue$19.94B
Operating Expenses$12.70B
Operating Income$7.24B
Interest Expense$698.00M
Net Income$4.23B
EPS (Basic)$5.09
EPS (Diluted)$5.07
Shares Outstanding (Basic)832.40M
Shares Outstanding (Diluted)835.40M

Key Highlights

  • 1In 2016, Union Pacific's freight revenue decreased 9% to $18.6 billion due to a 7% drop in carloads and lower fuel surcharge revenue, though core pricing gains provided some offset.
  • 2Despite lower volumes, net income remained strong at $4.2 billion ($5.07 per diluted share), marking the third-best earnings performance in the company's history.
  • 3The company achieved its best-ever reportable personal injury incidents rate (0.75 per 200,000 employee-hours) and improved key operational metrics like average train speed and terminal dwell time.
  • 4Union Pacific generated $7.5 billion in cash from operating activities, resulting in $2.3 billion in free cash flow after accounting for capital expenditures and dividend payments.
  • 5The company returned significant capital to shareholders in 2016, with $2.26 per share in dividends declared and approximately $3.1 billion in share repurchases.
  • 6Capital expenditures for 2017 are planned at approximately $3.1 billion, with a focus on infrastructure renewal, network capacity, and Positive Train Control (PTC) implementation.

Frequently Asked Questions

The primary drivers of the revenue decline were a 7% decrease in carloadings across several commodity groups (including coal, intermodal, and automotive) and a significant reduction in fuel surcharge revenue due to lower diesel prices. These factors were partially offset by core pricing gains.

Union Pacific managed costs through lower fuel prices, volume-related savings, productivity initiatives, and improved network fluidity, which led to lower locomotive and freight car maintenance expenses. These savings helped offset inflation and increased depreciation.

For 2017, Union Pacific anticipates volume growth in the low single-digit range, dependent on the overall economy and market conditions. The company expects continued margin improvement driven by pricing opportunities, ongoing productivity initiatives, and leveraging its resources.

Key risks include fluctuating demand for services and network capacity, transporting hazardous materials, significant governmental regulation, general economic conditions, competition from other transportation providers, reliance on technology, environmental laws and regulations, severe weather events, and potential labor disputes or work stoppages.