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Union Pacific Reports Fourth Quarter and Full Year 2022 Results

Union Pacific Reports Fourth Quarter and Full Year 2022 Results
PR Newswire
OMAHA, Neb., Jan. 24, 2023

Fourth quarter earnings per diluted share of $2.67Fourth quarter operating revenue up 8%Full year earnings per diluted share of $11.21Full year o…

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Union Pacific Reports Fourth Quarter and Full Year 2022 Results

PR Newswire

  • Fourth quarter earnings per diluted share of $2.67
  • Fourth quarter operating revenue up 8%
  • Full year earnings per diluted share of $11.21
  • Full year operating income up 6%

OMAHA, Neb., Jan. 24, 2023 /PRNewswire/ -- Union Pacific Corporation (NYSE: UNP) today reported 2022 fourth quarter net income of $1.6 billion, or $2.67 per diluted share. This compares to 2021 fourth quarter net income of $1.7 billion, or $2.66 per diluted share.

Reported net income for full year 2022 was $7.0 billion, or $11.21 per diluted share. These full year results compare to full year 2021 net income of $6.5 billion, or $9.95 per diluted share.

"In the fourth quarter, we grew carloads as we continued to face challenges hiring craft professionals in critical locations and experienced the impact of extreme winter weather on our network in December," said Lance Fritz, Union Pacific chairman, president, and chief executive officer. "As a result, revenue growth was more than offset by elevated operating expenses from operational inefficiencies and a higher inflationary environment. For the full year, we made good progress on employee safety, and we took another step toward our sustainability goals as our fuel consumption rate improved for the fourth consecutive year. Looking to 2023, we expect continued improvements in network fluidity to support business development, generating volume growth that exceeds industrial production. We also expect network improvements to help us recapture lost productivity while providing customers with reliable service."

Fourth Quarter Summary

Financial Results: Revenue Growth Offset by Higher Expenses Associated with Inflation and Network Recovery; Fourth Quarter Record for Operating Revenue
Fourth Quarter 2022 Compared to Fourth Quarter 2021

  • Operating revenue of $6.2 billion was up 8% driven by higher fuel surcharge revenue, core pricing gains, and volume growth, partially offset by a negative business mix.
  • Business volumes, as measured by total revenue carloads, were up 1%.
  • Union Pacific's 61.0% operating ratio deteriorated 360 basis points. Falling fuel prices late in the quarter positively impacted the operating ratio by 20 basis points.
  • Operating income of $2.4 billion declined 1%.
  • The company repurchased 3.5 million shares in fourth quarter 2022 at an aggregate cost of $0.7 billion.

Operating Performance: Service and Efficiency Measures Impacted by Network Congestion and Winter Weather; Fourth Quarter Record for Fuel Consumption Rate
Fourth Quarter 2022 Compared to Fourth Quarter 2021

  • Quarterly freight car velocity was 191 daily miles per car, a 3% decline.
  • Quarterly locomotive productivity was 123 gross ton-miles (GTMs) per horsepower day, a 5% decline.
  • Average maximum train length decreased 1% to 9,191 feet.
  • Quarterly workforce productivity decreased 3% to 1,010 car miles per employee.
  • Fuel consumption rate of 1.064, measured in gallons of fuel per thousand GTMs, improved 2%.

2022 Full Year Summary

Financial Results: Fuel Surcharge, Core Pricing Gains, and Volume Drive Revenue Growth; Records for Operating Revenue, Operating Income, Net Income, and Earnings Per Share
Full Year 2022 Compared to Full Year 2021

  • Operating revenue of $24.9 billion was up 14% driven by higher fuel surcharge revenue, core pricing gains, and volume growth.
  • Business volumes, as measured by total revenue carloads, grew 2%.
  • Union Pacific's 60.1% reported operating ratio deteriorated 290 basis points. Higher fuel prices negatively impacted the operating ratio by 20 basis points and the prior period adjustment related to new labor agreements added 30 basis points to operating ratio.
  • Operating Income of $9.9 billion was up 6%.
  • Union Pacific's 2022 capital program totaled $3.4 billion.
  • The company repurchased 27.1 million shares in 2022 at an aggregate cost of $6.3 billion.

Operating Performance: Network Operations Impacted by Crew Availability and Operational Inefficiencies; Record for Fuel Consumption Rate
Full Year 2022 Compared to Full Year 2021

  • Union Pacific's reportable personal injury rate improved 18% to 0.80 per 200,000 employee-hours compared to 0.98 for full year 2021.
  • Freight car velocity was 191 daily miles per car, a 6% decline.
  • Locomotive productivity was 125 GTMs per horsepower day, a 6% decline.
  • Average maximum train length of 9,329 feet was flat.
  • Workforce productivity of 1,036 car miles per employee was flat.
  • Fuel consumption rate of 1.078, measured in gallons of fuel per thousand GTMs, improved 1%.

2023 Guidance

  • Full year carloads to exceed Industrial Production
    • Current Industrial Production forecast: -0.5%
  • Full year operating ratio improvement
  • Pricing dollars in excess of inflation dollars
  • Capital Allocation:
    • Capital spending less than 15% of revenue
      • Capital plan of $3.6 billion
    • Long term dividend payout target of ~45% of earnings
    • Excess cash to share repurchases

Fourth Quarter 2022 Earnings Conference Call

Union Pacific will webcast its fourth quarter 2022 earnings release presentation live at www.up.com/investor and via teleconference on Tuesday, January 24, 2023, 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 (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.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

 

Millions, Except Per Share Amounts and

4th Quarter



Full Year


Percentages, For the Periods Ended December 31,

2022



2021



%



2022



2021



%


Operating Revenues

























Freight revenues


$

5,768



$

5,297




9

%


$

23,159



$

20,244




14

%

Other revenues



412




436




(6)




1,716




1,560




10


Total operating revenues



6,180




5,733




8




24,875




21,804




14


Operating Expenses

























Compensation and benefits



1,174




1,070




10




4,645




4,158




12


Fuel



853




597




43




3,439




2,049




68


Purchased services and materials



633




538




18




2,442




2,016




21


Depreciation



569




556




2




2,246




2,208




2


Equipment and other rents



238




230




3




898




859




5


Other



301




302




-




1,288




1,176




10


Total operating expenses



3,768




3,293




14




14,958




12,466




20


Operating Income



2,412




2,440




(1)




9,917




9,338




6


Other income, net



92




83




11




426




297




43


Interest expense



(333)




(295)




13




(1,271)




(1,157)




10


Income before income taxes



2,171




2,228




(3)




9,072




8,478




7


Income taxes



(533)




(517)




3




(2,074)




(1,955)




6


Net Income


$

1,638



$

1,711




(4)



$

6,998



$

6,523




7



























Share and Per Share

























Earnings per share - basic


$

2.67



$

2.67




-

%


$

11.24



$

9.98




13

%

Earnings per share - diluted


$

2.67



$

2.66




-



$

11.21



$

9.95




13


Weighted average number of shares - basic

612.7




640.4




(4)




622.7




653.8




(5)


Weighted average number of shares - diluted

613.7




642.1




(4)




624.0




655.4




(5)


Dividends declared per share


$

1.30



$

1.18




10



$

5.08



$

4.29




18



























Operating Ratio



61.0

%



57.4

%



3.6

pts



60.1

%



57.2

%



2.9

pts

Effective Tax Rate



24.6

%



23.2

%



1.4




22.9

%



23.1

%



(0.2)


 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 



4th Quarter



Full Year


For the Periods Ended December 31,


2022



2021



%



2022



2021



%


Freight Revenues (Millions)

























Grain & grain products


$

974



$

889




10

%


$

3,598



$

3,181




13

%

Fertilizer



171




176




(3)




712




697




2


Food & refrigerated



265




259




2




1,093




998




10


Coal & renewables



523




485




8




2,134




1,780




20


Bulk



1,933




1,809




7




7,537




6,656




13


Industrial chemicals & plastics



502




507




(1)




2,158




1,943




11


Metals & minerals



548




481




14




2,196




1,811




21


Forest products



325




351




(7)




1,465




1,357




8


Energy & specialized markets



624




558




12




2,386




2,212




8


Industrial



1,999




1,897




5




8,205




7,323




12


Automotive



594




469




27




2,257




1,761




28


Intermodal



1,242




1,122




11




5,160




4,504




15


Premium



1,836




1,591




15




7,417




6,265




18


Total


$

5,768



$

5,297




9

%


$

23,159



$

20,244




14

%

Revenue Carloads (Thousands)

























Grain & grain products



208




213




(2)

%



798




805




(1)

%

Fertilizer



41




48




(15)




190




201




(5)


Food & refrigerated



44




48




(8)




187




189




(1)


Coal & renewables



215




215




-




885




819




8


Bulk



508




524




(3)




2,060




2,014




2


Industrial chemicals & plastics



151




157




(4)




637




606




5


Metals & minerals



196




181




8




785




697




13


Forest products



52




63




(17)




241




250




(4)


Energy & specialized markets



140




137




2




552




559




(1)


Industrial



539




538




-




2,215




2,112




5


Automotive



198




182




9




778




701




11


Intermodal [a]



743




728




2




3,116




3,211




(3)


Premium



941




910




3




3,894




3,912




-


Total



1,988




1,972




1

%



8,169




8,038




2

%

Average Revenue per Car

























Grain & grain products


$

4,681



$

4,187




12

%


$

4,509



$

3,953




14

%

Fertilizer



4,167




3,705




12




3,749




3,470




8


Food & refrigerated



5,957




5,409




10




5,844




5,279




11


Coal & renewables



2,431




2,251




8




2,410




2,173




11


Bulk



3,799




3,457




10




3,658




3,305




11


Industrial chemicals & plastics



3,335




3,242




3




3,388




3,207




6


Metals & minerals



2,790




2,659




5




2,797




2,598




8


Forest products



6,264




5,521




13




6,092




5,424




12


Energy & specialized markets



4,459




4,054




10




4,320




3,956




9


Industrial



3,711




3,522




5




3,704




3,467




7


Automotive



3,007




2,576




17




2,902




2,511




16


Intermodal [a]



1,672




1,541




9




1,656




1,403




18


Premium



1,953




1,748




12




1,905




1,601




19


Average


$

2,902



$

2,686




8

%


$

2,835



$

2,519




13

%




[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


2022



2021


Assets









Cash and cash equivalents


$

973



$

960


Short-term investments



46




46


Other current assets



2,933




2,545


Investments



2,375




2,241


Properties, net



56,038




54,871


Operating lease assets



1,672




1,787


Other assets



1,412




1,075


Total assets


$

65,449



$

63,525











Liabilities and Common Shareholders' Equity









Debt due within one year


$

1,678



$

2,166


Other current liabilities



3,842




3,578


Debt due after one year



31,648




27,563


Operating lease liabilities



1,300




1,429


Deferred income taxes



13,033




12,675


Other long-term liabilities



1,785




1,953


Total liabilities



53,286




49,364


Total common shareholders' equity



12,163




14,161


Total liabilities and common shareholders' equity


$

65,449



$

63,525











Return on Average Common Shareholders' Equity

53.2

%



41.9

%

Return on Invested Capital as Adjusted (ROIC)*

17.3

%



16.4

%



*

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,


2022



2021


Operating Activities









Net income


$

6,998



$

6,523


Depreciation



2,246




2,208


Deferred and other income taxes



262




154


Other - net



(144)




147


Cash provided by operating activities



9,362




9,032











Investing Activities









Capital investments*



(3,620)




(2,936)


Maturities of short-term investments



46




94


Purchases of short-term investments



(46)




(70)


Other - net



149




203


Cash used in investing activities



(3,471)




(2,709)











Financing Activities









Share repurchase programs



(6,282)




(7,291)


Debt issued



6,080




4,201


Dividends paid



(3,159)




(2,800)


Debt repaid



(2,291)




(1,299)


Net issuance of commercial paper



(205)




325


Debt exchange



-




(270)


Other - net



(30)




(24)


Cash used in financing activities



(5,887)




(7,158)











Net Change in Cash, Cash Equivalents, and Restricted Cash

4




(835)


Cash, cash equivalents, and restricted cash at beginning of year


983




1,818


Cash, cash equivalents, and restricted cash at end of year

$

987



$

983











Free Cash Flow**









Cash provided by operating activities


$

9,362



$

9,032


Cash used in investing activities



(3,471)




(2,709)


Dividends paid



(3,159)




(2,800)


Free cash flow


$

2,732



$

3,523




*

Capital investments include locomotive and freight car early lease buyouts of $70 million in 2022 and $34 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.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Operating and Performance Statistics (unaudited)

 



4th Quarter



Full Year


For the Periods Ended December 31,


2022



2021



%



2022



2021



%


Operating/Performance Statistics

























Freight car velocity (daily miles per car)*



191




197




(3)

%



191




203




(6)

%

Average train speed (miles per hour)*



23.8




24.2




(2)




23.8




24.6




(3)


Average terminal dwell time (hours)*



24.5




24.4




-




24.4




23.7




3


Locomotive productivity (GTMs per horsepower day)

123




129




(5)




125




133




(6)


Gross ton-miles (GTMs) (millions)



208,949




209,970




-




843,443




817,919




3


Train length (feet)



9,191




9,319




(1)




9,329




9,334




-


Intermodal car trip plan compliance (%)**



73




78




(5)

pts



67




73




(6)

pts

Manifest/Automotive car trip plan compliance (%)**

58




58




-

pts



59




63




(4)

pts

Workforce productivity (car miles per employee)

1,010




1,046




(3)




1,036




1,038




-


Total employees (average)



31,120




29,989




4




30,717




29,905




3



























Locomotive Fuel Statistics

























Average fuel price per gallon consumed

$

3.70



$

2.53




46

%


$

3.65



$

2.23




64

%

Fuel consumed in gallons (millions)



222




228




(3)




909




888




2


Fuel consumption rate***



1.064




1.088




(2)




1.078




1.086




(1)



























Revenue Ton-Miles (Millions)

























Grain & grain products



20,683




21,656




(4)

%



79,725




79,520




-

%

Fertilizer



2,701




3,185




(15)




11,769




12,387




(5)


Food & refrigerated



4,576




4,651




(2)




17,965




18,475




(3)


Coal & renewables



21,847




22,795




(4)




91,824




85,586




7


Bulk



49,807




52,287




(5)




201,283




195,968




3


Industrial chemicals & plastics



6,626




7,257




(9)




29,572




30,048




(2)


Metals & minerals



9,367




8,611




9




37,827




32,993




15


Forest products



5,546




6,458




(14)




25,438




25,863




(2)


Energy & specialized markets



9,575




9,420




2




37,068




37,902




(2)


Industrial



31,114




31,746




(2)




129,905




126,806




2


Automotive



4,384




3,830




14




17,018




14,879




14


Intermodal



17,622




16,977




4




72,546




73,620




(1)


Premium



22,006




20,807




6




89,564




88,499




1


Total



102,927




104,840




(2)

%



420,752




411,273




2

%



*

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.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income (unaudited)

 

Millions,

2022


Except Per Share Amounts and Percentages,

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year


Operating Revenues





















Freight revenues


$

5,440



$

5,842



$

6,109



$

5,768



$

23,159


Other revenues



420




427




457




412




1,716


Total operating revenues



5,860




6,269




6,566




6,180




24,875


Operating Expenses





















Compensation and benefits



1,101




1,092




1,278




1,174




4,645


Fuel



714




940




932




853




3,439


Purchased services and materials



561




622




626




633




2,442


Depreciation



555




559




563




569




2,246


Equipment and other rents



215




230




215




238




898


Other



337




331




319




301




1,288


Total operating expenses



3,483




3,774




3,933




3,768




14,958


Operating Income



2,377




2,495




2,633




2,412




9,917


Other income, net



47




163




124




92




426


Interest expense



(307)




(316)




(315)




(333)




(1,271)


Income before income taxes



2,117




2,342




2,442




2,171




9,072


Income taxes



(487)




(507)




(547)




(533)




(2,074)


Net Income


$

1,630



$

1,835



$

1,895



$

1,638



$

6,998























Share and Per Share





















Earnings per share - basic


$

2.58



$

2.93



$

3.05



$

2.67



$

11.24


Earnings per share - diluted


$

2.57



$

2.93



$

3.05



$

2.67



$

11.21


Weighted average number of shares - basic



632.2




625.6




620.4




612.7




622.7


Weighted average number of shares - diluted



633.6




626.8




621.5




613.7




624.0


Dividends declared per share


$

1.18



$

1.30



$

1.30



$

1.30



$

5.08























Operating Ratio



59.4

%



60.2

%



59.9

%



61.0

%



60.1

%

Effective Tax Rate



23.0

%



21.6

%



22.4

%



24.6

%



22.9

%

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

Freight Revenues Statistics (unaudited)

 



2022



1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Full Year


Freight Revenues (Millions)





















Grain & grain products


$

877



$

867



$

880



$

974



$

3,598


Fertilizer



180




183




178




171




712


Food & refrigerated



267




271




290




265




1,093


Coal & renewables



508




492




611




523




2,134


Bulk



1,832




1,813




1,959




1,933




7,537


Industrial chemicals & plastics



520




557




579




502




2,158


Metals & minerals



485




562




601




548




2,196


Forest products



364




386




390




325




1,465


Energy & specialized markets



552




586




624




624




2,386


Industrial



1,921




2,091




2,194




1,999




8,205


Automotive



501




561




601




594




2,257


Intermodal



1,186




1,377




1,355




1,242




5,160


Premium



1,687




1,938




1,956




1,836




7,417


Total


$

5,440



$

5,842



$

6,109




5,768




23,159


Revenue Carloads (Thousands)





















Grain & grain products



205




195




190




208




798


Fertilizer



45




53




51




41




190


Food & refrigerated



47




48




48




44




187


Coal & renewables



225




202




243




215




885


Bulk



522




498




532




508




2,060


Industrial chemicals & plastics



160




161




165




151




637


Metals & minerals



182




205




202




196




785


Forest products



64




63




62




52




241


Energy & specialized markets



131




141




140




140




552


Industrial



537




570




569




539




2,215


Automotive



190




192




198




198




778


Intermodal [a]



757




805




811




743




3,116


Premium



947




997




1,009




941




3,894


Total



2,006




2,065




2,110




1,988




8,169


Average Revenue per Car





















Grain & grain products


$

4,269



$

4,451



$

4,641



$

4,681



$

4,509


Fertilizer



4,016




3,437




3,504




4,167




3,749


Food & refrigerated



5,637




5,770




6,017




5,957




5,844


Coal & renewables



2,262




2,426




2,514




2,431




2,410


Bulk



3,508




3,642




3,685




3,799




3,658


Industrial chemicals & plastics



3,247




3,455




3,508




3,335




3,388


Metals & minerals



2,660




2,755




2,969




2,790




2,797


Forest products



5,672




6,128




6,347




6,264




6,092


Energy & specialized markets



4,219




4,161




4,434




4,459




4,320


Industrial



3,574




3,674




3,852




3,711




3,704


Automotive



2,640




2,919




3,030




3,007




2,902


Intermodal [a]



1,566




1,711




1,672




1,672




1,656


Premium



1,782




1,943




1,939




1,953




1,905


Average


$

2,711



$

2,830



$

2,895



$

2,902



$

2,835




[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,


For the Twelve Months Ended


2022



2021


Net income


$

6,998



$

6,523


Add:









Income tax expense



2,074




1,955


Depreciation



2,246




2,208


Interest expense



1,271




1,157


EBITDA


$

12,589



$

11,843


Adjustments:









Other income, net



(426)




(297)


Interest on operating lease liabilities**



54




56


Adjusted EBITDA


$

12,217



$

11,602


Debt


$

33,326



$

29,729


Operating lease liabilities



1,631




1,759


Unfunded pension and OPEB, net of tax cost of $0 and $0 [a]



-




-


Adjusted debt


$

34,957



$

31,488


Adjusted debt / adjusted EBITDA



2.9




2.7



Comparable Adjusted Debt / Adjusted EBITDA*











Dec 31,



Dec 31,




2022



2021


Adjusted debt / Adjusted EBITDA



2.9




2.7


Factors Affecting Comparability:









Labor accrual adjustment [b]



(0.1)




N/A


Comparable adjusted debt / adjusted EBITDA*



2.8




2.7




[a]

Prior periods were recast to conform to the current year presentation, which removes the impact of pension and OPEB when the net amount represents a funded amount.

[b]

Adjustments remove the impact of $69 million from net income and $23 million from income tax expense for the year ended December 31, 2022. See page 10 for a reconciliation to GAAP.



*

Total debt plus operating lease liabilities plus after-tax unfunded pension and other postretirement benefit (OPEB) liabilities 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 tables above provide a reconciliation from net income to adjusted EBITDA, debt to adjusted debt, and adjusted debt to adjusted EBITDA to comparable adjusted debt to adjusted EBITDA. At December 31, 2022 and 2021, the incremental borrowing rate on operating lease liabilities was 3.3% and 3.2%, 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


2022



2021


Net income


$

6,998



$

6,523


Average equity


$

13,162



$

15,560


Return on average common shareholders' equity



53.2

%



41.9

%


Return on Invested Capital as Adjusted (ROIC)*









Millions, Except Percentages


2022



2021


Net income


$

6,998



$

6,523


Interest expense



1,271




1,157


Interest on average operating lease liabilities



56




54


Taxes on interest



(304)




(280)


Net operating profit after taxes as adjusted


$

8,021



$

7,454


Average equity


$

13,162



$

15,560


Average debt



31,528




28,229


Average operating lease liabilities



1,695




1,682


Average invested capital as adjusted


$

46,385



$

45,471


Return on invested capital as adjusted



17.3

%



16.4

%

Comparable Return on Invested Capital as Adjusted (Comparable ROIC)*




2022



2021


Return on invested capital as adjusted



17.3

%



16.4

%

Factors Affecting Comparability:









Labor accrual adjustment [a]



0.1




N/A


Comparable return on invested capital as adjusted



17.4

%



16.4

%



[a]

Adjustments remove the impact of $69 million from both net income for the year ended and shareholders' equity as of December 31, 2022. 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, 2022 and 2021, the incremental borrowing rate on operating lease liabilities was 3.3% and 3.2%, respectively.

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
Non-GAAP Measures Reconciliation to GAAP 


Financial Performance*


Reported results

Labor accrual

Adjusted results


Millions, Except Per Share Amounts and Percentages



(GAAP)




adjustment





(non-GAAP)


For the Twelve Months Ended December 31, 2022












Compensation and benefits expense


$

4,645



$

(92)




$

4,553


Operating expense



14,958




(92)





14,866


Operating income



9,917




92





10,009


Income taxes



(2,074)




(23)





(2,097)


Net income



6,998




69





7,067


Diluted EPS



11.21




0.12





11.33


Operating ratio



60.1

%



(0.3)


pts



59.8

%

As of December 31, 2022














Shareholders' equity


$

12,163



$

69




$

12,232




*

The above table reconciles our results for the twelve months ended and as of December 31, 2022, to adjust results that exclude the impact of certain items identified as affecting comparability. We use adjusted compensation and benefits expense, 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, compensation and benefits expense, operating expense, operating income, income taxes, net income, diluted EPS, operating ratio, and shareholders' equity as indicators of operating performance.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/union-pacific-reports-fourth-quarter-and-full-year-2022-results-301728715.html

SOURCE Union Pacific Corporation

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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