Union Pacific Corporation · NYSE:UNP
Union Pacific — Q1 2016 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Apr 21, 2016
Slide 1: First Quarter 2016 Earnings Release
April 21, 2016 First Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 1 First Quarter 2016 Results Earnings Per Share First Quarter • Earnings Per Share -11% Down 11% $1.30 $1.19 $1.16 • Softness in Demand • Solid Core Pricing • Focus on Productivity 2014 2015 2016 2
Slide 2: First Quarter 2016 Recap
April 21, 2016 First Quarter 2016 Marketing & Sales Review Eric Butler Executive VP - Marketing & Sales 3 First Quarter 2016 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 19% Automotive +7% 19% Coall C Agricultural 12% Chemicals Flat Products 20% Chemicals 19% Autos Intermod
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $882M (-6%) Volume 235K (-4%) ARC $3,749 (-2%) Grain* Grain Food & Products* Refrigerated* 94.6 -7% Volume Mix 87.7 -6% 83.1 77 8 77.8 +3% Food & 51.4 52.8 Refrigerated 22% Grain 45% 2015 2016 2015 2016 2015 2016 Grain Products 33% Quarterly Drivers • High Global Grain
Slide 4: Chemicals and Coal
Chemicals Revenue $878M (-2%) Volume 268K (Flat) ARC $3,272 (-3%) Crude Oil* Fertilizer* Industrial Chemicals* +16% 77.0 Volume Mix 66.2 Crude C d -8% Petrol. Oil 45.3 41.6 & LP Gas 6% 16% Fertilizer -32% 23.4 15% 15.9 Soda Ash 11% Plastics 2015 2016 2015 2016 2015 2016 Industrial 23% Chemicals 29%
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $834M (-18%) Volume 274K (-10%) ARC $3,041 (-9%) Minerals* Metals* Construction* 94.6 +5% 98.9 Volume Mix -38% 77 3 77.3 Lumber 12% -13% Paper 48.3 47.4 Minerals 41.1 18% 9% Specialized Markets 2015 2016 2015 2016 2015 2016 10% Construction 36% Metals 15% Quarterly Driver
Slide 6: 2016 Volume Outlook
2016 Volume Outlook Agricultural Products Chemicals - Global Grain Supply + LPGs + Domestic Grain Demand + Industrial Chemicals + Import p Beer ? Fertilizer - Crude C d Oil Automotive Industrial Products ? Sustained Consumer - Minerals Demand + Construction + Parts OTR Conversion + Lumber eta s ? Me
Slide 7: Safety; Network & Service Performance
Safety Employee Rail Equipment (Reportable Personal Injury Incidents Per (Reportable Derailment Incidents 200,000 Employee-Hours) Per Million Train Miles) Good Good 1.12 +2% 1.10 3.16 3.23 1 1.00 00 -12% 12% 2 2.93 93 2 2.98 98 0.85 2.79 0.75 First Qtr Record 1Q12 1Q13 1Q14 1Q15 1Q16 1Q12 1Q13 1Q14
Slide 8: Resourcing to Demand; Network Productivity
Resourcing to Demand Remaining Agile in a Dynamic Environment Total TE&Y** • TE&Y Workforce 18,090 17,593 16,341 14,808 14,141 • 1Q16 D Down 22% vs 1Q15 • Furlough / AWTS: ~ 3,800* 1Q15 2Q15 3Q15 4Q15 1Q16 • Locomotives Active Locomotive Fleet • 1Q16 Down 15% vs 1Q15 7,778 7 454 7,454 7,211 6,895 6,
Slide 9: Operating Outlook
Operating Outlook • Generate Record Safety Results • Remain Agile • Realize Productivity to Improve Cost Performance • Enhance Value Proposition with Excellent Customer Experience 17 April 21, 2016 First Quarter 2016 Financial Review Rob Knight CFO 18
Slide 10: First Quarter Income Statement; Freight Revenue
First Quarter Income Statement In Millions (except EPS) 2016 2015 % Operating Revenues $4,829 $5,614 (14) O Operating ti Expenses E 3 142 3,142 3 637 3,637 (14) Operating Income 1,687 1,977 (15) Other Income 46 26 77 Interest Expense (167) (148) 13 Income Taxes (587) (704) (17) Net Income $979 $1,15
Slide 11: Core Pricing Trends; Compensation & Benefits Expense
Core Pricing Trends • Solid Core Core Pricing Gains Pricing 4% 4% 3.5% 3.5% 3% • Pricing to a 2.5% 2.5% 2.5% Strong Value 2% Proposition 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 21 Compensation & Benefits Expense First Quarter 2016 $1,213M, -11% Compensation & Benefits Quarterly Drivers (in Mill
Slide 12: Fuel Expense; Expense Review
Fuel Expense First Quarter 2016 $320M, -43% Gross-Ton-Miles Quarterly Drivers (in Millions) 237,213 -13% • Decrease in GTMs 205,480 Driven by Lower Volumes & Mix 2015 2016 • Consumption Rate Increased 1% Driven Average Fuel Price (Per Gallon Consumed) By Negative Mix -36% $1.95 • Lower Average Diese
Slide 13: Expense Review (cont); Operating Ratio Performance
First Quarter 2016 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $311 -7% • Lower Volumes & $289 Improved Cycle Times • Decrease in Locomotive Lease Expense 2015 2016 Other -4% • Lower Personal Injury $259 $249 & Casualty Expenses • Higher State & Local Taxes 2015 2016
Slide 14: Free Cash Flow; Debt & Leverage
Free Cash Flow Three Month Period Ended March 31 ($ In Millions) Free Cash Flow* • Bonus Depreciation Cash From Ops In Investing esting Di id d Dividends $2,064 $2,173 • Capital Investments • Dividends ($1,142) ($672) ($922) 4Q14: • Payment Date ($438) ($465) Adjustment in First 1Q15: ($484) Quarter
Slide 15: Delivering Value to Shareholders; 2016 Outlook
Delivering Value to Shareholders Cumulative Share Repurchases • First Quarter Activity (In Millions) 289.1 • 9.3 Million Shares 279.8 • Repurchases Totaling $713 244.4 Million 212.4 183.3 • Repurchases Since 2007 157.7 • 289 Million Shares 128.1 • Avg Price: $57.93 • Current Program • About 43 Milli
Slide 16: Looking Ahead to the Future
April 21, 2016 First Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 31 Looking Ahead to the Future • Uncertain Economy & Demand Outlook • Efficient Network and Excellent Service • Unrelenting Focus on Productivity • Long-Term Franchise Opportunity 32
Slide 17: Cautionary Information
Cautionary Information This presentation 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 ge