Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2015 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Jul 23, 2015
Slide 1: Second Quarter 2015 Results
July 23, 2015 Second Quarter 2015 Earnings Release Lance Fritz President & CEO 1 Second Quarter 2015 Results Earnings Per Share Second Quarter • Earnings Per Share Down 3% -3% $1.43 $1.38 $1.18 • Solid Core Pricing • Softness in Demand • Resource Agility 2013 2014 2015 2
Slide 2: Second Quarter 2015 Recap
July 23, 2015 Second Quarter 2015 Marketing & Sales Review Eric Butler Executive VP - Marketing & Sales 3 Second Quarter 2015 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 22% Automotive +7% 19% Coal 13% Agricultural Intermodal +2% Products 17% Chemicals 18% Autos Chemicals
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $867M (-7%) Volume 225K (-7%) ARC $3,844 (Flat) Grain* Grain Food & Products* Refrigerated* 86.7 -19% 83.0 -3% Volume Mix 80.5 70.1 -2% 59.3 57.9 Food & Refrigerated 25% Grain 39% 2014 2015 2014 2015 2014 2015 Grain Products 36% Quarterly Drivers • Weak Global Demand fo
Slide 4: Chemicals and Coal
Chemicals Revenue $905M (-1%) Volume 283K (Flat) ARC $3,197 (-1%) Plastics* Petrol. & LP Crude Oil* Gas* +11% 66.4 Volume Mix 59.7 +10% Petrol. Crude 43.3 -29% & LP Gas 39.4 Oil 35.6 15% 9% 25.2 Soda Ash 11% Fertilizer 17% Industrial 2014 2015 2014 2015 2014 2015 Chemicals 25% Plastics 23% Quarterly
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $970M (-14%) Volume 308K (-13%) ARC $3,144 (-1%) Construction* Minerals* Metals* 112.8 -5% 106.6 Volume Mix** -24% 76.7 Lumber -27% Minerals 10% 58.3 61.3 19% Paper 44.9 9% Specialized Markets 12% 2014 2015 2014 2015 2014 2015 Construction Metals 35% 15% Quarterly Drivers
Slide 6: 2015 Volume Outlook
2015 Volume Outlook Agricultural Products Chemicals ? Grain + Core Markets Solid + Ethanol Production - Crude Oil Prices and Spreads Automotive Industrial Products + Strong Industry Sales - Shale Drilling Continue ? Housing Impact + Construction Products Coal Intermodal ? Weather ? Retail Inventory
Slide 7: Safety and Network Performance
Safety Employee Rail Equipment (Reportable Personal Injury Incidents Per (Reportable Derailment Incidents 200,000 Employee-Hours) Per Million Train Miles) Good Good 1.19 +17% 1.10 -23% 3.46 1.06 1.06 3.28 3.21 3.24 2.95 0.82 First Half First Half Record Record 2011 2012 2013 1H14 1H15 2011 2012 2013
Slide 8: Resourcing to Demand and Network Productivity
Resourcing to Demand Progress Throughout 2015 Total TE&Y** • TE&Y Workforce 18,054 18,100 18,115 17,965 17,393 17,422 - 4% • June Down 4% vs March vs. Mar • Reduction in Training Jan Feb Mar Apr May Jun • Furlough / AWTS: 1,200* Active Locomotive Fleet • Locomotives 7,929 7,791 7,613 7,641 7,452 7,2
Slide 9: 2015 Operating Outlook
2015 Operating Outlook • Generate Record Safety Results on the Way Towards Zero • Leverage Franchise to Drive Operational Performance • Realize Productivity to Improve Cost Performance • Create Value for Customers & Increase Returns for Shareholders 17 July 23, 2015 Second Quarter 2015 Financial Rev
Slide 10: Second Quarter Income Statement and Freight Revenue
Second Quarter Income Statement In Millions (except EPS) 2015 2014 % Operating Revenues $5,429 $6,015 (10) Operating Expenses 3,480 3,819 (9) Operating Income 1,949 2,196 (11) Other Income 142 22 F Interest Expense (153) (138) 11 Income Taxes (734) (789) (7) Net Income $1,204 $1,291 (7) Weighted Ave
Slide 11: Core Pricing Trends and Compensation & Benefits Expense
Core Pricing Trends • Core Pricing 2014 - 15 Core Pricing Gains Above Inflation 4% 4% • Pricing to the 2.5% 2.5% 3% Value Proposition 2% • Legacy Benefit 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 21 Compensation & Benefits Expense Second Quarter 2015 $1,305M, +5% Compensation & Benefits Quarterly Drivers (in Mi
Slide 12: Fuel Expense and Expense Review
Fuel Expense Second Quarter 2015 $541M, -41% Gross-Ton-Miles Quarterly Drivers (in Millions) 252,500 -10% • Decrease in GTMs 227,608 Driven by Lower Volumes 2014 2015 • Consumption Rate Deteriorated 2% Average Fuel Price (Per Gallon Consumed) $3.10 -36% • Lower Average Diesel Fuel Price $1.99 2014 2
Slide 13: Expense Review and Operating Ratio Performance
Second Quarter 2015 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $316 -1% $312 • Lower Locomotive Lease & Freight Car Rental Expense 2014 2015 Other -1% • Lower Personal Injury $228 $225 Expense • Higher State & Local Taxes 2014 2015 25 Operating Ratio Performance Seco
Slide 14: Strong Financial Position and Shareholder Value
Strong Financial Position Six Month Period Ending June 30 ($ In Millions) Free Cash Flow* Cash From Ops Investing Dividends • Timing of Tax Payments $3,221 $3,773 • Capital Investments ($2,178) ($2,136) • Dividends ($1,401) ($776) 4Q: ($438) 1H: ($963) • Payment Date Adjustment in First Quarter 2014
Slide 15: 2015 Second Half Outlook
2015 Second Half Outlook • Focus on Core Pricing • Lower Year-over-Year Volumes • Business Mix Headwinds • Productivity / Cost Improvement 29 July 23, 2015 Second Quarter 2015 Earnings Release Lance Fritz President & CEO 30
Slide 16: Looking Ahead
Looking Ahead • Challenging Markets • Remain Agile with Resources • Improve Operating Performance • Focus on Safety, Service & Returns 31 Cautionary Information This presentation and related materials contain statements about the Corporation’s future that are not statements of historical fact, inclu
Slide 17: Question & Answer Session
July 23, 2015 Second Quarter 2015 Earnings Release Question & Answer Session 33