Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2014 Earnings Presentation
19 slides from Union Pacific's earnings presentation, Jan 22, 2015
Slide 1: Fourth Quarter 2014 Record Results
Fourth Quarter 2014 Earnings Release January 22, 2015 Jack Koraleski, CEO 1 Fourth Quarter 2014 Record Results Earnings Per Share Positives Fourth Quarter • Best-Ever Quarter +27% $1.61 • Operating Income Best-Ever Quarter • Operating Ratio $1.27 • Earnings $1.10 • Franchise Diversity Challenges • N
Slide 2: Fourth Quarter 2014 Recap
Fourth Quarter 2014 Marketing & Sales Review January 22, 2015 Eric Butler, Executive VP – Marketing & Sales 3 Fourth Quarter 2014 Recap Freight Revenue Mix Volume Growth Intermodal Industrial al 20% +10% Industrial Productss 19% Agricultural 17% Coal +9% Coal Autos 19% 9% Chemicals Intermodal dal +6
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $1,018M (+9%) Volume 252K (+4%) ARC $4,031 (+5%) Grain* +3% Volume Mix 93.2 96.1 Grain Products 33% Food & Refrigerated 2013 2014 23% Grain Grain Products* 44% +4% 84.0 80.8 Quarterly Drivers 2013 2014 • Exports of Grain and Grain Food & Refrigerated* Products +4% 58.8
Slide 4: Chemicals and Coal
Chemicals Revenue $922M (+8%) Volume 275K (+5%) ARC $3,344 (+3%) Fertilizer* Volume Mix +17% 44.6 38.2 Petrol. Crude Oil & LP Gas 13% 15% Fertilizer Soda Ash 16% 2013 2014 11% Crude Oil* Industrial Chemicals Plastics +7% 23% 22% 34.4 32.1 Quarterly Drivers 2013 2014 • Strong Dry Nitrogen and Petrole
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $1,098M (+15%) Volume 335K (+10%) ARC $3,283 (+5%) Non-Metallic Minerals* Volume Mix +28% 82.0 Lumber 9% Paper 64.3 Minerals/ Consumer 8% 25% Gov’t/Waste 2013 2014 11% Construction 31% Metals Construction* 16% +17% 103.1 88.3 Quarterly Drivers 2013 2014 • Continued Frac S
Slide 6: 2015 Volume Outlook
2015 Volume Outlook Agricultural Products + Grain ? Ethanol & DDGs + Beer & Refrigerated Automotive + Strong Industry Sales Continue Coal + Low Coal Inventories ? Natural Gas Prices Chemicals + Most Markets Remain Solid - Crude Oil Prices and Spreads Industrial Products ? Shale Drilling + Constructi
Slide 7: Safety and Network Performance
Safety Full Year Employee* Rail Equipment (Reportable Personal Injury Incidents Per (Reportable Derailment Incidents 200,000 Employee-Hours) Per Million Train Miles) Good Good 1.37 3.28 -7% 3.21 3.24 1.19 -11% 2.98 3.00 1.06 1.10 0.98 Full Year Record Full Year Record 2010 2011 2012 2013 2014 2010 2
Slide 8: Network Productivity and Resources
Network Productivity Fourth Quarter 2014 Train Size Performance (vs 4Q 2013) Good Manifest* +5% • Solid Growth in Auto* +3% Each Region Coal* +2% • Leveraged Volume Intermodal +1% Growth Grain* +1% * Best-ever quarter • Net Productivity Fuel Consumption Rate* Gains (vs 4Q 2013) Good -2% 1.157 • Reco
Slide 9: Strengthening the Franchise; Setting the Course for 2015
Strengthening the Franchise Replacement, Growth & Productivity, and PTC $4.1B 2014 Capital* 2015 Capital Plan (in Millions) • Larger than 2014 Infrastructure • Safe and Resilient Replacement Infrastructure $1,780 PTC $385 • Continued Capacity Capacity/ Investments Commercial Facilities Locomotives/
Slide 10: Fourth Quarter Income Statement
Fourth Quarter 2014 Financial Review January 22, 2015 Rob Knight, CFO 19 Fourth Quarter Income Statement In Millions (except EPS) 2014 2013 % Operating Revenues $6,153 $5,630 9 Operating Expenses 3,780 3,657 3 Operating Income 2,373 1,973 20 Other Income 71 37 92 Interest Expense (146) (127) 15 Inco
Slide 11: Freight Revenue and 2014 Core Pricing Trends
Freight Revenue Fourth Quarter (In Millions) +9% $5,794 +3% Flat Flat +6% $5,297 Volume Core Fuel Mix Price Surcharge Mix Drivers Positive Negative • Frac Sand • Intermodal 2013 2014 21 2014 Core Pricing Trends • Core Pricing Above 2014 Core Pricing Gains Inflation 3% 2.5% 2.5% 2% • 2014 Legacy “Lig
Slide 12: Compensation & Benefits Expense; Fuel Expense
Compensation & Benefits Expense Fourth Quarter 2014 $1,289M, +7% Compensation & Benefits (in Millions) • Higher Volume +7% $1,210 $1,289 • Inflation Costs • Training Pipeline • Operational Inefficiencies 2013 2014 Workforce Levels (Quarterly Average) +5% 48,037 • Volume Related 45,951 Increases 2013
Slide 13: Expense Review
Fourth Quarter 2014 Expense Review In Millions Purchased Services & Materials • Volume Driven Contract +14% $665 and Subsidiary Expenses $585 • Higher Locomotive & Freight Car Material Costs • Increased Crew 2013 2014 Transportation & Lodging Depreciation +7% $489 $458 • Higher Depreciable Asset Bas
Slide 14: Operating Ratio Performance; Full Year Income Statement
Operating Ratio Performance Achieved Sub-65 OR Target Fourth Quarter Full Year (Percent) (Percent) 70.7 68.3 67.1 67.8 -2.6 pts -3.6 pts 66.1 65.0 63.5 61.4 Full Year Record Best- Ever Quarter 2011 2012 2013 2014 2011 2012 2013 2014 New Full Year Target of 60 +/- by 2019 27 Full Year Income Statemen
Slide 15: Strong Cash Generation; Capital Program and Returns
Strong Cash Generation Twelve Month Period Ending December 31 ($ In Millions) Cash From Operations +8% $7,385 $6,161 $6,823 Full Year • Record Cash from Ops Record • Free Cash Flow after Dividends of $1.5 Billion 2012 2013 2014 • Higher Capital Free Cash Flow* Expenditures (After Dividends) $2,085 F
Slide 16: Delivering Value to Shareholders; Strong Financial Position
Delivering Value to Shareholders Declared Dividend Per Share (cents) +10% 50 50 • Performance Drives Dividend +15% 45.5 45.5 Increases +14.5% 39.5 39.5 • Declared Dividend Increase of 34.5 34.5 27% vs. 4Q13 • Achieved Payout Ratio of 33.2% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2013 2014 Quarterly Share Repurchase
Slide 17: A Look Ahead to 2015
A Look Ahead to 2015 • 1Q and FY Volume Growth Assuming an Improving Economy • Record Earnings & Operating Ratio • Pricing for Reinvestability • Leverage Diverse Franchise • Increasing Shareholder Returns 33 Fourth Quarter 2014 Earnings Release January 22, 2015 Jack Koraleski, CEO 34
Slide 18: Looking Ahead; Cautionary Information
Looking Ahead • Moderate Economy • Uncertain Energy Market • Positive Volume Growth • Safely Improving Network Performance • Increasing Shareholder Returns 35 Cautionary Information This presentation and related materials contain statements about the Corporation’s future that are not statements of h
Slide 19: Question & Answer Session
Fourth Quarter 2014 Earnings Release January 22, 2015 Question & Answer Session 37