Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2018 Earnings Presentation
15 slides from Union Pacific's earnings presentation, Oct 25, 2018
Slide 1: Third Quarter 2018 Results
October 25, 2018 Third Quarter 2018 Earnings Release Lance Fritz Chairman, President & CEO 1 Third Quarter 2018 Results Earnings Per Share Operating Ratio Third Quarter Third Quarter +43% $2.15 Flat All-Time 61.7 61.7 $1.50 Quarterly Record 2017 2018 2017* 2018 * Certain prior period amounts have be
Slide 2: Third Quarter 2018 Recap
October 25, 2018 Third Quarter 2018 Marketing & Sales Review Kenny Rocker Executive Vice President – Marketing & Sales 3 Third Quarter 2018 Recap Volume Growth 7-Day Monthly Carloadings (000s) 190 Energy -2% 180 2018 @173 Agricultural +2% 2017 @168 170 Premium +9% 2016 @164 160 I d ti l Industrial +
Slide 3: Agricultural Products and Energy
Agricultural Products Revenue $1,133M (+6%) Volume 285K (+2%) ARC $3,973 (+4%) Grain* Grain Fertilizer Products Volume Mix +2% 84.7 86.4 +6% 75.7 79.9 Food & +5% 48.8 51.5 Refrigerated 18% Grain 36% Fertilizer 2017 2018 2017 2018 2017 2018 18% Grain Quarterly Drivers Products 28% • Feed Grain Streng
Slide 4: Industrial and Premium
Industrial Revenue $1,497M (+13%) Volume 458K (+9%) ARC $3,269 (+3%) Construction Industrial Plastics +10% Chemicals 98.5 107.9 +14% Volume Mix 83.9 +14% 73.4 70.7 61.9 Specialized 12% Soda Ash Construction 7% 24% Plastics Forest 2017 2018 2017 2018 2017 2018 15% Products 13% Quarterly Drivers Metal
Slide 5: 2018 Volume Outlook
2018 Volume Outlook Agricultural Products Industrial ? Grain + Plastics + Biofuels + Metals + Food and Beverage + Industrial Production Energy Premium + Petroleum Products + Over the Road Conversions – Frac F S d Sand + New N IInternational t ti l Business B i – Coal Headwinds ? Automotive Sales 9 O
Slide 6: Safety and Unified Plan 2020
Safety Employee Rail Equipment (Reportable Personal Injury Incidents Per (Reportable Derailment Incidents 200,000 Employee-Hours) Per Million Train Miles) Good Good +8% 0 98 0.98 3.10 3 02 3.02 3.20 0.87 1% -1% 2 97 2.97 0.75 0.78 0.77 2.65 Full Year Record FY14 FY15 FY16 YTD17 YTD18 FY14 FY15 FY16
Slide 7: Mid-America Corridor Update and Key Performance Indicators
Mid-America Corridor Update Eastport Seattle Duluth Portland Hinkle • ~50% of Carloads Touch the Corridor Minneapolis/St. Paul Nampa Eugene Milwaukee Pocatello Clinton Green River North Platte Chicago Ogden Council Des Cheyenne Gibbon Bluffs Moines Elko Salt Lake City Grand Jct Denver Marysville Top
Slide 8: Laser Focused on Resources; Recent Initiatives
Laser Focused on Resources Active Locomotive Fleet -8% 7,505 6,878 • Removed Over 625 Aug 1, 2018 Current* Locomotives Since August 1 TE&Y • TE&Y Operating Leverage ((Full-Time Equivalent) q ) -2% 15,751 15,401 Aug '18 Sep '18 * As of October 24, 2018 15 Recent Initiatives • Consolidating Operating
Slide 9: Operating Outlook
Operating Outlook • Encouraged by Early Results • Unified Plan 2020 Expectations: − A Safe, More Reliable Service Product − Significant g Productivity y Savings 17 October 25, 2018 Third Quarter 2018 Financial Review Rob Knight Executive Vice President & Chief Financial Officer 18
Slide 10: Third Quarter Income Statement and Freight Revenue
Third Quarter Income Statement $ in Millions (except EPS) 2018 2017 % Operating Revenues $5,928 $5,408 10 O Operating ti Expenses* E * 3 659 3,659 3 335 3,335 10 Operating Income 2,269 2,073 9 Other Income / (Expense)* 48 90 (47) Interest Expense (241) (180) 34 Income Taxes (483) (789) (39) Net Inco
Slide 11: Third Quarter Operating Expenses
Third Quarter Operating Expenses $ In Millions Compensation & Fuel Benefits +46% $659 +2% $1 237 $1,237 $1 262 $1,262 $450 2017* 2018 2017 2018 Purchased Services & • Volume-Related Costs, Network Materials Inefficiencies and TE&Y Training +3% $615 $632 • Higher Diesel Fuel Prices • Higher Purchased
Slide 12: Productivity Update and Cash Flow & Debt
Productivity Update 3Q18 Net Productivity by Category ($ in millions) •4Q14: Productivity $438 Gains of ~$60 ($20) Network and Slower velocity, velocity TE&Y recrew, recrew Train Ops Limos & Lodging, Overtime, and Higher fuel consumption rate Million, Offset by ~$50 Million of Service Related Costs
Slide 13: Delivering Value to Shareholders; Financial Outlook
Delivering Value to Shareholders $ In Millions Dividends Share Repurchases $1,716 $7,034 YTD 2018 Cash Returned $1,460 ASR to Shareholders $2,911 $3,600 • Dividends: $3,434 − $1.7 Billion YTD 2017 YTD 2018 YTD 2017 YTD 2018 − Three, 10% dividend increases in the past year Cash Returned to Shareholde
Slide 14: Looking Ahead
October 25, 2018 Third Quarter 2018 Earnings Release Lance Fritz Chairman, President & CEO 27 Looking Ahead • Record Third Quarter Results • Strong Business Environment • Regain Productivity M Momentum t • Unified Plan 2020 28
Slide 15: 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; its ability to generate financial r