Union Pacific Corporation · NYSE:UNP
Union Pacific — Q1 2015 Earnings Presentation
18 slides from Union Pacific's earnings presentation, Apr 23, 2015
Slide 1: First Quarter 2015 Results
April 23, 2015 First Quarter 2015 Earnings Release Lance Fritz President & CEO 1 First Quarter 2015 Results Earnings Per Share Positives First Quarter • Operating Income up 7% +9% • Operating Ratio improved 2.3 pts. $1.30 $1.19 • Earnings Per Share up 9% $1.02 • Solid Core Pricing Challenges • Softn
Slide 2: First Quarter 2015 Recap
April 23, 2015 First Quarter 2015 Marketing & Sales Review Eric Butler Executive VP - Marketing & Sales 3 First Quarter 2015 Recap Freight Revenue Mix Volume Growth Intermodal 18% Industrial Automotive +7% 19% Agricultural 18% Agricultural Products ducts +3% Coal Autos 18% 10% Chemicals Chemicals -1
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $939M (+3%) Volume 245K (+3%) ARC $3,838 (+1%) Grain* Grain Food & Products* Refrigerated* 90.1 -2% 88.7 +4% 82.9 Volume Mix 79.9 +3% 55.7 57.5 Food & Refrigerated 25% Grain 39% 2014 2015 2014 2015 2014 2015 Grain Products 36% Quarterly Drivers • Gulf and River Exports
Slide 4: Chemicals and Coal
Chemicals Revenue $897M (Flat) Volume 267K (-1%) ARC $3,362 (+2%) Plastics* Fertilizer* Crude Oil* 57.9 +8% 62.5 Volume Mix +10% 45.3 Petrol. Crude 41.0 -38% & LP Gas 37.6 Oil 15% 9% 23.4 Soda Ash 11% Fertilizer 17% Industrial 2014 2015 2014 2015 2014 2015 Chemicals 25% Plastics 23% Quarterly Driver
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $1,017M (+1%) Volume 306K (-3%) ARC $3,325 (+3%) Construction* Metals* Gov’t / Waste* 91.6 +4% 95.1 Volume Mix -17% Lumber 57.2 10% 47.4 Minerals / -8% Paper 38.4 35.3 Consumer 9% 23% Gov’t/Waste 12% Construction 2014 2015 2014 2015 2014 2015 31% Metals Quarterly Drivers
Slide 6: 2015 Volume Outlook
2015 Volume Outlook Agricultural Products Chemicals ? Weather / 2015 Crop + Most Markets Remain + Ethanol & DDGs Solid + Beer & Refrigerated - Crude Oil Prices and Spreads Automotive Industrial Products + Strong Industry Sales - Shale Drilling Continue + Construction Products + Housing Coal Intermod
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 -23% 3.28 +6% 1.06 1.10 1.10 3.21 3.24 3.16 2.98 0.85 First Qtr Record 2011 2012 2013 1Q14 1Q15 2011 2012 2013 1Q14 1Q15 Public •
Slide 8: Network Productivity and Balancing Our Resources
Network Productivity Train Size Performance (vs 1Q14) • Record Train Size Auto* +5% Good Performance Manifest** +5% Coal* +1% • Terminal Grain** +1% Intermodal Flat Improvement * Best-ever quarter **First quarter record • Limited Resource Locomotive Productivity (Gross Ton Miles per HP Day) Producti
Slide 9: Strengthening the Franchise
Strengthening the Franchise Replacement, Growth & Productivity, and PTC • Safe and Resilient ~$4.2B 2015 Capital Plan* ($ in Millions) Infrastructure Technology / • Continued Capacity Locomotives / Equipment Other $200 Spending $1,100 • Southern Region Capacity / • Network Strategies Commercial Faci
Slide 10: 2015 Operating Outlook
2015 Operating Outlook • Record Safety Results on the Way Towards Zero • Drive Improvement in Network Performance • Realize Productivity • Remain Agile & Focus on Costs • Create Value for Customers & Increase Returns for Shareholders 19 April 23, 2015 First Quarter 2015 Financial Review Rob Knight C
Slide 11: First Quarter Income Statement and Freight Revenue
First Quarter Income Statement In Millions (except EPS) 2015 2014 % Operating Revenues $5,614 $5,638 - Operating Expenses 3,637 3,784 (4) Operating Income 1,977 1,854 7 Other Income 26 38 (32) Interest Expense (148) (133) 11 Income Taxes (704) (671) 5 Net Income $1,151 $1,088 6 Weighted Average Dilu
Slide 12: Core Pricing Trends
Core Pricing Trends • Core Pricing Above 2014 - 15 Core Pricing Gains Inflation 4% • More Favorable 3% Pricing Environment 2.5% 2.5% 2% • Legacy Benefit • Slightly Higher Inflation Escalators 1Q14 2Q14 3Q14 4Q14 1Q15 • Pricing for Reinvestibility 23 Compensation & Benefits Expense First Quarter 2015
Slide 13: Fuel Expense and Expense Review
Fuel Expense First Quarter 2015 $564M, -39% Gross-Ton-Miles Quarterly Drivers (in Millions) -1% 240,169 237,213 • GTMs Decreased 1% Driven by Lower Volumes • Consumption Rate 2014 2015 Improved 1% Average Fuel Price • Lower Average Diesel (Per Gallon Consumed) $3.12 -38% Fuel Price $1.95 2014 2015 2
Slide 14: Expense Review (cont) and Operating Ratio Performance
First Quarter 2015 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $312 Flat $311 • Higher Freight Car Rental Expense • Lower Other Rents Expense 2014 2015 Other +15% $259 • Higher State & Local $226 Taxes • Higher Casualty Expense 2014 2015 27 Operating Ratio Performance
Slide 15: Strong Financial Position and Shareholder Value
Strong Financial Position Three Month Period Ending March 31 ($ In Millions) Free Cash Flow* Cash From Ops Investing Dividends • Solid Cash from $2,064 Operations $1,767 • Increase in CapEx ($1,142) ($905) ($922) 4Q: ($438) • Dividends ($363) 1Q: ($484) • 1Q: 10% Increase 2014 2015 2014 2015 2014 20
Slide 16: 2015 Outlook
2015 Outlook Second Quarter • Energy Volumes Challenged • Coal Down Mid-Single Digits • Gradual Productivity Improvement Full Year • Continued Core Pricing Gains • Uncertain Volume Outlook • Potential Mix Shifts 31 April 23, 2015 First Quarter 2015 Earnings Release Lance Fritz President & CEO 32
Slide 17: Looking Ahead to the Future; Cautionary Information
Looking Ahead to the Future • Energy Market Uncertainty • Strengthening Economy • Improving Network Performance • Focus on Safety, Service & Returns 33 Cautionary Information This presentation and related materials contain statements about the Corporation’s future that are not statements of historic
Slide 18: Question & Answer Session
April 23, 2015 First Quarter 2015 Earnings Release Question & Answer Session 35