Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2015 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Oct 22, 2015
Slide 1: Third Quarter 2015 Earnings Release
October 22, 2015 Third Quarter 2015 Earnings Release Lance Fritz Chairman, President & CEO 1 Third Quarter 2015 Results Earnings Per Share Third Quarter • Earnings Per Share -2% Down 2% $1.53 $1.50 $1.24 • Softness in Demand • Solid Core Pricing • Record Operating 2013 2014 2015 Ratio 2
Slide 2: Third Quarter 2015 Recap
October 22, 2015 Third Quarter 2015 Marketing & Sales Review Eric Butler Executive VP - Marketing & Sales 3 Third Quarter 2015 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 20% Automotive +5% 19% Coal Agricultural Agricultural Products -3% 17% Products 17% Chemicals Autos Ch
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $880M (-4%) Volume 232K (-3%) ARC $3,793 (-1%) Grain* Grain Food & Products* Refrigerated* 85.7 -11% +1% Volume Mix 79.7 80.3 76.5 Flat 57.8 57.7 Food & Refrigerated 25% Grain 40% 2014 2015 2014 2015 2014 2015 Grain Products 35% Quarterly Drivers • Soft Export Grain Dem
Slide 4: Chemicals and Coal
Chemicals Revenue $882M (-6%) Volume 278K (-3%) ARC $3,165 (-3%) Plastics* Fertilizer* Crude Oil* 62.4 +7% 66.6 Volume Mix -10% 50 7 50.7 Crude 45.6 Petrol. -40% & LP Gas Oil 34.8 14% 8% 21.0 Fertilizer Soda Ash 16% 11% 2014 2015 2014 2015 2014 2015 Industrial Plastics Chemicals 24% 27% Quarterly Dr
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $979M (-16%) Volume 319K (-12%) ARC $3,073 (-4%) Minerals* Metals* Construction* 115.2 +1% 116.8 Volume Mix** -31% 81.2 Lumber -26% Minerals 10% 56.3 60.3 Paper 18% 44.8 9% Specialized Markets 12% 2014 2015 2014 2015 2014 2015 Construction Metals 37% 14% Quarterly Drivers
Slide 6: Fourth Quarter 2015 Volume Outlook
Fourth Quarter 2015 Volume Outlook Agricultural Products Chemicals - Global Grain Supply + Core Markets Solid ? Refrigerated Markets - Crude Oil Prices and S Spreads d Automotive Industrial Products + Strong Industry Sales - Shale Drilling Continue ? Housing Impact + Construction Products Coal Inter
Slide 7: Safety and 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 +17% 1.19 -12% 3.56 1.06 1.10 1.05 3.28 3.21 3.24 0 92 0.92 3 04 3.04 YTD YTD Record Record FY 2011 FY 2012 FY 2013 YTD YTD FY 2011 FY
Slide 8: Resourcing to Demand and Network Productivity
Resourcing to Demand Significant Progress in Third Quarter Total TE&Y** 18,054 18,100 18,115 17,965 • TE&Y Workforce 17,393 17,422 17,115 16,220 15,687 • Furlough F l h / AWTS: AWTS ~ 2,700* 2 700* • September Down 10% vs June Jan Feb Mar Apr May Jun Jul Aug Sep • Locomotives Active Locomotive Fleet
Slide 9: Operating Outlook
Operating Outlook • Generate Record Safety Results on the Way Toward Incident Free Environment • Leverage Franchise to Drive Operational Performance • Realize Productivity to Improve Cost Performance • Create Value for Customers & Increase Returns for Shareholders 17 October 22, 2015 Third Quarter 2
Slide 10: Third Quarter Income Statement and Freight Revenue
Third Quarter Income Statement In Millions (except EPS) 2015 2014 % Operating Revenues $5,562 $6,182 (10) O Operating ti Expenses E 3 354 3,354 3 852 3,852 (13) Operating Income 2,208 2,330 (5) Other Income 30 20 50 Interest Expense (157) (144) 9 Income Taxes (781) (836) (7) Net Income $1,300 $1,370
Slide 11: Core Pricing Trends and Compensation & Benefits Expense
Core Pricing Trends • Core Pricing Core Pricing Gains Above bo e Inflation at o 4% 4% 3.5% 3% • Pricing to the 2.5% 2.5% Value Proposition 2% • Legacy Benefit 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 21 Compensation & Benefits Expense Third Quarter 2015 $1,267M, -2% Compensation & Benefits Quarterly Drive
Slide 12: Fuel Expense and Expense Review
Fuel Expense Third Quarter 2015 $484M, -45% Gross-Ton-Miles Quarterly Drivers (in Millions) -8% 259,969 • Decrease in GTMs 238,001 Driven by Lower Volumes 2014 2015 • Consumption Rate Increased 1% Driven Average Fuel Price (Per Gallon Consumed) By Negative Mix -40% $3.01 • Lower Average Diesel $1.81
Slide 13: Expense Review and Operating Ratio Performance
Third Quarter 2015 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $310 -3% $302 • Lower Locomotive Lease & Volume- Related Expense 2014 2015 Other • Decreased ec eased Freight, e g t, $242 -15% Equipment, & Property $205 Damage Costs • Reduction in General 2014 2015 Expe
Slide 14: Free Cash Flow and Debt & Leverage
Free Cash Flow Nine Month Period Ended September 30 ($ In Millions) Free Cash Flow* • Solid Cash From Ops C h From Cash F Ops O IInvesting ti Dividends $5,358 $5,625 • Capital Investments ($3,325) ($3,250) • Dividends (($1,877)) • Payment Date ($1,186) 4Q: ($438) Adjustment in First Quarter 2014 201
Slide 15: Driving Strong Shareholder Value and Closing Out 2015
Driving Strong Shareholder Value Quarterly Share Repurchases ($ In Millions) • Repurchase Activity $1,238 • 13.8 Million Shares in 3Q $834 $856 $683 $807 $806 • 28.7 28 7 Million Shares YTD • ~ 59 Million Shares Remain 2014 2015 2014 2015 2014 2015 Under Current Authorization 1Q 2Q 3Q Dividends & Sh
Slide 16: Looking Ahead
October 22, 2015 Third Quarter 2015 Earnings Release Lance Fritz Chairman, President & CEO 31 Looking Ahead • Further Productivity & Cost Efficiencies • Unrelenting Focus on Safety & Service • Uncertain Economy & Demand Outlook • Long-Term Franchise Opportunity 32
Slide 17: Cautionary Information
Cautionary Information This presentation and related materials contain statements about the Corporation’s future that are not statements of historical fact, including specifically the statements regarding the Corporation’s expectations with respect to economic conditions, government regulation, and