Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2014 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Jul 24, 2014
Slide 1: Second Quarter 2014 Earnings Release
Second Quarter 2014 Earnings Release July 24, 2014 Jack Koraleski, CEO 1 Second Quarter 2014 Record Results Earnings Per Share Positives Second Quarter • Best-Ever Quarter +21% $1.43 – Operating Revenue Best-Ever – Operating Income Quarter $1.18 – Operating Ratio $1.05 – Earnings • Franchise Diversi
Slide 2: Second Quarter 2014 Marketing & Sales Review
Second Quarter 2014 Marketing & Sales Review July 24, 2014 Eric Butler, Executive VP – Marketing & Sales 3 Second Quarter 2014 Recap Freight Revenue Mix Volume Growth Intermodal Agricultural 20% +16% Industrial Products 20% Agricultural 17% Intermodal dal +12% Coal Autos 17% 10% Chemicals al Industr
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $934M (+19%) Volume 243K (+16%) ARC $3,833 (+2%) Grain* +43% Volume Mix 86.7 60.6 Grain Products 34% Food & 2013 2014 Refrigerated 24% Grain Products* Grain 42% +8% 83.0 76.5 Quarterly Drivers 2013 2014 • Grain and Grain Products Exports Food & Refrigerated* +3% 59.3 •
Slide 4: Chemicals and Coal
Chemicals Revenue $913M (+3%) Volume 283K (-1%) ARC $3,230 (+4%) Industrial Chemicals* +7% Volume Mix 62.9 67.1 Petrol. Crude Oil & LP Gas 13% 14% Soda Ash Fertilizer 2013 2014 10% 18% Industrial Fertilizer* Chemicals Plastics +2% 24% 21% 52.0 50.8 Quarterly Drivers 2013 2014 • Strong Industrial Che
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $1,130M (+16%) Volume 356K (+12%) ARC $3,175 (+3%) Non-Metallic Minerals* Volume Mix +21% 76.0 Lumber 62.9 Minerals/ 10% Paper Consumer 8% 21% Gov’t/Waste 2013 2014 12% Construction 32% Metals Lumber* 17% +17% 35.0 29.9 Quarterly Drivers 2013 2014 • Drilling Activity – Fr
Slide 6: Second Half 2014 Volume Outlook
Second Half 2014 Volume Outlook Agricultural Products ? 2014 Crop Projections + Ethanol Automotive + Strong Industry Sales Continue Chemicals + Most Markets Remain Solid - Crude Oil Spreads Coal + Low Coal Inventories ? Weather Industrial Products + Shale Drilling - Frac Sand + Construction ? Housin
Slide 7: Dedicated Focus on Safety; Network Performance Challenges
Dedicated Focus on Safety 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 3.21 3.07 -4% 2.95 1.15 -6% 2.98 1.01 1.07 1.01 Full Year 1st Half Record Record Full Year 1st Half Record
Slide 8: Service Metrics and Network Productivity
Service Metrics Second Quarter Velocity (As reported to the AAR, in mph) • Operational Headwinds Good 26.1 26.6 -7% 25.7 23.9 • Agility & Resiliency Demonstrated with Resources & Service Plan 2011 2012 2013 2014 • Strategic Investments & Freight Car Dwell (As reported to the AAR, in hours) Surge Res
Slide 9: Capital Investments and 2014 Operating Outlook
Capital Investments Replacement, Service, Growth & Productivity, and PTC 2014 Capital Plan: ~$4.1 Billion Key 2014 Capacity Projects ($ in Millions) • Sunset Route: 56 miles PTC • Southern Region Capacity $450 - Siding additions Service, Growth - Terminal enhancements & Productivity $1,200 - Double
Slide 10: Second Quarter 2014 Financial Review: Income Statement
Second Quarter 2014 Financial Review July 24, 2014 Rob Knight, CFO 19 Second Quarter Income Statement In Millions (except EPS) 2014 2013 % Operating Revenues $6,015 $5,470 10 Operating Expenses 3,819 3,592 6 Operating Income 2,196 1,878 17 Other Income 22 23 (4) Interest Expense (138) (133) 4 Income
Slide 11: Freight Revenue and Core Pricing Trends
Freight Revenue Second Quarter (In Millions) +10% +2.5% $5,661 +8% (.5%) Flat $5,153 Volume Mix Fuel Core Surcharge Price Mix Drivers Positive Negative • Grain • Intermodal • Frac Sand • Aggregates & Cement 2013 2014 21 Core Pricing Trends • Core Pricing Above Core Pricing Gains Inflation 4% 4% 3.5%
Slide 12: Compensation & Benefits Expense; Fuel Expense
Compensation & Benefits Expense Second Quarter 2014 $1,246M, +5% Compensation & Benefits (in Millions) • Higher Volume +5% $1,185 $1,246 • Inflation Costs • Less than Optimal Service Performance • Leveraging Volume 2013 2014 Growth Workforce Levels (Quarterly Average) +1% 47,052 • Volume Related 46,
Slide 13: Second Quarter 2014 Expense Review
Second Quarter 2014 Expense Review In Millions Purchased Services & Materials • Higher Subsidiary Contract +9% $636 Expense $585 • Higher Locomotive & Freight Car Material Costs • Increased Crew 2013 2014 Transportation & Lodging Depreciation +7% $470 $438 • Higher Depreciable Asset Base from Recent
Slide 14: Operating Ratio Performance; Strong Financial Position
Operating Ratio Performance Second Quarter Best-Ever Quarter (Percent) • 8% Volume Increase 71.3 vs 2013 67.0 • Pricing Above Inflation -2.2 pts 65.7 63.5 • Leveraging Volume Best-Ever Quarter 1st Half 2014 Operating Ratio: 65.2% 2011 2012 2013 2014 27 Strong Financial Position Six Month Period Endi
Slide 15: Driving Strong Shareholder Value; 2014 Outlook
Driving Strong Shareholder Value Cumulative Share Repurchases • First Half 2014 Activity (In Millions) 228.4 – Repurchases totaling $1.5 212.4 billion 183.3 – 16 million shares @ avg 157.7 price of $93.29 128.1 • Since 2007, repurchases total 228.4 94.8 94.8 million shares @ avg price of $47.43 50.5
Slide 16: Looking Ahead
Second Quarter 2014 Earnings Release July 24, 2014 Jack Koraleski, CEO 31 Looking Ahead • Volume Growth • Network Performance • Invest in the Future • Economic Optimism 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, the potential impact of wea