Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2017 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Jan 25, 2018
Slide 1: Fourth Quarter 2017 Results
January 25, 2018 Fourth Quarter 2017 Earnings Release Lance Fritz Chairman, President & CEO 1 Fourth Quarter 2017 Results Earnings Per Share Operating Ratio Fourth Quarter Fourth Quarter $9.25 +0.6 pts. +10% 62.0 62.6 $1.53 58.7 $1.39 2016 2017 2017 2016 2017 2017 Adjusted* Reported Adjusted* Report
Slide 2: Fourth Quarter 2017 Recap
January 25, 2018 Fourth Quarter 2017 Marketing & Sales Review Beth Whited Executive VP & Chief Marketing Officer 3 Fourth Quarter 2017 Recap Volume Growth 7-Day Monthly Carloadings (000s) Industrial Products +17% 210 Chemicals +5% 190 2014 @188 Intermodal Flat 2015 @177 170 2017 @168 Coal -3% 2016 @
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $922M (-4%) Volume 239K (-7%) ARC $3,856 (+3%) Grain* Grain Food & Products* Refrigerated* -19% 111.3 Volume Mix 89.8 -2% 79.4 77.7 +2% Food & 51.0 52.2 Refrigerated 22% Grain 46% 2016 2017 2016 2017 2016 2017 Grain Products 32% Quarterly Drivers • Reduced Grain Exports
Slide 4: Chemicals and Coal
Chemicals Revenue $917M (+7%) Volume 270K (+5%) ARC $3,403 (+2%) Petroleum & LPG* Plastics* Fertilizer* Volume Mix -4% 67.1 64 7 64.7 Petrol. +15% & LP Gas 54.8 20% Fertilizer 47.8 +11% 43.3 16% Soda Ash 39.0 Soda 12%Ash 12% Plastics 2016 2017 2016 2017 2016 2017 Industrial 24% Chemicals 28% Quarter
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $1,062M (+28%) Volume 309K (+17%) ARC $3,434 (+10%) Minerals* Specialized Markets* +71% 91.2 Volume Mix 53.4 Other Lumber +20% Minerals 10% Paper 31.7 6% 9% 26.5 Frac Sand* 24% Construction 2016 2017 2016 2017 28% Specialized Markets Metals Quarterly Drivers 10% 13% • Imp
Slide 6: 2018 Volume Outlook
2018 Volume Outlook Agricultural Products Energy Industrial Premium + Ethanol Exports ? Frac Sand + Plastics + Over-the-Road Conversions + Food and Refrigerated ? Natural Gas Prices + Construction Products + International Intermodal ? Grain - Continued Coal Headwinds + Industrial Production - Automo
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 1.10 -3% 0 98 0.98 +5% 3 10 3.10 3 02 3.02 0.87 2.84 2.94 0.75 0.79 2.65 FY Record FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 Pu
Slide 8: Resources and Productivity
Resources TE&Y (Full-Time Equivalent) +6% 14,701 13,838 • Total Operating Workforce Down More Than 200 4Q16 4Q17 • Increase in TE&Y Training Mechanical & Engineering ((Full-Time Equivalent) q ) • Fewer Capital Employees 19,499 -4% 18,680 Driven by Productivity 4Q16 4Q17 15 Productivity Train Size Pe
Slide 9: Strengthening the Franchise and Operating Outlook
Strengthening the Franchise Replacement, Growth & Productivity, and PTC 2018 Capital Plan: ~$3.3 Billion* • Safe & Resilient Infrastructure ($ in Millions) Locomotives/ E i Equipmentt • Equipment Acquisitions $460 Technology/ • ~60 New Locomotives Other $240 • ~700 Freight Cars Infrastructure Replac
Slide 10: 2017 Impact of Tax Cuts and Jobs Act
January 25, 2018 Fourth Quarter 2017 Financial Review Rob Knight Executive VP & Chief Financial Officer 19 2017 Impact of Tax Cuts and Jobs Act $ in Millions (except EPS) Operating Income Net Diluted Fourth Quarter Income Taxes Income EPS Op Ratio 4Q 2017 Reported Results (GAAP) $2,251 ($5,186) $7,2
Slide 11: Fourth Quarter Income Statement and Freight Revenue
Fourth Quarter Income Statement $ in Millions (except EPS) 2017* 2016 % Operating Revenues $5,450 $5,168 5 O Operating ti Expenses E 3 411 3,411 3 203 3,203 6 Operating Income 2,039 1,965 4 Other Income 29 40 (28) Interest Expense (188) (174) 8 Income Taxes (676) (687) 2 Net Income $1,204 $1,144 5 W
Slide 12: Fourth Quarter Operating Expenses
Fourth Quarter Operating Expenses $ In Millions Compensation & Fuel Benefits +27% $547 +4% $1,232 $431 $1 186 $1,186 2016 2017 2016 2017 Purchased Services & • Wage & Benefits Inflation Materials +6% $585 • Higher Diesel Fuel Prices $553 • Increased Subsidiary Contract 2016 2017 Services Expense 23
Slide 13: Productivity and Full Year Income Statement
Productivity Initiatives: 2017 Results ($ in millions) Network and TE&Y / Train length / Train Ops Intermodal & Premium Ops / Joint facility $110 $90 $36 $70 $75 Equipment Active fleet / Car repair / $36 $5 (Loco and Car) Equip rental costs $21 $15 $20 $8 $22 $53 $50 Other Ops, Engineering / Fuel co
Slide 14: Cash Flow & Debt; Delivering Value to Shareholders
Cash Flow & Debt $ In Millions Cash From Ops ROIC** -4% +1.0 pts. $7,525 $7,230 13.7% • Higher Net Income 12.7% • 2016 Bonus Depreciation Benefit 2016 2017 2016 2017* Adjusted Debt** • Improved ROIC $17 878 $17,878 $19,480 • Increased Adj. Debt $17,390 $14,838 ~$1.6 Billion since 2016 1.9 1.9 $12,75
Slide 15: 2018 Tax Act Impact and A Look Ahead to 2018
2018 Impact of “Tax Cuts and Jobs Act” • Effective Income Tax Rate ~25% 4Q14: $438 • Cash Tax Rate Between 17% and 18% • Incremental Cash of ~$1 Billion • Balanced Approach to Capex, Dividends, and Share Repurchases 29 A Look Ahead to 2018 • 1Q and Full-Year Volume Up Operating Ratio 4Q14: $438 (%)
Slide 16: Looking Ahead
January 25, 2018 Fourth Quarter 2017 Earnings Release Lance Fritz Chairman, President & CEO 31 Looking Ahead • Optimistic About the Economy • Execute Our Value Track Strategy • Create Value for Our Stakeholders 32
Slide 17: 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