Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2014 Earnings Presentation
18 slides from Union Pacific's earnings presentation, Oct 23, 2014
Slide 1: Third Quarter 2014 Earnings Release: Record Results
Third Quarter 2014 Earnings Release October 23, 2014 Jack Koraleski, CEO 1 Third Quarter 2014 Record Results Earnings Per Share Positives Third Quarter • Best-Ever Quarter +23% $1.53 – Operating Revenue Best-Ever – Operating Income Quarter $1.24 – Operating Ratio $1.10 – Earnings • Franchise Diversi
Slide 2: Third Quarter 2014 Marketing & Sales Review
Third Quarter 2014 Marketing & Sales Review October 23, 2014 Eric Butler, Executive VP – Marketing & Sales 3 Third Quarter 2014 Recap Freight Revenue Mix Volume Growth Intermodal 20% Agricultural +14% Industrial Products 20% Agricultural 16% Industrial al +12% Autos Coal Productss 19% 9% Chemicals 1
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $915M (+19%) Volume 239K (+14%) ARC $3,836 (+4%) Grain* +34% Volume Mix 63.8 85.7 Grain Products 34% Food & 2013 2014 Refrigerated 24% Grain Products* Grain 42% +6% 79.7 75.2 Quarterly Drivers 2013 2014 • Exports of Grain and Grain Food & Refrigerated* Products +3% 57.8
Slide 4: Chemicals and Coal
Chemicals Revenue $936M (+6%) Volume 288K (+2%) ARC $3,249 (+4%) Industrial Chemicals* Volume Mix +7% 70.0 65.7 Petrol. Crude Oil & LP Gas 12% 14% Soda Ash Fertilizer 10% 2013 2014 18% Industrial LP Gas* Chemicals Plastics +12% 24% 16.1 22% 14.4 Quarterly Drivers 2013 2014 • Strong Industrial Chemic
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $1,161M (+19%) Volume 363K (+12%) ARC $3,195 (+7%) Non-Metallic Minerals* Volume Mix +30% 80.4 Lumber 61.7 Minerals/ 9% Paper Consumer 8% 22% Gov’t/Waste 2013 2014 12% Construction 32% Metals Lumber* 17% +15% 32.7 28.5 Quarterly Drivers 2013 2014 • Frac Sand for Shale-rel
Slide 6: Fourth Quarter 2014 Volume Outlook
Fourth Quarter 2014 Volume Outlook Agricultural Products + Record Crop in 2014 + Ethanol Exports + Import Beer Demand Automotive + Strong Industry Sales Continue Chemicals + Most Markets Remain Solid - Crude Oil Spreads Coal + Low Coal Inventories ? Weather Industrial Products + Shale Drilling - Fra
Slide 7: Dedicated Focus on Safety
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 3.26 -7% 1.23 3.21 1.13 -4% 2.98 3.04 1.10 1.09 Full Year YTD Full Year YTD Record Record Record Record
Slide 8: Network Performance, Service Metrics and Resources
Service Metrics Third Quarter 2014 Velocity* Freight Car Dwell* (in mph) (in hours) Good Good +13% • Operational Headwinds -10% 29.7 26.3 26.3 23.8 • Interruptions Reduce Network Capacity 3Q13 3Q14 3Q13 3Q14 7-Day Carloads & Velocity • Agility & Resiliency (000s) (MPH) Good 25.8 200 26 Demonstrated
Slide 9: Network Productivity and Operating Outlook
Network Productivity Third Quarter 2014 Train Size Performance (vs 3Q 2013) Manifest* +4% • Solid Growth in Auto** +3% Each Region Grain** +2% • Net Productivity Coal** +1% Gains Intermodal Flat * Best-ever quarter **Third Quarter record • Leveraged Volume Manifest Growth Impact Growth (vs 3Q 2013)
Slide 10: Third Quarter Income Statement
Third Quarter 2014 Financial Review October 23, 2014 Rob Knight, CFO 19 Third Quarter Income Statement In Millions (except EPS) 2014 2013 % Operating Revenues $6,182 $5,573 11 Operating Expenses 3,852 3,611 7 Operating Income 2,330 1,962 19 Other Income 20 28 (29) Interest Expense (144) (138) 4 Inco
Slide 11: Freight Revenue and Fuel Surcharge Lag Impact
Freight Revenue Third Quarter (In Millions) +11% $5,819 +2.5% +1% +0.5% +7% $5,250 Volume Core Fuel Mix Price Surcharge (Lag Impact) Mix Drivers Positive Negative • Grain • Intermodal • Frac Sand 2013 2014 21 Fuel Surcharge Lag Impact Quarterly EPS Impact Price/ Actual and Estimated Gallon $3.40 $3.
Slide 12: Core Pricing Trends and Compensation & Benefits
Core Pricing Trends • Core Pricing Above Core Pricing Gains Inflation 4% 4% 3.5% 3.5% • 2014 Legacy “Light” 2.5% 2.5% 2% • Inflation Escalators Remain Low 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Non-Legacy Legacy • Pricing for Reinvestibility 23 Compensation & Benefits Expense Third Quarter 2014 $1,287M,
Slide 13: Fuel Expense and Expense Review
Fuel Expense Third Quarter 2014 $882M, +2% Gross Ton-Miles (in Millions) • GTMs Increased 8% +8% 241,350 259,969 driven by Higher Volumes • Consumption Rate Improved 1% 2013 2014 Average Fuel Price (Per Gallon Consumed) -5% • Lower Average Diesel $3.17 $3.01 Fuel Price 2013 2014 25 Third Quarter 201
Slide 14: Expense Review and Operating Ratio Performance
Third Quarter 2014 Expense Review (cont) In Millions Equipment & Other Rents $309 Flat $310 • Higher Freight Car Rental Expense • Lower Freight Car & Container Lease Costs 2013 2014 Other +18% $242 • Higher State & Local Taxes $205 • Increased Damaged Freight & Equipment Costs • Higher Personal Inju
Slide 15: Strong Financial Position and Shareholder Value
Strong Financial Position Nine Month Period Ending September 30 ($ In Billions) Free Cash Flow* • Solid Cash from Operations $5.4 $4.9 ‒ Cash Headwind from Prior Years’ Bonus Depreciation ($3.3) ($2.6) • Increase in Capital ($1.0) ($1.2) Investment & Dividends 2013 2014 2013 2014 2013 2014 Cash from
Slide 16: Closing out 2014
Closing out 2014 Fourth Quarter • Positive Volumes Assuming Continued Economic Growth • Continued Core Pricing Gains • Improving Network Fluidity • Record Financial Results 31 Third Quarter 2014 Earnings Release October 23, 2014 Jack Koraleski, CEO 32
Slide 17: Looking Ahead
Looking Ahead • Volume Growth • Network Performance • Invest in the Future • Franchise Opportunity 33 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 reg
Slide 18: Question & Answer Session
Third Quarter 2014 Earnings Release October 23, 2014 Question & Answer Session 35