Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2016 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Jul 21, 2016
Slide 1: Second Quarter 2016 Results: Earnings Per Share Down 15%
July 21, 2016 Second Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 1 Second Quarter 2016 Results Earnings Per Share Second Quarter • Earnings Per Share $1.43 $1.38 -15% Down 15% $1.17 • Volume Headwinds • Positive Core Pricing • Focus on Productivity 2014 2015 2016 2
Slide 2: Second Quarter 2016 Recap
July 21, 2016 Second Quarter 2016 Marketing & Sales Review Eric Butler Executive VP & Chief Marketing Officer 3 Second Quarter 2016 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 21% Agricultural Products +2% 19% Coal Agricultural -2% 11% Products Automotive 19% Chemicals Aut
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $845M (-3%) Volume 229K (+2%) ARC $3,692 (-4%) Grain* Grain Food & Products* Refrigerated* +10% Volume Mix 83.4 -6% 80 80.7 7 75.9 76.2 +2% Food & 51.8 52.8 Refrigerated 23% Grain 44% 2015 2016 2015 2016 2015 2016 Grain Products 33% Quarterly Drivers • Export Feed Stren
Slide 4: Chemicals and Coal
Chemicals Revenue $864M (-5%) Volume 275K (-3%) ARC $3,146 (-2%) Plastics* Industrial Chemicals* Crude Oil* +15% 80.5 Volume Mix -5% 70.3 66.4 62.9 62 9 Crude C d Petrol. Oil & LP Gas 5% 16% Fertilizer -46% 25.2 16% 13.7 Soda Ash 11% Plastics 2015 2016 2015 2016 2015 2016 Industrial 23% Chemicals 29
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $830M (-14%) Volume 275K (-11%) ARC $3,025 (-4%) Minerals* Metals* Construction* 106.3 -4% 102.3 Volume Mix -32% Lumber 65.2 12% -11% Minerals Paper 44.4 44.9 39.8 16% 9% Specialized Markets 11% 2015 2016 2015 2016 2015 2016 Construction Metals 37% 15% Quarterly Drivers •
Slide 6: 2016 Volume Outlook
2016 Volume Outlook Agricultural Products Chemicals + Grain - Crude Oil - Soybean Meal + Import Beer + LPGs + Industrial Chemicals - Fertilizer Automotive ? Sustained Consumer Industrial Products Demand - Minerals/Metals + Parts OTR Conversions + Lumber ? Production Levels + Rock Coal Intermodal ? P
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 -1% 1.12 3.46 3.43 1.06 1.06 3.11 3.07 -15% 15% 2 95 2.95 0.82 0.70 First Half First Half Record Record 1H12 1H13 1H14 1H15 1H16 1H12 1
Slide 8: Volume and Performance Drive Resources; Network Productivity
Volume and Performance Drive Resources Remaining Agile in a Dynamic Environment Total TE&Y** • TE&Y Workforce 18,090 17,593 16,341 14,808 14,141 13,761 • 2Q16 Down 22% vs 2Q15 • Furlough / AWTS: ~ 3,300* 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 • Adjusting Other Segments Active Locomotive Fleet of Workforce 7,
Slide 9: Operating Outlook
Operating Outlook • Continue to Generate Record Safety Results • Utilize Franchise Strengths to Remain Agile • Enhance Customer Experience • Realize Productivity to Improve Cost Performance 17 July 21, 2016 Second Quarter 2016 Financial Review Rob Knight Executive VP & Chief Financial Officer 18
Slide 10: Second Quarter Income Statement; Freight Revenue
Second Quarter Income Statement In Millions (except EPS) 2016 2015 % Operating Revenues $4,770 $5,429 (12) O Operating ti Expenses E 3 110 3,110 3 480 3,480 (11) Operating Income 1,660 1,949 (15) Other Income 77 142 (46) Interest Expense (173) (153) 13 Income Taxes (585) (734) (20) Net Income $979 $
Slide 11: Core Pricing Trends; Compensation & Benefits Expense
Core Pricing Trends • Positive Core Core Pricing Gains Pricing 4% 4% 3.5% 3.5% 3% • Pricing to a 2.5% 2.5% 2.5% 2% 2% Strong Value Proposition 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 21 Compensation & Benefits Expense Second Quarter 2016 $1,160M, -11% Compensation & Benefits Quarterly Driv
Slide 12: Fuel Expense; Second Quarter 2016 Expense Review
Fuel Expense Second Quarter 2016 $346M, -36% Gross-Ton-Miles Quarterly Drivers (in Millions) 227,608 -11% • Decrease in GTMs 202,943 Driven by Lower Volumes 2015 2016 • Consumption Rate Improved 2% Average Fuel Price (Per Gallon Consumed) -27% • Lower Average Diesel $1.99 $1.45 Fuel Price 2015 2016
Slide 13: Expense Review (cont); Operating Ratio Performance
Second Quarter 2016 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $312 -8% • Lower Volumes $286 • Decrease in Locomotive Lease Expense 2015 2016 Other $225 +8% $244 • Higher Personal Injury Expense 2015 2016 25 Operating Ratio Performance Second Quarter (Percent) • Prod
Slide 14: Free Cash Flow; Debt & Leverage
Free Cash Flow Six Month Period Ended June 30 ($ In Millions) Free Cash Flow* • Lower Net Income Cash From Ops Investing Dividends $3,773 • Bonus Depreciation $3,525 • Capital Investments ($2,136) ($1,838) ($1,401) • Dividends 4Q14: ($438) ($925) 1H15: ($963) • Payment Date Adjustment in First 2015
Slide 15: Delivering Value to Shareholders; 2016 Outlook
Delivering Value to Shareholders Cumulative Share Repurchases • Second Quarter Activity (In Millions) 296.1 • 7 Million Shares 279.8 • Repurchases Totaling $602 244.4 Million 212.4 183.3 • Repurchases Since 2007 157.7 • 296 Million Shares 128.1 • Avg Price: $58.59 • Current Program • About 36 Millio
Slide 16: Second Half of 2016
July 21, 2016 Second Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 31 Second Half of 2016 • Economic Headwinds Remain • Cautiously Optimistic in Certain Segments • Value Tracks Focus on Long Term Success Long-Term • Solid Returns for Shareholders 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 and demand levels; its ability to ge