Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2013 Earnings Presentation
18 slides from Union Pacific's earnings presentation, Jan 23, 2014
Slide 1: Fourth Quarter 2013 Earnings Release
Fourth Quarter 2013 Earnings Release January 23, 2014 Jack Koraleski, CEO 1 Union Pacific Achieves Record 2013 Results Positives Earnings Per Share Fourth Quarter • All-Time Record Quarter +16% and Full Year Financial $2.55 Best-Ever Results Quarter $2.19 • Quarterly Records $1.99 – Operating Revenu
Slide 2: Fourth Quarter 2013 Marketing & Sales Review
Fourth Quarter 2013 Marketing & Sales Review January 23, 2014 Eric Butler, Executive VP – Marketing & Sales 3 Fourth Quarter 2013 Recap Freight Revenue Mix Volume Growth Intermodal 19% Industrial Agricultural +13% 18% Agricultural 18% Automotive +10% Coal 19% Autos 10% Chemicals Industrial 16% +9% P
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $937M (+19%) Volume 243K (+13%) ARC $3,846 (+5%) Grain* +41% 93.2 Volume Mix 66.2 Grain Products 33% Food & 2012 2013 Refrigerated 23% Grain Products* Grain 44% +6% 80.8 76.1 Quarterly Drivers 2012 2013 • Record Corn Production Food & Refrigerated* -4% • Grain Exports 5
Slide 4: Chemicals and Coal
Chemicals Revenue $855M (+3%) Volume 263K (-1%) ARC $3,255 (+3%) Industrial Chemicals** Volume Mix* 52.0 +6% 54.9 Petrol. Crude Oil & LP Gas 12% 15% Fertilizer Soda Ash 15% 2012 2013 11% Industrial Petroleum & LP Gas** Plastics Chemicals 23% +7% 24% 39.1 36.4 Quarterly Drivers 2012 2013 • Improved I
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $954M (+14%) Volume 305K (+9%) ARC $3,134 (+5%) Non-Metallic Minerals** Volume Mix* +28% 64.3 Lumber 50.2 Minerals/ 9% Paper Consumer 9% 21% Gov’t/Waste 2012 2013 13% Construction 29% Metals Metals ** 19% +11% 57.0 51.2 Quarterly Drivers 2012 2013 • Drilling Activity – Fr
Slide 6: 2014 Volume Outlook
2014 Volume Outlook Agricultural Products + Record 2013 Crop + Food and Refrigerated ? Weather / 2014 Crop Automotive + Auto Sales Growth Chemicals + Most Markets Remain Solid ? Crude Oil Spreads Coal + Export Demand - Legacy Contract loss ? Weather Industrial Products + Shale Drilling - Frac Sand +
Slide 7: Operating Foundation, Safety Focus; Network Performance
Operating Foundation, Safety Focus Full Year 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 +1% 3.21 3.24 1.15 +4% 2.98 1.01 1.05 All-Time All-Time Record Record 2010 2011 2012 20
Slide 8: Network Productivity and Capital Investments
Network Productivity Fourth Quarter Train Size Performance Locomotive Productivity (vs 4Q 2012) (Gross Ton Miles per HP Day) Grain* Good +2% +2% 121 120 118 118 Auto** +1% Manifest** +1% Coal Flat Intermodal -2% 2010 2011 2012 2013 Manifest Growth Impact Agility & Resource Readiness (vs 4Q 2012) • L
Slide 9: Setting the Course for 2014
Setting the Course for 2014 Safety, Service, and Value • Drive Record Safety Results • Leverage Growth Opportunities • Realize Productivity with Innovation • Create Value with Excellent Service • Increase Returns for Shareholders 17 Fourth Quarter 2013 Financial Review January 23, 2014 Rob Knight, C
Slide 10: Fourth Quarter Income Statement
Fourth Quarter Income Statement In Millions (except EPS) 2013 2012 % Operating Revenues $5,630 $5,250 7 Operating Expenses 3,657 3,525 4 Operating Income 1,973 1,725 14 Other Income 37 43 (14) Interest Expense (127) (128) (1) Income Taxes (709) (604) 17 Net Income $1,174 $1,036 13 Weighted Average D
Slide 11: 2013 Core Pricing Trends
2013 Core Pricing Trends Core Pricing Gains • Solid Core Pricing 4.0% 4.0% in 2013 3.5% 3.5% • Core Pricing Gains Impacted by Lower Coal Volumes 1Q13 2Q13 3Q13 4Q13 • Inflation Escalators Moderating Rail Cost Escalator (All-LF) 2.0% (excludes Fuel) • 2014 Legacy “Light” 0.7% (0.1%) (0.4%) 0.3% • Pri
Slide 12: Fuel Expense and Expense Review
Fuel Expense Fourth Quarter 2013 $905M, -2% Average Fuel Price (Per Gallon Consumed) -4% $3.25 $3.11 • Average Diesel Fuel Price down 4% 2012 2013 Gross Ton-Miles (in Millions) • GTMs up 2% +2% 244,631 compared to 2012 238,898 • Consumption Rate Increase of 1% 2012 2013 23 Fourth Quarter 2013 Expens
Slide 13: Expense Review (cont) and Operating Ratio Performance
Fourth Quarter 2013 Expense Review (cont) In Millions Equipment & Other Rents +3% • Container Costs – Contract $311 $302 Arrangement • Higher Freight Car Rental Expense 2012 2013 Other • Higher Property Tax Expense +3% $188 • Increased Freight and $182 Equipment Damage Costs • Lower Personal Injury
Slide 14: Full Year Income Statement and Cash Generation
Full Year Income Statement In Millions (except EPS) 2013 2012 % Operating Revenues $21,963 $20,926 5 Operating Expenses 14,517 14,181 2 Operating Income 7,446 6,745 10 Other Income 128 108 19 Interest Expense (526) (535) (2) Income Taxes (2,660) (2,375) 12 Net Income $4,388 $3,943 11 Weighted Averag
Slide 15: Investments and Returns; Delivering Value to Shareholders
Investments and Returns Total Capital Spending* Return on Invested Capital** (In Billions) (Percent) $3.7 14.7 $3.6 14.0 Best- $3.2 12.4 Ever Record 2011 2012 2013 2011 2012 2013 Base New Locomotive Positive Train Capital Purchases/Leases Control * Includes cash capital, leases and other non-cash ca
Slide 16: Strong Financial Position; A Look Ahead to 2014
Strong Financial Position As of December 31 ($ In Millions) Total Debt* (Adjusted) • Strong Balance Sheet $12,753 $12,772 $12,804 • Investment Grade Credit 40.7% ~40% 39.1% 37.6% Ratings • 2013 Balance Sheet Debt increase of $600 Million 2011 2012 2013 2014E Adjusted Debt to Capital • Targeting 40%
Slide 17: Union Pacific's Prospects Going Forward
Fourth Quarter 2013 Earnings Release January 23, 2014 Jack Koraleski, CEO 33 Union Pacific’s Prospects Going Forward • Well Positioned for Economic Growth • Unrelenting Focus on Safety • Excellent Service – Supports Pricing Initiatives – Improves Asset Utilization • Capital Investment Strategy • Pow
Slide 18: Cautionary Information
Cautionary Information This press release 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 general economic conditions and its ability to