Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2015 Earnings Presentation
19 slides from Union Pacific's earnings presentation, Jan 21, 2016
Slide 1: Fourth Quarter 2015 Earnings Release
January 21, 2016 Fourth Quarter 2015 Earnings Release Lance Fritz Chairman, President & CEO 1 Fourth Quarter 2015 Results Earnings Per Share Fourth Quarter • Earnings Per Share $1.61 -19% Down 19% $1.27 $1.31 • Softness in Demand • Solid Core Pricing 2013 2014 2015 2
Slide 2: Fourth Quarter 2015 Recap
January 21, 2016 Fourth Quarter 2015 Marketing & Sales Review Eric Butler Executive VP - Marketing & Sales 3 Fourth Quarter 2015 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 20% Automotive +8% 17% Coal 15% Agricultural Chemicals -2% Products 19% Chemicals Autos Agricultural
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $895M (-12%) Volume 239K (-5%) ARC $3,745 (-7%) Grain* Grain Food & Products* Refrigerated* 96.1 -12% -4% Volume Mix 85.0 84.0 80.9 -1% Food & 58.8 58.1 Refrigerated 24% Grain 42% 2014 2015 2014 2015 2014 2015 Grain Products 34% Quarterly Drivers • High Worldwide Grain
Slide 4: Chemicals and Coal
Chemicals Revenue $859M (-7%) Volume 270K (-2%) ARC $3,188 (-5%) Crude Oil* LPG* Petroleum Products* 34.4 -42% Volume Mix -6% Crude 23.5 22.1 20.1 +5% Petrol. Oil 17.6 18.4 & LP Gas 7% 15% Fertilizer 16% Soda Ash 11% Plastics 2014 2015 2014 2015 2014 2015 Industrial 23% Chemicals 28% Quarterly Drive
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $842M (-23%) Volume 280K (-16%) ARC $3,004 (-8%) Minerals* Metals* Specialized Markets* 90.7 -42% Volume Mix Lumber -27% 11% 53.0 52.7 Minerals Paper 38.3 +7% 9% 29.5 31.5 19% Specialized Markets 2014 2015 2014 2015 2014 2015 11% Construction Metals 36% 14% Quarterly Driv
Slide 6: 2016 Volume Outlook
2016 Volume Outlook Agricultural Products Chemicals - Global Grain Supply + Strong LPGs + Import Beer - Low Crude Oil Prices and Unfavorable Spreads ? Fertilizer Automotive Industrial Products + Low Interest Rates and - Shale Drilling Gasoline Prices + Construction ? Sustained Demand Coal Intermodal
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 1.19 +14% 1.10 -11% 3.28 3.21 3.24 3.42 1.06 0.98 3.00 0.87 Full Year Record FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2011 FY 2012 FY
Slide 8: Resourcing to Demand and Network Productivity
Resourcing to Demand Remaining Agile in a Dynamic Environment Total TE&Y** • TE&Y Workforce 17,975 18,090 17,593 16,341 14,808 • Furlough / AWTS: ~ 3,900* • 4Q15 Down 18% vs 4Q14 4Q14 1Q15 2Q15 3Q15 4Q15 • Locomotives Active Locomotive Fleet • Storage: ~ 1,400* 7,896 7,778 7,454 7,211 6,895 • 4Q15 D
Slide 9: Strengthening the Franchise and Operating Outlook
Strengthening the Franchise Replacement, Growth & Productivity, and PTC 2016 Capital Plan: ~$3.75 Billion* • Safe & Resilient Infrastructure ($ in Millions) Locomotives / • Capacity Investments Equipment $965 Technology / • Southern Region Other $190 • Network Strategies Infrastructure Capacity / •
Slide 10: Fourth Quarter Income Statement
January 21, 2016 Fourth Quarter 2015 Financial Review Rob Knight CFO 19 Fourth Quarter Income Statement In Millions (except EPS) 2015 2014 % Operating Revenues $5,208 $6,153 (15) Operating Expenses 3,290 3,780 (13) Operating Income 1,918 2,373 (19) Other Income 28 71 (61) Interest Expense (164) (146
Slide 11: Freight Revenue and Core Pricing Trends
Freight Revenue Fourth Quarter (In Millions) -16% $5,794 - 9% + 3.5% $4,863 - 6.5% - 4% Volume Fuel Mix Core Surcharge Price 2014 2015 21 Core Pricing Trends • Solid Core Pricing Core Pricing Gains 4% 4% • Pricing to the 3.5% 3.5% 3% Value Proposition 2.5% 2.5% 2% • Legacy Benefit 1Q14 2Q14 3Q14 4Q1
Slide 12: Compensation & Benefits and Fuel Expense
Compensation & Benefits Expense Fourth Quarter 2015 $1,220M, -5% Compensation & Benefits Quarterly Drivers (in Millions) $1,289 -5% • Aligning Workforce $1,220 with Demand • Inflation Costs 2014 2015 Workforce Levels (Quarterly Average) -7% 48,037 44,490 • Volume & Productivity Related Reductions 20
Slide 13: Fourth Quarter 2015 Expense Review
Fourth Quarter 2015 Expense Review In Millions Purchased Services & Materials Quarterly Drivers $665 -11% • Lower Volume-Related $589 Costs • Reduced Locomotive & Car Fleet Repair Costs 2014 2015 Depreciation +6% $517 $489 • Higher Depreciable Asset Base 2014 2015 25 Fourth Quarter 2015 Expense Revi
Slide 14: Operating Ratio Performance and Full Year Income Statement
Operating Ratio Performance Fourth Quarter (Percent) 68.3 67.1 65.0 61.4 +1.8 pts. 63.2 • Focus on Aligning Resources 2011 2012 2013 2014 2015 • Productivity Initiatives Full Year (Percent) • Solid Core Pricing 70.7 67.8 66.1 -0.4 pts. 63.5 63.1 Best-Ever Year Full Year Target of 60 +/- by 2019 2011
Slide 15: Free Cash Flow, Capital Program and Returns
Free Cash Flow Twelve Month Period Ended December 31 ($ In Millions) Free Cash Flow* • Solid Cash From Ops Cash From Ops Investing Dividends $7,385 $7,344 • Capital Investments • Dividends ($4,249) ($4,476) ($2,344) • Payment Date ($1,632) 4Q: ($438) Adjustment in First Quarter 2015 2014 2015 2014 2
Slide 16: Debt & Leverage and Delivering Value to Shareholders
Debt & Leverage ($ In Millions) Total Debt* (Adjusted) $17,390 • Strong Balance $12,751 $14,838 Sheet 45.7% 37.5% 41.2% • Investment Grade 12/31/2013** 12/31/2014** Adjusted Debt to Capital 12/31/2015 Credit Rating Adjusted Debt / Adjusted EBITDA* • $3.35 Billion Debt 1.7 1.4 1.4 Issuance in 2015 *
Slide 17: A Look Ahead to 2016
A Look Ahead to 2016 First Quarter • Lower Coal and Overall Volumes • Fuel Challenges & Mix Pressure Full Year • Slightly Lower Volumes & Mix Pressure • Record Productivity • Solid Core Pricing • Improved Operating Ratio • Strong Shareholder Returns 33 January 21, 2016 Fourth Quarter 2015 Earnings R
Slide 18: The Year Ahead and Cautionary Information
The Year Ahead • Uncertain Economy & Demand Outlook • Focus on Efficiency • Unrelenting Focus on Safety & Service • Long-Term Franchise Opportunity 35 Cautionary Information This presentation and related materials contain statements about the Company’s future that are not statements of historical fa
Slide 19: Question & Answer Session
January 21, 2016 Fourth Quarter 2015 Earnings Release Question & Answer Session 37