Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2018 Earnings Presentation
14 slides from Union Pacific's earnings presentation, Jul 19, 2018
Slide 1: Second Quarter 2018 Results
July 19, 2018 Second Quarter 2018 Earnings Release Lance Fritz Chairman, President & CEO 1 Second Quarter 2018 Results Earnings Per Share Operating Ratio Second Quarter Second Quarter +37% $1.98 +1.1 pts. 63.0 All-Time 61.9 $1.45 Quarterly Record 2017 2018 2017* 2018 * Certain prior period amounts h
Slide 2: 2nd Quarter 2018 Recap
July 19, 2018 Second Quarter 2018 Marketing & Sales Review Beth Whited Executive VP & Chief Marketing Officer 3 2nd Quarter 2018 Recap Volume Growth 7-Day Monthly Carloadings (000s) 190 Agricultural -1% 180 2018 @170 Energy -1% 2017 @168 170 Industrial +6% 2016 @164 160 Premium +6% 6% 150 TOTAL +4%
Slide 3: Agricultural Products and Energy
Agricultural Products Revenue $1,114M (+5%) Volume 285K (-1%) ARC $3,903 (+6%) Grain* Grain Fertilizer Products -4% 4% Volume Mix 92.4 88.9 +6% 78.7 74.0 Food & -5% 50.7 Refrigerated 48.4 Grain 19% 37% Fertilizer 2017 2018 2017 2018 2017 2018 17% Grain Quarterly Drivers Products 27% • Reduced Wheat
Slide 4: Industrial and Premium
Industrial Revenue $1,437M (+8%) Volume 452K (+6%) ARC $3,178 (+2%) Construction Metals +8% 101.5 109.5 Volume Mix +18% Specialized 48.7 11% 41.2 Soda Ash Construction 6% 24% Plastics 16% Forest 2017 2018 2017 2018 Products 14% Metals M t l Quarterly Drivers 11% Industrial Chemicals • Increased Rock
Slide 5: 2018 Second Half Volume Outlook
2018 Second Half Volume Outlook Agricultural Products Industrial + Ethanol Exports + Plastics + Food and Beverage + Industrial Production ? Grain Energy Premium + Petroleum Products + Over the Road Conversions ? Frac Sand + New International Business – Coal Headwinds ? Automotive Sales 9 July 19, 20
Slide 6: 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 1.06 3.19 3.13 -3% Flat 3 01 3.01 2.93 0.82 0.76 0.76 2.61 0.70 First Half Record 1H14 1H15 1H16 1H17 1H18 1H14 1H15 1H16 1H17 1H18 Pub
Slide 7: Volume & Performance Drive Resources
Volume & Performance Drive Resources Active Locomotive Fleet +13% 7,460 • Locomotive Surge Capacity 6,666 Provides Flexibility 2Q17 2Q18 • ~200 HHP Units in Storage TE&Y • Maintain Strong TE&Y ((Full-Time Equivalent) q +8% ) Recruiting Pipeline 15,420 14,282 • Improving Crew Supply 2Q17 2Q18 13 Prod
Slide 8: Operating Outlook
Operating Outlook • Service S i Improvements I t • Network Optimization • Resource Adjustments 15 July 19, 2018 Second Quarter 2018 Financial Review Rob Knight Executive VP & Chief Financial Officer 16
Slide 9: Second Quarter Income Statement and Freight Revenue
Second Quarter Income Statement $ in Millions (except EPS) 2018 2017 % Operating Revenues $5,672 $5,250 8 O Operating ti Expenses* E * 3 573 3,573 3 252 3,252 10 Operating Income 2,099 1,998 5 Other Income / (Expense)* 42 50 (16) Interest Expense (203) (179) 13 Income Taxes (429) (701) (39) Net Inco
Slide 10: Second Quarter Operating Expenses
Second Quarter Operating Expenses $ In Millions Compensation & Fuel Benefits +48% $643 +3% $1 204 $1,204 $1,241 , $434 2017* 2018 2017 2018 Purchased Services & • Volume-Related Costs, Network Materials Inefficiencies & Increased TE&Y +6% $630 Training $597 • Higher Diesel Fuel Prices • Higher Freig
Slide 11: Productivity Update and Cash Flow & Debt
Productivity Update 2Q18 Net Productivity by Category ($ in millions) •4Q14: Productivity $438 Gains of ~$65 ($25) Network and Slower velocity, velocity TE&Y recrew, recrew Train Ops Overtime, and Higher fuel consumption rate Million, Offset by ~$65 Million of Service Related Costs ($5) Equipment Ac
Slide 12: Delivering Value to Shareholders and 2018 Outlook
Delivering Value to Shareholders $ In Millions Dividends Share Repurchases $1,125 $980 $6,693 First Half Cash Returned $ ASR $3,600 to Shareholders $1,611 • Dividends: $3,093 − $1.1 Billion 1H 2017 1H 2018 1H 2017 1H 2018 − 21% Increase in Dividend Per Share vs 1H 2017 Cash Returned to Shareholders
Slide 13: Looking Ahead
July 19, 2018 Second Quarter 2018 Earnings Release Lance Fritz Chairman, President & CEO 25 Looking Ahead • Record Second Quarter Results • Strong Business Environment • Regain Productivity Momentum 26
Slide 14: 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