Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2016 Earnings Presentation
17 slides from Union Pacific's earnings presentation, Oct 20, 2016
Slide 1: Third Quarter 2016 Results: Earnings Per Share
October 20, 2016 Third Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 1 Third Quarter 2016 Results Earnings Per Share Third Quarter • Earnings Per Share $1.53 -9% Down 9% $1.50 $1.36 • Volume Challenges • Positive Core Pricing • Productivity Gains 2014 2015 2016 2
Slide 2: Third Quarter 2016 Recap
October 20, 2016 Third Quarter 2016 Marketing & Sales Review Eric Butler Executive VP & Chief Marketing Officer 3 Third Quarter 2016 Recap Freight Revenue Mix Volume Growth Industrial Intermodal Products 20% Agricultural Products +11% 18% Coal Agricultural -1% 15% Products Chemicals 19% Chemicals Au
Slide 3: Agricultural Products and Automotive
Agricultural Products Revenue $937M (+6%) Volume 258K (+11%) ARC $3,637 (-4%) Grain* Grain Food & Products* Refrigerated* +27% 105.1 Volume Mix +5% 82.8 80.5 84.3 Food & Flat Refrigerated 51.2 51.1 20% Grain 47% 2015 2016 2015 2016 2015 2016 Grain Products 33% Quarterly Drivers • Near Record Grain V
Slide 4: Chemicals and Coal
Chemicals Revenue $875M (-1%) Volume 274K (-1%) ARC $3,201 (+1%) Crude Oil* Industrial Chemicals* 75.7 +3% 77.9 Volume Mix Crude Oil 4% Petrol. & LP Gas 15% Fertilizer -48% 17% 21.0 Soda Ash 11.0 11% Industrial Plastics 2015 2016 2015 2016 Chemicals 24% 29% Quarterly Drivers • Crude Oil Headwinds •
Slide 5: Industrial Products and Intermodal
Industrial Products Revenue $855M (-13%) Volume 283K (-11%) ARC $3,019 (-2%) Minerals* Construction* Metals* 116.4 -8% 107.4 Volume Mix Lumber -22% 11% 62.9 Minerals Paper 48.8 -13% 44.8 17% 10% 38.8 Specialized Markets 10% 2015 2016 2015 2016 2015 2016 Construction Metals 38% 14% Q Quarterly t l Dr
Slide 6: 2016 Volume Outlook
2016 Volume Outlook Agricultural Products Coal + Grain + Price of Natural Gas + Ethanol - High Inventory Levels + Import Beer ? Weather Automotive Industrial Products ? Consumer Demand - Minerals + Parts Highway Conversions - Metals + Lumber Chemicals Intermodal + LPG - Ocean Carrier Challenges + In
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 1.10 -4% 1.06 0 0.98 98 -16% % 3.26 3 13 3.13 0 92 0.92 2.83 2.84 0.77 2.65 YTD Record FY12 FY13 FY14 YTD15* YTD16* FY12 FY13 FY14 YT
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 14,065 • 3Q16 Down 14% vs 3Q15 • Furlough / AWTS: ~ 2,700* 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 • Adjusting Other Segments Active Locomotive Fleet of
Slide 9: Operating Outlook
Operating Outlook • Continue to Generate Positi e Safet Positive Safety Res Results lts • Leverage Growth Opportunities • Maintain Focus on Customer Experience & Productivity 17 October 20, 2016 Third Quarter 2016 Financial Review Rob Knight Executive VP & Chief Financial Officer 18
Slide 10: Third Quarter Income Statement and Freight Revenue
Third Quarter Income Statement In Millions (except EPS) 2016 2015 % Operating Revenues $5,174 $5,562 (7) O Operating ti Expenses E 3 214 3,214 3 354 3,354 (4) Operating Income 1,960 2,208 (11) Other Income 29 30 (3) Interest Expense (184) (157) 17 Income Taxes (674) (781) (14) Net Income $1,131 $1,3
Slide 11: Core Pricing Trends and Compensation & Benefits Expense
Core Pricing Trends • Positive Core Core Pricing Gains Pricing 4% 4% 3.5% 3.5% • Challenging Market 3% Environment 2.5% 2.5% 2.5% 2% 2% 1.5% • Pricing to a Strong Value Proposition 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 • Committed to Returns 21 Compensation & Benefits Expense Third
Slide 12: Fuel Expense and Third Quarter Expense Review
Fuel Expense Third Quarter 2016 $392M, -19% Gross-Ton-Miles Quarterly Drivers (in Millions) 238,001 -6% • Decrease in GTMs 224,633 Driven by Lower Volumes 2015 2016 • Consumption Rate Improved 2% Average Fuel Price (Per Gallon Consumed) -13% • Lower Average Diesel $1.81 $1.57 Fuel Price 2015 2016 23
Slide 13: Expense Review (cont) and Operating Ratio Performance
Third Quarter 2016 Expense Review (cont) In Millions Equipment & Other Rents Quarterly Drivers $302 -7% • Lower Volumes $282 • Reduced Locomotive Lease Expense 2015 2016 Other • One-Time Items +32% $271 • Increased State & $205 Local Taxes and Environmental Cost 2015 2016 25 Operating Ratio Performa
Slide 14: Free Cash Flow and Debt & Leverage
Free Cash Flow Nine Month Period Ended September 30 ($ In Millions) Free Cash Flow* Cash From Ops Investing Dividends • Lower Net Income $ $5,625 $5,467 • Bonus Depreciation ($3,250) • Capital Investments ($2,819) ($1,877) • Dividends 4Q14:($438) ($1,382) • Payment Date 2015 2016 2015 2016 2015 2016
Slide 15: Delivering Value to Shareholders; Closing Out 2016
Delivering Value to Shareholders Cumulative Share Repurchases • Third Quarter Activity (In Millions) 305.2 • 9 Million Shares 279.8 • Repurchases Totaling $851 244.4 Million 212.4 183.3 • Repurchases Since 2007 157.7 • 305 Million Shares 128.1 • Avg Price: $59.63 • Current Program • About 27 Million
Slide 16: Looking Ahead
October 20, 2016 Third Quarter 2016 Earnings Release Lance Fritz Chairman, President & CEO 31 Looking Ahead • Difficult Market Environment • Certain Business Segments Improving • Continued Focus on Productivity & Customer Experience • 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