Union Pacific Corporation · NYSE:UNP

Union Pacific — Q1 2014 Earnings Presentation

17 slides from Union Pacific's earnings presentation, Apr 17, 2014

  1. Slide 1: First Quarter 2014 Earnings Release: Record Results

    First Quarter 2014 Earnings Release April 17, 2014 Jack Koraleski, CEO 1 First Quarter 2014 Record Results Earnings Per Share Positives First Quarter • First Quarter Records +17% $2.38 – Operating Revenue 1st Qtr $2.03 Record – Operating Income – Operating Ratio $1.79 – Earnings • Franchise Diversit

  2. Slide 2: First Quarter 2014 Marketing & Sales Review and Recap

    First Quarter 2014 Marketing & Sales Review April 17, 2014 Eric Butler, Executive VP – Marketing & Sales 3 First Quarter 2014 Recap Freight Revenue Mix Volume Growth Intermodal Agricultural 20% Industrial +13% Products 19% Agricultural 17% al Industrial +9% Coal Autos Productss 18% 9% Chemicals 17%

  3. Slide 3: Agricultural Products and Automotive

    Agricultural Products Revenue $910M (+16%) Volume 239K (+13%) ARC $3,815 (+3%) Grain* +39% Volume Mix 90.1 64.7 Grain Products 34% Food & 2013 2014 Refrigerated 23% Grain Products* Grain 43% +5% 79.9 76.1 Quarterly Drivers 2013 2014 • Corn and Soybean Production Food & Refrigerated* -3% 57.2 • Grain

  4. Slide 4: Chemicals and Coal

    Chemicals Revenue $893M (+2%) Volume 270K (Flat) ARC $3,307 (+3%) Industrial Chemicals* +7% Volume Mix 60.0 64.2 Petrol. Crude Oil & LP Gas 14% 15% Fertilizer Soda Ash 15% 2013 2014 11% Industrial Plastics Fertilizer* Chemicals 21% +7% 24% 41.0 38.4 Quarterly Drivers 2013 2014 • Demand for Industria

  5. Slide 5: Industrial Products and Intermodal

    Industrial Products Revenue $1,011M (+10%) Volume 314K (+9%) ARC $3,218 (+1%) Non-Metallic Minerals** Volume Mix* +18% 67.8 Lumber 57.6 Minerals/ 10% Paper Consumer 9% 22% Gov’t/Waste 2013 2014 12% Construction 29% Metals Construction ** 18% +10% 91.6 83.2 Quarterly Drivers 2013 2014 • Drilling Acti

  6. Slide 6: 2014 Volume Outlook; Operations Review

    2014 Volume Outlook Agricultural Products + Strong Exports ? Weather / 2014 Crop ? California Drought Automotive + Auto Sales Recovery Continues Chemicals + Most Markets Remain Solid - Crude Oil Spreads Coal + Low Coal Inventories ? Weather Industrial Products + Shale Drilling - Frac Sand + Housing

  7. Slide 7: Operating Foundation, Safety Focus; Winter Weather Challenges

    Operating Foundation, Safety Focus 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 3.21 +7% 1.15 -3% 2.98 2.98 1.07 1.04 2.79 1.01 Full Year Record Qtrly Full Year Record Record 20

  8. Slide 8: Network Performance and Productivity

    Network Performance First Quarter Velocity (as Reported to the AAR) Good • Weather Interruptions -7% 26.1 26.3 26.4 24.5 – Adverse Winter Conditions • Agility & Resiliency Demonstrated with 2011 2012 2013 2014 Resources & Service Plan Service Delivery* and IS&P • Strategic Investments & Industry Spo

  9. Slide 9: 2014 Operating Outlook; Financial Review

    2014 Operating Outlook Safety, Service, and Value • Restore Network Performance • Drive Record Safety Results • Leverage Growth Opportunities & Realize Productivity • Capital Effectiveness • Create Value with Excellent Service • Increase Returns for Shareholders 17 First Quarter 2014 Financial Revie

  10. Slide 10: First Quarter Income Statement and Freight Revenue

    First Quarter Income Statement In Millions (except EPS) 2014 2013 % Operating Revenues $5,638 $5,290 7 Operating Expenses 3,784 3,657 3 Operating Income 1,854 1,633 14 Other Income 38 40 (5) Interest Expense (133) (128) 4 Income Taxes (671) (588) 14 Net Income $1,088 $957 14 Weighted Average Diluted

  11. Slide 11: Core Pricing Trends; Compensation & Benefits Expense

    Core Pricing Trends Core Pricing Gains 4.0% 4.0% • Core Pricing Above 3.5% 3.5% Inflation 2.0% • 2014 Legacy “Light” 1Q13 2Q13 3Q13 4Q13 1Q14 • Inflation Escalators Non-Legacy Legacy Moderating Rail Cost Escalator (All-LF) • Pricing for (excludes Fuel) 2.0% Reinvestibility 0.7% (0.1%) (0.4%) 0.3% 1Q

  12. Slide 12: Fuel Expense; Expense Review

    Fuel Expense First Quarter 2014 $921M, +2% Gross-Ton-Miles (in Millions) +5% • GTMs Increased 5% 240,169 227,688 driven by Higher Volumes • Consumption Rate 2013 2014 Flat Average Fuel Price – Adverse Weather (Per Gallon Consumed) Conditions -3% $3.23 $3.12 • Lower Average Diesel Fuel Price 2013 201

  13. Slide 13: Expense Review (cont); Operating Ratio Performance

    First Quarter 2014 Expense Review (cont) In Millions Equipment & Other Rents Flat $313 $312 • Higher Freight Car Rental Expense • Lower Container Lease Costs 2013 2014 Other -5% $237 • Higher Utilities Expense $226 • Decreased Costs for Freight & Equipment Damage • Lower Environmental & 2013 2014 Pe

  14. Slide 14: Strong Financial Position; Shareholder Value

    Strong Financial Position Three Month Period Ending March 31 ($ In Millions) Free Cash Flow* • Solid Cash from Operations $1,767 $1,524 • Increase in Capital ($905) Investment ($800) ($323) ($363) • 32% Increase in Declared 2013 2014 2013 2014 2013 2014 Dividends to $0.91 per Cash from Investing Div

  15. Slide 15: 2014 Outlook

    2014 Outlook Full Year • Positive Volumes Assuming Continued Economic Growth • Weather will be a Factor • Continued Core Pricing Gains • Network Efficiencies • Record Financial Results 29 First Quarter 2014 Earnings Release April 17, 2014 Jack Koraleski, CEO 30

  16. Slide 16: Looking Ahead to the Future; Cautionary Information

    Looking Ahead to the Future • Recovery from Winter • Growth Opportunities • Customer Value Proposition • Regulatory Uncertainty • Economic Optimism • Well Positioned for the Future 31 Cautionary Information This press release and related materials contain statements about the Corporation’s future th

  17. Slide 17: Question & Answer Session

    First Quarter 2014 Earnings Release April 17, 2014 Question & Answer Session 33

Union Pacific — Q1 2014 Earnings Presentation on 6ix