Cautionary Information

Transcription

1 November 4, 2015 Goldman Sachs Industrials Conference 2015 Rob Knight CFO 1 Cautionary Information This presentation 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 economic conditions, government regulation, and demand levels; and its ability to generate financial returns, improve network performance and cost efficiency, and provide returns to its shareholders. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of Forward-looking statements t t also generally include, without t limitation, it ti information or statements t t regarding: projections, predictions, expectations, estimates or forecasts as to the Corporation s and its subsidiaries business, financial, and operational results, and future economic performance; and management s beliefs, expectations, goals, and objectives and other similar expressions concerning matters that are not historical facts. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations regarding operational and financial improvements and the Corporation s future performance or results are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statement. Important factors, including risk factors, could affect the Corporation s and its subsidiaries future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Information regarding risk factors and other cautionary information are available in the Corporation s Annual Report on Form 10- K for 2014, which was filed with the SEC on February 6, The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or such other reports that may be filed with the SEC). Forward-looking statements speak only as of, and are based only upon information available on, the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on or available through the website is not, and should not be deemed to be, incorporated by reference herein. 2

2 The Strength of a Unique Franchise Excellent Network Strategic Terminal Locations Broad Port Access Border and Interchange Coverage Business Mix Sep 2015 YTD Freight Revenue:$15.5B Automotive Distribution Centers Intermodal Terminals Manifest Terminals Ports Border Crossings, Gateways and Interchanges Intermodal 20% Industrial Products 19% Coal 16% Agricultural Products 17% Autos 11% Chemicals 17% 3 Third Quarter 2015 Results Earnings Per Share Third Quarter $1.24 Earnings Per Share Down 2% -2% $1.53 $1.50 Softness in Demand Solid Core Pricing Record Operating Ratio 4

3 2015 Volumes Day Monthly Carloadings (000s) 4QTD 2015 Volumes* (vs 2014) Automotive +7% YTD Down 5%* Agricultural Products Chemicals -1% -4% Intermodal 160 January December TOTAL Dom: Flat Int l: -16% Industrial Products -15% Coal -17% -8% -8% *Through October 28, Resourcing to Demand Significant Progress in Third Quarter TE&Y Workforce Furlough /AWTS: ~ 2,900* September Down 10% vs June Locomotives Storage: ~ 1,050* Aligning Other Resources Total TE&Y** 18,054 18,100 18,115 17,965 17,393 17,422 17,115 16,220 15,687 Jan Feb Mar Apr May Jun Jul Aug Sep Active Locomotive Fleet 7,929 7,791 7,613 7,641 7,452 7,270 7,297 7,207 7,130 Jan Feb Mar Apr May Jun Jul Aug Sep * As of October 31, 2015 ** Full-time Equivalent 6

4 Network Performance Good 25.8 UP Velocity (As reported to the AAR, in mph) Solid Improvement Dynamic Environment 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Good UP Terminal Dwell (As reported to the AAR, in hours) Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q Q15 Trend Q15 Trend 42 Leverage Franchise Strengths Focus on Further Improving Service & Costs 7 Coal Trends 50,000 30,000 10,000 1Q Volume Impact (ly Carloadings) PRB Flooding 2Q 3Q Natural Gas Prices * 4Q Jan 2013 Powder River Basin Coal Stockpiles (Days of Burn) Jul Inventory 5-Year Average Jan 2014 Jul 2014 Jan Sep 2015 Electricity Generation Market Share* % from coal % from natural gas 50% 50% 48% 48% Coal Inventory Levels Exports 17% 20% 19% 21% 20% 47% Apr 12: 32% 38% 40% 42% 37% 27% 25% 24% 28% 20 35% 35% *Through October 31, *U.S. Energy Information Administration (EIA) Aug 15 8

5 Shale-Related Volumes 3.3% of 2015 YTD Total Volume YTD 2015 Through September Volume (000s) % Incr (vs 2014) % of Total UP Volume Frac Sand* % 2.1% Crude Oil 70-36% 1.0% Pipe 15-40% 0.2% Total Shale % 3.3% Frac Sand Drivers Lower Energy Prices / Lower Rig Counts Enhanced Fracking Technology Crude Oil By Rail Market Drivers Lower Crude Oil Prices Unfavorable Price Spreads Ave. Month hly U.S. Rig Cou unts 2,500 30,000 2,000 1,500 20, ,000 10, Jan-14 May-14 Sep-14 Jan-15 May-15 0 Sep-15 UNP Mont thly Carloads U.S. Rig Count** UNP Frac Sand Carloads* UNP Crude Oil Carloads * Includes barites ** Source: Baker Hughes 9 Grain Volumes Export Grain Flows Major UP-Served Grain Producing Region +41% 1,731 1,232 U.S. Grain Stocks* (Bushels in 000s) Corn *Source: USDA Sept. 1, % Soybeans Sept. 1, % 2,089 1,907 Wheat 9,000 7,500 AAR ly Grain Carloads (UNP) 2015* ,000 4,500 3, *Through October 31,

6 Anticipated North American Expansions Plastic Resins 2017 Joffre, AB 2016 La Porte, TX 2016 Sarnia, ON 2018 Lake Charles, LA Overall New U.S. Chemical Industry Investment: $100+ Billion* La Porte, TX Baytown, TX Freeport, TX Plaquemine, LA 2017 Plaquemine, LA 2018 Sweeny, TX 2015 Coatzacoalcos, VL 2016 Corpus Christi, TX Point Comfort, TX *American Chemistry Council 11 Intermodal Seattle Tacoma Portland Sparks Twin Cities Council Bluffs Chicago 2015 Volume Mix YTD Through September International 49% Domestic 51% Lathrop Oakland LA Long Beach Salt Lake City Las Vegas Nogales Intermodal Terminals Ports Interchange Points Tucson Denver Santa Teresa / El Paso Eagle Pass Laredo Kansas City Dallas San Antonio Houston St. Louis Memphis Shreveport New Orleans Required Average Daily Transit Miles International 400 Domestic Truckload 600 Domestic Premium 800-1,

7 U.S. Vehicle Sales 2015 Volume Mix YTD Through September Seattle Portland Oakland Salt Lake City Eastport Twin Cities Omaha Denver Kansas City Duluth Chicago St. Louis Auto Parts 43% Finished Vehicles 57% U.S. Light Vehicle SAAR* Los Angeles Dallas Memphis Borders & Interchange Houston New Orleans 10.4 Distribution Centers/Ports (UP Owned/Leased and Private) Assembly Centers (UP served) E 2016E 2017E 2018E 2019E *Source: October 2015 IHS Global Insight forecast 13 Mexican Automotive Production Growth 2014: 80% of Finished Vehicles Exported Mexico Auto Production* 7 th Largest Automotive Manufacturer (In Millions) 4 th Largest Automotive Exporter No. 2 Supplier of Vehicles to U.S New Car Plants, Toyota Tupelo, Miss. '05 '13 '14 '15E '16E '17E '18E '19E * October 2015 IHS Global Insight SOUTHERN U.S. FACTORIES Hyundai Montgomery, Ala. Kia West Point, Ga. Volkswagen Cattanooga, Tenn. Projected to begin production MEXICO FACTORIES 2005 GM San Luis Potosi *Sources: ProMexico, Mexican Economy Secretary (Mexico free-trade agreements); Office of the U.S. Trade Representative (U.S. free-trade agreements); Center for Automotive Research 2010 Nissan Aguascalientes Honda Celaya Mazda Salamanca 2015 Audi San Jose Chiapa Kia Pesqueria Nissan / Mercedes-Benz Aguascalientes BMW San Louis Potosi Toyota Guanajuato 2020 Ford Chihuahua & Guanajuato (Timeline not announced) 14

8 UP Positioned for Mexico Growth Strong Investments Foreign & Domestic Volume Growth (Carloads in Thousands) +8% % +5% % '05 '06 '07 '08 '09 '10 '11 '12 '13 ' Volume Mix YTD Through September Autos 47% Ag Products 14% Industrial 10% Chemicals 7% Intermodal 22% Coal <1% 15 Capital Program Supported by Returns Capital Program* & Returns** (Capital in Billions) $ % ROIC** $3.2 $3.7 $3.6 $ % ~$ E Infrastructure Replacement Locomotives / Equipment Capacity / Commercial Facilities Technology / Other Positive Train Control Safe and Resilient Infrastructure Continued Capacity Spending Southern Region Network Strategies Equipment Acquisitions 218 New Locomotives 800 Freight Cars More than 6,000 Containers & 6,500 Chassis * Includes cash capital, leases and other non-cash capital Capital excludes buyout of lease on Headquarters building. ** See Union Pacific website under Investors for a reconciliation to GAAP. 16

9 Debt & Leverage ($ In Millions) Total Debt* (Adjusted) $14, % 12/31/2014 9/30/2015 Adjusted Debt to Capital $16,493 Sheet 44.5% Adjusted Debt / Adjusted EBITDA* /31/2014 9/30/2015 Strong Balance Sheet Investment Grade Credit Rating $ Billion YTD Debt Issuance Includes $1.1 Billion Issued in October * See Union Pacific website under Investors for a reconciliation to GAAP. 17 Driving Strong Shareholder Value Quarterly Share Repurchases ($ In Millions) $683 $807 $806 $834 $856 1Q 2Q 3Q $1, Repurchase Activity 13.8 Million Shares in 3Q 28.7 Million Shares YTD ~ 59 Million Shares Remain Under Current Authorization Dividends & Share Repurchases* ($ In Millions) Share Repurchases Dividends +22% $3,531 $4,318 Cash Returned to Shareholders up 22% 2014 YTD 2015 YTD** * Through September ** Excludes 4Q14 dividend payment made Jan. 2,

10 Closing Out 2015 Will Fall Short of Fourth Quarter & Full Year 2014 EPS Records Lower Year-over-Year Volumes Business Mix Challenges Focus on Core Pricing Continued Productivity & Cost Improvement 19 Growing Shareholder Value KEY DRIVERS Moderate Economy Diverse Franchise Opportunities Strong Value Proposition - Reinvestability Positive Volume Growth Real Core Price Gains Volume + Pricing + Productivity Replacement t& Productivity it Growth with High Returns Increasing Cash Generation Low to Mid 40 s Adj. Debt/Cap 1.5x Plus (<2x) Adj. Debt / Adj. EBITDA Strong Investment Grade Operating Ratio 60% +/- CapEx of ~16%-17% of Revenue Dividend Payout Target of 35% Opportunistic Share Repurchases 20