Cautionary Information

Transcription

1 September 6, Cowen & Company 10 th Annual Global Transportation Conference Rob Knight CFO 1 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 generate financial returns, improve network performance and customer service; implementation of corporate strategies; and providing excellent service to its customers and 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 also generally include, without t limitation, information or statements regarding: projections, predictions, expectations, estimates or forecasts as to the Company 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 Company 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 Company 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 Company s Annual Report on Form 10-K for 2016, which was filed with the SEC on February 3,. The Company 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 Company 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 Company does update one or more forward-looking statements, no inference should be drawn that the Company 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 1H Freight Revenue: $9.7B Automotive Distribution Centers Intermodal Terminals Manifest Terminals Ports Border Crossings, Gateways and Interchanges Intermodal 19% Industrial Products 20% Coal 13% Agricultural Products 19% Automotive 11% 18% 3 Business Trends Day Monthly Carloadings (000s) 3QTD Volumes* (vs 2016) Agricultural Products Coal Vehicles: -9% Parts: +4% -8% -6% Automotive -3% Flat Intermodal Dom: Flat Int l: +2% Industrial Products +1% +14% January December TOTAL Flat *Through September 1, 4

3 Agricultural Products 1H Volume Mix 9,000 UNP Weekly Grain Carloads (As reported to the AAR) Food & Refrigerated 22% Grain Products 31% Grain 47% Grain Inventories Export Market Fundamentals Food & Refrigerated Shipment Demand *Through August 26, 7,500 6,000 4,500 3,000 1Q Q 3Q U.S. Grain Stocks* (Bushels in Billions) 4.8 4Q Corn Soybeans Wheat *Source: USDA; As of June 1 st H Volume Mix 35,000 30,000 25,000 20,000 15,000 10,000 UNP Monthly Volumes Industrial Plastics Fertilizer July-17 Solid Base Anticipated Strength in Plastics Petroleum /LPG 17% Soda Ash 12% Industrial 29% Fertilizer 17% Plastics 25% Key End-Use Markets (% of 2016 Volume) Consumer Goods 47% Crop Production 15% Automotive 6% Construction 12% Fuel & Energy 20% 6

4 North American Auto Production Growth North American Light Vehicle Production Forecast* 1H Volume Mix Auto Parts 48% Millions 12 8 Finished Vehicles 52% 4 Cautious on Auto Sales E 2018E 2019E United States Mexico Canada Continued Parts Growth *Source: IHS Global Insight August 7 Coal Trends 45,000 UNP Weekly Coal Carloads* (As reported to the AAR) 35, ,000 15,000 5,000 1Q Q Weather Impacts Demand 3Q 4Q Natural Gas Prices Coal Inventory Levels Powder River Basin Coal Stockpiles* (Tons in MM) Inventory 5-Year Average *Energy Ventures Analysis July Electricity Generation Market Share** 48% 21% 2016 % from coal % from natural gas 43% 23% 42% 24% 38% 33% 27% 32% 3 31% 29% *Through August 26, 2Q 07 2Q 09 2Q 11 2Q 13 **U.S. Energy Information Administration (EIA) 2Q 15 2Q 17 8

5 Intermodal 180, , , , ,000 80, UNP Monthly Intermodal Volume International Mar-15 West Coast Port Labor Issues Domestic July-17 Truck Capacity & Inventory Outlook Trans Pacific Market Challenges H Volume Mix International 48% Domestic 52% Retail Inventory-to-Sales Ratio Source: U.S. Bureau of Economic Analysis Jan-12 Jan-14 Jan June-17 9 Industrial Products 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10, UNP Monthly Volumes Construction* Minerals* Metals* July-17 Construction Product Demand Increased Drilling Activity & Frac Sand Demand *Prior periods have been adjusted for the re-categorization of commodities **Includes barites 1H Volume Mix Other Lumber Minerals 11% Paper 7% 9% Frac Sand** 17% Construction ti Other Lumber Construction 32% 11% Products 10% 37% Metals 14% 1H Frac Sand Volume** (000s) 1Q17 vs. 1Q14: -17% 2Q17 vs. 2Q14: -6% %

6 UP Positioned for Mexico Growth Volume Growth (Carloads in Thousands) +8% Flat +4% +3% H vs. 1H 2016: Flat '12 '13 '14 ' H17 1H Volume Mix (In Carloads) Coal 3% Intermodal Industrial 21% 8% 7% Autos 45% Ag Products 16% 11 Network Performance & Resources Good UP Velocity (As reported to AAR, in mph) 2016 Good -5% % % nd Quarter June July UP Terminal Dwell (As reported to AAR, in hours) +6% +4% +3% Weather & Continued Episodic Events in July Hurricane Harvey impact on 2H of Third Quarter 29.6 ~1,400 Locomotives in Storage* nd Quarter June July *As of August 31, 12

7 Productivity Initiatives: Network and TE&Y / Train length / Train Ops Joint facility YTD Results ($ in millions) $110 $90 $36 Equipment (Loco and Car) Active fleet / Car repair / Equip rental costs $36 $21 $22 Other Ops, Support, Sourcing and Safety Engineering / Fuel conservation / Intermodal & Premium Ops / Admin / Supply Chain / Sourcing / Safety performance $32 1Q17 $53 2Q17 Full Year Productivity Target: $350 - $400 M 13 Capital Program Supported by Returns Capital Program* & Returns** (Capital in Billions) $ % Reduction of $1.2 Billion $3.7 $3.6 from 2015 ROIC** $4.3 $4.1 $3 7 $ $ % 14.3% $3.5 ~$ % Decreasing Locomotive Spend (~60 Locomotives in ) PTC Spending ~$300 M in E Infrastructure Replacement Locomotives / Equipment Capacity / Commercial Facilities Technology / Other Positive Train Control * Includes cash capital, leases and other non-cash capital. Supports Core Pricing that Drives Continued Investment ** See Union Pacific website under Investors for a reconciliation to GAAP. 14

8 Debt $ In Millions $12,751 $14,838 Adjusted Debt ($ In Millions) $17,390 $17,878 $18,440 Close to Adjusted Debt / EBITDA Target Ratio of /31/13 12/31/14 12/31/15 12/31/16 6/30/17 Adjusted Debt / EBITDA* Increased Adj. Debt ~$5.7 Billion since /31/13** 12/31/14** 12/31/15 12/31/16 6/30/17 *See Union Pacific website under Investors for a reconciliation to GAAP. 15 Delivering Value to Shareholders $1.91 Cash From Operations Less Capital Investments $3,327 76% Dividends $3,039 $2,694 59% 56% $4,020 95% ($ In Millions) $1, H as % of Net Income 83% Share Repurchases (Per Share) (Cumulative, In Millions) $2.20 $ Solid Cash From Ops 10% Dividend Increase in 4Q 2016 Repurchased 15.3 Million Shares Totaling over $1.6 Billion thru 1H ~30% of Outstanding Shares Since '07-' H 16

9 Outlook Full Year Volume Up Low Single Digits (Closer to Flat in 3Q) 4Q14: $438 Price at Reinvestable Levels, Above Rail Inflation Costs Productivity it $350 to $400 Million ($200 M First Half) Continued Focus on G Initiatives 63.5 Operating Ratio (%) 60 +/ Target 55 Realizing 55 Improved OR in 17