Union Pacific : Webcast and Pitchbook

UNION PACIFIC CORPORATION

May 2020

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 resource productivity; enhancing the customer experience; implementing corporate strategies; and providing excellent service to its customers, returns to its shareholders and potential impacts of the Covid-19 pandemic. These statements are, or will be, forward-looking statements as defined within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward- looking statements also generally include, without 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 2019, which was filed with the SEC on February 7, 2020. 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

CURRENT OVERVIEW / BUSINESS UPDATE

May 2020

3

First Quarter 2020 Results

Earnings Per Share		Operating Ratio
	$2.15
$1.93		63.6
	+11%
				59.0
				-4.6 pts
2019	2020	2019	2020
				All-Time
				Quarterly
				Record

4

2020 Business Trends

Second Quarter Volume*

Bulk-18%

Industrial-15%

Premium -30%

TOTAL -23%

7-Day Monthly Carloadings

	(000s)
190
180	2018 @174
170
160	2019 @163
150
140
130	2020 @145
120
January	December

5*Through May 5, 2020

BUSINESS TEAM REVIEW

May 2020

6
Diverse Portfolio of Business
	Bulk
	25%
	2019	Industrial
	Volume	26%
	Premium
	49%
v	2019 Results
	Revenue $20,243M (-5%)
	Volume 8,346K (-6%)
Automotive Distribution Centers	ARC $2,425 (+1%)
Intermodal Terminals
Manifest Terminals
Ports
Border Crossings, Gateways and Interchanges
7	ARC = Average Revenue Per Car

Economic Indicators

	Industrial		Housing	Light Vehicle	Imports	Exports
	Production	GDP	Starts (MM)	Sales (MM)	of Goods	of Goods
2019	0.9%	2.3%	1.30	16.9	0.3%	0.2%

2020	-12.2%	-5.4%	1.08	13.2	-14.2%	-5.3%
2021	0.3%	6.3%	1.12	15.1	14.3%	8.4%

8 Source: IHS Markit U.S. Economic Outlook, April 2020

2019 Freight Volumes

International Trade

Domestic

59%

• Diverse franchise creates opportunity
• Off-shoring/near-shoringof U.S. manufacturing
• Demand for grain and food

Other

Imports

17%

Other

Exports	Imports
from
13%
	Mexico
		6%
Exports to
Mexico
5%

International Volumes

Other - 9%

Food & Beverage - 1%

Metals- 1%	Intermodal
Fertilizer - 1%
(excl Mexico)
Forest Products - 2%
Grain Products - 2%	54%
Coal - 3%
Grain - 4%
Mexico Intermodal - 7%	Vehicles
& Parts
	16%

9

Bulk
		Potash		Grain &
			Grain Products
Produce				34%
Grain
Export				2019	Fertilizer
				9%
				Volume	Food &
	Dairy			Refrigerated
				9%
	Coal	Major Grain,Grain	Coal &
			Products, &	Renewables
	Dairy	Fertilizer Region	48%
Produce
	Coal
Dairy,
Poultry
		Cattle,		2019 Results
		Poultry	Cattle,
		Revenue $6,529M (-8%)
	Cattle		Poultry
				Volume 2,087K (-9%)
				ARC $3,128 (+2%)
		Grain	Grain
		Export	Export
10				ARC = Average Revenue Per Car

Grain

• Grain drivers
• • Grain inventory management
  • Export market fundamentals
  • Food & beverage shipment demand

UNP Weekly Grain Carloads*	U.S. Grain Stocks**
(As reported to the AAR)	(Bushels in Billions)

9,000
7,500
6,000			2018
4,500	2020		2019
3,000	2Q	3Q	4Q
1Q
11	*Through May 9, 2020

12.0	12.5	12.9
11.6
10.7

2016	2017	2018	2019	2020
	Corn	Soybeans	Wheat

**Source: USDA; As of March 1, 2020

Coal

• Coal drivers
• • Weather impacts demand
  • Natural gas prices
  • Coal inventory levels

UNP Weekly Coal Carloads*

Electricity Generation Market Share**

	(As reported to the AAR)		% from coal	% from natural gas
25,000			50%	47%
			2018		36%		32%		38%
							31%
15,000			2019			42%
	2020						29%	28%
				29%	24%
			19%	21%			23%
5,000
2Q	3Q	4Q
1Q
			1Q'08	1Q'10	1Q'12	1Q'14	1Q'16	1Q'18	1Q'20
12	*Through May 9, 2020
			**Source: U.S. Energy Information Administration (EIA)

Industrial	Petroleum
	LPG
	Lumber,				Energy &	Industrial
				Chem & Plastic
	Paper			Sand	Specialized	28%
				28%	2019
					Volume
				Steel	Forest
	Soda			Products
	Shale			10%	Metals&
	Ash
					Minerals
						34%
	Copper,
	Iron Ore,		Shale
	Salt, Lime
	and Other		Shale		2019 Results
	Minerals
			Pipe,		Revenue $7,472M (-3%)
				Volume 2,199K (-1%)
		Shale	Cement,	Shale
		Aggregates		ARC $3,398 (-2%)
				Petroleum LPG,
Network and Regional Manifest Terminals
Major Transload Terminals			Shale	Plastics,
		Industrial Chem
13					ARC = Average Revenue Per Car

Plastics

OKLAHOMA
ARKANSAS
Dallas	To East for
LOUISIANA	Export

	TEXAS	To Gulf for
To LA/LB for
	Export
Export

Houston

New Orleans

Corpus Christi

Future Expansions

2017-2019 Expansions

UP SIT Facility

14	*Source: American Chemistry Council, June 2019

• $204 billion petrochemical investment in Gulf*
• Comprehensive product offerings & service excellence
• Dallas to Dock service solution for export plastics

- Plastic pellets travel in hopper cars from Gulf region to Dallas

• Pellets are packaged and transferred into intermodal containers for export
• Katoen Natie expanding their Dallas packaging facility to double capacity to 500,000+ square feet by Q4 2020
• KTN has the ability to grow to 2.5 million square feet

Shale Related Volumes

First Quarter	Volume	% Incr	% of Total
2020*	(000s)	(vs 2019)	UP Volume
Crude	24	68%	1.2%
Frac Sand**	21	(41%)	1.1%

• • Exclude pipe related to shale activity
  • *Includes Barites
• Crude oil drivers
• • Crude oil price spreads
  • Production & demand
  • Pipeline capacity
• Frac sand drivers
• • Energy prices
  • Rig counts
  • Enhanced fracing technology
  • White / brown sand mix

	Crude Oil Volume
		(000s)
46		46	75
		24
	14
2016	2017	2018	2019	1Q 20

Frac Sand Volume*

(By Shale, 000s)

230 233

119			122
				21
2016	2017	2018	2019	1Q 2020

Eagle Ford Permian DJ Basin Marcellus/Utica Other

15

Housing Trends

• Housing market still well below historical averages
• UP lumber, stone & glass business correlates with housing starts
• Housing also drives appliances, roofing, rebar, aggregates, and cement demand
• Housing related shipments represent ~ 5 - 10% of current UP volumes

Lumber, Stone & Glass

UP Wkly				Housing Starts
Carloadings*				(mils)
10,000									2.0
									1.8
8,000									1.6
									1.4
6,000
									1.2
4,000										1.0
									0.8
2,000									0.6
'16	'17	'18	'19	'20

IHS Global Insight forecast

16	*Through May 9, 2020
Premium
		Intermodal
		79%
		2019
		Volume
		Automotive
		21%
		Agricultural
		13%Industrial
		26%
v		2019 Results
	Energy 17%	Revenue $6,242M (-6%)
		Volume 4,060K (-7%)
Automotive Distribution Centers		ARC $1,538 (+2%)
Intermodal Terminals
Ports
Border Crossings, Gateways and Interchanges
17		ARC = Average Revenue Per Car

Highway Conversion Growth Opportunities

Cass Truckload Linehaul Index

145

135
125
115
105
95
2008	Mar 2020

Transportation Mode

(By Tonnage)

Water 6%

Rail 11%

Truck 83%

• Highway conversion opportunities in all business groups
• High insurance costs
• Drug & alcohol testing
• Truck capacity
• LOUP

18 Source: Cass Information Systems, Index uses January 2005 as its base month, U.S DOT Bureau of Transportation Statistics

Butler Intermodal Terminal

Hybrid Service Product - Valor Victoria

Manly

Butler

Boone

Council	Council Bluffs
Bluffs

LA

Initial Intermodal Service

Manifest Service

Short Line Service

Private Intermodal Terminal

19

Finished Vehicles
Seattle	Eastport
Portland		Duluth
		Twin Cities
			Chicago
		Omaha
Oakland	Salt
	Lake	Denver
	City
		Kansas	St. Louis	U.S. Light Vehicle SAAR*
		City
Los			Memphis	17.5
Angeles			17.4	17.1	17.2	16.9
		Dallas
			New				15.1
			Orleans				13.2
		Houston
Borders & Interchange
Distribution Centers/Ports
(UP Owned/Leased and Private)
Assembly Centers (UP served)
20		*Source: Global Insight

Full-Service Expertise For Almost Any Commodity

Loup Total Supply Chain Logistics

	Wholesale	Retail Auto	Carload	Carrier
	Intermodal	Parts	Traditional Rail	Relations
	Door-to-Door	Just-In-Time		Execution
	Service	Performance		Capacity
	EQUIPMENT	INVENTORY	MILITARY	DRAYAGE
VALUE	MANAGEMENT
MANAGEMENT	SERVICES	SOURCING
ADDED		NETWORK
SERVICES	POOL	WAREHOUSING	CROSSTOWN
	MANAGEMENT	OPTIMIZATION		SERVICES

TRANSLOADING

VISIBILITY

21

		Calexico
Mexico		Mexicali
	Nogales
		Ciudad	El Paso
		Nogales
			Juárez
		Hermosillo			Eagle Pass
						San Antonio
		Guaymas		Piedras Negras
		Chihuahua
						Nuevo	Laredo
						Laredo
		Topolobampo						Brownsville
				Torreón	Saltillo		Matamoros
						Monterrey
Bulk	Industrial		Durango
Mazatlán			San
18%	17%
				Luis
						Potosi		Altamira
	2019		Aguascalientes			Tampico	Progresso
				Silao				Puebla
Volume		Guadalajara
		Querétaro
Premium		Manzanillo		Toluca		Veracruz
	65%	Ferromex	Lazaro Cardenas	Mexico		Coatzacoalcos
		KCSM				City
		Ferrosur
		Short Lines				Salina Cruz
		UP Intermodal Operations
22		UP Offices						Ciudad Hidalgo
	Border Crossings

OPERATIONS OVERVIEW

May 2020

23

FIRST QUARTER RESULTS
Safety
		Employee				Rail Equipment
(Reportable Personal Injury Incidents			(Reportable Derailment Incidents
	Per 200,000 Employee-Hours)			Per Million Train Miles)
				Good				-18%	Good
1.02			-11%					4.26	3.48
0.89				3.25
	0.74	0.90	0.80	2.86	2.76
2016	2017	2018	2019	2020	2016	2017	2018	2019	2020
		Public
(Crossing Accidents Per Million Train Miles) Good	•Continued Focus on Safety
		3.05	+10%	2.81
2.37	2.26		2.55	•Goal of Zero Incidents
2016	2017	2018	2019	2020

Unified Plan 2020

Precision Scheduled Railroading Tenets

• Shifting the focus of operations from moving trains to moving cars
• Minimizing car dwell, car classification events and locomotive requirements
• Utilizinggeneral-purpose trains by blending train services
• Balancing train movements to improve the utilization of crews and rail assets

25

Unified Plan 2020

Key Performance Metrics - 1Q 2020 vs. 1Q 2019

209

23.8

25.4

131

894

85

64

FREIGHT CAR

FREIGHT CAR

TRAIN SPEED*

LOCOMOTIVE

WORKFORCE

INTERMODAL

MANIFEST/AUTO

VELOCITY *

TERMINAL

(Miles Per Hour)

PRODUCTIVITY

PRODUCTIVITY

TRIP PLAN

TRIP PLAN

(Daily Miles per Day)

DWELL *

(GTMs Per HP Day)

(Daily Miles per FTE)

COMPLIANCE

COMPLIANCE

(Hours)

(% of Cars On Time)

(% of Cars On Time)

8% 11% 3% 18% 10% 19 pts 1 pt

26*Prior years have been recast to conform to the current year presentation which reflects minor refinements.

Unified Plan 2020 Update

Terminal Rationalization & Network Changes

• Consolidated Mechanical shops
• Santa Teresa Block Swap Facility In Service
• Completed Eight 15,000 Foot Sidings
• Continued Improvement in Train Length

Train Length

(Max on Route, in Feet)

	~1,300 ft
8,500	+19%
8,000
7,500
7,000
6,500

27

Unified Plan 2020

Locomotive Productivity

GTMs per	7 Day
HP Day	Carloads
160	200

140	177	168		180
	163
120			131	160
		120
100	109	109	151	140
80				120

28

• Result of using the locomotive fleet more efficiently
• First quarter GTMs per horsepower day increased 18% compared to first quarter 2019
• Driven by less units, increased train length and reduced dwell

Unified Plan 2020

Inventory Management

Operating Inventory and

Cars in Storage

• Operating inventory reduced with Unified Plan 2020

50,000	Operating		43,817	250,000	-Excludes cars in storage and cars
	Inventory	193,082			placed at customer
40,000			200,000
			-Change driven by improved freight
30,000	Cars in Storage	159,113	150,000	car velocity and terminal dwell
		•Cars in storage on the rise
20,000		24,526		100,000
10,000				50,000	-Increased more than 80% since
			fourth quarter 2018
	Unified Plan 2020 Launch
0				0
29

Unified Plan 2020

Employee Force Levels

Force Levels						7-Day	•Unified Plan 2020 driving a
				Carloadings
(FTEs)						(000's)		significant reduction in FTEs
50,000	47,457						200		-Down ~15% or about 6,200 FTEs in
45,000							190		first quarter 2020 from first quarter
	42,919					180		2019
								-Lowest number of FTEs in the last 15
40,000							170
				37,483			years
35,000				174		33,872	160		-Driven by asset utilization and
177		168
164		163		150		process improvements
						151
							•	Additional opportunity exists
30,000							140
	2015	2016	2017	2018	2019	1Q
						2020
30

Positive Train Control (PTC)

• Approximately $2.9 billion invested through 2019
• Total estimated investment ~ $2.9 billion
• Field testing since October 2013
• Installed on 100% of required rail lines
• Implemented on 100% of required rail lines
• Testing and refining PTC interoperability in 2020 and enhance the Energy Management Systems

31

Enabling New Capabilities

NetControl

Mobile

Work Order

Terminal

32

Lines of Code

85M

62M

UP Vision

40M

v

145k

Micro-services

CX	7,500
Customer APIs	4,500
SmartETA

1,000

Improving the Customer Experience Through APIs

•	13 API services in 2019 with additional
	services in 2020
•	Real-time access to data between
	applications and devices

Shipment

Location/Tracks

Learn about your

Display information

shipment(s) including

about tracks at your

their locations, events,

facility

product, status and ETA

Order In	Release
Request rail car if you	Identify rail cars to be
released to/from an industry
are anOrder In
track
customer

• Streamline and automate workflows
•	Enables customer to take action on their
	shipments from their interfaces
•	Expands visibility into the supply chain

Equipment

Display details and characteristics of specific equipment IDs

Gate Reservation

Provides intermodal specific services, like create and view gate reservations

Cases (Service Issues)

Retrieve case (service issue) status, details and responses

Accounts/Contacts

Retrieve information associated with your business(s) and people

UPGo - Intermodal

Provides intermodal driver

services to expedite the

intermodal terminal

experience

33

Protecting the Environment

Fuel Efficiency

• Union Pacific can move one ton of freight 444 miles on a single gallon of diesel fuel
• Our customers eliminate GHG emissions by choosing rail over truck
• Innovative locomotive software to help save fuel installed on the majority of high horsepower units

34

One Train

Equals

~300 Trucks

FINANCIAL REVIEW

May 2020

35

Updated 2020 Guidance

Withdrawing Full Year Guidance on:

• Volume
• Headcount
• Operating Ratio
• Share Repurchases

Second Quarter Outlook

• Volumes Down ~25%
• Aggressive Cost Control
• Volume Outlook Makes Operating Ratio Improvement Unlikely

36

Full Year 2020

• Pricing Gains in Excess of Inflation Dollars
• $400-500Million of Productivity
• Solid Free Cash Flow After Dividends Under Various Scenarios
• Capital Allocation Plan Based on Scenarios:
• • Capital Spending Reduced by $150 to $200 Million
  • Maintain Dividend
  • Suspend Share Repurchases

Financial Performance

Expanding Margins and Driving Returns

			Operating Ratio					Earnings Per Share
							(Percent)								$7.91	$8.38
			63.7%
62.9%					62.8%	62.7%					$5.49	$5.07	$5.79
													60.6%
177								174
				168
164	163
2015	2016	2017*	2018	2019		2015	2016	2017*	2018	2019
					7 Day Volume (000s)

ROIC**

15.1% 15.0%

14.3%

13.7%

12.7%

2015 2016 2017* 2018 2019

37

*Adjusted to exclude the impact of Corporate Tax Reform

** See Union Pacific website under Investors for a reconciliation to GAAP.

Financial Performance

Growing Cash Flow and Shareholder Returns

	Cash From Ops			Dividends Paid
	($ in Billions)	$8.7	$8.6			($ in Billions)
			$2.3			$2.3	$2.6
$7.3	$7.5	$7.2				$2.0
		$1.9
2015	2016	2017	2018	2019	2015	2016	2017	2018	2019
Cumulative Share Repurchases			Market Cap
	($ in Billions)		$37.2			($ in Billions)
		$23.2	$31.4					$126
	$19.1				$105	$100		$107
$16.0					$85
2007-15	2016	2017	2018	2019	2016	2017	2018	2019	2020
				May 8
38

Pricing Fundamentals

• Unified Plan 2020 service reliability drives cost savings to the customer
• Balanced portfolio provides flexibility for repricing as value grows
• Pricing above inflation

Balanced Revenue Portfolio

Contracts	Tariffs
>1 Year
45%	25%

Contracts

• 1 Year
  30%

39

FIRST QUARTER RESULTS

Productivity Update

Net Productivity of $220 Million	Union Pacific is More Efficient
		Than During Past Recessions
Car Velocity &	$35	• Greater Than 100% Volume Variable in
Inventory
	First Quarter 2020
Train Length	$55	• 1500+ Basis Points Operating Ratio
Improvement Since 2008/2009

Locomotive

$70

Efficiency

Other Workforce

Productivity

40

$60

Strengthening the

Franchise

2020 Capital Plan

($ In Millions)

	Base	Capacity /	Strategic
Infrastructure	Commercial
Replacement	Capital	Facilities	Siding
$470	Extensions
$1,850
$2.95B		$150
		Equipment
		$295

Technology /

PTCOther

$90$245

Trimming 2020 Capital by $150-200 million

(April 2020)

• 2020 Capital Plan:
• • Base capital of $2.95 billion, plus
  • $150 million for siding extensions
• Safe & resilient infrastructure
• Equipment acquisitions:
• • Locomotive modernizations
  • Targeted freight car purchases
• Capacity & commercial facilities
• PTC spending

41

Capital Program

Capital Spending & Returns

$4.3

	$3.5				ROIC**
		$3.2	$3.2
		$3.1	$2.90-2.95	•	Return-focused capital
								program
							•	Productivity through G55+0
								initiatives
							• Capex less than 15% of
								revenue longer-term
2015	2016	2017*	2018	2019	2020E

Positive Train Control

Technology / Other

Capacity / Commercial Facilities

Locomotives / Equipment

Infrastructure Replacement

42*Adjusted to exclude the impact of Corporate Tax Reform.

**See Union Pacific website under Investors for a reconciliation to GAAP.

Managing Returns & Liquidity

Cash From Ops	Cash to Shareholders
($ in millions)		($ in millions)
		$4,100	$3,600
$1,959	$2,155
1Q 2019	1Q 2020		1Q 2019	1Q 2020
	Cash Balance

($ in millions)	~$2,000

$1,130

$831

12/31/2019 3/31/2020 Current

First Quarter Year-to-Date

• Cash Flow Conversion Rate Equal to 91% of Net Income
• Repurchased 14 million Shares for a 5% Reduction in the Average Share Balance
• Adjusted Debt Increased $2.5 Billion sinceYear-End 2019
• Adjusted Debt / EBITDA of 2.7x

43

Shareholder Returns

• Dividend payout target of 40% to 45%
• Five dividend increases in the past ten quarters
• Repurchased ~40% of shares since 2007
• Share repurchase authorization three years beginning April 1, 2019
• Up to 150 million shares
• Suspended share repurchase program as of April 2020

44

Declared Dividend Per Share

(cents)

			97	97
			88
			80
			73
55 55	55	60.5	60.5

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2015

2016

2017

2018

2019

2020

Cumulative Share Repurchases

($ In Billions, Shares in Millions)

				$37.2	$39.7
			$31.4
	$19.1	$23.2			457.7
$16.0		408.4	443.4
	314.8	351.2
279.8
2007-15	2016	2017	2018	2019	1Q 2020

Growing Margins

	P75+0				Operating Ratio
	2007 - 2010					(Percent)
79.3%
					Project OR&0
					2011 - 2014					Unified Plan 2020 and G55+0
			70.6%							G55+0
										2016 +
							63.5%
190												60.6%
												163	55%
2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017*	2018	2019	Goal
							7-Day Volume (000s)

45

• Adjusted to exclude the impact of Corporate Tax Reform
  .