Cautionary Information

February 11, 2016 BB&T Capital Markets 31st Annual Transportation Services Conference Rob Knight CFO 1 Cautionary Information This presentation an...
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February 11, 2016

BB&T Capital Markets 31st Annual Transportation Services 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; 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 1934. Forward-looking statements also generally ll include, i l d without ith t limitation, li it ti i f information ti or statements t t t regarding: di projections, j ti predictions, di ti expectations, t ti 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 2015, which was filed with the SEC on February 5, 2016. 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

The Strength of a Unique Franchise Excellent Network Strategic Terminal Locations Broad Port Access Border and Interchange Coverage

Business Mix 2015 Freight Revenue: $20.4B Intermodal 20% Automotive Distribution Centers

Automotive 11%

Industrial Products 19%

Intermodal Terminals Manifest Terminals Ports

Coal 16%

Border Crossings, Gateways and Interchanges

Agricultural Products 17%

Chemicals 17%

3

2015 Full Year Results Earnings Per Share $4.71

$5.75

-5%

$5.49

• Softness in Demand • Business Mix Shifts

2013

2014

2015

• Solid Core Pricing

Operating Ratio 66.1%

63.5%

-0.4 pts

63.1% Best-Ever Year

2013

2014

• Resource Agility • Lower Fuel Prices

2015 4

2016 Volumes 2016 YTD Volumes*

7-Day Monthly Carloadings

(vs 2015)

(000s)

+16%

Automotive

200 2006 @192 2014 @188

190 180

2013 @ 176 2012 @176 2015 @177

170 2016 YTD Down 9%*

160

Flat

Chemicals Intermodal

Int’l: Flat Dom: -2%

Agricultural Products

150 January

-34%

TOTAL

December

-8% -15%

Industrial Products Coal

-1%

-9%

*Through February 4, 2016

5

Resources & Network Performance Total TE&Y* 17,975

-18%

Active Locomotive Fleet 7,896

14,808

4Q14

4Q15

6,895

• ~ 4,100 TE&Y Employees in Furlough / AWTS**

4Q15

• ~ 1,500 Locomotives in Storage**

-13%

4Q14

*Full-time equivalent

**As of February 5, 2016

UP Velocity

UP Terminal Dwell

(As reported to AAR, in mph)

(As reported to AAR, in hours)

Good

+13%

Good

27.0

31.0

23.8

-5% 29.4

• Record Velocity at 4Q Volume Levels • Focus on Further Improving Service & Costs

4Q14

4Q15

4Q14

4Q15

6

Coal Trends

Powder River Basin Coal Stockpiles*

Volume Impact

(Days of Burn)

(Weekly Carloadings)

2013 -15 Inventory

120

50,000

5-Year Average

105 39

80 2014

30,000

40

2015 2016*

10,000 1Q

66

0 Jan 2013

PRB Flooding

Jul 2013

Jan 2014

Jul 2014

Jul Dec Jan 2015 2015 2015

*Energy Ventures Analysis

2Q

3Q

4Q

Electricity Generation Market Share** % from coal

• Natural Gas Prices • Coal Inventory Levels • Exports

50%

48%

% from natural gas 2016- 2017 EIA Est.

47% 40% 33%

Apr ’12: 32%

32% 25% 19%

17%

2007 *Through February 6, 2016

2009

20%

2011

2013

Dec 2015

**U.S. Energy Information Administration (EIA)

7

Shale-Related Volumes 3.2% of 2015 Total Volume 2015 Frac Sand*

Volume

% Incr

(000s)

(vs 2014)

177

-30%

2.0%

Crude Oil

90

-37%

1.0%

Pipe

19

-43%

0.2%

286

-33%

3.2%

• Lower Energy Prices / Lower Rig Counts • Enhanced Fracking Technology

• Crude Oil By Rail Market Drivers • Lower Crude Oil Prices • Unfavorable Price Spreads

2,500

30,000

2,000 20 000 20,000

1,500 1,000

10,000

500 0

Jan-14

May-14

Sep-14

U.S. Rig Count**

Jan-15

May-15

UNP Frac Sand Carloads* UNP Crude Oil Carloads

Sep-15

0

UNP Montthly Carloads

Ave. Month hly U.S. Rig Cou unts

Total Shale

• Frac Sand Drivers

% of Total UP Volume

Dec-15 * Includes barites ** Source: Baker Hughes

8

Grain Volumes

U.S. Grain Exports* (Bushels in Millions)

Export Grain Flows

2013/14 1,920 1,864

1,700

2014/15

1,638

1,843

2015/16 Est. 1,690 1,176 , 854

Major UP-Served Grain Producing Region

Corn

Soybeans

800

Wheat

*Source: USDA January 2016

UNP Weekly Grain Carloads (As reported to the AAR)

9,000 ,

2014

7,500 6,000

2016* 2015

4,500 3,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 *Through February 6, 2016

9

Intermodal

2015 Volume Mix

Seattle

International 49%

Portland

Domestic D ti 51%

Chicago Sparks

Omaha Salt Lake City

NorCal

Denver

St. Louis

KC

Las Vegas

Retail Inventory-to-Sales Ratio Memphis

Tucson Los Angeles

El Paso

Nogales Intermodal Terminals

Dallas San Eagle Antonio Pass Laredo

New Orleans

1.48

1.5

1.4

Houston

Ports Interchange Points

Shreveport

Source: U.S. Bureau of Economic Analysis 1.6

1.46 1.39

1.3 Jan-10

60 0

1.34

Jan-12

Jan-14

Nov-15 10

Chemicals

2015 Volume Mix

2015 Revenue: $3.5 Billion Canadian Oil Sands

Crude Oil Petroleum 8% Fertilizer / LPG 17% 15% Soda Ash 11%

Potash Bakken

Soda Ash / Trona Ore

Industrial Chemicals 26%

Niobrara

Plastics Pl ti 23%

Key End-Use Markets (% of 2015 Volume) Crop Production 15% Consumer Goods 43%

Permian

Port Storage-in-Transit

Eagle Ford

11

2015 Volume Mix

Eastport

Seattle

Auto Parts 43%

Duluth

Portland

Construction 10% Fuel & Energy 26%

Gulf Coast Infrastructure

U.S. Vehicle Sales and Drivers

Automotive 6%

Finished Vehicles 57%

Twin Cities Chicago Omaha Oakland

Salt Lake City

Denver Kansas City

Los Angeles

St. Louis

U.S. Light Vehicle SAAR*

Memphis 17.5 16 5 16.5

Dallas

17.8

18.2

18.1

17.7

16 4 16.4

New Orleans Borders & Interchange Distribution Centers/Ports (UP Owned/Leased and Private)

Houston

10.4

2006

2009

2014

2015 2016E 2017E 2018E 2019E

Assembly Centers (UP served) *Source: January 2016 IHS Global Insight forecast

12

UP Positioned for Mexico Growth Strong Investments – Foreign & Domestic

Volume Growth (Carloads in Thousands) +8% +5% +9%

764 776 743

817

+3%

Flat

956 956

857 882

750 600

'06

'07

'08

'09

'10

'11

'12

'13

'14

15

2015 Volume Mix (In Carloads)

Coal 1% Chemicals 6%

IIntermodal t d l 22%

Industrial 9%

Ag Products 14% Autos 48%

13

Strengthening the Franchise

Replacement, Growth & Productivity, and PTC

2016 Capital Plan: ~$3.75 Billion* ($ in Millions)

Locomotives/ Equipment $965

Infrastructure Replacement p $1,825 PTC $375

• Safe & Resilient Infrastructure • Capacity C it Investments I t t

Technology/ Other $190 Capacity/ Commercial Facilities $395



Southern Region



Network Strategies

• Equipment Acquisitions •

230 New Locomotives



450 Freight Cars

• Positive Train Control *Includes cash capital, leases and other non-cash capital. 14

Leverage & Shareholder Returns ($ In Millions)

Adjusted Debt / Adjusted EBITDA* 1.7 1.4

1.4

12/31/2013**

12/31/2014**

• Strong Balance Sheet • Investment Grade Credit Rating

12/31/2015

Dividends & Share Repurchases

• $3.35 Billion Debt Issuance in 2015

($ In Millions) Share Repurchases Dividends

+37%

+20% $4,857

$5,809

$3,551

• Repurchased 15% of Shares over past 5 years * See Union Pacific website under Investors for a reconciliation to GAAP.

2013

2014

2015*

*2015 includes 4Q14 dividend payment made Jan. 2, 2015

** Prior periods have been adjusted for the retrospective adoption of Accounting Standard Update 2015-03.

15

Summary of 2016 Key Guidance First Quarter • Coal Volume Down 20% or so • Total Volume Down Mid-Single Digits

Full Year • Total Volume Down Slightly • Fuel & Mix Pressure • Record Productivity • Improved Operating Ratio • Capital Plan of ~$3.75 Billion 16

Aspiring to New Levels: “G55 + 0” Kicked off Fall 2015

• 15 Focused Teams • Turbocharge Productivity – All Areas • New Capital Efficiency Approaches • Improve the Customer Experience • New Business Development p • Continue Pricing to Service & Value

• $ Billions of Ideas – Launch in 2016 17

“G55 + 0” Key Initiatives Initiatives: Engineering Fuel Support

Relative Operating Expense + Capital Savings

45+ Projects

Frontline Locomotive Sourcing Car Corridor Terminal

Increased Annual Productivity

All Other Projects

18

Realizing Potential of the Franchise 87.5

Operating Ratio (Percent)

63.1

60 +/55

184 177

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 7-Day Volume (000s)

2019 Target

Realizing 55

19

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