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Union Pacific Corp UNP
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

Operator: Greetings and welcome to the Union Pacific's Second Quarter 2013 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded, and the slides for today's presentation are available on Union Pacific's website.

It is now my pleasure to introduce your host, Mr. Jack Koraleski, CEO for Union Pacific. Thank you, Mr. Koraleski, you may begin.

John J. Koraleski - President and CEO: Thanks Robin, good morning, everybody. Welcome to Union Pacific's second quarter earnings conference call. With me here in Omaha are Rob Knight, our Chief Financial Officer; Eric Butler, our Executive Vice President of Marketing and Sales; and Lance Fritz, our Executive Vice President of Operations.

This morning we are pleased to announce that Union Pacific achieved an all-time record quarter generating an earnings milestone of $2.37 per share, an increase of 13% compared to the second quarter of 2012. We managed our network efficiently and continued to show the agility of our strong and diverse franchise. When combined with solid core pricing gains, we've more than offset the slight shortfall in volumes, generate a new best ever quarterly operating ratio of 65.7%, translates into value that we are creating for our customers and increased financial returns for our shareholders. So with that let's get started, I'll turn it over to Eric.

Eric L. Butler - EVP, Marketing and Sales: Thanks, Jack and good morning. Let's start with how we are creating value for our customers the cornerstone of our strategy. So I'll start with the industry's best franchise which provides customer's access to diverse and growing markets. Through targeted investments we continue to enhance this franchise so that we can deliver the best service that support future growth.

Our passion for providing excellent service has allowed us to introduce innovative products that not only run business, but also secure re-investable returns. The capstone of our value proposition is our relationship with our customers, a key component that we worked hard to develop and maintain.

Today, our value proposition is stronger than ever as reflected by our customer satisfaction scores, which came in at 93 for the second quarter. We appreciate this recognition from our customers and continue to focus on providing excellent services strengthening our value offering.

In the second quarter, volume was down about 1% compared to last year as strong growth in chemicals and solid gains in automotive were offset by declines in intermodal and ag. The drop related decline in ag continues to have a significant impact on overall volumes. Setting ag aside, the other five groups were up about 1% in total.

Core price improved 4% with all six businesses posting gains. So, pricing gains along with some positive mix were the main drivers in the 5% improvement in average revenue per car. With price driven average revenue per car gains outpacing the volume declines, freight revenue grew 5% to more than $5.1 billion.

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