Good morning, everyone. Welcome to day two of Barclays' 43rd Annual Industrial Select Conference. I'm Brandon Oglinski, Airline and Transport Analyst, and very excited to have up next Union Pacific. We're joined by Jim Vinna, CEO, Jennifer Heyman, CFO, and Kenny Rocker, Head of Marketing and Sales. So very excited to talk about a lot of developments here on the M&A front and on your business. But for those that have done this already, let's just queue up question number one for the audience real quick. Do you currently own UNP? yes overweight market weight three underweight or four no can I get the

names yeah underweight question number two please in your what's your general

bias towards Union Pacific right now positive negative or neutral and then question number three please in your opinion through cycle EPS for Union Pacific will be above peers in line with peers or below peers and thanks to everyone for participating we do publish these at the end of the conference All right, Jim, maybe somewhat of a favorite audience here.

Yeah, I thought maybe, you know, one of the UP people in the crowd with a button there would have tried to skew it, but thank God you didn't, Diana.

Well, thank you for coming to Miami, especially during a busy time for you guys. I think yesterday you made a filing with the STB effectively saying that the refiling of the application for the merger with Norfolk Southern would be in by April 30th. I think some expectations have been that that would be March. So can you talk to, you know, maybe the slight delay here?

Well, listen, thanks very much for inviting us and having us here, and thanks for everybody that's showing up in the room and online. Maybe just before I answer that, I just have to talk about, in general, how we feel today versus where we were six months ago and where we were last July. You know, what we're proposing in this merger, we even have more conviction now on what the benefits are. Benefits for the country, having an end-to-end railroad that operates seamlessly, very important. Enhances competition, because any time you can move things seamlessly across the country, people that have to compete against you have to compete against you on that level of service, or they have to compete against you on some other way. So if they can even match the service. And remember, in our industry, we're moving products and we're moving a lot of product in one rail car. So it's important that customers use that as inventory and they also bring it closer to themselves for final inventory and how they're going to use that product. So if we can move it quicker, they get the benefit of carrying less inventory and all of you know how to figure out the inventory costs. And on top of that, they have less costs for transportation because they don't have to own as many rail cars to move that business that they're moving. So we're going to offer that, and we know by the millions of cars that we interchange yearly with other railroads what happens. And we are even more sure and convicted that we can gain 24 to 48 hours on those cars by removing the touch points, switching earlier the way we handle them from origin to destination. So if you're one of our competitors, you need to compete against service, which you're going to have a hard time doing because you're not set up to go across the country. And second is you have to compete somehow, and I think the customer wins. The customer is going to see them trying to compete against us to take into account those other things using price. And that's really the reason the railroads are so adamant against it, is they want to talk about competition. And I don't blame them. They're smart people at the other railroads, but they have to do something. And what that something is, is to see what they can get the STB to be able to put in place so that they can try to close that gap. But that's not the STB's job, is to close that gap for them financially. It's their job to make sure that the competition is out there. So, Brandon, I'm telling you, we're very comfortable on that. Now, the process of application and then approval and going through all the steps. Listen, some of the regulations date back to the early 1900s when railroads actually were the predominant way to move products across the United States of America. You had water, and you had railroads. But a lot of places, the rivers don't line up, okay, with where people were populated in the country. If you go across our network, some of the cities that are there today were established by Union Pacific as they built out, and the other railroads in the western part of the U.S. So bottom line is, there's a process. We knew it. And I think if today somebody was writing the regulations, they'd be different. But it is what it is, and it is a process. So we went through the process first to put the application in, and that was important for us to cover off all those key areas that the STB is responsible for. Is it in public interest? Does it enhance competition? Is it good for employees, the environmental? and we put that all in that application and we made sure we did that. And because it was a bolt-on with a very small piece of overlap and a very small piece of two-to-one customers, we dealt with that. So they said that we needed to give them some more information. Last week, through the liaison, they told us the way they wanted to see that information was different than we thought three weeks ago after they had sent it back to us to put more information in. And we were, by regulation, we had to give them an answer on the 17th whether we were going to reapply and when they could expect the application. So we put out yesterday that it's the end of April. That's all it is, is just going through the process. Now, I'm hoping we're working hard, and the contractors we've hired, the economists, right, the traffic studies people that are doing this separately from us because they've got some expertise on that, you know, they need some time to do that. And that's where we are, Brandon. I don't know if you two have any comments on where the, you know, you guys are good. I'm going to bring them in as much as I can, Brandon, if you don't mind.

And on process, so assuming that you did file by April 30th, what's the next steps?

Well, it's laid out. In general, what happens is they give any constituent time to be able to look and formally respond to the application. And I'm sure they've been working at it because it's not substantive change of what we're doing to it. So they're going to have a few extra months, and hopefully the STB looks at that and says they don't need the 90 days for that, and give them 45 days, because they've already been looking at that application for a while. But that happens. Then there could be hearings. Then there could be back and forth before we get to the end. Yeah, listen, it's different than the way I do business. You know, I made a decision on some stuff that we're buying our company, and I think It took me 20 minutes last night with Jennifer, and we pounded it out, and we're done. So I like to do things in 20 minutes, and some things take a little bit longer. But we knew it. Brandon, this is not a surprise. If it was a surprise, then people out in the audience and online should think, holy cow, that Union Pacific leadership doesn't understand. We understand. But we also want to try to speed it up. It is what it is.

Does this push back the idea that the deal could close mid-next year, early next year? Yeah, I think we're still there.

Okay. We really are. You know, it's a great deal for America. If this was not a compelling story for customers, for our employees, and everybody has heard me say this, but I'll say it again. You know, when you go through mergers, people talk about New York dock protection. What we've offered is black and white, a job for life at the new Union Pacific for every unionized employee. That's a big deal, right? So when we look at that, environmentally, we might operate a few more trains, but through some of the communities, but we're taking off trucks off the highway and trucks within the city. That is huge. Remember, we're 70% more greenhouse gas efficient than a truck. So when we look at the whole scheme from one end to the other, and also United States service and defense, we move a lot of products for the Army and other parts of the defense. And being able to do that in a seamless manner from one end to the other, I got it. We probably don't have to worry about it, but I'll tell you, we're ready to move things in a real fast, expedited fashion from the east to the west or from the west to the east, from the north to the south, and do whatever we have to. And a seamless railroad just does it better. One bill, one contact, one way to look at it. So the STB gets it. They're smart. You know, they're very smart people, but they want to go through the process, And they don't want to get sued by the other railroads that they gave, that they did something that was not by regulation. So we're good with it. Well, I don't have bad dreams about it, Brandon, you know, going, oh, my God, what's going on?

Jim, this all sounds wonderful, but one of your former colleagues will be on stage here tomorrow. And I suspect the conversation is going to go in a very different direction. And I think a lot of it's going to be focused around the idea that M&A. You can name them. Mr. Creel.

Mr. Creel, yes. I know Keith, good friends. I think we're going to bet on the hockey ladies and the men at some point. But I think he doesn't want to go up as high as I do on the ladies.

Well, I think he's going to push the idea that, you know, M&A needs to enhance rail-to-rail competition. Do you agree with that?

Well, listen, Keith is a real smart guy. I've known him for a long time, and I give him accolades on what he's been able to do. When he was putting together Canadian Pacific in Kansas City Southern, he talked about single line, seamless, better competition, and that was the story. So what we're doing now, you replace Canadian Pacific by Union Pacific, and you replace Norfolk Southern from Kansas City, and what we're talking about is a seamless that enhances the movement and it gives customers better optionality. So he has to say something. The rest of the industry has to say something. And the reason they have to say something is this. If you're in business, anybody who's a leader of a company will tell you that if you're a competitor and direct competitor for a small piece of the business, remember, us railroads make up about 13% of the total movement of goods in the U.S. So we're not the majority like we used to be in 1890. 90. Second is Union Pacific today runs 27% on a GTM basis of the traffic that's on the railroads. Our biggest competitor on the west is Burlington Northern, and they're at 39. When we get this deal done on a GTM, which is really the amount of goods you move, we're going to be the same size. So I don't know how we end up hurting that. And if you're one of the competitors, what you're worried about is this. Like I said a minute ago, if you're in an industry, you would only complain if you think what the other company is doing, which is Union Pacific, is driving better than you can deliver. Otherwise, why would you complain? You would let that company do it. So all the noise we're getting from the railroads is they're worried about competing, and they know the only way they're going to be able to move traffic as I opened on the service piece is they have to do it with price. That's what they're worried about. Canadian Nationals are worried about what happens to some of their automobile. We're going to be more competitive into Michigan and Ohio and the southeast. CSX is worried about seamlessly, can we attack some of their and go after some of the business that they have in the boxcar business, in the merchandise business that they have. But the application, so that's what it's going to say, and hopefully you ask that question. Say, you know, you said when you went through the Canadian Pacific, Kansas City, that it was such end-to-end as the way to go and all this. And we have about the same amount of overlap as they had in their deal. And you need to ask them about, how about Canada? Last time I looked, I haven't seen anybody, the two railroads in Canada announcement come up that they need to split the railroads in two because in four. So they have four railroads in Canada, and they shouldn't operate across the country.

So if you ask them those questions, go ahead. I'll be listening in to see if you do. I'm sure it'll be a nice exchange. Can you maybe talk to the Reverend Synergies or Jennifer? Because I think when you guys did file the application, they actually came up, and you guys took away what you thought were going to be concessions. Can you speak to that change you made?

Maybe I'll just talk to the concessions piece first, and then Kenny can talk to the revenue synergies. So you're right. When we first made the announcement about the merger application, we discounted out about $750 million in concessions that we thought might be necessary in terms of getting the deal done. As we then spent time over the next several months really studying where the traffic is going to come from, where the origins and destinations are, and really the enhanced service product, going back to the competition piece, that we're going to be offering and how we can enhance it otherwise. As we look at that, we don't think those concessions are necessary. Again, it's largely end-to-end. Seventy-five percent of the business that we're expecting to grow is coming off the highway. It's not coming from another road. It's coming off the highway. And we've heard competitive gateway pricing, which not only helps address some of the customers that might be impacted by the merger, it actually extends that benefit out further to customers that would have seen no change in their business with the merger but for us offering this. And now they have the ability for either BNSF or CSX to offer a through rate for them. So when we did all that and looked at that, we're like, we don't need those concessions. We don't think they're necessary to make our point and to drive better enhanced competition.

So before I hit on these revenue synergies, I want to add a different perspective to what Jim mentioned about the merger. From a customer perspective, the customer wins also. So when Jim first came back in August of 2023, the first week on the job, as we were competing with Canadian Pacific, we looked at our service product, and that's the first thing that we added to to make sure it was stronger. In that sense, the customer won. We also are in, you know, competitive situations where, to Jim's point, you do have to price. In that sense, the customer wins. So let's make it clear the customer will win in this merger. Now, with these revenue synergies, yeah, we laid it out. Jennifer did a good job. You're talking about two million trucks that are going to come off the highway. The thing that we're excited about is it's both car load and the intermodal side. We don't talk about that car load piece. We've got six lanes that we've laid out that are going to attack the watershed markets. A lot of that's moving on water. A lot of that is moving on trucks. And then on the intermodal side, we've got some lanes that we really think are going to be exciting from SoCal into the northeast, from the Texas-Mexico area into the southeast. Jim and I were with a pretty large intermodal customer last week, and they did a good job of saying, hey, we think you're thinking about it right. We think it could be a little bit undersized, and we think there are some other lanes that the merger will open up.

And I guess, can you just expand for the audience, because maybe not everyone understands how rail interchange works today and why it can be so inefficient for a shipper to go east to west and kind of that arbitrary border near the Mississippi River?

Yeah, so a few things, and we don't talk about it a lot. A lot of the business, I'll just give an example, and we talk about Chicago. a lot of that business stops in Chicago and then is rubber-tired to another railroad inside Chicago. And then the more egregious thing is that it stops in Chicago and then it's trucked into Toledo, Detroit, other places in Ohio. And so the customer wants the solution where it still will and where it goes in the end. They don't want to have to negotiate that and go through and have that other logistics leg there.

Okay, but I think some of your competitors would push back and say, hey, look, we could get these benefits just by working better together, and we've seen announcements with your competitors launching new services.

Yeah, that's great. That's called competition and enhanced competition. I think they're making our case is I hope they do. I hope they look at ways to be able to improve it. But the history will tell you, though, that those things don't last. Railroads start looking internally about their assets and how they handle it. And, you know, today I could tell you that we have disagreements on locomotives, fuel. And we pass locomotives back and forth, but people will say, well, I don't know if we should, you know, you didn't give us 3,000 gallons. It was 2,850 gallons, so we don't want to pay that. And you go back and forth trying to settle it. and, oh, we get 24 free hours, or it wasn't our fault, it was the customer fault. Bottom line is, is when you have a seamless railroad, all that goes away. It's how you move it. And everybody misses, everybody loves the intermodal. I also love merchandise. And if you're originating somewhere in the western part of the U.S. and going east, is we handle it what's the best for Union Pacific. we we've tried to make deals with other railroads to see if you can move traffic in a much more seamless but you're talking about capital what a railroad has to do and they're not willing nobody's willing to do that especially if you don't have a long-term commercial deal to do that and it's just never happened we're going to be able to at that hump yard that we have in houston we're going to build blocks for philadelphia we're going to build blocks for Pittsburgh so you don't handle the cars on the other side that's just fact like I like talking fact not fiction or you know what's going to happen like my kids well my kids are 40 but when they were younger they would talk about geez maybe I get to go to Mars okay well I'm okay with that that's a dream right we've been to the moon I'd rather think I know how to get to the moon than to worry about that and that's what the analogy is for this is they can talk but if I can't see I've never seen the result last for a long time with with Canadian Pacific before before they purchased Kansas City Southern we we delivered an 11,000 plus foot train okay to go across the Norfolk Southern, over the Meridian Speedway. For some reason, now that that was a deal that was there for years, this is not a three-month deal, now we have to split the train in two pieces and give a max 8,500 feet. I think that's a pretty prime example of railroads for whatever reason. It was okay on the railroad before, but not okay a few months after you take the ownership of a company. That's what happens. Sorry for the long answer, but I like to talk fast, Brandon. Appreciate it. Not something that I'm making up, because it comes back to the key point. If they truly thought the other railroads, and they're smart, when you take a look at it, if you're one of the other railroads, you look at this deal and you say, how's it going to impact us? What is it that it's going to do to us? if they thought that what it was going to do to them was we wouldn't be able to technologically put the companies together, which we did with NetControl, okay, in our company. And that's our base fundamental, and it was a non-event. And we think we can do that, pretty use the same template. Not day one, do that at Norfolk Southern and implement the best systems that both companies have across each other. At the end of the day, if they can't argue, they can come up with things like, I wonder if they can handle the technological change. Fact is, we've done it internally, and we've upgraded all our main systems. Second is, how's the competition? What's it do to us? Brandon, what are they going to say? If you have to compete on price, and you might have to take a price cut to compete against the new Union Pacific, and you can't grow your business the way we can on the watershed because we go long haul, what's Canadian Pacific and Canadian National going to do? They want to try to do everything they can to affect this transaction. The SDB is too smart for that. They know you should never listen to a competitor as the key input on when you're looking at what's happening. It's just common knowledge.

Well, I appreciate that. Can we queue up question number four? And if there's any questions from the audience as well, just raise your hand. We'll get you a mic. In your opinion, what should U&P do with excess cash, both on M&A, larger M&A, share repurchases, dividends, debt pay down?

Give it back to the shareholders, okay? That's the way we look at it. We need to return money to our shareholders.

After the larger M&A. Yeah, after capital and everything else. I got it.

Did I hurt that question by sort of giving?

Question number five, please. In your opinion, what multiple of 2026 earnings should Union Pacific trade? We can go ahead and vote, please. We don't get the vote, Kenny. Diana, six. Okay, and then question number six, please. What do you see as the most significant share price I had when facing UNP? Core growth, margin performance, capital deployment, or execution and strategy? And while we're waiting for the results of this, Jennifer, I did want to ask about the business. It looks like, I think last week, volumes looked pretty good for your network. I think you guys have been talking about pretty decent operations. Can you give us an update on how the year is trending thus far?

Yeah, sure. So, you know, we were impacted a little bit in January with some weather that hit the southern part of our region. We rebounded. In fact, that was right around the time of our earnings release, and you heard us talk about the fact that we looked for a quick rebound. We've done that. The network is running. you know we're back at call it 230 240 car miles per day our dwell times are sub 20 again and with that you've seen the car loads come back because we're again back in a position where we're putting the cars up against the customers we're moving them on demand and you've actually seen us you know i think right now our car loads are down two percent overall in the quarter but we're up year over year in the month of february and that's really largely because a lot of that bulk business We're seeing strong demand on the grain side, strong demand on the coal side, and even some of the petrochem markets, plastics in particular, and domestic intermodal is still good for us. So you've got the biggest headwinds out there in terms of the international intermodal, which is the year-over-year comp that we knew was there. And then some of the industrial markets, autos is weaker, although starting to look a little bit better, forest products with housing. But net-net, when you get a well-running network, you're going to get every carload that's available, and we've rebounded from that January weather and running very, very well.

And, Kenny, are you guys getting incremental wins on the network this year?

Yeah, I mean, you have to set aside the markets because the markets can change on you at any time. So we talked about the cold. You know, we had a win around springtime this time last year that we're enjoying on top of that. Same thing with the grain business. Grain is up because the markets are stable, but they're not hot. But they're up because we are winning. We are winning in the moving product out of the Gulf, moving into Mexico. Same thing with the petrochem business. Petrochem business, it's not like it's on fire. You have to go out there and win, and we've done that, and we feel good about winning more. And then we talked about domestic and immodal. And the thing about domestic and immodal we like is that it's been pure over-the-road truck wins, It's not against share or another railroad. So we've been able to open up the pie with a great service product.

And our customers are expanding, right? We can see it in the aggregate moves in Texas and places like that. We see that on the aggregate side.

We see that in mature markets like the grain business where we've added literally more destinations and more origins. Later today, Jim is going to get a contract for a customer that just signed on a new grain facility in Iowa for us that we expect to get us some really good growth.

We've got a record number of shuttles in place for our grain business today.

We've got a record number of shuttles, and we had a number of commodities that have had record revenues here recently, and we want to build on that.

Does this sound maybe a little bit more bullish than the outlook was on the earnings call?

We'll see. I mean, it is still February. So, I mean, we like how we've started the year, but there's a lot more of the year to play out. If we can get some benefit from the economy, as we talked, if you look at some of the macro indicators, I know people are excited about ISM, excited about some of the truck pricing. We'll see if that continues. If that does, we're in a great position to capitalize on it.

The fundamentals are real important, Brandon, and that's why our strategy is safety, service, and operational excellence. If you can deliver a service at the level that we're delivering here, where really the amount of noise is just about minuscule or not there, then customers look at it and say, if you're able to do that for a long time, and it can't be just a quarter, if you're doing it for a year, year and a half, they trust that you're going to be able to do that, and there's no offense or buts. We're just the operating people, led by Eric Geringer, are basically making the job easy for Kennedy to go win. So, son of a gun. Okay, let's go.

Well, Jim, we only have about a minute here. What do you want to leave us with?

It was an exciting time on the railroad industry. It really is. strong competitors, and we want to win. The only way to win is to look at what's coming, not look backwards. The worst thing you can do in the world is imagine the world that's static and you only look backwards. So the reason we're moving ahead is we look at things on what's possible. And what's possible is for us to have a railroad that's going to compete better against trucks, against barges. We open up for our customers new markets, and we win. That's what it's all about. We'd like to move forward and not backwards. Thank you very much for joining us. Thank you.