Union Pacific Corporation

Greetings, and welcome to the Union Pacific fourth quarter 2018 conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. 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. Lance Fritz, Chairman, President, and CEO for Union Pacific. Mr. Fritz, you may now begin.

Thank you, Rob, and good morning, everybody, and welcome to Union Pacific's fourth quarter earnings conference call. With me here today in Omaha are Jim Venna, our new chief operating officer, Kenny Rocker, executive vice president of marketing and sales, Tom Lisher, executive vice president of operations, and Rob Knight, our chief financial officer. This morning, Union Pacific is reporting record 2018 fourth quarter net income of $1.6 billion, or $2.12 per share. This represents an increase of 29% in net income and 39% in earnings per share when compared to adjusted results for 2017. Total volume increased 3% in the quarter compared to last year. Industrial and premium car loadings grew 6% and 9% respectively, while agricultural products declined 2% and energy volumes were down 9%. The quarterly operating ratio came in at 61.6%, which improved 1.1 percentage points compared to the fourth quarter, of 2017. Strong top-line growth and improved operating performance drove the year-over-year improvement during the quarter. We launched Unified Plan 2020 on October 1st of last year to help drive improved safety, service, and operations. And I'm pleased to report that we're ahead of our initial schedule in seeing meaningful gains in on-time performance, productivity, and financial results. The network design changes we implemented over the past few months have already had a measurable impact. We've eliminated the excess network costs that we previously discussed. Cost savings are being realized by parking excess freight cars and locomotives, by cycling cars faster in our network, and by reducing the size of our workforce. We're seeing steady improvement in the key performance indicators we use to gauge progress. As a result, we announced late last year that we're accelerating implementation of Unified Plan 2020, which we now expect to be complete by the middle of the year. Shortly, you'll hear from the team on our fourth quarter results and the status of the Unified Plan 2020 initiative. But first, I'd like to introduce Jim Venna, an old friend who we just appointed Chief Operating Officer Effective last week. Jim's leadership abilities and accomplishments over a 40-year career at Canadian National Railway are well known in the rail industry. Jim will have full authority over all aspects of Union Pacific's operations to implement precision scheduled railroading principles and as he leads the next stages of our Unified Plan 2020. We're fortunate to have him as the newest member of our leadership team. I'll now turn it over to Jim for a few remarks.

Thank you, Lance, and good morning. First, I'd like to say how pleased I am to return again to the railroad industry. Union Pacific is a great company with a storied history and an impressive track record of financial success. I am proud to be part of it. While I arrived only last week, it is apparent to me that Union Pacific is committed to changing its operating model in pursuit of running a safe, more reliable, and highly efficient network. I've also observed that there are a lot of talented people here working hard to move the company ahead. There's been good progress made in recent months improving a number of key service metrics, but we have a long way to go. I plan to spend time right away out on the railroad interacting with employees, In fact, I've already visited the field, and I can tell you there's a lot of opportunity out there. I'm assessing the status of Unified Plan 2020, both in terms of progress made to date and initiatives that are currently underway. I believe that Union Pacific can become the industry leader in safety, operating efficiency, customer service, and financial performance. I know the railroad has a vision in place to get to a 55 operating ratio already. and we will be working aggressively towards that goal. But first things first, Lance, let's break 60. I'm excited about the opportunities and challenges that lie ahead. And with that, Kenny, I turn it over to you.