J. P. Morgan Aviation, Transportation & Industrials Conference

Transcription

1 J. P. Morgan Aviation, Transportation & Industrials Conference Rob Knight, CFO March 11, Cautionary Information This presentation and related materials contain statements about the Corporation s future that are not statements of historical fact, including specifically the statements regarding the Corporation s expectations with respect to general economic conditions and its ability to meet its customers transportation requirements, operate safely, adequately serve its customers and improve financial performance and shareholder returns. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of Forward-looking statements also generally include, without limitation, information or statements regarding: projections, predictions, expectations, estimates or forecasts as to the Corporation 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 Corporation 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 Corporation 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 Corporation s Annual Report on Form 10-K for 2013, which was filed with the SEC on February 7, The Corporation 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 Corporation 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 Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation 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

2 The Strength of a Unique Franchise Freight Revenue $20.7B in 2013 Coal 19% Ag Agricultural 16% 19% Autos 10% Industrial Industrial Chemicals 18% Chemicals 17% 16% 15% Intermodal 20% 2013 Freight Volumes Domestic 62% Other Imports 16% Mexico Imports 5% Mexico Exports 5% Other Exports 12% Full Year Record Results Positives Best-Ever Records Operating Revenue Operating Income Operating Ratio Earnings Franchise Diversity Challenges Coal & Grain Volumes Earnings Per Share $6.72 $ % $9.42 Best-Ever Year Operating Ratio (%) (1.7) pts 66.1 Best-Ever Year

3 Diverse Portfolio Volume Drivers 2014 YTD Volume Growth* (vs 2013) Agricultural Industrial Products Coal Automotive Chemicals Intermodal TOTAL -1% -2% +1% +8% +6% +3% +12% YTD Drivers + Strong Grain Shipments + Growth in Frac Sand + Construction-Related Moves + Coal Shipments + Base Chemicals + Domestic Intermodal - Crude Oil Moves - Finished Vehicles - International Intermodal *Through March 4, Network Performance First Quarter UP Velocity (As reported to the AAR, in mph) Good 23.5 Good 41.0 UP Terminal Dwell (As reported to the AAR, in hours) Proviso (Chicago) Q11 1Q12 1Q Weekly Trend 1Q11 1Q12 1Q Weekly Trend Severe Weather Impacts Velocity and Terminal Dwell Train size limitations Switching operations Asset utilization (crews & equip) Fuel consumption Agility & Resource Readiness Adjust transportation plans Leverage fluid routes and terminals Realign resources & utilize surge capacity Maximize windows of opportunity 6

4 Agricultural Trends 2013 Volume Mix Grain Products 35% Food & Refrigerated 26% Grain (Year-over-Year Volume Change) Domestic* Export* 93% Grain 39% 1% 0% 9,000 7,500 6,000 4,500 3,000 AAR Weekly Grain Carloads (UNP) 2014* *Through March 8, % -20% -17% -14% -34% 1Q13 2Q13 3Q13 4Q13 *Excludes equipment shipments. Ag Domestic & International 2013 Volume Mix Domestic Ag 71% Export Grain 15% Meals & Oils, 5% Import Beer, 4% Feed & Animal Protein, 2% Frozen Meat & Poultry, 1% Other Int l, 2% 7 Coal Trends 45,000 40,000 35,000 30,000 25, * Volume Trends (Weekly Carloadings) 1Q Other 13% Weather & Economy Electricity Consumption Inventory Stockpiles 2014 Contract Loss Exports *Through March 8, 2014 Southern Powder River Basin 74% 2Q WY Blizzard 3Q Q 11,388 11, Thru Week 9 Electricity Generation Market Share* 50% 50% Electricity Generation* Total U.S. Electrical Generation (thousand megawatt hrs/day) -3% 48% 48% % from coal 47% 17% 20% 19% 21% 20% Apr 12: 32% +6% *U.S. Energy Information Administration (EIA), Edison Electric Institute % from natural gas 38% 39% 27% 26% *U.S. Energy Information Administration (EIA) through December

5 Shale-Related Volumes Shale-Related Volumes (000s) 2013 Vol % Inc Frac Sand Crude Oil Pipe Brl $ $120 $110 $100 Crude Oil Prices Brent LLS WTI ~4.5% of Total Volumes $90 Quarterly Shale Carloads (000s) Pipe Crude Oil Frac Sand Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q $80 Jan 2013 Aug 2013 Mar 2014* Additional pipeline capacity impacting short-haul Texas & Oklahoma shipments Spread differentials displace Gulf Coast shipments to East Coast *Through March 7, Expanding Chemical Franchise Texas/Louisiana Investments Chevron Phillips Chemical Co. $5 Billion investment in cracker & additional capacity projects. Ft. Worth Total capacity: 1.5 million mt/year Estimated completion in 2017 Dallas Investment Announcements Total Over $10 Billion Shreveport Formosa Plastics Corp. >$1.7 Billion investment in cracker San and additional capacity projects. Antonio Cracker capacity: 800,000 mt/year Estimated completion in 2017 Gruppo Mossi & Ghisolfi Investment in new PET & PTA plants. Capacity: 1.0 & 1.2 million mt/year Estimated completion in 2016 Existing Plants New Plant/Expansions Houston Brownsville New Orleans Exxon Mobil Corp. Investment in steam cracker. Total capacity: 1.5 million mt/year Estimated completion in 2016 Dow Chemical Co. $1.7 Billion investment in cracker and additional capacity projects. Total capacity: 1.5 million mt/year Estimated completion in 2017 Source: Public Announcements 10

6 Mexico Trends for Union Pacific 708 Volume Growth (Carloads in Thousands) % +5% % '05 '06 '07 '08 '09 '10 '11 '12 '13 UP Interchange Points Ports Ferromex (FXE) KCSM Ferrosur (FSRR) New Industrial Investment Only Rail to serve all 6 Major Gateways to/from Mexico 10% of Total Volumes No Physical Operations in Mexico 26% Ownership of FXE 11 New Intermodal Service Offerings Eagle Premium Service Seamless Intermodal Service between Monterrey, Mexico & multiple U.S. destinations Working in conjunction with FXE (Ferromex) Access to Mexico s Second Largest Consumer Market Access to the largest Rail-owned Container Fleet 12

7 Highway Conversions Comprehensive Network Significant Domestic Truck-Load Conversion Opportunity Truckload Opportunity Originating from Mexico 1,159 Domestic Volumes (Units in 000 s) 1, % 1,452 1,475 1,526 1,575 Strong Value Proposition Competitive Service at an Affordable Price Environmental Friendliness Truck s Traditional Advantage is Eroding Regulations & Rising Costs Highway Congestion & Infrastructure 13 Pricing Trends Fundamentals Continue Core Pricing Gains Value is the Key to Future Price Improvement 4.5% 5% 4.5% 4.5% 4% 4% 3.5% 3.5% Balanced Portfolio Provides Flexibility for Repricing as Value Grows 2014 Core Pricing above Inflation Legacy Light Year Lower Inflation Escalators Q13 2Q13 3Q13 4Q13 Balanced Revenue Portfolio Tariffs Contracts 30% > 1 Year 40% Contracts < 1 Year 30% 14

8 Sub 65 Operating Ratio Before Operating Ratio (Percent) Targeting Sub 65% FY Operating Ratio Before 2017 Sub Before Day Volume (000s) 15 Strengthening the Franchise Replacement, Growth & Productivity, and PTC Safe and Resilient Infrastructure ~$3.9B 2014 Capital Plan* (in Millions) Continued Capacity Spending Southern Region Network Strategies 200 New Locomotives Equipment Purchases Increased PTC Spending Capital Spend of 16% - 17% of Revenue for PTC $450 Capacity/ Commercial Facilities $680 Technology/ Other $200 Infrastructure Replacement $1,725 Locomotives/ Equipment $845 * Includes cash capital, leases and other non-cash capital. 16

9 Delivering Value to Shareholders 17.5 Declared Dividend Per Share (cents) x % 250% 200% 150% 100% 50% Stock Price UNP DJ TRANS 308% 66% 3Q Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q % -50% 01/01/07 S&P % 03/07/14 Cumulative Share Repurchases ($ In Billions) $9.3 Future Allocation $7.1 $5.7 $3.0 $3.0 $4.2 $ Strong Financial Position As of December 31 ($ In Millions) $12,753 $12,772 $12, % Total Debt* (Adjusted) 39.1% 37.6% Adjusted Debt to Capital ~40% E Adjusted Debt / Adjusted EBITDA* ~1.5 Strong Balance Sheet Investment Grade Credit Ratings 2013 Balance Sheet Debt increase of $600 Million Targeting 40% Debt-to- Cap and 1.5 times Debtto-EBITDA at year-end 2014 January 2014 Debt Issuance of $1 Billion E * See Union Pacific website under Investors for a reconciliation to GAAP. 18

10 A Look at 2014 FY and 1Q 2014 Volume Growth Assuming an Improving Economy Record Earnings & Operating Ratio Pricing for Reinvestibility Leverage Diverse Franchise Increasing Shareholder Returns 19 Question & Answer Session Rob Knight, CFO March 11,