Burlington Northern Santa Fe, LLC

Transcription

1 Burlington Northern Santa Fe, LLC 2014 Fixed-Income Investor Call November 12, 2014 This presentation is intended to provide information to certain investors in Burlington Northern Santa Fe, LLC and BNSF Railway Company debt securities. The information presented should not be distributed to third parties or quoted in analyses prepared based on this presentation. 1

2 Agenda Network Update Financial Results Agricultural Products Spotlight Expenses and Financial Management 2

3 Cautionary Statement Regarding Forward-Looking Statements and Information Statements made in this presentation relating to the Company s future economic performance or business outlook, projections or expectations of financial or operational performance or economic outlook, or which refer to matters which are not historical facts, are "forward looking statements" within the meaning of the federal securities laws. Similarly, statements that describe the Company's objectives, expectations, plans or goals are forward looking statements. Forward looking statements include, without limitation, the Company's expectations concerning its marketing outlook for its four business units, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets, revenue growth, and free cash flow. Forward looking statements involve a number of risks and uncertainties, and actual results may differ materially. Important factors that could cause such differences include, but are not limited to: Economic and industry conditions: material adverse changes in economic or industry conditions, both in the United States and globally; volatility in the capital or credit markets including changes affecting the timely availability of and cost of capital; changes in customer demand, effects of adverse economic conditions affecting shippers or BNSF s supplier base, and effects due to more stringent regulatory policies such as the regulation of carbon dioxide emissions that could reduce the demand for coal or governmental tariffs or subsidies that could affect the demand for grain, the impact of low natural gas prices on coal demand for electric power plants, changes in environmental laws that could affect the demand for drilling products and products produced by drilling, changes in fuel prices and other key materials, the impact of high barriers of entry for prospective new suppliers and disruptions in supply chains for these materials; competition and consolidation within the transportation industry; and changes in crew availability, labor and benefits costs and labor difficulties, including stoppages affecting either BNSF s operations or customers abilities to deliver goods to BNSF for shipment; Legal, legislative and regulatory factors: developments and changes in laws and regulations, including those affecting train operations or the marketing of services; the ultimate outcome of shipper and rate claims subject to adjudication; claims, investigations or litigation alleging violations of the antitrust laws; increased economic regulation of the rail industry through legislative action and revised rules and standards applied by the U.S. Surface Transportation Board in various areas including rates and services; developments in environmental investigations or proceedings with respect to rail operations or current or past ownership or control of real property or properties owned by others impacted by BNSF operations; losses resulting from claims and litigation relating to personal injuries, asbestos and other occupational diseases; the release of hazardous materials, environmental contamination and damage to property; regulation, restrictions or caps, or other controls on diesel emissions that could affect operations or increase costs; the availability of adequate insurance to cover the risks associated with operations; and Operating factors: changes in operating conditions and costs; operational and other difficulties in implementing positive train control technology, including increased compliance or operational costs or penalties; restrictions on development and expansion plans due to environmental concerns; constraints due to the nation s aging infrastructure; disruptions to BNSF s technology network including computer systems and software, including cybersecurity intrusions, misappropriation of assets or sensitive information, corruption of data or operations disruptions; as well as natural events such as severe weather, fires, floods and earthquakes or man made or other disruptions of BNSF Railway s or other railroads operating systems, structures, or equipment including the effects of acts of terrorism on the Company s system or other railroads systems or other links in the transportation chain. We caution against placing undue reliance on forward looking statements, which reflect our current beliefs and are based on information currently available to us as of the date a forwardlooking statement is made. We undertake no obligation to revise forward looking statements to reflect future events, changes in circumstances, or changes in beliefs. In the event that we do update any forward looking statements, no inference should be made that we will make additional updates with respect to that statement, related matters, or any other forward looking statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from our forward looking statements may appear in BNSF s public filings with the Securities and Exchange Commission, which are accessible at or on BNSF s website at and which you are advised to consult. In particular, a discussion of significant risk factors applicable to BNSF is included in Part I, Item 1A, of BNSF s Form 10 K. 3

4 Network Update 4

5 2014 Long-Term Actions to Add Capacity (YTD) Yearly Goals: 3,500 >2, $2,500 $1,050 85% +100% 96% 87% 72% Actuals: 2,958 2, * $2,181 $760 TY&E Hiring Engineering & Mech Hiring Locomotives Delivered* Maintenance Capital (Millions) Expansion Capital (Millions) As of Oct. 31, *Includes long-term leases and acquisitions. 5

6 Seeing Results 52.6% On-Time Performance Source: BNSF Corporate Dashboard through Oct. 28, % Intermodal On-Time Performance Down 17.3% Terminal Dwell 5.6% Train Speed (mph) Down 47.0% Trains Holding for Power Since February

7 BNSF Weekly Volume Trends Recovery from service and velocity challenges continues; Week 43 volumes of 214K are highest since late 2006 Thousands BNSF Railway Units Weekly Railroad Traffic K Thousands Actuals thru Week K % from '06 Peak K Week # Note: Peak of 219K occurred during the week ending 9/30/2006 Source: Association of American Railroads (AAR); WRT Data thru Week /8/2014 7

8 Third Quarter Results 8

9 BNSF 2014 Volumes Thousands & % Change vs Third Quarter Year-to-date* Coal 40K ( 7%) Ag Products 6K ( 3%) Coal +12K (+1%) Ag Products +4K (+1%) Industrial Products +50K (+10%) Industrial Products +76K (+5%) Consumer Products 28K ( 2%) Consumer Products +23K (+1%) Total Units 2,611K Change from K (-1%) Total Units 7,628K Change from K (+2%) *Year to date through 9/30/14 9

10 BNSF 2014 Freight Revenues Millions & % Change vs Third Quarter Year-to-date* Coal $103M ( 8%) Ag Products +$135M (+16%) Coal $52M ( 1%) Ag Products +$384M (+15%) Consumer Products $15M ( 1%) Industrial Products +$193M (+13%) Consumer Products +$69M (+1%) Industrial Products +$358M (+8%) Total Freight Revenues $5,650M Change from $210M (+4%) Total Freight Revenues $16,459M Change from $759M (+5%) *Year to date through 9/30/14 10

11 BNSF YTD Revenue Per Unit $5,000 % CAGR $4, % $4, % $3,516 $3,582 $3,599 $3, % $3,107 $3,020 $2,933 $2, % $2, % $2,183 $2,225 $2,242 $2,195 $2,067 $2,090 $2,158 $1,982 $1,000 $1,369 $1,386 $1,396 $1,293 $0 Consumer Products Coal Industrial Products Ag Products Total *Year to date through 9/30/14 11

12 Consumer Products Volume Highlights: For the nine months ended September 30, 2014, unit volumes increased 1%, primarily due to higher international intermodal traffic 12

13 Industrial Products Volume Highlights: For the nine months ended September 30, 2014, unit volumes increased 5%, primarily due to expanded shipments of petroleum products, driven mainly by increased crude unit train loadings and frac sand volumes 13

14 Coal Volume Highlights: For the nine months ended September 30, 2014, unit volumes increased 1%, primarily due to higher demand 14

15 Agricultural Products Volume Highlights: For the nine months ended September 30, 2014, unit volumes increased 1%, due to heightened customer demand following a record grain harvest in late

16 Ag Spotlight John H. Miller Group Vice President, Agricultural Commodities 16

17 BNSF Helps Feed the World Historically BNSF has moved more Agricultural Products than any other railroad in the U.S. 1/3 of all U.S. Ag Products rail shipments are moved by BNSF Over 40% of all U.S. grain shipments are moved by BNSF In the last 3 years, BNSF has moved 3% more Ag Products volume than all Eastern U.S. railroads combined and 14% more than our primary western U.S. competitor BNSF services more of the nation s major grain-producing regions than any other railroad BNSF transports enough grain to supply 900 million people with a year s supply of bread Source: Association of American Railroads (AAR) 17

18 BNSF Diverse Ag Network PNW Export Duluth Superior California Eastern Markets W Texas Southeast Markets Mexico Texas Gulf 18

19 Agricultural Products Breakdown Wheat Barley Corn Soybeans Milo Grain Bulk Foods Sweeteners Syrups Animal Products Starch Other Grain Products Oils Feeds Flour Specialty Grains Oilseeds & Meals Malt Fertilizer Ethanol 19

20 BNSF Agricultural Commodity Breakdown Volume Breakdown % 17% 13% 39% 21% 10% Corn Based Wheat Based Other Soybean based Fertilizer 20

21 BNSF is the Grain Leader in U.S. Rail Shipments UNITS 500,000 BNSF MOVED 63% MORE GRAIN VOLUME IN 2013 THAN OUR NEAREST COMPETITOR 400, , , ,000 0 BNSF UP CPRS CN NS CSXT KCS Source: Association of American Railroads (AAR)

22 BNSF Agricultural Business % Volume Breakdown 73% 27% 76% 21% 3% PNW Gulf HOL Domestic Export 22

23 Shuttle Train Service Trainload movements of freight from one origin to one destination (70% of whole grain volume) 110 car trains with dedicated power Most efficient and cost competitive service Maximizes network capacity 225 participating origin facilities and 95 destination facilities 23

24 BNSF Grain Shuttle Network - Current Grain Shuttle Facilities 225 Shuttle Origins On line (BNSF) Off line (non BNSF) 95 Shuttle Destinations On line (BNSF) Off line (non BNSF) Mexico (28) 24

25 U.S. Corn & Soybean Production/Exports IMPROVING YIELDS WILL LEAD TO HIGHER PRODUCTION OF GRAINS AND GRAIN RELATED PRODUCTS 20,000 Million Bushels (MBu) 4,000 18,000 3,600 16,000 3,200 14,000 2,800 12,000 2,400 10,000 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 19/20 2,000 Production (left axis) Exports (right axis) 25

26 Growth in Chinese Corn & Soybean Imports China s demand for Corn and Soybeans are expected to grow 54% over the next 10 years Million Metric Tons (MMT) Corn Soybeans Source: USDA 26

27 Outlook Current Market Conditions Opportunities/Strategies Issues/Risks 27

28 Expenses and Financial Management 28

29 BNSF 2014 Operating Expenses $ Millions Third Quarter Year-to-date* Materials & Other +$10M (+4%) Equipment Rents +$11M (+5.4%) Compensation & Benefits +$46M (+4%) Materials & Other +$125M (+17%) Equipment Rents +$48M (+8%) Compensation & Benefits +$231M (+7%) Depreciation & Amortization +$38M (+8%) Purchased Services +$19M (+3%) Fuel $22M ( 2%) Depreciation & Amortization +$104M (+7%) Purchased Services +$72M (+4%) Fuel +$95M (+3%) Total Operating Expenses $4,013 vs $102M or +3% Total Operating Expenses $12,147 vs $675M or +6% *Year to date through 9/30/14 29

30 Operating Expenses Operating expenses were up 6 percent for the nine months ended September 30, A significant portion of this increase is due to the following changes in expenses, which includes increased costs related to severe weather issues and service-related challenges: Compensation and benefits Increased 7% for the nine months ended September 30, 2014 Primarily due to higher unit volumes and average headcount, as well as higher training, overtime and wage inflation, partially offset by lower incentive compensation expense Fuel expense Increased 3% for the nine months ended September 30, 2014 Due to higher volumes and lower fuel efficiency, partially offset by lower average fuel prices Depreciation and amortization Increased 7% for the nine months ended September 30, 2014 Due to additional assets in service Materials and other expenses Increased 17% for the nine months ended September 30, 2014 Primarily as a result of higher crew transportation, lodging and other travel costs, utilities and locomotive materials 30

31 Record Capital Investment Ensures Future Capability and Reliability BNSF s 2014 Capital Commitment $5.5B 4% 32% 45% 19% Core Network and Related Assets Expansion and Efficiency Locomotive, Freight Car, and Other Equip PTC $2.5 billion Core Network and Related Assets $1.75 billion Loco, Freight Car, & Other Equip $1.05 billion Expansion & Efficiency $200 million PTC 31

32 Expanding Infrastructure Will Improve North Dakota Traffic Flow Lakeside Sub* 17 new miles of double track in service, 1 new siding Forsyth Sub* 2 new siding, 4 siding extensions Glasgow Sub* 55 new miles of double track in service Devils Lake Sub 6 CTC islands Hillsboro Sub* 2 new sidings, 2 siding extensions Fallbridge Sub 2 new sidings * Projects Complete Dickinson Sub* 1 new siding, 3 siding extensions Jamestown Sub 1 new siding, CTC signaling 32

33 2014 Major Expansion Project Timeline MAY Lakeside Sub Siding Project JUNE Glasgow Sub 21 miles Double Track Lakeside Sub 13 miles Double Track JULY Lakeside Sub 4 miles Double Track AUGUST Glasgow Sub 20 miles Double Track Willow Springs IBU Parking Improvements Turner Yard Modifications Forsyth Sub 3 Siding Projects Northtown Yard Track Reconfiguration SEPTEMBER Forsyth Sub 3 Siding Projects Tower 55 Project Complete San Bernardino IBU Additional Lead Track Hillsboro Sub 2 Siding Projects OCTOBER Glasgow Sub 7 miles Double Track Dickinson Sub 4 Siding Projects Hillsboro Sub 2 Siding Projects NOVEMBER Zap Sub 1 Siding Project Glasgow Sub 7 miles Double Track Jamestown Sub 1 Siding Project DECEMBER Fallbridge Sub 2 Siding Projects LaCassine Yard In Service Alliance & Pearland IABU Track & Parking Improvements Sioux City/ Noyes Subs 2 Siding Projects Aurora Sub 2 Siding Projects Expansion projects will carry through until year end. More than 70 miles of double track will be completed. Q 2 Q 3 Q 4 33

34 Financial Management Shareholder Returns Flexible No Target / Minimum Requirement Excess Cash Defined as Cash after: Maintenance Capital Expansion Capital Liquidity Continue to Manage to the Metrics Adjusted debt to EBITDA less maintenance capital 3 to 4x EBITDA interest coverage less maintenance capital 5 to 6x 34

35 Cash Flow Summary $ Millions LTM (Ending 9/30/14) Cash From Operations 5,852 5,762 5,433 Investment/CapEx (4,658) (3,863) (3,836) Free Cash Flow 1,194 1,899 1,597 Shareholder Returns (3,850) (4,000) (3,750) Net Borrowings 2,348 2,560 2,018 Other (31) (28) (31) Change in cash (339) 431 (166) Cash Balance 2,470 2,225 1,794 Credit Metrics: Adjusted Debt to EBITDA less Maintenance Capital EBITDA less Maintenance Capital Interest Coverage Please refer to the Appendix of this presentation for a Non-GAAP Reconciliation of the Adjusted Debt to EBITDA Less Maintenance Capital and EBITDA less Maintenance Capital Interest Coverage measures used on this page pursuant to SEC Regulation G. 35

36 2014 Financing Update Issued $3.0 billion in notes: $500 million 3.75% debentures due 2024 $1,000 million 4.90% debentures due 2044 $700 million 3.4% debentures due 2024 $800 million 4.55% debentures due 2044 Consider all forms of financing: Public unsecured debt Secured equipment financing Project financing for facilities 36

37 BNSF Investor Relations Contact Prospectively, direct your questions to: Beth Miller General Director - Finance and Assistant Treasurer BNSFInvestorInquiries@bnsf.com This presentation is intended to provide information to certain investors in Burlington Northern Santa Fe, LLC and BNSF Railway Company debt securities. The information presented should not be distributed to third parties or quoted in analyses prepared based on this presentation. 37

38 Appendix BNSF reports its results in accordance with generally accepted accounting principles ( GAAP ). Management believes, however, that certain non-gaap financial measures used in the management of its business may provide users of the information with additional comparisons to publicly reported results. These non-gaap measures are used by management in the evaluation of the business and in making certain operating decisions. These non-gaap measures should not be considered a substitute for GAAP measures. 38

39 Reconciliation to GAAP Computation of Adjusted Debt to EBITDA less Maintenance Capital and EBITDA less Maintenance Capital Interest Coverage Twelve Months Ending 9/30/ EBITDA $ 8,875 $ 8,640 $ 7,901 $ 7,117 $ 6,228 $ 4,799 $ 5,309 $ 4,779 $ 4,697 Less: Other adjustments including maintenance capital (2,251) (2,061) (1,889) (1,918) (1,429) (1,571) (1,446) (1,197) (1,199) Adjusted EBITDA $ 6,624 $ 6,579 $ 6,012 $ 5,199 $ 4,799 $ 3,228 $ 3,863 $ 3,582 $ 3,498 Debt $ 19,330 $ 17,006 $ 14,533 $ 12,665 $ 11,980 $ 10,335 $ 9,555 $ 8,146 $ 7,385 Other adjustments (965) 267 1,270 2,042 2,012 3,482 3,871 4,891 4,877 Adjusted Debt $ 18,365 $ 17,273 $ 15,803 $ 14,707 $ 13,992 $ 13,817 $ 13,426 $ 13,037 $ 12,262 Adjusted Debt to EBITDA less Maintenance Capital Adjusted EBITDA $ 6,624 $ 6,579 $ 6,012 $ 5,199 $ 4,799 $ 3,228 $ 3,863 $ 3,582 $ 3,498 Interest Adjustments including interest portion of rent expense Adjusted Interest $ 1,007 $ 923 $ 824 $ 755 $ 712 $ 788 $ 763 $ 746 $ 708 EBITDA less Maintenance Capital Interest Coverage

40 Operating & Financial Information Reports currently on BNSF website ( SEC filings Annual R-1 Report to the Surface Transportation Board Operating expenses, operating statistics, equipment inventories, maintenance information, etc. Weekly intermodal and carload data Weekly, QTD & YTD volumes by major commodity group compared to same period last year 40

41 Operating & Financial Information Reporting available on BNSF website ( Performance updates Comparative financial performance on both quarterly and YTD basis Statistical and narrative information Posted upon filing of SEC Forms 10-Q,10-K and 8-K 41

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