Fourth Quarter Earnings Release January 19, 2012

Transcription

1 Fourth Quarter Earnings Release January 19, 2012 Jim Young, Chairman & CEO 1 Union Pacific Achieves Milestones Positives Record Financial Results Achieved in 4 th Quarter and Full Year Employee Safety Great Service Customer Satisfaction Franchise Diversity Earnings Per Share $ th Quarter $ % $1.56 $1.99 Best-Ever Quarterly Record

2 Fourth Quarter Marketing & Sales Review January 19, 2012 Jack Koraleski, Executive VP Marketing & Sales 3 Customer Satisfaction GOOD Quarterly Record Quarterly Record = Full Year Record 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2010 Customer Satisfaction 7 Day Carloadings 4 2

3 Fourth Quarter Recap Volume Growth Automotive +10% Chemicals +10% Energy +8% Revenue Mix Industrial 17% Energy 22% Intermodal 20% Agricultural 18% Autos 8% Chemicals 15% Industrial Products Intermodal -3% +7% Performance Improvement (Year-Over-Year Change) +13% +16% Agricultural TOTAL -5% +3% +3% Volume ARC Freight Revenue 5 Agricultural Products Revenue $854M (+2%) Volume 236K (-5%) ARC $3,630 (+7%) Revenue Mix Grain Products 38% Grain 34% Food/ Refrigerated 28% Export Grain* % Domestic Grain* +22% Quarterly Drivers Weaker Grain Exports Partially Offset by Domestic Growth Strength in Biofuels Biofuels* +18% *Volume in thousands of carloads 6 3

4 Automotive Revenue $408M (+26%) Volume 171K (+10%) ARC $2,378 (+13%) Revenue Mix Auto Parts 21% Finished Vehicles* +14% Finished Vehicles 79% Quarterly Drivers Industry Sales Continue to Gain Momentum Improving Vehicle Inventory Levels Auto Parts* +7% *Volume in thousands of carloads 7 Chemicals Revenue $728M (+18%) Volume 232K (+10%) ARC $3,131 (+7%) Revenue Mix Soda Ash 14% Petroleum & LP Gas 23% Industrial Chemicals 23% Other 6% Fertilizer 15% Plastics 19% Petroleum Products* +46% Quarterly Drivers Continued Growth in Crude Oil Strong Plastics Market Solid Performance Across All Major Market Segments Plastics* +7% *Volume in thousands of carloads 8 4

5 Energy Revenue $1,070M (+21%) Volume 558K (+8%) ARC $1,917 (+12%) Revenue Mix Other 4% Colorado/ Utah 19% Southern Powder River Basin* +7% Southern Powder River Basin 77% Quarterly Drivers New Business Drives SPRB Growth Solid Production and Export Demand Produces CO/UT Gains Colorado/Utah* +10% *Tons in millions 9 Industrial Products Revenue $810M (+24%) Volume 281K (+7%) ARC $2,878 (+16%) Revenue Mix Non-Metallic Minerals* % 49.2 Minerals/ Consumer 25% Government/ Waste 8% Metals 27% Lumber 13% Paper 13% Construction 14% Steel* +9% Quarterly Drivers Strong Energy Drilling Demand Ramp-up of Iron Ore Exports to China Metallic Minerals* +73% *Volume in thousands of carloads 10 5

6 Intermodal Revenue $959M (+13%) Volume 817K (-3%) ARC $1,175 (+16%) Revenue Mix Domestic 53% International 47% International* -7% Quarterly Drivers Weak Imports and 2Q Contract Loss Impact International Record Domestic Volume Domestic* +3% *Volume in thousands of units Economic Outlook Metric 2012E Gross Domestic Product (%) Industrial Production (%) Light Vehicle Sales (Millions) Housing Starts (Millions) Imports (%) Exports (%) Unemployment (%) Source: Global Insight January

7 2012 Volume Growth Potential Solid Minerals Petroleum Domestic Intermodal Finished Vehicles Auto Parts CO/UT Coal Metals Lumber Fertilizer LPG Moderate Domestic Grain Grain Products (ex. Biofuels) Industrial Chemicals Plastics Soda Ash Construction Slow to Negative SPRB Coal International Intermodal Paper Government / Hazardous Biofuels Food & Beverage Refrigerated Food Grains Export Grain 13 Fourth Quarter Operations Review January 19, 2012 Lance Fritz, Executive VP - Operations 14 7

8 Operating Foundation, Safety Focus Full Year Employee (Reportable Personal Injury Incidents Per 200,000 Man-Hours) Rail Equipment (Reportable Derailment Incidents Per Million Train Miles) Public (Crossing Accidents Per Million Train Miles) Good % Good % 3.28 Good % All-Time Record All-Time Record All-Time Record Consistent Network Performance (000s) (MPH) Agility and Resiliency Demonstrated with Resources and Service Plan Recovered from Weather Challenges Positioned for Growth 1,030 Employees Furloughed 600 Locomotives Stored* *Excludes locomotives on hand to manage day-of-week loading cycles Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Day Carloads Velocity ** **As reported to the AAR 16 8

9 Service and Efficiency 4 th Quarter 1,723 Slow Order Miles 1,008 Good % 590 Best-Ever Quarter GTMs per Employee Good (In Millions) +2% Good Intermodal Boxes Manifest Cars Train Size (Average Units per Train) ** th Qtr Record Service Delivery* and IS&P Good Industry Spot & Pull % ** ** 4 th Quarter Record *Includes early deliveries 17 Growth Trend Manifest Volume Growth Increase in Carloads vs (in Thousands) Strong Manifest Franchise Growth, Especially in South West South North Cars Switched per Man-Day Leverages Terminal Infrastructure Capital Plan Aligned, Preserving Long-Term Strategies

10 2012 Capital Plan Replacement, Growth & Productivity $3.6+ Billion in 2012 Safe and Resilient Infrastructure Increased Capacity Spending Santa Teresa Facility Southern Region Projects 200 New Locomotives Increased PTC Spend $1,908 $1, Replacement 2012 vs. Capital* ($ In Millions) $1,084 $1,345 Growth & Productivity $224 $160 PTC $ *Includes cash capital, leases and other non-cash capital 19 Operating Outlook World Class Safety Results Excellent Service with Growth Productivity / Volume Leverage Capital Effectiveness Critical Initiatives 20 10

11 Fourth Quarter Financial Review January 19, 2012 Rob Knight, CFO 21 Fourth Quarter Earnings Summary In Millions (except EPS) 2010 % Operating Revenues $5,108 $4, Operating Expenses 3,491 3, Operating Income 1,617 1, Other Income 54 9 F Interest Expense (141) (142) (1) Income Taxes (566) (405) 40 Net Income $964 $ Weighted Average Diluted Shares (2) Diluted EPS $1.99 $

12 Freight Revenue Fourth Quarter (In Millions) + 16% $4, % $4, % + 5% Volume & Mix Core Price Fuel Surcharge Pricing Gains & Leverage Core Pricing Incremental Margins 5.0% 4.5% 4.5% 4.5% 5.0% 57% 13% 45% 36% 41% 59% 5% 3% 3% 1% Q11 2Q11 3Q11 4Q11 Reported Core Price (Including RCAF Fuel Impact) Q11 2Q11 3Q11 4Q11 Incremental Margins* Year-over-year carload growth * adjusted for fuel price & one-time items. See Union Pacific website under Investors for a reconciliation to GAAP

13 Compensation & Benefits Fourth Quarter Compensation & Benefits (in Millions) $1,112 +4% $1,155 Labor Inflation of 4.5% Volume-Related Expenses Offset by Productivity , Workforce Levels (Quarterly Average) +3% 44,922 Base Business Activity and Increased Capital Work (incl PTC) Each Drove Half of the Increase 25 Fuel Expense Fourth Quarter $935M, +36% Average Fuel Price (Per Gallon Consumed) +28% $3.16 $2.46 Barrel Price Fuel Consumption (Million Gallons) % Conversion Spreads 286 Higher Diesel Fuel Prices added $199 Million to Costs Conversion Spreads More than Doubled versus 2010 GTMs Increased 5%

14 Fourth Quarter Expense Review In Millions Purchased Services & Materials +9% $467 $ Increased Contract Services Locomotive & Freight Car Materials Usage Crew Lodging & Transportation Costs Other $ % $191 Higher Property Taxes Lease Buy-Out Expense Fourth Quarter Expense Review (cont) In Millions Depreciation $380 +9% $413 Ongoing Capital Spending Volume Driven - Higher Expense 2010 Equipment & Other Rents +4% $278 $ Higher Short-Term Car Rental Expenses and Container Leases Lower Locomotive Lease Expense 28 14

15 Operating Ratio Performance Fourth Quarter (Percent) 77.4 Full Year (Percent) pts pts Fuel Price Impact Full Year Income Statement In Millions (except EPS) 2010 % Operating Revenues $19,557 $16, Operating Expenses 13,833 11, Operating Income 5,724 4, Other Income F Interest Expense (572) (602) (5) Income Taxes (1,972) (1,653) 19 Net Income $3,292 $2, Weighted Average Diluted Shares (3) Diluted EPS $6.72 $

16 Solid Financial Position Twelve-Month Period Ending December 31 ($ In Millions) Free Cash Flow* $2,017 $602 $1,415 $837 $1,917 12/31/ /31/ Total Debt* (Adjusted) $13,139 $12, % 40.7% 12/31/ /31/ $2,754 Before Dividends Dividends After Dividends Adjusted Debt to Capital * See Union Pacific website under Investors for a reconciliation to GAAP. Record Cash from Operations and Free Cash Flow 39% Cash Dividend Increase YTD Targeted Dividend Payout Ratio of 30% Maintain Solid Investment Grade Rating 31 Investments and Returns Total Capital Spending* (In Billions) ~$3.6 $3.1 $2.5 $2.5 $3.2 $3.3 (excl PTC) Return on Invested Capital** (Percent) All-Time Record Base Capital Locomotive Purchases/Leases Positive Train Control * Includes cash capital, leases and other non-cash capital. ** See Union Pacific website under Investors for a reconciliation to GAAP

17 Delivering Value to Shareholders Declared Dividend Per Share $0.27 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Cumulative Share Repurchases $0 $0.38 $0.38 $0.33 $0.33 $466 (In Millions) $1,857 $1,497 $1,249 $1, % $ % $0.475 $0.475 $2,667 $2,285 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Performance Drives Dividend Increases Declared Dividend Increase of 58% in Targeted Payout Ratio of 30% Opportunistic Share Repurchases 4Q = $381 Avg Price of $98.16 Full Year = $1.4 Billion 27.8 Million Shares Remaining in Current Authorization 33 A Look Ahead to 2012 Full Year Top Line Growth Opportunities Real Pricing Gains Value Proposition Productivity Focus Targeting Record Operating Ratio & Earnings 34 17

18 Fourth Quarter Earnings Release January 19, 2012 Jim Young, Chairman & CEO 35 Positioned for Success in 2012 Expect Slow, Continued Growth despite Economic Uncertainties Confidence in Strategy Investments Supported by Higher Returns Provide Increased Value to Customers and Shareholders Targeting Improved Financial Results in

19 Cautionary Information This press release 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 its ability to take advantage of growth opportunities and generate returns for shareholders; future economic conditions; and its prospects for future performance. 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 2010, which was filed with the SEC on February 4,. 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. 37 Fourth Quarter Earnings Release January 19, 2012 Question & Answer Session 38 19