Fourth Quarter 2012 Earnings Release

Transcription

1 Fourth Quarter Earnings Release January 24, 2013 Jack Koraleski, CEO 1 Union Pacific Achieves Milestones Positives Fourth Quarter and Full Year Financial Results Employee Safety Customer Satisfaction Franchise Diversity Earnings Per Share Fourth Quarter $ % $1.99 $2.19 Tie All-Time Quarterly Challenges Coal & Grain Volumes

2 Fourth Quarter Marketing & Sales Review January 24, 2013 Eric Butler, Executive VP Marketing & Sales 3 Customer Satisfaction GOOD th Qtr = Full Year 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2010 Customer Satisfaction 7 Day Carloadings 4

3 Fourth Quarter Recap Volume Growth Chemicals Automotive +14% +9% Intermodal +2% Revenue Mix Industrial 17% Coal 20% Intermodal 21% Agricultural 16% Autos 9% Chemicals 17% Industrial Products Agricultural -9% Flat Freight Revenue Performance (Year-Over-Year Change) +4.5% Coal -17% -2.5% +2% TOTAL -2.5% Volume ARC Freight Revenue 5 Coal Revenue $990M (-7%) Volume 463K (-17%) ARC $2,141 (+12%) 47,000 43,000 Volume Impact (Weekly Carloadings) Other 13% 50.3 Southern Powder River Basin* -19% 39,000 35,000 31, Southern Powder River Basin 74% ,000 1Q 2Q 3Q 4Q Colorado/Utah* Quarterly Drivers High Coal Stockpiles Global Demand for Western Coal +6% *Tons in millions 6

4 Agricultural Products Revenue $785M (-8%) Volume 215K (-9%) ARC $3,647 (Flat) Volume Mix Grain Products 36% Food/ Refrigerated 27% Grain 37% Grain* -22% Grain Products* -6% Quarterly Drivers Limited corn supply in UP territory Reduced gas consumption impacts ethanol Growth in Food & Refrigerated Food & Refrigerated* +8% *Volume in thousands of carloads and excludes equipment shipments 7 Automotive Revenue $466M (+14%) Volume 187K (+9%) ARC $2,487 (+5%) Volume Mix Auto Parts 41% Finished Vehicles* +7% Finished Vehicles 59% Quarterly Drivers Pent-up Demand to Replace Aging Vehicles Improved Consumer Credit Year-end Incentives Auto Parts* +13% *Volume in thousands of carloads 8

5 Chemicals Revenue $834M (+15%) Volume 265K (+14%) ARC $3,146 (Flat) Volume Mix Petroleum Products* +69% 62.7 Petroleum & LP Gas 29% Soda Ash 10% Industrial Chemicals 22% Other 6% Fertilizer 10% Plastics 23% 37.2 Industrial Chemicals* +8% Quarterly Drivers Continued Crude Oil Growth Strength in Industrial Chemicals and Plastics Export Soda Ash Demand Plastics* +7% *Volume in thousands of carloads and excludes equipment shipments 9 Industrial Products Revenue $835M (+3%) Volume 280K (Flat) ARC $2,978 (+3%) Volume Mix Minerals/ Consumer 22% Gov t/waste 10% Metals 18% Lumber 10% Paper 10% Construction 30% Rock* +14% Lumber* +17% Quarterly Drivers Increased Construction Activity Housing Start Growth Hazardous Waste, Steel & Scrap, and Export Ore Decline Hazardous Waste* -48% *Volume in thousands of carloads 10

6 Intermodal Revenue $1,021M (+6%) Volume 831K (+2%) ARC $1,229 (+5%) Volume Mix International* Flat Domestic 47% International 53% Quarterly Drivers Weak International Peak Season Highway Conversions Drive Domestic Growth Domestic* +4% *Volume in thousands of units Volume Outlook Coal High Stockpiles & Contract Loss + Export Demand Agricultural Products Diminished crops + Food & Refrigerated Automotive + Auto Sales Growth Chemicals + Crude Oil + Most Other Markets Remain Solid Industrial Products + Housing & Construction, Metals, Minerals Reduced Government Spending Intermodal + Domestic Growth Continues, Stronger International Peak 12

7 Fourth Quarter Operations Review January 24, 2013 Lance Fritz, Executive VP Operations 13 Operating Foundation, Safety Focus Full Year Employee (Reportable Personal Injury Incidents Per 200,000 Employee-Hours) Rail Equipment (Reportable Rail Equipment Incidents Per Million Train Miles) Public (Crossing Accidents Per Million Train Miles) Good -12% Good % Good % All-Time All-Time All-Time

8 Network Performance Fourth Quarter Agility and Resiliency Demonstrated with Resources and Service Plan Mix Shift and Volume Growth in Southern Region Service Performance Accelerates Positioned for Growth Good Service Delivery* and IS&P Industry Spot & Pull % Velocity (as Reported to the AAR) th Qtr 88 Tie 4th Qtr % ** Tie 4th Qtr Good * Includes early deliveries ** Fourth Quarter 15 Network Productivity Fourth Quarter Good Intermodal Boxes Manifest Cars 1, Slow Order Miles 1, * Train Size (Average Units per Train) Good -31% 409 All Time th Qtr Car Utilization (Days) All-Time Quarterly % Good Hardening infrastructure and reducing service failures Improving asset utilization Generating capacity with efficiency * 4th Quarter 16

9 Agility and Resource Readiness Volume Growth 5% TE&Y Active Workforce (FY vs. FY) 3% South 9% -2% Flat South Total South Total 4Q12 vs. 4Q11 FY vs. FY North West Total -3% -2% Flat South North Active Locomotive Fleet (FY vs. FY) -8% 9% Volumes in South at Pre- Recession Levels Resource Realignment & Network Routing West Total -1% -1% Improving Network Fluidity & Performance 17 Capital Investment Supports Service & Growth 2013 Safe and Resilient Infrastructure Continued Capacity Spending Santa Teresa Facility Southern Region Projects 100 New Locomotives Increased PTC Spending ~$3.6 Billion Capital Plan (In Millions) PTC $450 Capacity/ Commercial Facilities $670 Technology/ Other $195 Infrastructure Replacement $1,675 Locomotives/ Equipment $610 18

10 2013 Operating Outlook Safety, Service and Value Improved Network Performance / Agility & Resiliency 2013 Carry Momentum Forward Drive Safety & Service & Productivity Remain Agile / Resource Readiness Celebrate & Repeat Standardize Engage Support Empower 19 Fourth Quarter Financial Review January 24, 2013 Rob Knight, CFO 20

11 Fourth Quarter Income Statement In Millions (except EPS) % Operating Revenues $5,250 $5,108 3 Operating Expenses 3,525 3,491 1 Operating Income 1,725 1,617 7 Other Income (20) Interest Expense (128) (141) (9) Income Taxes (604) (566) 7 Net Income $1,036 $964 7 Weighted Average Diluted Shares (3) Diluted EPS $2.19 $ Freight Revenue Fourth Quarter (In Millions) $4,829-3% +2% +1% +0.5% +4% $4,931 Volume & Mix Fuel Surcharge (Price & Lag Impact) Fuel Surcharge (Improved Coverage) Core Price 22

12 Compensation & Benefits Expense Fourth Quarter $1,135M, -2% Compensation & Benefits (in Millions) $1,155-2% $1,135 Lower GTMs Solid Operations Lower Payroll Taxes Higher Training Costs Moderate Inflation Costs Workforce Levels (Quarterly Average) 44, % 46,067 Increased Workforce mostly Driven by Higher TE&Y Training & Capital (incl PTC) 23 Fuel Expense Fourth Quarter $920M, -2% Gross-Ton-Miles (in Millions) 252,686-5% 238,898 Average Fuel Price (Per Gallon Consumed) $ % $3.25 GTMs Decreased 5% Higher Diesel Fuel Prices Increased Expenses by $26 Million Consumption Rate Increased 1% driven by Lower Coal Volumes 24

13 Fourth Quarter Expense Review In Millions Purchased Services & Materials +5% $508 $533 Higher Subsidiary Contract Expenses Increased Joint Facility Expense & Locomotive Repair Costs Depreciation $ % $453 Higher Depreciable Asset Base from Growing Capital Programs 25 Fourth Quarter Expense Review (cont) In Millions Equipment & Other Rents +4% $302 $289 Higher Short-Term Freight Car Rental Expense Lower Locomotive Lease Expenses $191 Other -5% $182 Lower Equipment, Property & Freight Damage Expenses Lower Volume-Related Costs & Cost Control Measures Higher Personal Injury & Property Tax Expenses 26

14 Operating Ratio Performance Fourth Quarter (Percent) Full Year (Percent) pts th Qtr pts 67.8 All-Time Full Year Full Year Income Statement In Millions (except EPS) % Operating Revenues $20,926 $19,557 7 Operating Expenses 14,181 13,833 3 Operating Income 6,745 5, Other Income (4) Interest Expense (535) (572) (6) Income Taxes (2,375) (1,972) 20 Net Income $3,943 $3, Weighted Average Diluted Shares (3) Diluted EPS $8.27 $

15 Strong Financial Position Twelve Month Period Ending December 31 ($ In Millions) $5,873 $6,161 Cash from Ops Free Cash Flow* ($3,633) ($3,119) Investing ($1,146) ($837) Total Debt* (Adjusted) $12,753 $12, % Dividends 39.1% 12/31/ 12/31/ Adjusted Debt to Capital Solid Free Cash Flow Larger Capital Spend 37% Cash Dividend Increase Strong Cash from Ops Higher Cash Tax Payments from Prior Bonus Depreciation Programs Strong Balance Sheet Investment Grade Credit Rating * See Union Pacific website under Investors for a reconciliation to GAAP. 29 Investments and Returns $3.1 Total Capital Spending* (In Billions) $2.5 $2.5 $3.2 $3.7 ~$3.6 $3.15 (excl PTC) Return on Invested Capital** (Percent) Best- Ever Base Capital New 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. 30

16 Delivering Value to Shareholders Declared Dividend Per Share $ % $0.475 $ % $0.60 $0.60 $0.60 $0.60 $0.69 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Performance Drives Dividend Increases Declared Dividend Increase of 15% in Full Year Declared Dividends grew 29% vs. Achieved Payout Ratio of 30% Dividends & Share Repurchases ($ In Billions) Share Buybacks Dividends $ % $2.62 FY FY Opportunistic Share Repurchases 4Q = $248 Avg Price of $ Full Year = $1.5 Billion 15 Million Shares Remaining in Current Authorization 31 A Look Ahead to 2013 Full Year Cautious Outlook Potential for Slightly Positive Volume Growth Solid Core Pricing Gains Leverage Diverse Franchise Operating Ratio & Earnings assuming Economic Growth Increasing Shareholder Returns 32

17 Fourth Quarter Earnings Release January 24, 2013 Jack Koraleski, CEO 33 Union Pacific s Prospects Going Forward 2013 Challenges in Coal & Grain Markets Impact of Domestic Fiscal Policies Maintain Successful Strategy Remain Agile Leverage Diverse Franchise Create Customer Value Generate Strong Shareholder Returns 34

18 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 general economic conditions and financial returns; its business strategy for the upcoming year; and legislative activity. 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, which was filed with the SEC on February 3,. 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. 35 Fourth Quarter Earnings Release January 24, 2013 Question & Answer Session 36