BB&T Transportation Services Conference February 15, 2012

Transcription

1 BB&T Transportation Services Conference February 15, 2012 Rob Knight, CFO 1 Cautionary Information This presentation and related materials contain statements about the Corporation s future that are not statements of historical fact, including specifically the Corporation s outlook regarding: economic conditions and growth opportunities; future safety and operating performance; future capital investments; and its ability to generate volume leverage, increase returns to shareholders, and attract new business. 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. Forwardlooking 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 2011, 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. 2 1

2 Union Pacific Achieves 2011 Milestones Record Highlights Safety & Service Operating Income Earnings Free Cash Flow* ROIC* Customer Satisfaction Investing for Growth and Returns Increased Shareholder Value * See Union Pacific website under Investors for a reconciliation to GAAP. 190 $3.44 Earnings Per Share 7-Day Volume (000s) +22% $5.53 $ Consistent Network Performance Agility and Resiliency Demonstrated with Resources and Service Plan Recovered from Weather Challenges Positioned for Growth 875 Employees Furloughed 700 Locomotives Stored* *Excludes locomotives on hand to manage day-of-week loading cycles. (000s) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Day Carloads Velocity ** (MPH) **As reported to the AAR 4 2

3 2011 Business Levels Day Monthly Carloadings (000s) Chemicals Volume Growth +9% Automotive Industrial Products Energy Agricultural +2% +5% +7% +7% Units (excl Intermodal) +6% 140 Intermodal -2% January December TOTAL +3% 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 6 3

4 Intermodal Trends UP Intermodal Volumes (7 Day) Domestic & International (Year-over-Year Volume Growth ) 74,000 6% 1% 0% 2% 3% 66,000 58, * % Domestic -7% International -12% 1Q11 2Q11 3Q11 4Q11 50,000 + Solid Domestic Volumes & Highway Conversions 42,000 Jan Dec Sluggish International Volumes *Through February 8, Coal Trends 46,000 44,000 UP Coal Volumes (7 Day) 2011 Southern Powder River Basin (Trains Per Day and Monthly Inventory Days**) Trains/Day 40 Demand Inventory (days) ,000 40,000 38, * Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Inventory ,000 34,000 32,000 Jan Dec Mild Winter Weather Growing Stockpiles 1Q 2012 Contract Losses + New Business in Higher Export Volumes *Through February 8, 2012 **Energy Ventures Analysis, Inc. 8 4

5 Global Demand for Energy Diverse Opportunities for UP, over $6 Billion in 2011 Energy Sources Coal Petroleum/LPG Oil Sands, Ethanol Wind Related Markets Frac Sand Minerals Pipe Other Materials 9 Global Demand for Energy Integrated Strategy Crude Oil Frac Sand Minerals Steel Pipe Canadian Oil Sands Bakken Niobrara Originating Railroads UP Route (Crude) UP Route (Sand) Industrial Sand To Marcellus Potential Volume Growth (Carloads In Thousands) Crude Sand/Minerals Pipe Permian Haynesville Formations Drilling Sand (Proppants) Eagle Ford 10 5

6 Mexico Opportunities Freight Revenue FY 2011 of $1.8B Calexico Nogales El Paso Energy 1% Intermodal 11% Industrial 19% Agricultural 26% Hermosillo Chihuahua Eagle Pass Laredo Chemicals 9% Automotive 34% Ferromex (FXE) KCSM Ferrosur (FSRR) Short Lines Torreón Culiacán Aguascalientes Guadalajara Manzanillo Monclova Saltillo Lázaro Cárdenas Mexico City San Luis Potosí Monterrey Querétaro Puebla Brownsville Tampico Salina Cruz Veracruz Growing Population Faster Economic Recovery Favorable Macro Drivers Increasing Near-Shoring Skilled Labor Base Rising Transpacific and Chinese Labor Costs Growing Foreign Direct Investment Coatzacoalcos 11 Pricing Gains and Opportunities Core Pricing Gains Legacy Contracts as of Jan 2012 ($950 Million Remaining)* 6.0% 6.0% 4.5% 5.0% 4.5% $500M 2013 $350M 2014 $100M Remaining Legacy* Energy ~85% All Other ~15% *Based on freight revenue for 12-months ended December 31,

7 Operating Ratio Trend Operating Ratio (Percent) Fuel Price 177 Targeting a 65% to 67% Full Year Operating Ratio by point improvement from 2006 to E 7-Day Volume (000s) 13 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. 14 7

8 Strong Capital Investments Creating Capacity Spending on Infrastructure Top 10 State Highway Agencies vs. Railroads 1. California 2. Texas 3. Florida 4. Pennsylvania BNSF Union Pacific 5. New York 6. Illinois 7. Louisiana 8. North Carolina Norfolk Southern CSX 9. Washington 10. Michigan Data includes capital outlays and maintenance expenses. Sources: FHWA & AAR 15 Strong Financial Position Twelve-Month Period Ending December 31 ($ In Millions) Free Cash Flow* $2,017 $602 $1,415 $837 $1,917 12/31/ /31/2011 Total Debt* (Adjusted) $13,139 $12, % $2,754 Before Dividends 40.7% Dividends After Dividends Record Cash from Operations and Free Cash Flow Larger Bonus Depreciation Benefit in 2011 Maintain Solid Investment Grade Rating 12/31/ /31/2011 Adjusted Debt to Capital * See Union Pacific website under Investors for a reconciliation to GAAP. 16 8

9 Delivering Value to Shareholders Cash To Shareholders (Cumulative) (Dividends + Share Repurchases, in Billions) Record $1.9 Billion Free Cash Flow $8.5 $3.8 $4.4 $6.2 Declared Dividend Increase of 58% in % Targeted Dividend Payout Ratio $1.4 Billion in Share Repurchases in 2011 $ Million Shares Remaining in Current Authorization* * As of December 31, Total Shareholder Return Average Annual Total Return* Time Frame** UP S&P Yrs 11.2% 5.5% 10 Yrs 16.2% 4.1% 5 Yrs 19.9% 0.8% 3 Yrs 35.0% 18.3% 1 Yr 22.6% 4.1% * Assumes dividends are reinvested in company stock ** Periods ending February 8,

10 Leveraging the Strength of the UP Franchise Macro Demand Drivers Highway Conversions Food Production International Markets Energy Consumption Value Proposition Franchise Strength & Diversity Service / Price Continued Productivity Growth Capital Investment Shareholder Returns 19 Question & Answer Session 20 10