J.P. Morgan Transportation Conference March 13, 2012

Transcription

1 J.P. Morgan Transportation Conference March 13, 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, 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 Record Results Top Line Growth $19.6 $17.0 Recovering economy 3% volume growth $ % price gains $2.2 B fuel recovery Up $1 Billion Revenue 76.1 Margins Operations Record Employee Safety Solid Service Metrics, despite weather challenges Customer Satisfaction at highest annual mark Bottom Line $ Operating Ratio Only 0.1 points behind record year Fuel cost 1.7 points Productivity initiatives Best of U.S. Rails $5.53 Record / Best in Industry Record FCF $1.9 Billion* $3.74 Record ROIC at 12.4% EPS * See Union Pacific website under Investors for a reconciliation to GAAP. 3 Consistent Network Performance Agility and Resiliency Demonstrated with Resources and Service Plan Volume Growth in Southern Region Positioned for Growth 690 Employees Furloughed 750 Locomotives Stored* (000s) *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 Q4 Jan Feb Day Carloads Velocity ** (MPH) **As reported to the AAR 4 2

3 Business Level Trends Day Monthly Carloadings* (000s) Volume Growth Chemicals +9% up Automotive Industrial Products Energy +5% +7% +7% Agricultural +2% Units (excl Intermodal) +6% 140 Intermodal -2% January December TOTAL +3% *Through March 8, Day Volume Trends Through March 8, ,000 15,000 13,000 11,000 9,000 7,000 Automotive ,000 20,000 18,000 16,000 14, Chemicals ,000 23,000 21,000 19,000 17,000 Industrial Products ,000 12,000 15,000 Jan Dec Jan Dec Jan Dec 2012 YTD up 14% 2012 YTD up 10% 2012 YTD up 13% Continued Growth in U.S. Auto Sales Improving Inventory Levels Aging Vehicles Continued Growth in Crude Oil Lower Fertilizer Volumes, Timing and Seasonal Demand Drilling Demand Drives Non-Metallic Minerals and Steel Iron Ore Exports to China 6 3

4 Coal Trends 48,000 45,000 UP Coal Volumes (7 Day) Southern Powder River Basin (Trains Per Day and Monthly Inventory Days**) Trains/Day Inventory (days) , , Inventory Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb ,000 33,000 30,000 Jan 2012* 2012 YTD down 5% Dec Mild Winter Weather Growing Stockpiles 1Q 2012 Contract Losses + New Business in Higher Export Volumes *Through March 8, 2012 **Energy Ventures Analysis, Inc. 7 Intermodal Trends UP Intermodal Volumes (7 Day) Domestic & International (Year-over-Year Volume Growth) 73,000 69,000 65,000 61,000 57, * % 1% 0% Domestic International -2% 2% 3% -7% 6% -5% -12% 1Q11 2Q11 3Q11 4Q11 1Q12* 53,000 Sluggish International Volumes 49,000 45,000 Jan Dec Timing of Chinese New Year + Solid Domestic Volumes & Highway Conversions *Through March 8,

5 Panama Canal Impact Seattle/ Tacoma 14 Days* Coast Neutral Favors East Coast LA/Long Beach 13 Days* Favors West Coast NJ/ NY 27 Days* Norfolk 28 Days* Savannah 29 Days* Most Freight Favors the West Coast Time-Sensitive Freight Cost of Panama Canal Expansion East Coast Investments Required *Average transit days from Shanghai Panama Canal 9 Housing Trends Lumber, Stone & Glass UP Wkly Housing Carloadings 12,000 Housing Starts (mils) Housing represents ~7% 2.5 of current UP volumes 10,000 8,000 6, Lumber, Stone & Glass down 4,000 carloads a week, a 2.5% total volume growth opportunity 1.0 4, , * *Through March 3, 2012 Including Chemicals & Intermodal, total volume growth opportunity could be 6-7% 10 5

6 Global Demand for Energy Diverse Opportunities for UP, over $6 Billion in Energy Sources Coal Ethanol Wind Petroleum/LPG Oil Sands, Related Markets Frac Sand Minerals Pipe Other Materials 11 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 St. James, Louisiana 12 6

7 Leveraging the Franchise Louisiana Growth Livonia Plant Expansions / New Facilities Crude Oil Facilities Customer Facilities Georgia Gulf (Expansion) Shintech (Expansions) SNF Holding Co. (New Facility) NuStar Energy / EOG Resources Expansion scheduled completion by 2Q 2012 Total off-loading capacity after completion: 100,000 bpd Storage Capacity: 8,000,000 barrels US Development Group Current phase of expansion completed in 4Q. Total off-loading capacity: 130,000 bpd Connected to storage terminal (7,000,000 barrel capacity) and pipeline network St. James New Orleans 13 Mexico Opportunities Calexico Nogales El Paso Volume Growth (Carloads in Thousands) +9% Hermosillo Ferromex (FXE) KCSM Ferrosur (FSRR) Short Lines Torreón Culiacán Aguascalientes Guadalajara Manzanillo Chihuahua Monclova Saltillo Lázaro Cárdenas Eagle Pass Mexico City Laredo 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 14 7

8 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, Capital Plan Replacement, Growth & Productivity Safe and Resilient Infrastructure Increased Capacity Spending Santa Teresa Facility Southern Region Projects 200 New Locomotives Increased PTC Spend Technology $100 $3.6+ Billion Capital Plan (In Millions) Capacity/ Commercial Facilities $600 PTC PTC $335 Other $50 Infrastructure Replacement $1,670 $625 Replacement $220 $160 Locomotives/ Equipment $845 (purchases and upgrades) Growth and Productivity 16 8

9 Investments and Returns Total Capital Spending* (In Billions) $3.6 $2.8 $2.7 $3.0 $3.1 $2.5 $2.5 $ % 10.2% 10.8% 8.2% 8.8% 8.2% 6.4% Return on Invested Capital** * Includes cash capital, leases and other non-cash capital. ** See Union Pacific website under Investors for a reconciliation to GAAP. 17 Strong Financial Position Twelve-Month Period Ending December 31 ($ In Millions) Free Cash Flow* $2,017 $602 $1,415 $837 $1,917 12/31/ 12/31/ 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 Maintain Solid Investment Grade Rating 12/31/ 12/31/ Adjusted Debt to Capital * See Union Pacific website under Investors for a reconciliation to GAAP. 18 9

10 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 30% Targeted Dividend Payout Ratio $1.4 Billion in Share Repurchases in $ Million Shares Remaining in Current Authorization** * See Union Pacific website under Investors for a reconciliation to GAAP. ** As of December 31, 19 Total Shareholder Return Average Annual Total Return* Time Frame** UP S&P Yrs 10.7% 5.4% 10 Yrs 15.5% 3.6% 5 Yrs 19.2% 1.7% 3 Yrs 48.9% 28.6% 1 Yr 15.8% 5.6% * Assumes dividends are reinvested in company stock ** Periods ending March 8,

11 Leveraging the Strength of the UP Franchise Macro Demand Drivers Consumer Demand World Population Growth International Markets Energy Consumption Value Proposition Franchise Strength & Diversity Service / Price Continued Productivity Growth Capital Investment Shareholder Returns 21 Question & Answer Session 22 11