BAML 2012 Global Transportation Conference May 17, 2012

Transcription

1 BAML 2012 Global Transportation Conference May 17, 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 First Quarter 2012 Results Positives First Quarter Records Operating Revenue* Operating Income Operating Ratio Earnings Safety* Customer Satisfaction* Franchise Diversity Challenges Coal Volumes * Best-ever Quarterly Record Earnings Per Share $1.01 $ % $1.79 Best-Ever First Quarter Operating Ratio (%) (4.2) pts 70.5 Best-Ever First Quarter 3 First Quarter 2012 Revenue Drivers Volume Growth (vs. 2011) Pricing Gains Automotive +15% 6% Industrial Products Chemicals +8% +10% 4.5% 5% Added Fuel Surcharge Intermodal +1% Agricultural -2% Sub Total (excl Energy) +4% Energy -8% TOTAL +1% FY 2011 Price 1Q 2012 Price 1Q 2012 Price & New Fuel 4 2

3 Market Shifts First Quarter 2012 vs. First Quarter 2011 Volume Growth Volume Growth By Region Manifest +5% 6% Premium +3% Bulk -4% Total Volume Growth +1% 1% -1% West South North Resource Realignment Network Routing Employee Assignments Locomotive Repositioning Velocity (as Reported to the AAR) 1% Coal Trends Volume Impact (Weekly Carloadings) Southern Powder River Basin (Trains Per Day and Monthly Inventory Days**) 44,000 40,000 36,000 Other 13% Southern Powder River Basin 74% 2011 SPRB Trains/Day Inventory (days) 85 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2011 Inventory ,000 28,000 1Q 2012 (as of May 12) 2Q 3Q 4Q Mild Winter Weather Low Natural Gas Prices 1Q 2012 Contract Losses + New Business in Higher Export Volumes 6 3

4 7 Day Volume Trends Through May 12, ,000 15,000 13,000 11,000 9,000 7,000 Automotive ,000 20,000 18,000 16,000 14,000 Chemicals ,000 23,000 21,000 19,000 17,000 Industrial Products ,000 12,000 15,000 Jan Dec Jan Dec Jan 2012 YTD up 15% 2012 YTD up 8% 2012 YTD up 9% Dec Continued Growth in U.S. Auto Sales Improving Inventory Levels Aging Vehicles Continued Growth in Crude Oil Lower Fertilizer Volumes Drilling Demand Drives Non-Metallic Minerals and Steel Iron Ore Exports to China YTD Volume Drivers Through May 12, 2012 Nonmetallic Minerals Crude Carload Growth vs YTD Volumes (000s): , ,228 Variance 9 17 (16) (16) (86) Related Vehicles & Parts Domestic Imdl Ind Chem & Plastics Hazard Waste Wheat Coal Other 8 4

5 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 9 Leveraging the Franchise Louisiana Growth Livonia Plant Expansions / New Facilities Crude Oil Facilities Customer Facilities Shintech (Expansions) US Development Group Current phase of expansion completed in 4Q Total off-loading capacity: 130,000 bpd Connected to storage terminal (7MM barrel capacity) and pipeline network Georgia Gulf (Expansion) SNF Holding Co. (New Facility) St. James Petroplex International LLC Recently announced new $600MM oilstorage terminal in St. James Capacity of 4 6MM barrels Operational in 2014 NuStar Energy / EOG Resources Expansion completion by 2Q 2012 Total off-loading capacity after completion: 100,000 bpd Storage Capacity: 8MM barrels New Orleans 10 5

6 U.S. Chemical Cost Advantage Driving Global Competitiveness Fuel Cost Comparisons 1 st Quarter 2012 $/MMBTU* $ % 2011 Global Feedstock Sources 50% Brent Crude $2.44 U.S. Natural Gas 0% North America Middle East South Europe Russia America Natural Gas Crude Asia Source: U.S. Energy Information Administration; IHS Chemical; McKinsey *Brent Oil Price converted at the energy content basis (6.02 barrels per MMBTU) 11 Expanding Chemical Franchise Texas/Louisiana Investments Dallas Chevron Phillips Chemical Co. $5 Billion investment in cracker & additional capacity projects. Ft. Worth Total capacity: 1.5 million mt/year Estimated completion in 2017 Shreveport Formosa Plastics Corp. >$1.7 Billion investment in cracker San and additional capacity projects. Antonio Cracker capacity: 800,000 mt/year Estimated completion in 2016 Houston New Orleans Gruppo Mossi & Ghisolfi Investment in new PET & PTA plants. Capacity: 1.0 & 1.2 million mt/year Estimated completion in 2014 Ethylene Plants New Plant/Expansions Brownsville Dow Chemical Co. $1.7 Billion investment in cracker and additional capacity projects. Total capacity: 1.5 million mt/year Estimated completion in 2017 Source: Public Announcements 12 6

7 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 3,500 carloads a week, a 2% total volume growth opportunity 1.0 4, , * *Through May 12, 2012 Including Chemicals & Intermodal, total volume growth opportunity could be 6-7% 13 Mexico Opportunities Strong Investments Foreign and Domestic Volume Growth (Carloads in Thousands) % Recent Announcements from Audi & Unilever ~ $2.5B Investment* 7% Volume Growth in 1Q 2012 UP Interchange Points Ferromex (FXE) KCSM Ferrosur (FSRR) New Industrial Investment *Estimation by Mexico s Secretary of Economy 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% 5.0% $500M 2013 $350M 2014 $100M Remaining Legacy* Coal ~85% All Other ~15% Q2012 *Based on freight revenue for 12-months ended December 31, 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) 16 8

9 2012 Capital Plan Replacement, Growth & Productivity Safe and Resilient Infrastructure Increased Capacity Spending Technology $100 $3.6+ Billion Capital Plan (In Millions) PTC $335 Infrastructure Replacement $1,670 Santa Teresa Facility Southern Region Projects 200 New Locomotives Increased PTC Spend Capacity/ Commercial Facilities $600 PTC Other $50 Replacement $625 $220 Locomotives/ Equipment $845 (purchases and upgrades) Growth and Productivity 17 Investments and Returns Total Capital Spending* (In Billions) $3.6 $2.8 $2.7 $3.0 $3.1 $2.5 $2.5 $ % 8.2% 8.8% 10.2% 8.2% 10.8% 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. 18 9

10 Delivering Value to Shareholders $1.7 Free Cash Flow* $637 $186 $451 $3.8 $4.4 $289 $285 3/31/2011 3/31/2012 $574 Before Dividends Cash To Shareholders (Cumulative) (Dividends + Share Repurchases, in Billions) $6.2 $8.5 Dividends After Dividends $9.2 Strong Cash from Operations 55% Cash Dividend Increase Targeted Dividend Payout Ratio of 30% Opportunistic Share Repurchases Since 2007, 82.7 million shares repurchased Cumulative Purchases total over $6 Billion Q'12 * See Union Pacific website under Investors for a reconciliation to GAAP. 19 Total Shareholder Return Average Annual Total Return* Time Frame** UP S&P Yrs 10.3% 5.0% 10 Yrs 16.0% 4.0% 5 Yrs 15.4% -0.5% 3 Yrs 36.5% 16.9% 1 Yr 13.2% 2.1% * Assumes dividends are reinvested in company stock ** Periods ending May 16,

11 Positioned for Success Growth Opportunities Despite Coal Headwinds Second Quarter 2012 Record Earnings Strong Incremental Margin Consistent with First Quarter Sub-70 Operating Ratio Targeting Record FY 2012 Earnings and Operating Ratio Confidence in Strategy Increase Customer and Shareholder Value Enable Continued, Strategic Investments 21 11