union pacific q3 2012 eps slides

7/31/2019 Union Pacific Q3 2012 EPS Slides

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11

Third Quarter 2012 Earnings ReleaseOctober 18, 2012

Jack Koraleski, CEO

22

2010 2011 2012

$1.56

$1.85

$2.19

All-TimeQuarterlyRecord

Third Quarter 2012 Results

+18%

Earnings Per ShareThird QuarterPositives

All-Time Quarterly Records

Operating Revenue

Operating Income

Operating Ratio

Earnings

Customer Satisfaction Safety

Franchise Diversity

Challenges

Coal Volumes


2/17

33

Third Quarter 2012 Marketing & Sales ReviewOctober 18, 2012

Eric Butler, Executive VP Marketing & Sales

44

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

87

8990 90

9192

9192

93 93 94

164

169

178175

172174

180 180

172175

181

Customer Satisfaction

GOOD

20112010

Customer Satisfaction

7 Day Carloadings

92 = Full Year Record


2012


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55

Chemicals

Automotive

Coal

Third Quarter Recap

Volume ARC FreightRevenue

Freight Revenue Performance(Year-Over-Year Change)

Volume Growth

Flat

+4% +4%

Revenue Mix

Agricultural16%

Autos

9%

Chemicals17%

Coal21%

Industrial17%

Intermodal20%

e

Agricultural

TOTAL

-2%

+13%

-2%

-12%

+1%

Flat

+18%

IndustrialProducts

Intermodal

Sub Total(excl Coal) +3%

66

Agricultural ProductsRevenue $783M (-4%) Volume 218K (-2%) ARC $3,596 (-2%)

Quarterly Drivers

Weakness in Grain

Reduced Ethanol Production &Local Feeding of DDGS

Growth in Food & Refrigerated

GrainProducts

34%

Grain39%

Food/Refrigerated

27%

Volume Mix

*Volume in thousands of carloads

78.673.2

Grain Products*

2011 2012

-7%

75.469.9

Grain*

2011 2012

-7%

54.158.7

Food & Refrigerated*

+9%

2011 2012


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77

AutomotiveRevenue $436M (+15%) Volume 181K (+13%) ARC $2,407 (+2%)

FinishedVehicles

58%

Volume Mix

92.2

104.5

Finished Vehicles*

2011 2012

+13%

68.1

76.5

Auto Parts*

2011 2012

+12%


Quarterly Drivers

Pent-up Demand to ReplaceAging Vehicles

Improved Consumer Credit

Auto Parts42%

88

ChemicalsRevenue $841M (+17%) Volume 275K (+18%) ARC $3,064 (-1%)

Quarterly Drivers

Continued Growth in Crude Oil

Strength in Plastics

Plastics22%

IndustrialChemicals

22%

Petroleum& LP Gas

28%

Volume Mix


Fertilizer10%

Soda Ash9%

Other9%

31.8

62.1

Petroleum Products*

2011 2012

+95%

55.960.1

Plastics*

2011 2012

+8%


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99

CoalRevenue $1,058M (-5%) Volume 501K (-12%) ARC $2,111 (+9%)

Quarterly Drivers

Low Natural Gas Prices andHigh Coal Stockpiles

Global Demand for WesternCoal

Southern PowderRiver Basin

74%

Other13%

51.5

44.7

Southern Powder River Basin*

2011 2012

*Tons in millions

8.2 8.4

Colorado/Utah*

2011 2012

-13%

27,000

31,000

35,000

39,000

43,000

47,000

Volume Impact(Weekly Carloadings)

1Q 4Q

20112012

2Q 3Q

+2%

1010

Industrial ProductsRevenue $879M (+2%) Volume 299K (-2%) ARC $2,933 (+4%)

Quarterly Drivers Energy Drilling Demand

Increased Construction Activity

Housing Start Growth

Steel & Scrap, Export Ore, andHazardous Waste Decline

Paper10%

Govt/Waste11%

Metals19%

Volume Mix

Minerals/Consumer

20%

Construction31%

Lumber9%


63.5 67.3

Rock*

2011 2012

+6%

45.951.0

Non-Metallic Minerals*

2011 2012

+11%

50.244.9

Steel & Scrap*-11%

2011 2012


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1111

IntermodalRevenue $1,022M (+8%) Volume 857K (+1%) ARC $1,192 (+7%)

Quarterly Drivers

Slow Economic RecoveryContinues

Highway Conversions

International55%

Domestic

45%

Volume Mix

465.2 469.9

International*

2011 2012

+1%

382.3387.3

Domestic*

2011 2012

+1%

*Volume in thousands of units

1212

Fourth Quarter 2012 Outlook

Agricultural Products+ Soybean exports, refrigerated & beer

Corn, ethanol & DDGS

Autos+ Pent up demand and new models

Chemicals+ Crude oil growth+ Most other markets remain solid

Coal

+ Export demand Natural gas price and high stockpiles

Industrial Products+ Shale-related growth

Soft global steel market

Intermodal+ Domestic growth continues, muted

International peak


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1313

Third Quarter 2012 Operations ReviewOctober 18, 2012

Lance Fritz, Executive VP - Operations

1414

2010 2011 2012

3.153.38 3.35

Operating Foundation, Safety FocusThird Quarter YTD

Rail Equipment(Reportable Rail Equipment

Incidents Per Million Train Miles)

Public(Crossing Accidents Per

Million Train Miles)

2010 2011 2012

2.182.04

2.34Good Good

2010 2011 2012

1.36

1.15

1.04

Employee(Reportable Personal Injury

Incidents Per 200,000 Man-Hours)

Good+15%

All-Time

Record

All-TimeRecord

-10%

-1%


8/17

1515

2008 2009 2010 2011 2012

8693

9087 89

8689

94 9495

Network PerformanceThird Quarter

Agility and ResiliencyDemonstrated with

Resources and ServicePlan

Volume Growth inSouthern Region

Increased CapitalProjects Adding Capacity

Positioned for Growth

Service Delivery* and IS&PIndustry Spot & Pull %

Good

* Includes early deliveries

2008 2009 2010 2011 2012

23.7

27.425.7

24.626.1

Velocity(as Reported to the AAR)

+6%

** Ties All-Time Quarterly Record

ThirdQuarterRecord

**

Good


1616

158 158170 172 176

158

2008 2009 2010 2011 2012

8385 86

88 87

2008 2009 2010 2011 2012

1,880

1,371

990 958623

Network ProductivityThird Quarter

Slow Order Miles

Good

3rd QtrRecord

-35%

IntermodalBoxes

ManifestCars

*

3rd QtrRecord

Train Size(Average Units per Train)

* All-time quarterly record

Nbr of Cars Switched

Y&L Employee Days

Cars Switched(per employee day)

+3%

+0%

+2%

Manifest Growth Impact(3Q 2012 vs. 3Q 2011)

2008 2009 2010 2011 2012

9.23

8.40 8.58

9.07

8.52

Car Utilization(Days)

Good

-6%


Good


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1717

5%

6%

Flat Flat

Agility and Resource Readiness

Volume Growth

3Q12 vs. 3Q11 YTD12 vs. YTD11

South Total South Total

Volumes in South Back to Pre-Recession Levels

Resource Realignment &Network Routing

Improving Network Fluidity &Performance

1%

-2%

-2%

10%South

North

West

TE&Y Active Workforce(YTD 2012 vs. YTD 2011)

Total

Active Locomotive Fleet(YTD 2012 vs. YTD 2011)

-1%

-1%

-8%

9%South

North

West

Total

1818

2012 Operating Outlook

Improved Safety Results

Leverage GrowthOpportunities in the South

Remain Agile MatchResources with Volume

Continue Service andProductivity Gains

Capital Effectiveness


10/17

1919

Third Quarter 2012 Financial ReviewOctober 18, 2012

Rob Knight, CFO

2020

Third Quarter Earnings SummaryIn Millions (except EPS)

Operating Revenues $5,343 $5,101 5

Operating Expenses 3,557 3,523 1

Operating Income 1,786 1,578 13

Other Income 28 17 65

Interest Expense (137) (142) (4)

Income Taxes (635) (549) 16

Net Income $1,042 $904 15

Weighted Average Diluted Shares 475.2 488.1 (3)

Diluted EPS $2.19 $1.85 18

2012 2011 %


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2121

Freight RevenueThird Quarter (In Millions)

2011

Volume& Mix

CorePrice

FuelSurcharge

(LagImpact)

2012

-1%

+5% $5,019

$4,836

+4%

-1% +1%

FuelSurcharge(ImprovedCoverage)

2222

Compensation & Benefits ExpenseThird Quarter 2012 $1,188M, Flat

$1,193 $1,188

2011

Compensation & Benefits(in Millions)

2012

Flat

45,50746,205

2011

Workforce Levels(Quarterly Average)

2012

+1.5%

Lower GTMs and TrainingCosts

Solid Operations &Productivity Gains

2011 Drought-Related Costs

Labor Inflation Costs

Increased WorkforceDriven by Capital and PTC


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2323

Fuel ExpenseThird Quarter 2012 $880M, -4%

250,855245,415

2011

Gross-Ton-Miles(in Millions)

2012

-2%

Reduced Costs drivenby Lower Volumes

Coal Declines drivingGTMs down 2%

$3.18

Average Fuel Price(Per Gallon Consumed)

2011 2012

Flat

Jul Aug Sep

$3.19

JunMay Jul Aug SepJunMay

Diesel Fuel Prices FlatCompared to 2011

Rising Fuel Prices Created

Negative Lag on FuelSurcharge Recovery

2424

$506$542

Third Quarter 2012 Expense ReviewIn Millions

2011

Purchased Services & Materials

2012

Higher Subsidiary ContractExpenses

Increased Locomotive andFreight Car Repair Costs

+7%

$408$447 Higher Depreciable Asset

Base from Growing CapitalSpend

2011

Depreciation

2012

+10%


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2525

Third Quarter 2012 Expense Review (cont)In Millions

Higher Short-Term FreightCar Rental Expense

Lower Locomotive andFreight Car Lease Expenses

$293$300

2011

Equipment & Other Rents

2012

+2%

Lower Equipment & FreightDamage Expenses

Lower Volume-Related Costs &Cost Control Measures

Higher Property Tax Expense

$207$200

2011

Other

2012

-3%

2626

Operating Ratio Performance

2010 2011 2012

68.2

69.1

66.6

Third Quarter(Percent)

All-Time Quarterly Best

Solid Pricing

Continued Focus onProductivity Initiatives

Rising Fuel Prices &

Negative Lag Impact onSurcharge Recovery

Operating Ratio Impact(0.5) pts

EPS Impact of ($0.05)

-2.5 pts.


Fuel Price / Recovery Lag Impact


14/17

2727

Cash fromOps

Investing Dividends

$4,334

($2,241)

($607)

$4,366

($2,866)

($860)

Strong Financial PositionNine Month Period Ending September 30 ($ In Millions)

Solid Free Cash Flow

Larger Capital Spend

42% Cash DividendIncrease

Strong Cash from Ops

Higher Cash Tax Paymentsfrom Prior BonusDepreciation Programs

Strong Balance Sheet

Investment Grade CreditRating

Free Cash Flow*

Total Debt*(Adjusted)

40.7% 40.2%

* See Union Pacific website under Investors for a reconciliation to GAAP.Adjusted Debt to Capital

12/31/2011 9/30/2012

$12,753$13,130

20122011 20122011 20122011

2828

Driving Strong Shareholder Value

Repurchase Activity

3.1 Million Shares in 3Q

10.8 Million Shares YTD

Cash Returned toShareholders in

Dividends and ShareRepurchases up 27%

17.1 Million SharesRemaining in CurrentAuthorization

Dividends & Share Repurchases($ In Billions)

Quarterly Share Repurchases($ In Millions)

1Q 2Q 3Q 4Q

$248

$360

$428$381

$433 $415$378

20122011 20122011 20122011 2011

2011 YTD 2012 YTD

$1.6

$2.1DividendsShare Buybacks

+27%


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2929

2012 Outlook

Fourth Quarter

Uncertain EconomicEnvironment

Volumes likely Flat toModestly Negative

Sub-70 Operating Ratio

Full Year

Sub-70 Operating Ratio& Record Earnings

Longer-Term Prospects

Growing ShareholderReturns

3030


Jack Koraleski, CEO


16/17

3131

Union Pacifics Prospects Going Forward

Economic Uncertainties

Remain Agile inChanging Environment

Positive on Longer-Term Opportunities

Strategic Investments

Increase CustomerValue

Generate StrongShareholder Returns

3232

Cautionary Information

This press release and related materials contain statements about the Corporations future that are notstatements of historical fact, including specifically the statements regarding the Corporations expectations withrespect to economic conditions; its ability to adapt to changing market conditions and continue providing qualitycustomer service; and its ability to generate returns for its shareholders. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements also generally include, without limitation, information or statements regarding: projections,predictions, expectations, estimates or forecasts as to the Corporations and its subsidiaries business, financial, andoperational results, and future economic performance; and managements beliefs, expectations, goals, and objectivesand 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 notnecessarily 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 theCorporations future performance or results are subject to risks and uncertainties that could cause actual performanceor results to differ materially from those expressed in the statement. Important factors, including risk factors, couldaffect the Corporations and its subsidiaries future results and could cause those results or other outcomes to differmaterially from those expressed or implied in the forward-looking statements. Information regarding risk factors andother cautionary information are available in the Corporations Annual Report on Form 10-K for 2011, which was filedwith the SEC on February 3, 2012. The Corporation updates information regarding risk factors if circumstancesrequire such updates in its periodic reports on Form 10-Q and its subsequent Annual Reports on Form 10-K (or suchother reports that may be filed with the SEC).

Forward-looking statements speak only as of, and are based only upon information available on, the datethe statements were made. The Corporation assumes no obligation to update forward-looking information to reflectactual results, changes in assumptions or changes in other factors affecting forward-looking information. If theCorporation does update one or more forward-looking statements, no inference should be drawn that the Corporationwill make additional updates with respect thereto or with respect to other forward-looking statements. References toour website are provided for convenience and, therefore, information on or available through the website is not, andshould not be deemed to be, incorporated by reference herein.


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union pacific q3 2012 eps slides

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