union pacific q3 2012 eps slides
TRANSCRIPT
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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
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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
All-TimeQuarterlyRecord
2012
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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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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%
*Volume in thousands of carloads
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
*Volume in thousands of carloads
Fertilizer10%
Soda Ash9%
Other9%
31.8
62.1
Petroleum Products*
2011 2012
+95%
55.960.1
Plastics*
2011 2012
+8%
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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%
*Volume in thousands of carloads
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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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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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%
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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
All-TimeQuarterlyRecord
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%
All-TimeQuarterlyRecord
Good
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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
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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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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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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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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.
All-TimeQuarterlyRecord
Fuel Price / Recovery Lag Impact
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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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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
Third Quarter 2012 Earnings ReleaseOctober 18, 2012
Jack Koraleski, CEO
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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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Third Quarter 2012 Earnings ReleaseOctober 18, 2012
Question & Answer Session