First Quarter 2013 Earnings Release

Transcription

1 First Quarter 2013 Earnings Release April 18, 2013 Jack Koraleski, CEO 1 First Quarter 2013 Results Positives First Quarter s Operating Revenue Operating Income Operating Ratio Earnings Customer Satisfaction Franchise Diversity Earnings Per Share First Quarter $ % $1.79 $ st Qtr Challenges Coal & Grain Volumes

2 First Quarter 2013 Marketing & Sales Review April 18, 2013 Eric Butler, Executive VP Marketing & Sales 3 Customer Satisfaction 87 Good Tie All-Time = Full Year 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Customer Satisfaction 7 Day Carloadings 4

3 First Quarter 2013 Recap Volume Growth Chemicals +12% Intermodal +4% Automotive +2% Freight Revenue Mix Industrial 18% Coal 19% Intermodal 20% Agricultural 16% Autos 10% Chemicals 17% Industrial Products Agricultural -9% Flat Freight Revenue Performance (Year-Over-Year Change) +6% Coal TOTAL -19% -2% -2% +3% Volume ARC Freight Revenue 5 Coal Revenue $936M (-6%) Volume 402K (-19%) ARC $2,329 (+16%) 47,000 43,000 39,000 35,000 31,000 27,000 Volume Impact (Weekly Carloadings) 2013* 1Q Other 13% Southern Powder River Basin 74% 2Q 3Q 2011 Quarterly Drivers 2013 Contract Loss 4Q High Coal Stockpiles and Inventory Management Mine Production Issues Southern Powder River Basin* -19% Colorado/Utah* -15% *Tons in millions 6

4 Agricultural Products Revenue $784M (-9%) Volume 212K (-9%) ARC $3,694 (+1%) Volume Mix Grain Products 36% Food & Refrigerated 27% Grain 37% Grain* -19% Grain Products* -4% Quarterly Drivers Limited Corn Supply in UP Territory Reduced Ethanol Demand Foreign Bans on U.S. Meat and Poultry Food & Refrigerated* -3% *Volume in thousands of carloads and excludes equipment shipments 7 Automotive Revenue $487M (+13%) Volume 184K (+2%) ARC $2,648 (+11%) Volume Mix Auto Parts 43% Finished Vehicles* +1% Finished Vehicles 57% Quarterly Drivers Pent-up Demand to Replace Aging Vehicles Housing and Construction Increased Demand for Trucks OEM Vehicle Refresh Efforts Impact Shipments Auto Parts* +5% *Volume in thousands of carloads 8

5 Chemicals Revenue $873M (+14%) Volume 271K (+12%) ARC $3,225 (+1%) Volume Mix* Petroleum & LP Gas 15% Soda Ash 11% Industrial Chemicals 22% Crude Oil 17% Fertilizer 14% Plastics 21% Crude Oil* +107% Plastics* +3% Quarterly Drivers Continued Crude Oil Growth Demand for Plastics Strength in Petroleum and LP Gas * Beginning in 2013, Fertilizer includes Phos Rock and Sulfur; Soda Ash includes Sodium Products; Crude Oil separated from Petroleum & LPG LP Gas* +13% *Volume in thousands of carloads and excludes equipment shipments 9 Industrial Products Revenue $916M (+6%) Volume 289K (Flat) ARC $3,174 (+7%) Volume Mix Minerals/ Consumer 24% Gov t/waste 8% Metals 20% Lumber 10% Paper 9% Construction 29% Non-Metallic Minerals* +11% Lumber* +18% Quarterly Drivers Drilling Activity Frac Sand Growth in Housing Declines in Hazardous Waste, Steel & Scrap, and Export Ore Hazardous Waste* -63% *Volume in thousands of carloads 10

6 Intermodal Revenue $988M (+9%) Volume 810K (+4%) ARC $1,219 (+4%) Volume Mix Domestic 45% International 55% International* +8% Quarterly Drivers International Growth Driven by Slow Economic Recovery Highway Conversions Domestic* Flat *Volume in thousands of units Volume Outlook Coal High Stockpiles & Contract Loss + Increasing Natural Gas Prices Agricultural Products Diminished Crops Crop Projections Automotive + Auto Sales Growth Chemicals + Crude Oil + Most Other Markets Remain Solid Industrial Products + Housing & Construction, Metals, Minerals Iron Ore Exports Intermodal + Domestic Growth Continues, Stronger International Peak 12

7 First Quarter 2013 Operations Review April 18, 2013 Lance Fritz, Executive VP - Operations 13 Safety Trends 1.59 Employee (Reportable Personal Injury Incidents Per 200,000 Employee-Hours) % All-Time Qtrly Good 3.68 Rail Equipment (Reportable Derailment Incidents Per Million Train Miles) All-Time Annual % Good 2.79 All-Time Qtrly Q 1Q2013 Public (Crossing Accidents Per Million Train Miles) Good All-Time Annual +14% Q 1Q Q 1Q2013 Decrease in Severity of Injuries Infrastructure Investments & Improved Defect Detection Growing Rail and Highway Traffic in the South Focus on High Risk Crossings and Driver Behavior 14

8 Market Shifts 1Q 2013 vs. 1Q Southern Region Volume Growth* 5% 4% 3% Q 2013 * Reflects 7-day carloadings Southern Region Investments* $250+ $228 $ E *$ in Millions; Includes Capacity & Commercial Facilities Capital Spending Southern Region volume near 2006 levels, with 14% higher performance level Strong Track Renewal Program Resource Realignment Process Efficiencies & Capital Spending Support Network Fluidity and Service 15 Network Performance First Quarter Dynamic Market Shifts Agility and Resiliency Demonstrated with Resources and Service Plan Positioned for Growth Capital Effectiveness Southern Region Rail Replacement Programs Velocity (as Reported to the AAR) Flat Service Delivery* and IS&P Good Industry Spot & Pull % ** * Includes early deliveries ** Best-ever quarterly record 16

9 Network Productivity First Quarter 1,057 Slow Order Miles Good 8.81 Car Utilization (Days) % 8.83 Good % st Qtr 1 st Qtr Good Intermodal Boxes Manifest Cars Train Size (Average Units per Train) ** ** First Quarter 1 st Qtr Hardening infrastructure and reducing service failures Strong asset utilization Generating capacity with efficiency Operating Outlook Drive Safety, Service & Efficiency Remain Agile in Response to Traffic Shifts Productivity / Volume Leverage Capital Effectiveness 18

10 First Quarter 2013 Financial Review April 18, 2013 Rob Knight, CFO 19 First Quarter Income Statement In Millions (except EPS) 2013 % Operating Revenues $5,290 $5,112 3 Operating Expenses 3,657 3,602 2 Operating Income 1,633 1,510 8 Other Income F Interest Expense (128) (135) (5) Income Taxes (588) (528) 11 Net Income $957 $ Weighted Average Diluted Shares (2) Diluted EPS $2.03 $

11 Freight Revenue First Quarter (In Millions) $4, % Volume & Mix +3% +0.5% Fuel Surcharge +4% $4,984 Core Price Compensation & Benefits Expense First Quarter 2013 $1,216M, Flat Compensation & Benefits (in Millions) Flat $1,211 $1,216 45, Workforce Levels (Quarterly Average) +2% 46,437 Lower Volume Inflation Costs Traffic Mix & Capital Replacement Work in the South Increased Workforce Shift in Traffic Mix Capital (including PTC)

12 Fuel Expense First Quarter 2013 $900M, -3% Gross-Ton-Miles (in Millions) 240,484-5% 227, Average Fuel Price (Per Gallon Consumed) Flat $3.23 $3.23 GTMs Decreased 5% driven by lower Coal Volumes Volume-Related Cost Reductions 3% Consumption Rate Increase Average Diesel Fuel Price Flat 23 First Quarter 2013 Expense Review In Millions Purchased Services & Materials +6% $557 $526 Increased Locomotive & Freight Car Repair Costs New Logistics Management Fees 2013 Depreciation $427 +2% $434 Higher Depreciable Asset Base from Recent Capital Spending Levels New Equipment Rate Study

13 First Quarter 2013 Expense Review (cont) In Millions Equipment & Other Rents +6% $313 $ Container Costs - New Contract Arrangement Higher Freight Car Rental Expense Lower Freight Car & Locomotive Lease Expense Other $ % $237 Higher Property Tax Expense Increased Costs for Freight & Equipment Damage Lower Personal Injury Expense Operating Ratio Performance First Quarter (Percent) First Quarter Solid Core Pricing pts st Qtr First Sub-70 Performance 2% Volume Shortfall vs. Reiterate Full Year Sub- 65 Operating Ratio Goal by

14 Strong Financial Position Three Month Period Ending March 31 ($ In Millions) $1,404 Free Cash Flow* $1,524 ($830) ($800) Solid Free Cash Flow of $401 Million Strong Cash from Ops Cash from Ops Investing ($289) ($323) $12,772 Total Debt* (Adjusted) $13, % 40.2% Dividends 12% Cash Dividend Increase Strong Balance Sheet Investment Grade Credit Rating $650 Million Debt Issuance and $300 Million Increase in Sale of Receivable Program 12/31/ 3/31/2013 Adjusted Debt to Capital * See Union Pacific website under Investors for a reconciliation to GAAP. 27 Driving Strong Shareholder Value Cumulative Share Repurchases (In Millions) First Quarter Activity Repurchases totaling $394 million 2.9 million avg price of $ Since 2007, repurchases total 94.5 million avg price of $ million shares remaining in current authorization Q

15 2013 Outlook Second Quarter Flat Volumes Full Year Continued Core Pricing Gains & Network Efficiencies Assuming Continued Economic Growth: Positive Volume Growth Operating Ratio & Earnings Increasing Shareholder Returns 29 First Quarter 2013 Earnings Release April 18, 2013 Jack Koraleski, CEO 30

16 Positioned for Success Continued Economic Improvement Growth Opportunities Business Development Customer Value Strategic Investments Well Positioned for the Future 31 Cautionary Information This press release and related materials contain statements about the Corporation s future that are not statements of historical fact, including specifically the statements regarding the Corporation s expectations with respect to general economic conditions and business growth; its ability to provide safe, efficient and reliable customer service and increase customer value and shareholder returns. 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. Forward-looking 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 8, 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. 32

17 First Quarter 2013 Earnings Release April 18, 2013 Question & Answer Session 33