Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2012 Earnings Presentation
18 slides from Union Pacific's earnings presentation, Jan 24, 2013
Slide 1: Fourth Quarter 2012 Earnings Release
Fourth Quarter 2012 Earnings Release January 24, 2013 Jack Koraleski, CEO 1 Union Pacific Achieves 2012 Milestones Earnings Per Share Positives Fourth Quarter +10% • Record Fourth Quarter $2.19 and Full Year Financial $1.99 Tie All-Time Results Quarterly Record • Employee Safety $1.56 • Customer Sat
Slide 2: Marketing & Sales Review and Customer Satisfaction
Fourth Quarter 2012 Marketing & Sales Review January 24, 2013 Eric Butler, Executive VP – Marketing & Sales 3 Customer Satisfaction GOOD 94 93 93 93 92 92 91 91 4th Qtr 90 90 89 Record 87 180 180 181 178 176 175 175 174 172 172 169 164 93 = Full Year Record 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2010 2
Slide 3: Fourth Quarter Recap and Coal
Fourth Quarter Recap Revenue Mix Volume Growth Intermodal 21% Chemicals +14% Industrial 17% Agricultural 16% Automotive +9% Autos Coal 9% 20% Chemicals Intermodal 17% +2% Industrial Products Flat Freight Revenue Performance (Year-Over-Year Change) Agricultural -9% +4.5% +2% Coal -17% -2.5% TOTAL -2.
Slide 4: Agricultural Products and Automotive
Agricultural Products Revenue $785M (-8%) Volume 215K (-9%) ARC $3,647 (Flat) Grain* Volume Mix 85.1 -22% 66.2 Grain Products 36% Food/ 2011 2012 Refrigerated 27% Grain Products* Grain 37% -6% 81.3 76.1 Quarterly Drivers 2011 2012 • Limited corn supply in UP Food & Refrigerated* territory +8% 58.7 5
Slide 5: Chemicals and Industrial Products
Chemicals Revenue $834M (+15%) Volume 265K (+14%) ARC $3,146 (Flat) Petroleum Products* Volume Mix +69% 62.7 Other 37.2 Petroleum 6% & LP Gas 29% Fertilizer 10% 2011 2012 Soda Ash 10% Plastics Industrial 23% Industrial Chemicals* Chemicals 22% +8% 52.0 48.3 Quarterly Drivers 2011 2012 • Continued Cr
Slide 6: Intermodal and 2013 Volume Outlook
Intermodal Revenue $1,021M (+6%) Volume 831K (+2%) ARC $1,229 (+5%) Volume Mix International* Flat 436.7 436.1 Domestic 47% International 53% 2011 2012 Domestic* Quarterly Drivers +4% 394.2 • Weak International Peak 380.6 Season • Highway Conversions Drive Domestic Growth 2011 2012 *Volume in thousa
Slide 7: Operations Review: Operating Foundation, Safety Focus
Fourth Quarter 2012 Operations Review January 24, 2013 Lance Fritz, Executive VP – Operations 13 Operating Foundation, Safety Focus Full Year Employee Rail Equipment Public (Reportable Personal Injury Incidents (Reportable Rail Equipment (Crossing Accidents Per Per 200,000 Employee-Hours) Incidents
Slide 8: Network Performance and Productivity
Network Performance Fourth Quarter Velocity (as Reported to the AAR) Good 27.0 +4% 26.5 26.7 • Agility and Resiliency 25.1 4th Qtr Record 25.6 Demonstrated with Resources and Service Plan 2008 2009 2010 2011 2012 • Mix Shift and Volume Service Delivery* and IS&P Growth in Southern 95 ** Industry Spo
Slide 9: Agility and Resource Readiness; Capital Investment
Agility and Resource Readiness Volume Growth TE&Y Active Workforce (FY2012 vs. FY2011) 5% 3% South 9% -2% Flat North -3% West -2% South Total South Total Total Flat 4Q12 vs. 4Q11 FY2012 vs. FY2011 Active Locomotive Fleet (FY2012 vs. FY2011) • Volumes in South at Pre- Recession Levels South 9% • Reso
Slide 10: 2013 Operating Outlook
2013 Operating Outlook Safety, Service and Value 2012 • Improved Network Performance / Agility & Resiliency 2013 • Carry Momentum Engage Forward Celebrate & • Drive Safety & Service Repeat Empower & Productivity • Remain Agile / Standardize Support Resource Readiness 19 Fourth Quarter 2012 Financial
Slide 11: Fourth Quarter Income Statement and Freight Revenue
Fourth Quarter Income Statement In Millions (except EPS) 2012 2011 % Operating Revenues $5,250 $5,108 3 Operating Expenses 3,525 3,491 1 Operating Income 1,725 1,617 7 Other Income 43 54 (20) Interest Expense (128) (141) (9) Income Taxes (604) (566) 7 Net Income $1,036 $964 7 Weighted Average Dilute
Slide 12: Compensation & Benefits and Fuel Expense
Compensation & Benefits Expense Fourth Quarter 2012 $1,135M, -2% Compensation & Benefits (in Millions) $1,155 -2% • Lower GTMs $1,135 • Solid Operations • Lower Payroll Taxes • Higher Training Costs 2011 2012 • Moderate Inflation Costs Workforce Levels (Quarterly Average) +2.5% 46,067 44,922 • Incre
Slide 13: Fourth Quarter 2012 Expense Review
Fourth Quarter 2012 Expense Review In Millions Purchased Services & Materials +5% $533 • Higher Subsidiary $508 Contract Expenses • Increased Joint Facility Expense & Locomotive Repair Costs 2011 2012 Depreciation +10% $453 $413 • Higher Depreciable Asset Base from Growing Capital Programs 2011 2012
Slide 14: Operating Ratio Performance and Full Year Income Statement
Operating Ratio Performance Fourth Quarter Full Year (Percent) (Percent) 77.4 76.1 73.4 73.4 -2.9 pts 70.2 70.6 70.7 -1.2 pts 68.3 67.8 67.1 All-Time 4th Qtr Full Year Record Record 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 27 Full Year Income Statement In Millions (except EPS) 2012 2011 % O
Slide 15: Strong Financial Position and Investments and Returns
Strong Financial Position Twelve Month Period Ending December 31 ($ In Millions) Free Cash Flow* $5,873 $6,161 • Solid Free Cash Flow ($3,633) ($3,119) ԟ Larger Capital Spend ($1,146) ԟ 37% Cash Dividend ($837) Increase 2011 2012 2011 2012 2011 2012 Cash from Investing Dividends • Strong Cash from O
Slide 16: Delivering Value to Shareholders; A Look Ahead to 2013
Delivering Value to Shareholders Declared Dividend Per Share +15% +58% $0.69 • Performance Drives $0.60 $0.60 $0.60 $0.60 Dividend Increases $0.475 $0.475 $0.38 – Declared Dividend Increase of 15% in 2012 – Full Year 2012 Declared 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Dividends grew 29% vs. 2011 2011 2012 – Achie
Slide 17: Union Pacific's Prospects Going Forward
Fourth Quarter 2012 Earnings Release January 24, 2013 Jack Koraleski, CEO 33 Union Pacific’s Prospects Going Forward • 2013 Challenges in Coal & Grain Markets • Impact of Domestic Fiscal Policies • Maintain Successful Strategy – Remain Agile – Leverage Diverse Franchise – Create Customer Value • Gen
Slide 18: Cautionary Information
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 financial retur