Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2011 Earnings Presentation
19 slides from Union Pacific's earnings presentation, Jul 21, 2011
Slide 1: Second Quarter Earnings Release
Second Quarter Earnings Release July 21, 2011 Jim Young, Chairman & CEO 1 Second Quarter Results Positives Earnings Per Share • Second Quarter Records +14% $1.59 – Revenue $1.40 – Operating Income Best-Ever Quarterly – Earnings Record – Cash from Operations – Customer Satisfaction $0.92 • Franchise
Slide 2: Marketing & Sales Review: Customer Satisfaction
Second Quarter Marketing & Sales Review July 21, 2011 Jack Koraleski, Executive VP – Marketing & Sales 3 Customer Satisfaction Overall Satisfaction 92 GOOD 91 Best-Ever 90 90 Quarterly Record 89 87 1Q 2Q 3Q 4Q 1Q 2Q 2010 2011 4 2
Slide 3: Second Quarter Recap and Intermodal
Second Quarter Recap Volume Growth Revenue Mix Intermodal Agricultural +11% 20% Agricultural 19% Industrial Autos 17% 8% Chemicals +11% Energy Chemicals 21% 15% Industrial +4% Products Automotive +4% Performance Improvement (Year-Over-Year Change) Energy +2% +16% +13% Intermodal -1% +3% TOTAL +3% Vo
Slide 4: Agricultural Products and Automotive
Agricultural Products Revenue $849M (+22%) Volume 237K (+11%) ARC $3,580 (+9%) Revenue Mix Export Whole Grains* +58% Grain 41.5 Products 36% Food/ Refrigerated 26.3 29% Whole Grains 35% 2010 2011 Quarterly Drivers Import Beer* +28% • Improved Demand for Export 10.7 Whole Grains 8.4 • Import Beer Gai
Slide 5: Chemicals and Energy
Chemicals Revenue $703M (+19%) Volume 233K (+11%) ARC $3,024 (+7%) Petroleum Products* Revenue Mix +31% 28.8 Petroleum 22.0 & Other 27% Fertilizer Soda Ash 16% 14% 2010 2011 Industrial Plastics Chemicals 18% Fertilizer* 25% +22% 33.2 27.3 Quarterly Drivers 2010 2011 • Growth in Crude Oil Industrial
Slide 6: Industrial Products and 2011 Outlook
Industrial Products Revenue $803M (+16%) Volume 297K (+4%) ARC $2,697 (+11%) Metallic Minerals* Revenue Mix 106% 10.2 Lumber 4.9 Minerals/ 14% Consumer 25% Paper 13% 2010 2011 Government/ Waste Construction 7% 14% Metals Non-Metallic Minerals* 27% +34% 41.8 31.3 Quarterly Drivers 2010 2011 • Ramp-up
Slide 7: Operations Review: Operating Foundation, Safety Focus
Second Quarter Operations Review July 21, 2011 Lance Fritz, Executive VP – Operations 13 Operating Foundation, Safety Focus Second Quarter Employee Customer Public (Reportable Personal Injury (Reportable Derailment Incidents (Crossing Accidents Per Incidents Per 200,000 Man-Hours) Per Million Train
Slide 8: Flood Challenges and Consistent Network Performance
Flood Challenges • Central Corridor Preserved • Falls City and River Chicago North Platte Omaha Sub Outages St. • Response Actions Louis Kansas – Engineering City Mobilization – Contingency Planning Flood threats addressed – Reroute Schedule Current Flood outage 15 Consistent Network Performance (00
Slide 9: Productivity and Maintaining Service Performance
Productivity Second Quarter GTMs per Employee Good (In Millions) • Resource Metrics 5.28 5.36 5.32 4.59 Challenged – Adverse Flood Impact 2008 2009 2010 2011 – Surge Capability Train Size (Average Cars or Boxes per Train) • Productivity Good 164 168 Emphasis Maintained Intermodal 156 Boxes 149 90 –
Slide 10: Operating Outlook and Financial Review
Operating Outlook • Building a Total Safety Culture • Continued Flood Prevention Efforts • Leveraging Network Productivity • Growing Value Proposition for our Customers • Positioned for Growth 19 Second Quarter Financial Review July 21, 2011 Rob Knight, CFO 20 10
Slide 11: Earnings Summary and Freight Revenue
Second Quarter Earnings Summary In Millions (except EPS) 2011 2010 % Operating Revenues $ 4,858 $ 4,182 16 Operating Expenses 3,466 2,903 19 Operating Income 1,392 1,279 9 Other Income 26 19 37 Interest Expense (148) (152) (3) Income Taxes (485) (435) 11 Net Income $ 785 $ 711 10 Weighted Average Di
Slide 12: Pricing Gains & Leverage; Operating Expense Recap
Pricing Gains & Leverage Core Pricing Incremental Margins 5.5% 5.5% 60% 60% 58% 5.0% 4.5% 4.5% 48% 45% * 18% 3.5% 14% 36% * 13% 9% 5% 3% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Year-over-year volume growth * Adjusted for fuel price & one-time items. See Union Pacific website unde
Slide 13: Fuel Expense and Compensation & Benefits
Fuel Expense Second Quarter 2011 $904M, +49% Average Fuel Price (Per Gallon Consumed) +44% $3.29 • Higher Diesel Fuel Prices $2.29 Added $276 Million to Costs • Conversion Spreads more than Doubled versus 2010 2010 2011 Barrel Price Conversion Spreads • Negative Fuel Price Impact Fuel Consumption (v
Slide 14: Workforce Levels and Expense Review
Workforce Levels Second Quarter + 6% 44,971 + 2.5% + 1.0% + 2.5% 42,571 Base Training Capital Workforce Projects 2010 2011 27 Second Quarter 2011 Expense Review In Millions Other $196 • Higher Personal Injury and Other Casualty- $122 Related Expenses • Higher Property Taxes 2010 2011 Purchased Servi
Slide 15: Expense Review (cont) and Operating Ratio Performance
Second Quarter 2011 Expense Review (cont) In Millions Depreciation $401 $368 • Ongoing Capital Spending • Volume Driven - 2010 2011 Higher Expense Equipment & Other Rents • Increased Other Rent $282 $283 Expenses • Lower Freight Car and Locomotive Lease Expenses 2010 2011 29 Operating Ratio Performa
Slide 16: Solid Financial Position; Delivering Value to Shareholders
Solid Financial Position $ In Millions Free Cash Flow* $1,274 • Record Cash from Before Dividends $1,027 Dividends $374 $272 Operations and Free $755 $900 After Dividends Cash Flow • 38% Cash Dividend 1H 2010 1H 2011 Increase YTD Total Debt * • Maintain Solid (Adjusted) $13,139 Investment Grade $12,
Slide 17: 2011 Outlook
2011 Outlook Continued “Real” Ongoing Record Improved Volume Pricing Productivity Earnings Shareholder Growth Gains Focus Returns 33 Second Quarter Earnings Release July 21, 2011 Jim Young, Chairman & CEO 34 17
Slide 18: UP Gaining Momentum; Cautionary Information
UP Gaining Momentum • Strong UP Value Proposition – Price / Service – Franchise • Positioned for Growth • Remain Proactive • Reward Shareholders 35 Cautionary Information This press release and related materials contain statements about the Corporation’s future that are not statements of historical
Slide 19: Question & Answer Session
Second Quarter Earnings Release July 21, 2011 Question & Answer Session 37 19