Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2011 Earnings Presentation
18 slides from Union Pacific's earnings presentation, Oct 20, 2011
Slide 1: Third Quarter Earnings Release
Third Quarter Earnings Release October 20, 2011 Jim Young, Chairman & CEO 1 Third Quarter Results Earnings Per Share Positives +19% • Best-Ever Quarter $1.85 – Revenue $1.56 Best-Ever – Operating Income Quarterly Record – Earnings • Record YTD Free Cash $1.01 Flow • Franchise Diversity Challenges •
Slide 2: Third Quarter Marketing & Sales Review
Third Quarter Marketing & Sales Review October 20, 2011 Jack Koraleski, Executive VP – Marketing & Sales 3 Customer Satisfaction Overall Satisfaction GOOD 92 91 91 90 90 89 87 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 4 2
Slide 3: Third Quarter Recap; Agricultural Products
Third Quarter Recap Volume Growth Revenue Mix Intermodal Automotive +10% 19% Industrial 18% Agricultural Industrial 17% Products +8% Autos Energy 8% 23% Chemicals Energy +7% 15% Chemicals +5% Performance Improvement (Year-Over-Year Change) +16% Agricultural -3% +14% Intermodal -6% +1% TOTAL +1% Volu
Slide 4: Automotive and Chemicals
Automotive Revenue $379M (+23%) Volume 160K (+10%) ARC $2,364 (+12%) Revenue Mix Finished Vehicles* +5% Auto Parts 92.2 23% 88.0 Finished Vehicles 77% 2010 2011 Auto Parts* Quarterly Drivers +18% 68.1 • U.S. Auto Sales Up 6% 57.8 • Continued Recovery from Disaster in Japan 2010 2011 *Volume in thous
Slide 5: Energy and Industrial Products
Energy Revenue $1,112M (+21%) Volume 572K (+7%) ARC $1,945 (+13%) Revenue Mix Southern Powder River Basin* Other +5% 7% 51.5 Colorado/ 48.9 Utah 18% Southern Powder River Basin 75% 2010 2011 Colorado/Utah* Quarterly Drivers +9% 8.2 • New Business Drives SPRB Growth 7.5 • Improved Production and Expo
Slide 6: Intermodal; Fourth Quarter Volume Drivers
Intermodal Revenue $948M (+8%) Volume 848K (-6%) ARC $1,119 (+15%) Revenue Mix International* -12% 529.9 Domestic 465.2 53% International 47% 2010 2011 Domestic* Quarterly Drivers +2% • Weak Imports and 2Q Contract 374.6 382.3 Loss Impact International • Domestic Volume Strengthens as Quarter Progre
Slide 7: Operations Review: Operating Foundation, Safety Focus
Third Quarter Operations Review October 20, 2011 Lance Fritz, Executive VP – Operations 13 Operating Foundation, Safety Focus 3rd Quarter YTD Employee Rail Equipment Public (Reportable Personal Injury (Reportable Derailment Incidents (Crossing Accidents Per Incidents Per 200,000 Man-Hours) Per Milli
Slide 8: Weather Challenges; Network Performance
Weather Challenges Historical Slow Order Miles (Annual Average) • Recovery from Midwest 2,500 Good 2,000 Flooding 1,500 • Severe Drought and 1,000 Heat in Texas 500 0 2006 2007 2008 2009 2010 2011 – Speed Restrictions YTD 2011 Slow Order Miles – Maintenance Curfews 1,200 1,000 – Returning to Normal
Slide 9: Operational Efficiency; Operating Outlook
Operational Efficiency 3rd Quarter Train Size GTMs per Employee (Average Units per Train) (In Millions) Good 170 172 5.43 5.52 5.51 5.06 Intermodal 158 158 Boxes 88 85 86 83 Manifest Cars 2008 2009 2010 2011 2008 2009 2010 2011 TE&Y Furloughs • Maintained Productivity (Quarterly Average) Emphasis 4,
Slide 10: Third Quarter Earnings Summary
Third Quarter Financial Review October 20, 2011 Rob Knight, CFO 19 Third Quarter Earnings Summary In Millions (except EPS) 2011 2010 % Operating Revenues $5,101 $4,408 16 Operating Expenses 3,523 3,007 17 Operating Income 1,578 1,401 13 Other Income 17 25 (32) Interest Expense (142) (153) (7) Income
Slide 11: Freight Revenue; Pricing Gains & Leverage
Freight Revenue Third Quarter (In Millions) + 16% $4,836 + 7.0% + 4.5% + 4.5% $4,187 Volume Core Fuel & Mix Price Surcharge 2010 2011 21 Pricing Gains & Leverage Core Pricing Incremental Margins* 5.5% 5.5% 60% 60% 58% 5.0% 4.5% 4.5% 4.5% 18% 48% 45% 41% 3.5% 13% 14% 36% 9% 5% 3% 1% 1Q10 2Q10 3Q10 4Q
Slide 12: Operating Expense Recap; Fuel Expense
Operating Expense Recap Third Quarter 2011 vs. 2010 ($ Increase in Millions) $308 • $516 Million Increase • Drivers: – Fuel Price – Inflation/Depreciation – Volume/Productivity – Weather Challenges $101 – Training $41 $36 $29 $1 Fuel Comp & Prch Srvs Depr Other Equip & Benefits & Materials Rents 23
Slide 13: Compensation & Benefits; Workforce Levels
Compensation & Benefits Third Quarter + 9% $1,193 + 1.5% + 0.5% + 1.5% + 5.5% $1,092 Inflation Training Drought- Volume Related (Net of Productivity) Resources 2010 2011 25 Workforce Levels Third Quarter + 5% 45,507 + 1.5% + 1.0% + 2.5% 43,375 Base Training Capital Workforce Projects (Including Weat
Slide 14: Third Quarter 2011 Expense Review
Third Quarter 2011 Expense Review In Millions Purchased Services & Materials +9% • Increased Contract Services $506 $465 • Locomotive & Freight Car Materials Usage • Crew Lodging & Transportation Costs 2010 2011 Other +16% $207 $178 • Higher Property Taxes • Increased Costs for Damaged Freight and E
Slide 15: Operating Ratio Performance; Solid Financial Position
Operating Ratio Performance Third Quarter Operating Ratio (Pct) Third Quarter • Solid Pricing 74.9 73.8 • Modest Volume Growth 69.1 & Leverage 68.2 • Year-Over-Year Negative Fuel Price Impact of 1.7 Points Full Year • Improvement Excluding Fuel Price Impact 2008 2009 2010 2011 Fuel Price Impact 29 S
Slide 16: Delivering Value to Shareholders; 2011 Outlook
Delivering Value to Shareholders Cumulative Share Repurchases ($ In Billions) $5.27 $4.84 2011 Activity $4.23 $4.48 • Opportunistic Share Repurchases – 3Q 2011 = $428 Million $2.98 $2.98 – YTD 2011 = $1.04 Billion • 31.7 Million Shares $1.46 Remaining in Current Authorization 2007 2008 2009 2010 1Q
Slide 17: Union Pacific's Prospects Remain Positive
Third Quarter Earnings Release October 20, 2011 Jim Young, Chairman & CEO 33 Union Pacific’s Prospects Remain Positive • Continued Economic Uncertainties • UP’s Prospects Remain Positive • Confidence in Fundamental Strategy – Enhance UP Franchise – Provide Increased Value to Customers – Improve Fina
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 its ability to generate returns for shareholder