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J.P. Morgan Aviation, Transportation & Defense Conference Rob Knight, CFO – March 6, 2013
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Cautionary Information This presentation 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, future trends in commodity markets, and financial returns; its business strategy for the upcoming year and drivers for growth; and its plans to improve productivity with capital investments. 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 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 2012, which was filed with the SEC on February 8, 2013. 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.
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Portland
Los Angeles
Calexico
Seattle
Brownsville
Houston New Orleans
Twin Cities
Nogales El Paso
Duluth
Oakland Omaha
Denver Salt Lake City
Kansas City
Chicago
Memphis
St. Louis
Fastest Growing States
Ports
Borders & Interchange
C
To/From Asia
Portla
Oaklala
To/From Asia
To Europe, South America
and Africa
Industrial 16%
Agricultural 19%
Chemicals 15%
asosEagle Pass Laredo
Dallas
Eastport
a
Industrialllllll 16%
Agricuuuuuuultltltltltlturuuuuuuu al19%
ChChChChChemememememicicicicici alaallaaalss15%%
Intermodal 20%
Coal 20%
Autos 9%
Industrial 18%
Agricultural 17%
Chemicals 16%
Freight Revenue $19.7B in 2012
• Diverse Business Mix • Fastest Growing States • Broad Port Access • Interchange Traffic &
Border Crossings
The Strength of a Unique Franchise
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2004* 2012 2004* 2012
Successful Track Record 2004 to 2012
Operating Ratio 87.5%
67.8%
#1 – Industry Improvement
2004* 2012
EPS
$1.42
$8.27
ROIC
5.3%
14.0%
+25% CAGR
* 2004 adjusted for asbestos charge of $247.4 million.
-19.7 points
+8.7 points
7 Day Volume @ 184K
7 Day Volume @ 176K
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154 153 165 168 172
154 153165 168 172
2008 2009 2010 2011 2012
81 82 86
88 88
2008 2009 2010 2011 2012
1,922 1,351
940 725
509
Network Performance Drives Productivity Full Year
Slow Order Miles Good
All Time Record
-30%
Intermodal Boxes
Manifest Cars
*
All Time Record
Train Size (Average Units per Train)
* All Time Record
2008 2009 2010 2011 2012
9.38
8.61 8.58 8.94
8.58
Car Utilization (Days) Good
-4%
All Time Record
Good
All Time Record
3%
5%
-2.5% Flat
Volume Growth
4Q12 vs. 4Q11 FY2012 vs. FY2011 South Total South Total
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2012 Volume Drivers Vs. 2011 (Carloadings in 000s)
Shale Related
Vehicles & Parts
Intermodal Cement, Stone & Lumber
Ind Chem & Plastics
Hazard Waste
Corn & Wheat
Coal Other
85 58 51
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(33) (46)
(293)
(10)
Crude Oil
Frac Sand
Carload Growth vs. 2011
133 FY Volumes (000s): 2012 9,048 2011 9,072 Variance (24)
Domestic
Int’l
+84% +13% +2% +12% +7% -49% -14% -14%
+3x
+28%
Vehicles
Parts
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Diverse Portfolio – Volume Drivers
*Through March 2, 2013
Chemicals
Intermodal
Coal
Ag
TOTAL
-3%
+8%
-10%
-22%
+2%
-2%
+12%
Industrial Products
Automotive
YTD 2013 Volume Growth*
• Crude Oil up 100%+
• Strong Intl Intermodal
• Pent up Vehicle Sales
• Lower Hazardous Waste, Softer Steel & Scrap Markets
YTD Drivers
1st Quarter • Ag volumes down in high
single digit range
• Coal volumes down in the high teens vs. 2012
• Impact of 2012 Leap Year Excluding Coal, volume up 4%
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Coal Trends
Current Drivers • Mild Weather • 2013 Contract Loss
(10+ million tons) • Mine Production • Inventory Management
Southern Powder River Basin
74%
Other 13%
27,000
31,000
35,000
39,000
43,000
47,000
Volume Impact (Weekly Carloadings)
1Q 4Q
2011
2012
2Q 3Q
2013*
Longer Term Drivers + New Domestic Business + Growing Exports from
~8M tons in 2012 to 16M tons by 2017
+ Potential Backfill to Eastern Markets
Uncertainties - Plant Retirements - Natural Gas Prices
*Through March 2, 2013
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Our Strong Value Proposition Supports Growth Long-Term Growth Drivers
• Population Growth • Recovery of Weak Markets
• International Trade
• Global Energy Demand
• Highway Conversions
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0.0
0.5
1.0
1.5
2.0
2.5
0
2,000
4,000
6,000
8,000
10,000
12,000
2005 2013* 2007 2009 2011
UP Wkly Carloadings
Housing Starts (mils)
Housing Trends
*Through March 2, 2013
• Housing represents ~7% to 8% of current UP volumes
• Lumber, Stone & Glass down 3,000 carloads a week, a 2% overall volume impact
• Housing also drives appliances, roofing, rebar, aggregates, and cement demand
• Including IP, Chemicals & Intermodal, return to normal could add volume growth opportunity of ~5%
Lumber, Stone & Glass
1QTD 2013 Lumber up
16%
‘04
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International Trade
• Diverse Franchise Creates Opportunity Throughout Economic Cycles
• Off-shoring/Near-shoring of U.S. Manufacturing
• Demand for Grain and Food
• Low Natural Gas Prices Favor U.S. Plastics Production
• Demand for U.S. Raw Materials
Domestic 69%
Other Imports
12%
Other Exports
9%
5% – Mexico Imports
2012 Freight Revenue
UP International Trade Revenue ($6B)
5% – Mexico Exports
Grain Products – 4%
Wheat – 3%
International Intermodal
44%
Vehicles & Parts
17% Coal – 5%
Feed Grains – 3%
Soda Ash – 3% Steel – 3% Beer – 2%
Fertilizer – 2% Minerals & Ores – 2%
Plastics – 2% Lumber – 2%
Other – 8%
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UP Positioned for Mexico Growth Opportunities Strong Investments – Foreign and Domestic
Ferromex (FXE) KCSM Ferrosur (FSRR)
UP Interchange Points
New Industrial Investment
'05 '06 '07 '08 '09 '10 '11 '12
708 764 776 743
600
750 817
857
Volume Growth (Carloads in Thousands)
+5%
Ports
2012 Business Mix (In Carloads)
Audi - $1.3B
Agricultural 14%
Autos 45%
Intermodal 24% Industrial
10%
Chemicals 6%
Coal 1%
+9%
Source: Public Announcements
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Portland
Los Angeles
Seattle
Houston New Orleans
Twin Cities
Duluth
Oakland Omaha
Denver Salt Lake City
Chicago
Memphis
St. Louis
Borders & Interchange
Industrial 16%
Dallas
Eastport
Industrial 17%
Distribution Centers/Ports (UP Owned/Leased and Private)
Assembly Centers (UP served and in Mexico)
Kansas City
Union Pacific Connecting NAFTA Markets Automotive
2003-2007 Avg.
2017E
16.6
14.4
16.6
U.S. Vehicle Sales* (MM)
* February 2013 Global Insight
2012
2005 2017E
1.6
2.9
3.9
2012
Mexico Auto Production* (MM)
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Permian Basin
Marcellus
Eagle Ford
Niobrara
Bakken
Canadian Oil Sands
Current UP Origins Current UP Destinations Connecting Railroad Origins
Utica
Haynesville Barnett
$114 Brent
$114 Brent
$114 Brent
$116 LLS
$81
$83
$89
Crude prices as of 2/22/13 Source: Plains Posting & Argus Research
Union Pacific Crude-by-Rail
$102
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• Substantial oil industry investment in rail – $1 + Billion in rail terminals – 20,000 new tank cars in service
• Rail advantages – Market flexibility – Faster transit time – Faster permitting and construction – Scalable with lower capital cost
Shale Energy and Rail Sustainability
• Shale production will continue to exceed pipeline capacity • UP Crude > 300K bpd in Feb 2013
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Shreveport
Ft. Worth
Dallas
Houston New Orleans
San Antonio
Brownsville
Ethylene Plants New Plant/Expansions
Expanding Chemical Franchise Texas/Louisiana Investments
Formosa Plastics Corp. • >$1.7 Billion investment in cracker
and additional capacity projects. • Cracker capacity: 800,000 mt/year • Estimated completion in 2016
Dow Chemical Co. • $1.7 Billion investment in cracker
and additional capacity projects. • Total capacity: 1.5 million mt/year • Estimated completion in 2017
Chevron Phillips Chemical Co. • $5 Billion investment in cracker &
additional capacity projects. • Total capacity: 1.5 million mt/year • Estimated completion in 2017
k
Gruppo Mossi & Ghisolfi • Investment in new PET & PTA plants. • Capacity: 1.0 & 1.2 million mt/year • Estimated completion in 2014
Source: Public Announcements
Exxon Mobil Corp. • Investment in steam cracker. • Total capacity: 1.5 million mt/year • Estimated completion in 2016
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Intermodal: Highway Conversions
• Comprehensive & Integrated Intermodal Network
• Strong Value Proposition: – Competitive Service at an
Affordable Price – Innovative Solutions – Environmental Friendliness
• Truck’s Traditional Advantage is Eroding – Regulations & Rising Costs – Highway Congestion &
Infrastructure
• Capacity Available for Growth
Domestic Volume (Qtr-over-Qtr Volume Growth)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
1% 0%
2% 3%
6%
3%
1%
4%
2011 2012
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Investment Supports Intermodal Growth
Utilizing a systematic, structured approach to add capacity and improve service
Recent Intermodal Terminal Investments
5 New Terminals Completed 3 Terminal Expansions 1 New Terminal Under Construction 1 Interchange Gateway
Over $1.2 Billion Intermodal Terminal Investment since 2000
on
Terminal Investment since 2000
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Pricing Opportunity Strong Fundamentals Continue
2014 $100
2016 $100
• Value is the Key to Future Price Improvement
• Value/Service Gains Support Narrowing Discount to Truck
• New Business Supports Margin Improvement
• Balanced Portfolio Provides Flexibility for Repricing as Value Grows
2007 2008 2009 2010 2011 2012
6% 6%
4.5% 5% 4.5%
Core Pricing Gains
4.5%
20222222 14$1$ 00
20222222222 16$100
Contracts > 1 Year
40% Contracts < 1 Year 30%
Tariffs 30%
Balanced Revenue Portfolio
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2007 2008 2009 2010 2011 2012 2017
79.3 77.4
76.1
70.6 70.7
67.8 190
180
152
172 176.5 176
Raising the Bar – “Sub 65” Operating Ratio
Operating Ratio (Percent)
Sub-65
Now Targeting Sub 65% FY Operating
Ratio by 2017
Achieve high end of 2010
guidance sooner
than 2015
2010 Guidance: 65% - 67% FY Operating Ratio by 2015
7-Day Volume (000s)
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2008 2009 2010 2011 2012 2013 Est
$3.1
$2.5 $2.5
$3.2
$3.7 ~$3.6
10.2%
Capital Investments Supported by Returns
• Improved Profitability Drives Strong Cash Flow
• … Supports Investments that must meet high return hurdles
• … Supports Core Pricing that Drives Continued Investment
• Capital Spend to ~16% - 17% of Revenue for 2013 - 2017
ROIC*
Investments* & Returns** (Capital in Billions)
12.4%
** See Union Pacific website under Investors for a reconciliation to GAAP.
14.0%
New Locomotive Purchases/Leases
Base Capital
Positive Train Control
* Includes cash capital, leases and other non-cash capital.
$3.15(excl PTC)
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Delivering Value to Shareholders
Cumulative Share Repurchases ($ In Billions)
2008 2009 2010 2011 2012
$1.6 $1.6
$2.9
$4.3
$5.8
2/28/13
Stock Price Performance
12/31/07
UP
S&P 500
118%
3%
Future Allocation
Declared Dividends Per Share
2007 2008 2009 2010 2011 2012
$0.745 $0.98 $1.08
$1.31
$1.93
$2.49 +3x
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Union Pacific – A Promising Future
• Market-Based Pricing at Reinvestible Levels
• Focus on Productivity, Efficiency, and Innovation
• Leverage Strengths of Diverse Franchise
• Invest to Strengthen and Enhance Network
• Drive Increased Profitability & Shareholder Returns
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J.P. Morgan Aviation, Transportation & Defense Conference Question & Answer Session