Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2008 Earnings Presentation
32 slides from Union Pacific's earnings presentation, Jul 24, 2008
Slide 1: Second Quarter Earnings Release
Second Quarter Earnings Release July 24, 2008 Jim Young, Chairman & CEO
Slide 2: Second Quarter Results
Second Quarter Results Diluted Earnings per Share Operating Income In Millions + 24% + 18% $1.02 $931 $787 $0.82 2007 2008 2007 2008 2
Slide 3: Second Quarter Drivers
Second Quarter Drivers Record Fuel Prices Midwest Flooding Franchise Diversity Economic Sensitivity Strong Bulk Demand Pricing Strength Significant Operating Gains Record Customer Service 3
Slide 4: Second Quarter Marketing & Sales Review
Second Quarter Marketing & Sales Review July 24, 2008 Jack Koraleski, Executive VP – Marketing & Sales
Slide 5: Second Quarter Overview
Second Quarter Overview Freight Revenue Highlights $4.3 Billion, +13% ($Millions) Improved Average Revenue per Car Intermodal Agricultural Revenue $769 +7% $778 +29% Best Ever: Agricultural, Autos Chemicals, Energy & Industrial $352 (9%) Industrial Products Products $877 +9% Chemicals Record Second
Slide 6: Second Quarter Carloadings
Second Quarter Carloadings Agricultural 11% Drivers -20% Flood Impact on Automotive Volumes Chemicals 1% Economic Softness Continued Global Energy 2% Demand for Grain, Coal and Fertilizer Industrial Products -1% Intermodal -6% TOTAL -3% 6
Slide 7: Agricultural Products
Agricultural Products Second Quarter Volumes* Wheat +40% 30.3 Quarterly Drivers Worldwide Demand and a 21.6 Weak Dollar Drives Increase in Grain Exports 2007 2008 Ethanol and DDGS Growth Continues Feed Grains +13% 73.5 65.1 2007 2008 *Volume in (000s) of carloads 7
Slide 8: Energy
Energy Second Quarter SPRB Trains Per Day Quarterly Drivers 37.3 Improved Productivity 34.9 Weather-Related 33.8 Disruptions Dampen 32.8 32.5 Growth ‘07 April May June July MTD CO/UT Tonnage* - 3% 11.3 11.0 2007 2008 *Millions of Tons 8
Slide 9: Industrial Products
Industrial Products Second Quarter Volumes* Lumber Shipments Cement Shipments - 25% - 11% 49.8 40.5 36.2 37.1 2007 2008 2007 2008 Steel Shipments Rock Shipments +6% +20% 88.1 44.3 83.3 36.8 2007 2008 2007 2008 *Volume in (000s) of carloads 9
Slide 10: Customer Satisfaction Index
Customer Satisfaction Index Second Quarter Good 83 80 69 2006 2007 2008 10
Slide 11: 2008 Outlook
2008 Outlook Third Quarter Agricultural Products Growth Potential Energy 2008 Volume (+) Chemicals Third Quarter: -2% to -1% Mixed Industrial Products Full Year: Demand Drivers Domestic Intermodal ~ ~-1% (+/-) Automotive - Parts 2008 Core Price Full Year: Weak Automotive - Vehicles + 5% to 6% Demand
Slide 12: Second Quarter Operating Review
Second Quarter Operating Review July 24, 2008 Dennis Duffy, Executive VP - Operations
Slide 13: Operating Summary
Operating Summary Second Quarter Safety Flooding Challenges Strong Productivity Iowa East / West Main Line +3% GTM/Employee 4% Fewer Train Starts & 5% Fewer Yard/Local Starts Network Resiliency Cedar Rapids Yard 13
Slide 14: Network Performance
Network Performance Recoverability - Second Quarter +20% Innovative Recovery 54 Flow Control 45 Engineering Readiness Network Interruption Days 2007 2008 Capital Investment *Defined as a day with Hours Held > 50Hrs for Weather and/or Incident +6% Surge Resources 22.8 Incremental Capacity 21.6 Fluid
Slide 15: Strong Velocity Rebound
Strong Velocity Rebound AAR Velocity - 2008 23.8 MPH MPH 24.0 June 23.0 Flooding Impact Monthly Velocity (MPH) 22.0 Month 2007 2008 Change April 22.2 22.9 + 0.7 May 21.0 23.5 + 2.5 June 21.7 22.1 + 0.4 21.0 Week Ending 4/4 5/2 5/30 6/20 7/18 15
Slide 16: Network Performance Update
Network Performance Update Second Quarter AAR Inventory Freight Car Utilization (000) Good 325 Good Days 10.5 311 10.0 9.5 303 2006 2007 2008 2006 2007 2008 AAR Terminal Dwell Hours Good Recrew Rate Percentage Good 27.6 11.1 24.7 24.5 9.4 8.7 2006 2007 2008 2006 2007 2008 16
Slide 17: Operating Outlook
Operating Outlook TRT-909 Second Half 2008 Safety and Security Maintenance Planning & Capital Efficiency Resource Productivity Service Reliability 17
Slide 18: Second Quarter Financial Review
Second Quarter Financial Review July 24, 2008 Rob Knight, CFO
Slide 19: Income Statement Summary
Income Statement Summary* Second Quarter – In Millions 2008 2007 Pct Chg Operating Revenues Freight Revenues $ 4,349 $ 3,853 +13% Other Revenues 219 193 +13% Total Operating Revenues $ 4,568 $ 4,046 +13% Operating Expenses Compensation and Benefits 1,101 1,145 -4% Fuel 1,159 753 +54% Purchased Servi
Slide 20: Freight Revenue Drivers
Freight Revenue Drivers Second Quarter – In Millions Increased Fuel Cost +13% Recovery $4,349 6% Core Pricing Gain Positive Business Mix $3,853 Midwest Flooding Impact “Lost” $45 Million Primarily Coal Loadings 2007 2008 20
Slide 21: Compensation & Benefits
Compensation & Benefits Second Quarter – In Millions -4% Labor Productivity $1,145 -1% GTMs $1,101 -4% Workforce Lower Training Expenses 4% Wage Increase in National Contracts Effective 7/1/08 2007 2008 21
Slide 22: Fuel
Fuel Second Quarter +54% 64% Average Fuel Price $1,159 Increase 19 Million Gallons Saved 1% Fewer GTMs 5% Better Consumption Rate $753 $12 Million Increase for Non- Locomotive Fuel 2007 2008 22
Slide 23: Purchased Services & Materials
Purchased Services & Materials Second Quarter – In Millions +3% $494 Increased Contract Costs $478 Oregon Mudslide Midwest Flooding Higher Crew Transportation Expenses 2007 2008 23
Slide 24: Depreciation & Equipment Costs
Depreciation & Equipment Costs Second Quarter – In Millions Depreciation +6% $346 Depreciation $327 Increased Capital Spending 2007 2008 Equipment and Other Rents Equipment & Other Rents -5% $354 Improved Asset Utilization $338 Lower Car Hire Payments Less Leased Equipment 2007 2008 24
Slide 25: Other
Other Second Quarter – In Millions -1% $12 Million Casualty $202 Expense Reduction $199 Increased Utility Costs Higher State & Local Taxes 2007 2008 25
Slide 26: Second Quarter Operating Ratio
Second Quarter Operating Ratio (%) +4.6 80.5 -5.5 79.6 2007 Fuel Price Base 2008 Impact Business 26
Slide 27: Full Income Statement
Full Income Statement Second Quarter – In Millions (Except EPS) 2008 2007 Pct Chg Operating Revenues $ 4,568 $ 4,046 +13% Operating Expenses 3,637 3,259 + 12 Operating Income $ 931 $ 787 +18 Other Income – Net 19 36 -47 Interest Expense (128) (120) +7 Income Before Income Taxes 822 703 +17 Income Ta
Slide 28: Share Repurchase Program
Share Repurchase Program Cumulative Shares Repurchased (Millions) Second Quarter Purchases $2.3 Billion Returned to Shareholders since 6.3 Million Shares January 2007 $75.83 Average Price/Share 38.1 2008 Repurchase Summary 31.8 12.8 Million Shares 25.2 Repurchased 20.4 $68.73 Average Price/Share 11.
Slide 29: Total Debt Levels
Total Debt Levels Second Quarter - In Billions $12.5 Added $1.4 B Total Debt $11.1 Maintain Investment Grade Rating 44.5% 41.8% Lease Adjusted Total Debt ($Billions)* 2007 2008 Lease Adjusted Debt to Capital* * See Union Pacific Web site under Investor Relations for a reconciliation to GAAP. 29
Slide 30: 2008 Outlook
2008 Outlook 3rd Quarter: EPS = $1.10 to $1.20 (+10 to 20%) Volume = -2% to -1% Diesel Fuel ~ ~ $4.00/gallon Full Year: EPS = $4.00 to $4.20 (+16 to 21%) Volume ~ ~ -1% 30
Slide 31: Second Quarter Earnings Release
Second Quarter Earnings Release July 24, 2008 Jim Young, Chairman & CEO
Slide 32: Cautionary Information
Cautionary Information This presentation and related materials contain statements about the Corporation’s future that are not statements of historical fact, including specifically statements of management regarding the estimated impact of flooding, and expectation’s regarding the Corporation’s busin