Union Pacific Corporation · NYSE:UNP
Union Pacific — Q1 2009 Earnings Presentation
36 slides from Union Pacific's earnings presentation, Apr 23, 2009
Slide 1: First Quarter Earnings Release
First Quarter Earnings Release April 23, 2009 Jim Young, Chairman and CEO 1
Slide 2: First Quarter 2009 Results
First Quarter 2009 Results • EPS = $0.72 – Down 15% versus 2008 • Record Operating Ratio • Quarterly Safety “Bests” • Excellent Service • Strong Balance Sheet 2
Slide 3: First Quarter Marketing & Sales Review
First Quarter Marketing & Sales Review April 23, 2009 Jack Koraleski, Executive VP – Marketing & Sales 3
Slide 4: First Quarter Recap
First Quarter Recap Volume Revenue Agricultural -12% -13% Automotive -48% -55% Chemicals -20% -15% Energy -10% -6% Industrial -27% -29% Intermodal -23% -22% TOTAL -21% -20% 4
Slide 5: Agricultural
Agricultural First Quarter 2009 Quarterly Results Whole Grains* • $661M, -13% -26% 103.2 • -12% Carloadings • $3,116 ARC, -1% 76.1 Quarterly Drivers 2008 2009 • Lower Grain Demand Food & Refrigerated* • Reduction in Soybean -1% 41.7 Crush and Ethanol 41.4 Production • Produce Railexpress Growth 2008
Slide 6: Autos
Autos First Quarter 2009 Finished Vehicles* Quarterly Results -54% 112.1 • $162M, -55% • -48% Carloadings 51.4 • $1,675 ARC, -13% 2008 2009 Quarterly Drivers Vehicle Parts* • U.S. Light Vehicle Sales Down 38% Year-Over-Year -40% 76.0 • Extended Auto Shutdowns 45.6 2008 2009 *Volume in (000s) of carl
Slide 7: Chemicals
Chemicals First Quarter 2009 Fertilizer* Quarterly Results 33.9 -34% • $513M, -15% • -20% Carloadings 22.4 • $2,843 ARC, +6% 2008 2009 Quarterly Drivers Liquid and Dry* • Weak Demand Across -28% Major Market Segments 62.0 44.5 2008 2009 *Volume in (000s) of carloads 7
Slide 8: Energy
Energy First Quarter 2009 First Quarter SPRB Tonnage* Quarterly Results Record -10% 50.2 • $807M, -6% 45.0 • -10% Carloadings • $1,550 ARC, +5% 2008 2009 Quarterly Drivers CO/UT Tonnage* • SPRB Contract Losses 10.1 -21% • Higher-than-Normal Coal Stockpiles 8.0 • CO/UT Production Issues – Loaded 205
Slide 9: Industrial Products
Industrial Products First Quarter 2009 Steel* Quarterly Results -50% 40.8 • $546M, -29% 20.5 • -27% Carloadings • $2,459 ARC, -3% 2008 2009 Quarterly Drivers Lumber & Building Materials* • Sharp Downturn in Steel -37% Market 33.3 • Continued Softness in 20.9 Housing & Construction • High Inventories
Slide 10: Intermodal
Intermodal First Quarter 2009 International Volume* Quarterly Results -30% 510.6 • $551M, -22% 355.9 • -23% Carloadings • $897 ARC, +1% 2008 2009 Quarterly Drivers Domestic Volume* • Weak Economy Impacts -9% 285.0 International and Domestic 258.7 • Lapping 2008 Contract Loss • Service-Driven Product
Slide 11: Inventories Working Against Rail Volume
Inventories Working Against Rail Volume* Average Retail Trade Inventories (First Quarter) $503.3 $489.2 1.54 1.48 • Inventory Levels 1.47 $475.5 1.47 $475.0 Down, But Not Enough • Consumer Confidence 2006 2007 2008 2009** at All-Time Lows Retail Inventory (Billions) Inventory/Sales Ratio • Consumer
Slide 12: Leading Indicators
Leading Indicators Centerbeam Car Orders Gondola Car Orders 1,200 2008 2008 2,000 800 1,000 400 2009 2009 0 0 Jan Feb Mar Apr Jan Feb Mar Apr Boxcar Orders Southern Rock Loadings 3,000 2008 6,000 2008 2,000 2009 4,000 1,000 2,000 2009 0 0 Jan Feb Mar Apr Jan Feb Mar Apr 12
Slide 13: Customer Satisfaction Index
Customer Satisfaction Index Good 88 87 87 79 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Jan Feb Mar 2007 2008 2009 13
Slide 14: First Quarter Operating Review
First Quarter Operating Review April 23, 2009 Dennis Duffy, Executive VP – Operations 14
Slide 15: 2009 Performance Records
2009 Performance Records First Quarter AAR Velocity AAR Terminal Dwell Good Good MPH Hours 27.2 29.0 24.3 21.3 2006 2007 2008 2009 2006 2007 2008 2009 Freight Car Utilization Service Delivery Index* Good Cycle Days Good 11.0 91.9 9.1 66.0 2006 2007 2008 2009 2006 2007 2008 2009 * Includes early deli
Slide 16: Volume Variability
Volume Variability 7-Day Thruput • Crews Carloads (000) – Low Mileage Strategy Network 220 Capacity – Cutback Engineers Decreasing Volume •Fixed Plant – AWTS / Furloughs Increasing Volume 200 • Locomotives & Railcars 180 – Lease Returns – Storage / Retirements 160 • Working – Foreign Balance Resourc
Slide 17: Aligning Working Resources
Aligning Working Resources First Quarter Average Resource Reductions – Current Status -20% GTMs (millions) • Furloughs – 26% (~4,500) ~ ~ TE&Y Employees -21% Train Starts (000s) – ~~ ~ 700 Mechanical, Engineering, and Clerical -18% TE&Y Employees • Road Locomotives – 31% (~1,900) ~ ~ in Storage Road
Slide 18: Network Productivity
Network Productivity • Network Re-Design – Shift Workload to Most Efficient Facilities 14 Major – Combine Auto and Network Intermodal Train Networks Yards • Terminal Cost Control 30 Regional Yards – Remote Control Locomotives – Shift Eliminations 60 Local Yards – Staffing Reductions – Reduced Ramp O
Slide 19: 2009 Operating Initiatives
2009 Operating Initiatives • Continue “Zero Tolerance” on Safety • Volume Variability with Excellent Service • Capital Efficiency • Well Positioned for Upside Leverage 19
Slide 20: First Quarter Financial Review
First Quarter Financial Review April 23, 2009 Rob Knight, CFO 20
Slide 21: Income Statement Summary
Income Statement Summary First Quarter – In Millions 2009 2008 % Operating Revenues Freight Revenues $ 3,240 $ 4,059 (20) Other Revenues 175 211 (17) Total Operating Revenues $ 3,415 $ 4,270 (20) Operating Expenses Compensation and Benefits 1,070 1,132 (5) Purchased Services & Materials 399 469 (15)
Slide 22: Freight Revenue Drivers
Freight Revenue Drivers Average Revenue Per Car • $3.2 B Freight Revenue -9% $1,931 $1,891 – 20% Decline on 21% Lower $1,835 Carloadings $1,738 $1,755 • Pricing Gains Consistent with Outlook – +5 to 6% Average Core Price • Reduced Fuel Surcharges Lowering Customer Freight Q1 Q2 Q3 Q4 Q1 Bills 2008 2
Slide 23: Expense Initiatives Drive Results
Expense Initiatives Drive Results First Quarter Revenue Carloads Operating Expenses (000s) In Millions -21% 2,335 -12% $3,482 1,847 $3,078 Fuel Price Adjusted* $2,743 Reported 55% Variability 2008 2009 2008 2009 * See Union Pacific Web site under Investor Relations for a reconciliation to GAAP. 23
Slide 24: Compensation & Benefits
Compensation & Benefits First Quarter – In Millions -5% • 8% Workforce Reduction $1,132 $1,070 – Labor Productivity – Lower Volume • Wage & Benefit Inflation 2008 2009 24
Slide 25: Purchased Services & Materials
Purchased Services & Materials First Quarter – In Millions -15% $469 • Decreased Contract $399 Service Expense • Reduced Crew Transportation & Lodging 2008 2009 25
Slide 26: Fuel
Fuel First Quarter Average Fuel Price Per Gallon Consumed $2.84 • 20% Decline in Gross Ton- Miles $1.51 • Improved Fuel Efficiency – Fuel Consumption Rate 2008 2009 Better By 5% Fuel Consumption Gallons (in millions) • Current Diesel Spot Price 330 ~~ ~ $1.55 per gallon 252 2008 2009 26
Slide 27: Depreciation
Depreciation First Quarter – In Millions +1% $345 • Increased Capital $340 Spending in 2008 • Lower Depreciation Rates Effective 1/1/09 2008 2009 27
Slide 28: Equipment and Other Rents
Equipment and Other Rents First Quarter – In Millions -7% • Volume Savings $342 $317 – Autos – Intermodal – Industrial Products • Fewer Leased Assets 2008 2009 28
Slide 29: Other
Other First Quarter – In Millions -7% • Decreased Freight & $242 $226 Property Damage Expense • Lower Casualty Expenses • Higher State & Local Taxes • Increased Bad Debt Expense 2008 2009 29
Slide 30: Operating Ratio Improvement
Operating Ratio Improvement First Quarter (%) • Lower Fuel Prices 83.7 81.3 81.5 • Price Increases 80.3 • Improved Productivity 187.2 • Volume Headwind 145.5 2006 2007 2008 2009 Average 7-Day Carloadings (000s) 30
Slide 31: Full Income Statement
Full Income Statement First Quarter – In Millions (Except EPS) 2009 2008 % Operating Revenues $ 3,415 $ 4,270 (20) Operating Expenses 2,743 3,482 (21) Operating Income $ 672 $ 788 (15) Other Income – Net 23 25 (8) Interest Expense (141) (126) 12 Income Before Income Taxes 554 687 (19) Income Tax Exp
Slide 32: Debt & Liquidity
Debt & Liquidity* First Quarter – In Millions Total Debt** $12,639 $14,387 • Retired $250M Debt on 2/15 • Issued $750M Debt on 2/20 44.8% 47.9% • 2009 Capital Closer to $2.6B 2008 2009 Cash Balance – ~ ~ $150 - $200M Reduction $1,466 $827 **Lease Adjusted Total Debt 2008 Lease Adjusted Debt to Capit
Slide 33: Looking Ahead
Looking Ahead 7-Day Carloadings 200,000 Easter Chinese Holiday New Year 150,000 Weather-Related SPRB 100,000 Christmas Holiday Oct Dec Feb Apr 16 2008 2008 2009 2009 33
Slide 34: First Quarter Earnings Release
First Quarter Earnings Release April 23, 2009 Jim Young, Chairman and CEO 34
Slide 35: The Year Ahead
The Year Ahead • Uncertain Economic • Safety Gains Outlook • Customer Service • Additional Cost and Efficiency Initiatives • Strong Value of Rail Underscores Need for • Investing for the Future Balanced Regulation 35
Slide 36: 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 expectations regarding the Corporation’s outlook regarding economic conditions and future business volumes, future opera