Union Pacific Corporation · NYSE:UNP
Union Pacific — Union Pacific 2008 Analyst Conference
14 slides from Union Pacific's conference presentation, 2008
Slide 1: Project Operating Ratio
Project Operating Ratio Rob Knight, CFO
Slide 2: Rail Benchmarking
Rail Benchmarking 2006 vs 2007 Comparison Reported Operating Ratio Improvement 2.2 (pts) 0.2 0.2 0.1 (1.5) (1.8) UP CSX NS CP* BN CN* 79.3% 77.6% 72.6% 75.3% 77.3% 63.6% *CN and CP not adjusted for exchange rate. 2
Slide 3: Project Operating Ratio
Project Operating Ratio Project OR Profitable Organizational Operating Revenue Effectiveness Productivity Growth Council Return Strategic Safety Focus Sourcing 3
Slide 4: Operating Revenue Growth
Operating Revenue Growth Excluding Fuel Surcharges Annual Growth Rate* Future Growth Rate 6-8% CAGR 6.7% CAGR $14,805 $14,805 $11,439 2003 2007 2007 2012E * See Union Pacific Web site under Investor Relations for a reconciliation to GAAP. 4
Slide 5: Drivers of Revenue Growth
Drivers of Revenue Growth Excluding Fuel Surcharges 6 – 8% Revenue CAGR Legacy Pricing as of 1/1/08 (as a % of Revenue) 2 – 3% Volume Assumes “Normal” 2012+ 2012+ 2008 Economy 8% 8% 6% 2009 3% Negative Business Mix Re-priced 3% 2010 74% 5 – 6% Core Pricing 6% 2011 Gains 8% 2012+ 5
Slide 6: Legacy Pricing Opportunities
Legacy Pricing Opportunities Price to Market $4 Billion Portfolio as of 1/1/08 Improved Fuel Industrial Products & Agricultural Surcharge Recovery Chemicals 2% Long-Term 8% Opportunity Autos 10% Energy 44% Energy Intermodal 36% 6
Slide 7: Operating Ratio Gains
Operating Ratio Gains (%) Reported 89.4 Fuel Adjusted 90.0 86.8 86.0 81.5 81.5 82.0 79.3 78.0 74.0 70.0 2003 2004 2005 2006 2007 7
Slide 8: Project Operating Ratio
Project Operating Ratio 79.3% Drivers Cost Hurdles Low 70s% Pricing Volume Growth Improved Productivity 2007 2012E *Assumes crude oil prices at $100/barrel 8
Slide 9: Growing Profitability
Growing Profitability Operating Income Cash From Operations (Billions) (Billions) $3.4 $3.3 $2.4 $2.1 2003 2007 2003 2007 9
Slide 10: Balance Sheet Strength
Balance Sheet Strength* BBB/Baa Range Adjusted Debt to Adjusted Adjusted Debt to Capital (%) EBITDA 46.2 46.5 3.8x 3.5x 45.0 3.1x 43.6 2.5x 2.4x 41.6 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 * See Union Pacific Web site under Investor Relations for a reconciliation to GAAP. 10
Slide 11: "Cash" Deployment
“Cash” Deployment Capital Dividends Share Repurchase ($ Billions) ($ Millions) ($ Billions) $3.1 $364 $1.5 $2.1 $234 $0.0 2003 2007 2003 2007 2003 2007 “Cash” includes cash from operations, real estate and other plus net financing 11
Slide 12: Strong Cash Generation
Strong Cash Generation ($Billions) Cash from Operations Increased ($ Billions) Profitability Drives Double Digit Double Digit CAGR CAGR Increasing Cash Tax Rate $3.3 Stronger Cash Supports Higher Debt Levels 2007 2012E 12
Slide 13: Balancing Uses of "Cash"
Balancing Uses of “Cash” 2003 – 2007 2008 – 2012 Returned to Returned to Shareholders Shareholders Replacement Capital Growth Growth Capital Replacement Capital Capital “Cash” includes cash from operations, real estate and other plus net financing 13
Slide 14: Benchmark for Success
Benchmark for Success Project Operating Ratio Driving Returns 2008 – 2012 6% to 8% Freight Revenue CAGR Continuing Productivity and Service Gains Low 70’s Operating Ratio by 2012 “Mid-Teens” Earnings per Share CAGR Excludes Impact of Share Repurchase Strong Cash Generation Improve Return on Capital
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