Union Pacific Corporation · NYSE:UNP
Union Pacific — Q3 2009 Earnings Presentation
35 slides from Union Pacific's earnings presentation, Oct 22, 2009
Slide 1: Third Quarter Earnings Release
Third Quarter Earnings Release October 22, 2009 Jim Young, Chairman & CEO 1
Slide 2: Third Quarter 2009 Results
Third Quarter 2009 Results • EPS = $1.02 – Down 26% versus 2008 • Record Operating Ratio • Safety Gains • Best Ever Service Levels – Increasing value proposition • Ongoing Efficiency Gains • Strong Financial Position 2
Slide 3: Third Quarter Marketing & Sales Review
Third Quarter Marketing & Sales Review October 22, 2009 Jack Koraleski, Executive VP – Marketing & Sales 3
Slide 4: Third Quarter Summary
Third Quarter Summary Carloads Average Revenue Freight Revenue (000s) Per Carload (Millions) -12% -25% -15% 4,630 2,398 1,931 1,706 2,035 3,471 2008 2009 2008 2009 2008 2009 4
Slide 5: Improved Carload Trend
Improved Carload Trend 7-Day Carloadings (000s) Drivers 185.0 182.1 183.2 • Seasonality 169.6 • Inventory Alignment 9.5% 157.0 • Cash For Clunkers 145.5 143.4 • Supply Chain • New Business • Demand Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 5
Slide 6: Agricultural
Agricultural Third Quarter 2009 Whole Grains* -18% Quarterly Results 96.9 • $649M, -23% 79.7 • -12% Carloadings • $3,026 ARC, -13% 2008 2009 Quarterly Drivers Meals & Oils* • Weakness in Grain Exports -13% 33.3 • Decline in Animal Feeding 29.1 • Reduced Soybean Crush 2008 2009 *Volume in (000s) of c
Slide 7: Autos
Autos Third Quarter 2009 Finished Vehicles* Quarterly Results +25% 66.4 51.4 53.2 • $227M, -30% • -19% Carloadings Q1 Q2 Q3 • $1,827 ARC, -14% 2009 Quarterly Drivers Vehicle Parts* +47% • Cash for Clunkers 57.8 45.6 39.4 • Increased Production Rate versus 2nd Quarter Q1 Q2 Q3 2009 *Volume in (000s)
Slide 8: Chemicals
Chemicals Third Quarter 2009 Plastics* Quarterly Results 58.4 +1% 50.2 50.8 • $551M, -16% • -10% Carloadings • $2,730 ARC, -7% 2007 2008 2009 Quarterly Drivers Liquid & Dry* • Growth in Plastics Exports 62.6 -11% 58.5 51.9 • Weak Demand Across Major Market Segments 2007 2008 2009 *Volume in (000s) o
Slide 9: Energy
Energy Third Quarter 2009 SPRB Trains Per Day Quarterly Results -14% -11% -15% • $831M, -21% • -14% Carloadings • $1,564 ARC, -8% ‘08 ‘09 ‘08 ‘09 ‘08 ‘09 Q1 Q2 Q3 Quarterly Drivers CO/UT Trains Per Day • High Coal Stockpiles -21% -37% -22% • SPRB Contract Losses • CO/UT Production Issues ‘08 ‘09 ‘08
Slide 10: Industrial Products
Industrial Products Third Quarter 2009 Steel & Scrap* Quarterly Results -50% 61.3 • $557M, -39% 30.6 • -29% Carloadings • $2,367 ARC, -14% 2008 2009 Quarterly Drivers Rock* -26% • Major Market Segments 75.1 Reflect Weakness of Overall Economy 55.2 • New Short-Haul Waste Disposal Carloadings 2008 200
Slide 11: Intermodal
Intermodal Third Quarter 2009 International Volume* Quarterly Results -25% 526 393 • $656M, -22% • -13% Carloadings • $901 ARC, -11% 2008 2009 Quarterly Drivers Domestic Volume* • Continued Weak Import +9% 335 Volumes 308 • Domestic Product Offerings – Excellent service 2008 2009 – New business *Vol
Slide 12: Fourth Quarter Volume Drivers
Fourth Quarter Volume Drivers 7-Day Carloads • Challenges (000s) – Construction & Manufacturing 200 2007 – SPRB Contract Losses 180 – Supply Chain Issues 2008 – Fertilizer 160 • Opportunities – Fall Grain Harvests 140 2009 – Ethanol 120 – Autos – Hub Growth 100 – New Services January December – Stro
Slide 13: Customer Satisfaction Index
Customer Satisfaction Index Good 88 87 87 79 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 13
Slide 14: Third Quarter Operating Review
Third Quarter Operating Review October 22, 2009 Dennis Duffy, Executive VP – Operations 14
Slide 15: 2009 Safety & Service
2009 Safety & Service Third Quarter AAR Velocity Freight Car Utilization Good Cycle Days Good MPH 27.4 10.4 21.3 8.4 2006 2007 2008 2009 2006 2007 2008 2009 AAR Terminal Dwell Service Delivery Index* Good Good Hours 93 26.2 24.5 69 2006 2007 2008 2009 2006 2007 2008 2009 * Includes early deliveries
Slide 16: 2009 Productivity
2009 Productivity Total Production vs. Scheduled* (September YTD) • Capital Productivity 110% 90% – Process improvement – Slow Order reduction improves performance 2007 2008 2009 • Operating Expense Slow Order Miles Discipline (As of September 30) 2,629 -38% – Fuel savings 1,856 1,152 – Reduced equi
Slide 17: Agility
Agility Third Quarter Averages Current Reduction Levels -17% GTMs (millions) • 4,100 TE&Y Furloughs -20% Train Starts (000s) • 1,700 Locomotives -20% Average TE&Y Stored Employees Road • 50,000 Freight Cars -21% Locomotives Parked -25% Freight Cars 17
Slide 18: Creating Upside Leverage
Creating Upside Leverage Operating Efficiency • Unified Plan / Train Size • Locomotive Practices 27.8 • Surge Capabilities and AAR Speed (MPH) Processes 161 • Capital Investment 158 26.8 • Hardening the Infrastructure 152 Distributed Power Percent* (% of GTMs moved by DPU) 146 63% 7 Day Carloadings
Slide 19: Third Quarter Financial Review
Third Quarter Financial Review October 22, 2009 Rob Knight, CFO 19
Slide 20: Income Statement Summary
Income Statement Summary Third Quarter – In Millions 2009 2008 % Operating Revenues Freight Revenues $ 3,471 $ 4,630 (25) Other Revenues 200 216 (7) Total Operating Revenues 3,671 4,846 (24) Operating Expenses Compensation and Benefits 999 1,123 (11) Fuel 466 1,135 (59) Purchased Services & Material
Slide 21: Freight Revenue Drivers
Freight Revenue Drivers Year-Over-Year Percent Change • $3.5 B Freight Revenue +1% – 25% decline on 15% lower carloadings -8% -8% • ARC Declined 12% -12% -16% – Customers benefit from lower diesel fuel prices -22% Q1 Q2 Q3 – $590M less fuel surcharge 2009 revenue ARC $1,755 $1,685 $1,706 • Negative
Slide 22: Compensation & Benefits
Compensation & Benefits Third Quarter – In Millions -11% • 11% Workforce Reduction $1,123 – Labor productivity $999 – 15% fewer carloads • Average Compensation Per Employee – Completely offset July 1st union wage increase 2008 2009 22
Slide 23: Fuel and Volume Impact
Fuel and Volume Impact Fuel Surcharge Lag (Year-over-year EPS impact) • Quarterly Diesel Fuel ~$0.40 Prices Down 49% – 2008 = $3.70/gallon – 2009 = $1.87/gallon $0.00 • $180M Savings from 17% Decline in Gross Ton-Miles Q1 Q2 Q3 Q4E • Current Fuel Spot 2009 Price ~$2.05/Gallon Positive Earnings Impac
Slide 24: Purchased Services & Materials
Purchased Services & Materials Third Quarter – In Millions $481 -16% • Decreased Contract $403 Services Expense • Less Locomotive and Freight Car Material • Favorable Year-Over-Year Variance – $11M Gulf Coast hurricanes 2008 2009 24
Slide 25: Equipment and Other Rents
Equipment and Other Rents Third Quarter – In Millions • Lower Volume & -11% Increased Productivity $326 $290 – Reduced short-term car rents – Less leased equipment • Restructured Equipment Leases – Reduced lease expense – Higher depreciation costs 2008 2009 – Increased interest expense 25
Slide 26: Other
Other Third Quarter – In Millions -18% $218 • Lower Freight & Property $179 Damage Expense • Other Reduced Expenses – Bad debt – Employee travel – Utilities • Higher Property Taxes 2008 2009 26
Slide 27: Expense Variability
Expense Variability Third Quarter Revenue Carloads Volume Variability* (000s) -15% 80+% 2,398 ~ ~ 70% 2,035 55% 2008 2009 Q1 Q2 Q3 2009 * The calculation normalizes for the change in diesel fuel prices. 27
Slide 28: Operating Ratio
Operating Ratio Third Quarter (%) 81.1 • Third Quarter Record • Volume Variability 76.0 74.9 • Lower Fuel Prices 73.7 • Pricing Gains 2006 2007 2008 2009 28
Slide 29: Full Income Statement
Full Income Statement Third Quarter – In Millions (Except EPS) 2009 2008 % Operating Revenues $ 3,671 $ 4,846 (24) Operating Expenses 2,704 3,631 (26) Operating Income 967 1,215 (20) Other Income – Net 14 23 (39) Interest Expense (156) (130) 20 Income Before Income Taxes 825 1,108 (26) Income Tax Ex
Slide 30: Strong Financial Position
Strong Financial Position Third Quarter – In Millions Cash Balance $1,435 $857 • Maintaining Above- Average Cash Position 2008 2009 • Moderately Increased Total Debt* Year-Over-Year Debt $12,970 $14,530 45.2% 46.9% 2008 2009 Lease Adjusted Debt to Capital *Lease Adjusted Total Debt (See Union Pacifi
Slide 31: Fourth Quarter Drivers
Fourth Quarter Drivers • Easier Volume Comparisons • Significant Fuel Impact in Fourth Quarter 2008 • Continued Profitability Gains 31
Slide 32: Third Quarter Earnings Release
Third Quarter Earnings Release October 22, 2009 Jim Young, Chairman & CEO 32
Slide 33: Committed to the Future
Committed to the Future • No Quick Recovery • Pricing Gains Expected in 2010 • Capital Discipline • Operating Efficiency • Strong Cash Flows • Service Excellence 33
Slide 34: 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 the Corporation’s outlook regarding economic conditions and future business volumes, future productivity and operating p
Slide 35: Q&A Session
Q&A Session BUILDING AMERICA’