Union Pacific Corporation · NYSE:UNP
Union Pacific — Goldman Sachs conference (February 2003)
25 slides from Union Pacific's conference presentation, Feb 5, 2003
Slide 1: Goldman Sachs
Goldman Sachs February 5, 2003
Slide 2: Disclosure Statement
Disclosure Statement This This presentations presentations andand related related materials materials may may contain contain statements statements aboutabout the the Corporation's Corporation's future future that that are are not not statements statements of of historical historical fact. fact. The
Slide 3: 2002 Commitments
2002 Commitments Original Original Targets Targets Actuals Actuals Revenue Revenue 1%-3% 1%-3% 3% 3% Rail Rail Operating Operating Ratio Ratio Under Under 80% 80% 79.8% 79.8% Rail Rail Operating Operating Margin Margin Over Over 20% 20% 20.2% 20.2% EPS EPS Double Double Digit Digit Growth Growth 34%
Slide 4: Our Performance
Our Performance Operating Operating Revenue* Revenue* Operating Operating Margin $$ Billions Billions Rail Rail & & Other Other Operations Operations $12.5 $12.5 20.2% $12.1 $12.1 20.2% $12.0 $12.0 $11.3 18.3% 18.3% 18.6% 18.6% $11.3 17.5% 17.5% 1999 1999 2000 2000 2001 2001 2002 2002 1999 1999 2000
Slide 5: Balance Sheet Improvement
Balance Sheet Improvement Union Pacific Corporation Debt-to-Capital Coverage Ratios Ratios 6.1 6.1 56.9 56.9 54.7 54.7 4.9 4.9 51.8 51.8 51.6 51.6 4.5 4.5 49.2 49.2 22.0 22.0 48.4 48.4 4.1 4.1 46.1 46.1 19.2 19.2 With With Leases Leases (%) (%) 18.4 18.4 Without 17.3 17.3 Interest Interest Coverage
Slide 6: 2003 Economic Outlook
2003 Economic Outlook 2002 2003 Estimates GDP +2.4% +2% to +3% Industrial Production - 0.7% +2% to +3% Light Vehicle Sales - 2.3% -10% to -1% Housing Starts +5.6% -11% to -8% WTI Crude Oil +0.3% +15% to +6% Source: Source: Global Global Insight Insight Forecast Forecast
Slide 7: Yield Drivers
Yield Drivers Revenue • Price • Mix Improved • Volume Leverage Margin & Return Cost • Productivity • Asset Utilization
Slide 8: Yield Strategy Implementation
Yield Strategy Implementation Margin Optimization Commercial Commercial Network Network Design Design Finance Finance Operations Operations gy Business Team te tra Corridor S eld Product Yi Customer Carload
Slide 9: Long Term Growth Potential
Long Term Growth Potential Market – UP Markets Grow Faster Price – Premium Price for Premium Products – Price Analysis - Move to Market – Rigorous Pricing Review Penetration – Service Reliability / Velocity – New Markets – New Solutions – New Products – Alliances
Slide 10: 2003 Yield Strategy Targets
2003 Yield Strategy Targets Growth Overall Market 1% - 3% Price 1+% Penetration 1+% Total Revenue Growth 3% - 5%
Slide 11: Revenue Growth Potential
Revenue Growth Potential Ag Products Autos Autos Chemicals Energy Industrial Products Intermodal TOTAL GDP 0% 1% 2% 3% 4% 5% 6% 7%
Slide 12: Productivity Drivers
Productivity Drivers • Total Quality Management System • Technology Improvements • Continuous Process Improvements • Improved Asset Utilization
Slide 13: Productivity Drivers: Total Quality Management System
Productivity Drivers Total Quality Management System Tools: Customer Requirements • Six Sigma • Workout Planning • PDCA Improve & Adjust & Control • QSP Employee Business • Customer Satisfaction Development Processes Surveys • Ideaworks Customer Satisfaction Improved Business Results
Slide 14: Productivity Drivers: Technology Improvements
Productivity Drivers Technology Improvements Remote Control Technology Implementation Locations • Major Hump Yards • Flat Switching Yards • Industrial Yards
Slide 15: Productivity Drivers: Process Improvements
Productivity Drivers Process Improvements Terminal Capacity Freight Freight Car Terminal Dwell Hours 28.2 28.2 27.3 27.3 27.2 27.2 Continuous Improvement • Plan Design • Connection Performance 25.7 25.7 • Process Engineering 1999 1999 2000 2000 2001 2001 2002 2002
Slide 16: Productivity Drivers: Improved Asset Utilization, Locomotives
Productivity Drivers Improved Asset Utilization Locomotive Strategy Fuel Efficiency C C Rate Rate (Gallons (Gallons // 000 000 GTMs) GTMs) Fleet Modernization: 1.385 1.388 • Improved Productivity • Fuel Efficiency 1.343 • Maintenance Simplification 1.323 • Advanced Technology 1999 1999 2000 2000 200
Slide 17: Productivity Drivers: Freight Car Utilization
Productivity Drivers Improved Asset Utilization Freight Car Utilization 114,700 114,700 178.5 178.5 108,700 108,700 174.5 174.5 174.0 174.0 96,800 96,800 167.1 167.1 90,900 90,900 Freight Freight Cars Cars 7-Day 7-Day Carloadings Carloadings (000’s) (000’s) 1999 2000 2001 2002
Slide 18: Productivity Drivers: Employee Productivity
Productivity Drivers Improved Asset Utilization Employee Productivity Thousands Thousands Billions Billions 55 55 1,050 1,050 50 50 1,000 1,000 • 5,000+ Decrease - ‘99 to ‘02 • Long-Term Wage Cost 45 45 950 950 Challenges • Intense Focus on 40 40 900 900 Administrative Costs 35 35 850 850 1999 1999
Slide 19: Quality Service
Quality Service Cost of Quality Customer Satisfaction Satisfaction Percent Percent of Revenue Percent Percent Satisfied Low er F f a a c c ttion 15.3 15.3 ailu re C S S a a ttiissf osts o m m eerr 78 78 13.9 u s s t t o 77 77 13.9 h e e Cu rr C Hiigg H h 75 75 12.5 12.5 11.3 72 72 11.3 1999 1999 200
Slide 20: Yield Improvement
Yield Improvement Operating Operating Margin Margin (%) 20.2% Operating Operating Income / GTM (000) 17.5% 17.5% $2.27 $1.99 15.6% 15.6% $1.77 1996* 1999 2000 2001 2002 ** Pro Pro Forma Forma
Slide 21: First Quarter 2003
First Quarter 2003 Opportunities Opportunities Challenges Challenges Revenue Revenue Growth Growth Fuel Fuel Costs Costs Continued Continued Productivity Productivity Gains Gains Severance Severance Costs Costs 60/30 60/30 Railroad Railroad Reform Reform Protection Protection Pay Pay Remote Remote C
Slide 22: Long-Term Outlook
Long-Term Outlook 2003 2003 2004-2006 2004-2006 Revenue Revenue 33 -- 5% 5% 33 -- 5% 5% Rail Rail Operating Operating Ratio Ratio Continued Continued Improvement Improvement to to Mid Mid 70s 70s Rail Rail Operating Operating Margin Margin Continued Continued Improvement Improvement to to Mid Mid 20
Slide 23: Why Union Pacific?
Why Union Pacific? • Best Franchise in North America • Proven Business Model • Growing Free Cash Flow • Increasing Returns
Slide 24: Union Pacific is Committed To Be A Company Where...
Union Pacific is Committed To Be A Company Where…. Customers Want to Do Business Employees Are Proud to Work Shareholder Value is Created
Slide 25: Union Pacific Corporation
Union Pacific Corporation Veen ete Sansa ica oa ae aE ane Ra anh Sh Nila In ly ai ce tae tg “ Se Bere ae cage eee rai gr EIS ate Pet af tL aR be - SEA en TE Sen 2 é RS Rges Tema OT BUILDING AMERICA;
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