Union Pacific Corporation · NYSE:UNP
Union Pacific — Q2 2009 Earnings Presentation
37 slides from Union Pacific's earnings presentation, Jul 23, 2009
Slide 1: Second Quarter Earnings Release
Second Quarter Earnings Release July 23, 2009 Jim Young, Chairman and CEO 1
Slide 2: Second Quarter 2009 Results
Second Quarter 2009 Results • Reported EPS = $0.92 – Includes $0.14 from RTD land sale • Record Operating Ratio • Quarterly Safety “Bests” • Continued Service Excellence • Strong Cash Position & Solid Balance Sheet 2
Slide 3: Second Quarter Marketing & Sales Review
Second Quarter Marketing & Sales Review July 23, 2009 Jack Koraleski, Executive VP – Marketing & Sales 3
Slide 4: 2009 Volume Drivers
2009 Volume Drivers Selected Market Indicators • Agricultural Sector – Corn & soybean export sales -13% (’08/’09 Crop YTD) – Livestock sector prices -13 to -25% (June YTD) • Consumer Spending – U.S. light vehicle sales -35% (June YTD) – West Coast port volumes -20% (June YTD) • Manufacturing & Const
Slide 5: Second Quarter Volume
Second Quarter Volume (In Thousands) 2,371 (155) (91) (83) +12 (78) 1,852 (71) (53) 2008 International Coal Autos Construction Other Chemicals Domestic 2009 Intermodal Products Intermodal 5
Slide 6: Agricultural
Agricultural Second Quarter 2009 Quarterly Results Export Whole Grain* • $618M, -21% -46% 40.8 • -14% Carloadings 22.1 • $3,045 ARC, -8% Quarterly Drivers 2008 2009 • Slowdown in Grain Exports Domestic Whole Grain* • Decline in Domestic Animal Feeding -17% 53.0 • Reduction in Soybean 43.9 Crush 2008
Slide 7: Autos
Autos Second Quarter 2009 Finished Vehicles* Quarterly Results -49% 105.2 • $163M, -54% 53.2 • -47% Carloadings • $1,755 ARC, -12% 2009 2008 Quarterly Drivers Vehicle Parts* • Auto Plant Shutdowns -44% 70.6 • Vehicle Production -48% in Second Quarter 39.4 2008 2009 *Volume in (000s) of carloads 7
Slide 8: Chemicals
Chemicals Second Quarter 2009 Fertilizer* Quarterly Results -43% 35.3 • $499M, -24% 20.0 • -22% Carloadings • $2,659 ARC, -2% 2008 2009 Quarterly Drivers Liquid & Dry* • Weak Demand Across 61.7 -23% Major Market Segments 47.6 2008 2009 *Volume in (000s) of carloads 8
Slide 9: Energy
Energy Second Quarter 2009 SPRB Tonnage* Quarterly Results 47.6 -14% • $715M, -22% 40.9 • -16% Carloadings • $1,520 ARC, -7% 2009 2008 Quarterly Drivers CO/UT Tonnage* • Decreased Electrical 11.0 -35% Production 7.1 • SPRB Contract Losses • CO/UT Production Issues – Loaded 366 Fewer CO/UT 2008 2009
Slide 10: Industrial Products
Industrial Products Second Quarter 2009 Steel & Scrap* Quarterly Results -60% 62.5 • $531M, -39% 24.8 • -34% Carloadings • $2,319 ARC, -9% 2008 2009 Quarterly Drivers Lumber & Building • Sharp Downturn in Steel Materials* Market 37.1 -41% • Continued Softness in 21.9 Housing & Construction • High In
Slide 11: Intermodal
Intermodal Second Quarter 2009 International Volume* Quarterly Results -30% 524.9 • $595M, -23% 369.8 • -18% Carloadings • $889 ARC, -6% 2008 2009 Quarterly Drivers Domestic Volume* • Weak Import Volumes +4% 287.1 299.4 • Service-Driven Product Offerings 2008 2009 *Volume in (000s) of units 11
Slide 12: Looking Ahead
Looking Ahead Second Half Volume Second Half Opportunities • Agricultural 7-Day Carloads – Fall grain harvests (000s) – Ethanol 200 2007 • Autos – Record low inventories 180 – “Cash for Clunkers” 2008 • Chemicals 160 – Fertilizer? • Energy – Summer coal burn 140 2009 • Industrial Products – Uptick i
Slide 13: Customer Satisfaction Index
Customer Satisfaction Index Good 87 87 79 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2007 2008 2009 13
Slide 14: Second Quarter Operating Review
Second Quarter Operating Review July 23, 2009 Dennis Duffy, Executive VP – Operations 14
Slide 15: 2009 Safety & Service
2009 Safety & Service Second Quarter AAR Velocity Freight Car Utilization Good Cycle Days Good MPH 27.4 10.5 21.2 8.6 2006 2007 2008 2009 2006 2007 2008 2009 AAR Terminal Dwell Service Delivery Index* Good Good Hours 93 27.6 24.5 68 2006 2007 2008 2009 2006 2007 2008 2009 * Includes early deliveries
Slide 16: 2009 Productivity
2009 Productivity Second Quarter Recrew Rate Good 9.4% • Improved Train Crew 3.8% Productivity – Reduced crew expenses 2006 2007 2008 2009 • Record Fuel Efficiency Fuel Consumption Rate • Increased Network Gallons/(000) GTM Good 1.27 Fluidity 1.14 2006 2007 2008 2009 16
Slide 17: Aligning Working Resources
Aligning Working Resources Second Quarter Average -22% GTMs (millions) • April/May “Peak” Levels – 5,300 TE&Y furloughs -25% Train Starts (000s) – 2,100 locomotives stored Average TE&Y – 71,000 freight cars parked -22% Employees • Current Reduction Levels -27% Road – 4,400 TE&Y furloughs Locomotives
Slide 18: Volume Variability with Service Gains
Volume Variability with Service Gains Second Quarter Manifest SDI* Good Portland 91 65 Chicago Chicago Oakland Denver 2006 2007 2008 2009 Kansas St. Louis City St Louis Los Angeles Industry Spot and Pull Ft. Worth % Good San 97 Antonio Houston 88 Reduced Yard Operations 2006 2007 2008 2009 * Include
Slide 19: 2009 Capital Investments
2009 Capital Investments Update ~ $2.6 Billion Capital Plan* ~ In Millions • Replacement / Renewal Programs Engineering – Safety Replacement $1,700 – Service – Throughput Capacity/ Commercial Facilities • Productivity $400 • Engineering Maintenance Locomotives/ Equipment $400 – Slow order miles down
Slide 20: 2009 Operating Initiatives
2009 Operating Initiatives • Ongoing Safety Commitment • Volume Variability with Excellent Service • Summer Capital Programs – Productivity improvement • Well Positioned for Upside Leverage 20
Slide 21: Second Quarter Financial Review
Second Quarter Financial Review July 23, 2009 Rob Knight, CFO 21
Slide 22: Income Statement Summary
Income Statement Summary Second Quarter – In Millions 2009 2008 % Operating Revenues Freight Revenues $ 3,121 $ 4,349 (28) Other Revenues 182 219 (17) Total Operating Revenues 3,303 4,568 (28) Operating Expenses Compensation and Benefits 976 1,101 (11) Purchased Services & Materials 391 494 (21) Fue
Slide 23: Freight Revenue Drivers
Freight Revenue Drivers Average Revenue Per Car • $3.1 B Freight Revenue – 28% decline on 22% lower $1,931 carloadings $1,891 $1,835 • ARC Declined 8% $1,755 $1,738 – Customers benefit from $1,685 lower diesel fuel prices – $500M less fuel surcharge revenue • Pricing Gains Consistent with Outlook Q1
Slide 24: Compensation & Benefits
Compensation & Benefits Second Quarter – In Millions -11% • 10% Workforce Reduction $1,101 – Labor productivity $976 – 22% fewer GTMs • Wage & Benefit Inflation • July 1st Union Wage Increase = 4.5% 2008 2009 24
Slide 25: Purchased Services & Materials
Purchased Services & Materials Second Quarter – In Millions $494 -21% • Decreased Contract Service Expense $391 • Reduced Crew Transportation & Lodging • Fewer Locomotive Repairs & Materials 2008 2009 25
Slide 26: Fuel Surcharge Lag Impact
Fuel Surcharge Lag Impact Quarterly EPS Impact Actual and Estimated Price/ Gallon $4.00 $3.00 $2.00 $1.00 $0.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2008 2008 2008 2009 2009 2009 2009 Negative Lag Impact Fuel Price – Actual/Estimated Positive Lag Impact Fuel Price – Lagged 2 months 26
Slide 27: Volume & Efficiency Savings
Volume & Efficiency Savings Second Quarter Gross Ton-Miles (In Billions) 257 201 • 22% Decline in Gross Ton- Miles – $234M savings 2008 2009 • Fuel Efficiency Fuel Consumption – Fuel consumption rate Gallons (in millions) improved 6% 313 229 – $65M savings 2008 2009 27
Slide 28: Equipment and Other Rents
Equipment and Other Rents Second Quarter – In Millions -9% • Volume Savings $338 $307 – Industrial Products & Intermodal • Improved Asset Utilization • Fewer Leased Assets 2008 2009 28
Slide 29: Other
Other Second Quarter – In Millions -23% $199 • $38M Year-Over-Year Casualty Expense $153 Reduction • Lower Utility Costs • Higher Property Taxes • Increased Provision for Bad Debts 2008 2009 29
Slide 30: Expense Variability
Expense Variability Second Quarter Revenue Carloads Volume Variability (000s) -22% 2,371 ~ ~ 70% 1,852 55% 2008 2009 Q1 Q2 2009 30
Slide 31: Second Quarter Operating Ratio
Second Quarter Operating Ratio (%) • Volume Variability 81.7 80.5 79.6 – Cost reductions 77.3 – Efficiency gains • Lower Fuel Prices • Price Increases 2006 2007 2008 2009 31
Slide 32: Full Income Statement
Full Income Statement Second Quarter – In Millions (Except EPS) 2009 2008 % Operating Revenues $ 3,303 $ 4,568 (28) Operating Expenses 2,552 3,637 (30) Operating Income 751 931 (19) Other Income – Net 135 19 F Interest Expense (150) (128) 17 Income Before Income Taxes 736 822 (10) Income Tax Expense
Slide 33: Balance Sheet Strength
Balance Sheet Strength Second Quarter – In Millions Cash Balance $1,656 $611 • Maintaining Strong Cash Position 2008 2009 • Moderately Increased Year- Over-Year Debt Total Debt* $14,845 $12,731 45.0% 48.1% *Lease Adjusted Total Debt 2008 2009 Lease Adjusted Debt to Capital * See Union Pacific Web si
Slide 34: Second Half Drivers
Second Half Drivers 7-Day Carloads (000s) 200 • Volume Levels 2007 • Fuel 180 2008 • Continued Profitability 160 Improvements 140 2009 120 100 Jan June Dec July MTD, not a full month estimate 34
Slide 35: Second Quarter Earnings Release
Second Quarter Earnings Release July 23, 2009 Jim Young, Chairman and CEO 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, future operating and safety performance,
Slide 37: Q&A Session
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