Union Pacific Corporation · NYSE:UNP
Union Pacific — Q4 2002 Earnings Presentation
28 slides from Union Pacific's earnings presentation, January 2003
Slide 1: Dick Davidson, Chairman & CEO
Dick Davidson Chairman Chairman & & Chief Chief Executive Executive Officer Officer Union Union Pacific Pacific Corporation Corporation
Slide 2: Earnings per Share
Earnings per Share Union Pacific Corporation +33% $1.41 VTA VTA Land Land Sale Sale & & Tax Tax Adjustments Adjustments $1.06 +4% $1.10 Q4 2001 Q4 2002
Slide 3: Earnings per Share
Earnings per Share Union Pacific Corporation Reported EPS Core EPS +34% $5.05 +14% $4.30* $3.77 $3.77 **Excludes: Excludes: UTA UTA Land Land Sale Sale VTA VTA Land Land Sale Sale Tax Tax Adjustments Adjustments 2001 2002 2001 2002
Slide 4: Operating Margin
Operating Margin Rail & Other Operations 20.2% 18.6% 18.3% 17.5% 1999 2000 2001 2002
Slide 5: Record 2002 Performance
Record 2002 Performance 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 Gro
Slide 6: Jim Young, EVP Finance & CFO
Jim Young Executive Executive Vice Vice President President of of Finance Finance & & CFO CFO Union Union Pacific Pacific Corporation Corporation
Slide 7: Fourth Quarter Breakdown
Fourth Quarter Breakdown Union Pacific Corporation Vs EPS 2001 4th Quarter - As Reported $1.41 + 33 % VTA Land Sale ($0.16) Tax Adjustments ($0.15) 4th Quarter - Core EPS $1.10 + 4%
Slide 8: Other Income
Other Income Union Pacific Corporation 4th Quarter Full Year (Pre-Tax (Pre-Tax in in Millions) Millions) (Pre-Tax (Pre-Tax in in Millions) Millions) $108 $325 UTA & VTA Sale VTA Sale $73 $214 $162 $35 $111 $26 $60 2001 2002 2001 2002 2003 Est
Slide 9: Fuel Outlook
Fuel Outlook Rail & Other Operations Price per Gallon 90¢ 95¢ Crude Oil Futures Volatility 61¢ • 1st Half Avg - $30+ per Barrel • 2nd Half Avg - Mid $20’s per Barrel 7% Hedged at 72¢ in 2003 1st 1st Qtr Qtr January January February February 2002 2002 2003 2003 Est Est
Slide 10: Operating Margin
Operating Margin Rail & Other Operations Full Year 4th Quarter 21.3% 20.2% 20.3% ILWU ILWU 19.9% Impact Impact 18.6% 2001 2002 2001 2002
Slide 11: Cash Flow Generation
Cash Flow Generation Union Pacific Corporation - Year-to-Date ($ ($ Millions) Millions) 2002 2001 Change Cash From Operations - Before Pension $ 2,475 $ 1,992 $483 Cash Capital (1,887) (1,736) 151 Real Estate Sales & Other 366 192 174 Dividends Paid (201) (198) 3 Free Free Cash Cash Flow Flow -- Bef
Slide 12: Pension Update
Pension Update Union Pacific Corporation Voluntary Cash Contributions • $225 Million in 2002 • Future Annual Cash Payments Approximate Service Costs –– Estimated Estimated +/-$75 +/-$75 Million Million Funding Status • 97% of ERISA Requirement Equity Adjustment • $225 Million After-Tax (< 2% of Tota
Slide 13: Balance Sheet Improvement
Balance Sheet Improvement Union Pacific Corporation Debt-to-Capital Coverage 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 42.6 17.3 17.3 Interest Interest Coverage Coverage W
Slide 14: Ike Evans, President & COO
Ike Evans President President & & Chief Chief Operating Operating Officer Officer Union Union Pacific Pacific Railroad Railroad
Slide 15: Commodity Revenue
Commodity Revenue 2002 Vs 2001 Fourth Quarter Full Year Automotive +10% +8% Agricultural +8% +4% Industrial +7% +3% Chemicals +3% +2% Intermodal -2% +5% Energy -3% -2% Total +3% +3%
Slide 16: Revenue & Operating Highlights
Revenue & Operating Highlights Automotive • Record Breaking Year Industrial Products, Ag Products & Intermodal • Positive Pricing • Truck Competitive Service Service Efficiency • GTM’s Increased 4% • 86 More Tons per Train • 1% Improvement in Locomotive Fuel Efficiency • Freight Car Terminal Dwell T
Slide 17: Railroad Productivity
Railroad Productivity GTMs (Millions)/ Employee Fourth Quarter Trend Annual Trend +5% +5% 5.5 22 22 +10% +10% 5.2 18 18 G GRR CCAA 4.7 14 77% % 14 10 10 66 84 84 86 86 88 88 90 90 92 92 94 94 96 96 98 98 00 00 02 02 2000 2000 2001 2001 2002 2002
Slide 18: Employee Trends
Employee Trends Continued 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 2000 2000 2001 2001 2002 2002 2
Slide 19: Quality Service Costs Less
Quality Service Costs Less Reduced Failure Costs Improved Service Cost Cost of of Quality Quality -- % % of of Revenue Revenue AAllll--T Tiim mee 15.3 ““B e Bessttss”” 15.3 13.9 13.9 Customer Satisfaction 78% 78% 12.5 12.5 73% 73% 11.3 11.3 Service Delivery Index 1999 1999 2000 2000 2001 2001 2002 2
Slide 20: 2003 Yield Strategy Targets
2003 Yield Strategy Targets Growth Overall Market 1% - 3% Price 1+% Penetration 1+% Total Revenue Growth 3% - 5%
Slide 21: Changing the Game. . .
Changing the Game. . . CP • Franchise • Alliances • Customer & Service Focus • Business Development
Slide 22: Dick Davidson, Chairman & CEO
Dick Davidson Chairman Chairman & & Chief Chief Executive Executive Officer Officer Union Union Pacific Pacific Corporation Corporation
Slide 23: 2003 Economic Outlook
2003 Economic Outlook Base Case Pessimistic GDP +3.1% + 2.4% Industrial Production +2.9% + 2.1% Light Vehicle Sales - 1.2% - 9.6% Housing Starts - 7.7% -11.2% Source: Source: Global Global Insight Insight Forecast Forecast
Slide 24: First Quarter 2003
First Quarter 2003 • Revenue Growth - Railroad 2% - 4% - Overnite 7% - 9% • Continued Productivity Gains • Cost Challenges - Protection Pay - Insurance - Pension -- Severance • Fuel Prices ? • Potential $0.15 - $0.20 EPS Shortfall Vs 2002
Slide 25: 2003 Performance Targets
2003 Performance Targets Revenue Revenue 3% 3% -- 5% 5% Rail Rail Operating Operating Ratio Ratio Continued Continued Improvement Improvement Rail Rail Operating Operating Margin Margin Continued Continued Improvement Improvement EPS EPS -- Core Core 5% 5% -- 10% 10% Growth Growth Capital Capital Sp
Slide 26: 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 27: 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 28: Union Pacific Corporation
Union Pacific Corporation \=-BUILDING AMERICA’ eahnt ig o*