Transportation Conference. Jim Young, Chairman and CEO

Transcription

1 Merrill Lynch Global Transportation Conference Jim Young, Chairman and CEO

2 Cautionary Information This presentation and related materials may contain statements about the Corporation s future that are not statements of historical fact. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934 and can be identified d by the inclusion i of forwardlooking terminology, such as outlook, believes, expects, may, should, will, intends, plans, estimates, anticipates, projects, and similar words, derivations or expressions. Forward-looking statements include, without limitation, information or statements regarding: expectations regarding demand for rail transportation services; statements and expectations involving economic conditions; expectations as to operational improvements, including the effectiveness of network management initiatives that have been or will be implemented to improve system velocity, productivity, customer service and shareholder returns; expectations regarding increased returns, cost savings, revenue growth and earnings; expectations ti regarding fuel price; the time by which certain objectives will be achieved; estimates of costs relating to environmental remediation and restoration; proposed new products and services; expectations that claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity; and statements concerning projections, predictions, expectations, estimates or forecasts as to the Corporation s and its subsidiaries business, financial and operational results, and future economic performance; and statements of management s beliefs, expectations, goals and objectives and other similar expressions concerning matters that are not historical facts. Forward-looking statements and information are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements and information and should not be read as a guarantee of future performance or results or accurate indications of when such performance or results will be achieved. Forward-looking statements and information reflect the good faith consideration by management of currently available information, and may be based on underlying assumptions believed to be reasonable under the circumstances. However, such information and assumptions (and, therefore, such forward- looking statements and information) are or may be subject to variables or unknown or unforeseeable events or circumstances over which management has little or no influence or control. These events and uncertainties include the Risk Factors described in the Corporation s Annual Report on Form 10-K for 2007, which was filed with the SEC on February 28, All forward-looking statements and information are qualified by, and should be considered in conjunction with, these Risk Factors. The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q (or such other reports that may be filed with the SEC). Forward-looking statements speak only as of the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements. 2

3 Midwest Flooding Major Network Outages Spine Line / Iowa Branches 5/31 6/16 Intermittent Washouts Boone Sub 6/8 6/11 Intermittent Washouts Duluth Twin Cities Des Moines Omaha Kansas City River Sub 6/13 6/14 High Water Outage Cedar Rapids Cedar Rapids Area 6/10 6/17 High Water Outage Milwaukee St Louis Chicago Twin Cities 6/7 6/14 Intermittent Washouts Chicago Villa Grove Sub 6/4-6/8 Intermittent High Water Outages Iowa East-West Mainline Impacted by Outages for 10 Days Affects Roughly 20+% of UP s Daily Volume Limited Re-Route Capability Embargoes Issued Flow Control Issuing Traffic Permits 3

4 Second Quarter Volume Carloadings Through June 14 Agricultural 12% Automotive Chemicals 1% Energy 4% Industrial -1% Strong Grain Demand -19% Reduced Auto Production Fertilizer Shipments Coal Strength Continued Housing Softness Intermodal -4% TOTAL -1% 4

5 2008 Outlook* 2 nd Quarter: Weather Impact ~ $0.05/share EPS = $0.90 to $0.98 Volume Growth = -2% Full Year: EPS = $3.88 to $4.13 Volume Growth = -1% to +1% *EPS adjusted for 2 for 1 stock split effective May 28,

6 Long-Term Outlook 2008 to % to 8% Freight Revenue CAGR 2% to 3% Volume Growth 5% to 6% Core Pricing Gains 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 6

7 Strong Franchise Opportunities Vancouver Diverse Business Mix Seattle Portland Eastport Duluth Twin Cities Fastest Growing gstates Port Access Oakland Omaha Salt Lake City Denver Kansas City St. Louis Border Crossings Los Angeles Calexico Nogales El Paso Eagle Pass Laredo Port Access Border Crossing Fastest Growing States Memphis Dallas New Orleans Houston Brownsville Agricultural Intermodal Products 19% 17% Autos Industrial 9% 20% Chemicals Energy 15% 20% 2007 Freight Revenue 7

8 Serving Global Markets Diverse Franchise Creates Opportunity Throughout Economic Cycles Hot Export Marketing Driving Growth Whole Grains Fertilizer Coal Freight Revenue First Quarter 2008 Domestic 72% Other Other Exports Imports 11% Mexico Mexico 8% Imports Exports 3% 6% 8

9 America s Transportation Solution Safest Form of Ground Freight Transportation Moves 1 Ton 790 Miles on 1 Gallon of Diesel Reduces Greenhouse Gas Emissions by 67% Congested Highway System Creates Infrastructure Tax on America - $9 Billion Annually 9

10 Project Operating Ratio Project OR Profitable Revenue Growth Organizational Effectiveness Operating Productivity Council 10

11 Legacy Opportunity Total Percent of Revenue Re-priced 74% since % % 3% % 8% Percent of Legacy Revenue Chemicals 8% Autos 10% Intermodal 36% Industrial Products & Agricultural 2% Energy 44% 11

12 Operating Productivity Council Portland Oakland Los Angeles LA Basin Infrastructure Constraints Hinkle Yuma Sunset Tucson El Paso SPRB Red X North Platte San Antonio Ft. Worth Kansas City Chicago Houston Texas Gulf Coast St. Louis Focus Areas Velocity Unified Plan Train Starts Yard/Local Operations Management/TE&Y Locomotive Productivity Fuel Conservation Freight Car Engineering 12

13 Operating Improvement Cycle ce roductiv vity & Pe erforman P Continuous Improvement Unified Plan LEAN Projects Corridor Teams Business Planning Process Predictive Maintenance Introducing New Concepts Fuel Conservation Speeds (FCS) Network Access Guidelines Volume Variability Recoverability Train Flow Management Off Track Maintenance Changing The Game In Train Repairs Communication Based Train Control Innovative Labor Agreements Locomotive / Freight Car Technology Hybrid Locomotives Remote Control Locomotives Electronic Control Pneumatic Braking Development Continuum 13

14 Service Benchmarking Customer Service Ratings Truck Change Leading Rail Union Pacific Other Rails (Average) UP Improving Fast and Closing the Gap Creating Value For All Stakeholders!!! Source: Union Pacific Survey (100 Pt Scale) 14

15 Challenges to Our Growth Economic Impact of Fuel State t and Local Government Concerns Increased Interest in Passenger Rail Not in My Back Yard Attitude to Rail Expansion Increased Rail Regulation Carbon Emissions 15

16 Building a Record of Success Operating Income $2.9B $3.4B First Qtr $788M Earnings per Share* Velocity (MPH) Customer Satisfaction $2.96 $3.46 $ = Former or Current Best Ever *EPS adjusted for 2 for 1 stock split effective May 28,

17 Question & Answer Session