Jim Young_ President _ CEO by zhouwenjuan

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									January 25, 2007

Jim Young, President & CEO
Fourth Quarter Results
Diluted Earnings per Share   Operating Income
                             In Millions       + 52%
            + 62%                                      $810
                    $1.78



                                  $533


    $1.10




    2005            2006          2005                 2006



                                           2
Fourth Quarter Highlights

• 6 Point Operating Ratio
  Improvement to 79.6%
• Record Coal Tonnage
  – SPRB Tonnage +14%
• Record Quarterly Operating
  Revenue
• Operating Improvement




                               3
2006 Recap
 Net Income                                      Return On Invested Capital
  In Millions
                      + 77%
                              $1,606                                  + 2.5 pts
                                                                                  8.2%


                                                      6.4%
                                                                   5.7%

    $1,026
                  $908




 Reported Adjusted*            2006               Reported Adjusted*              2006
   2005     2005                                    2005     2005
* See Union Pacific web site under Investor Relations for a reconciliation to GAAP.


                                                                       4
Fourth Quarter Earnings Release




January 25, 2007

Jim Young, President & CEO
  Fourth Quarter Marketing & Sales Review




January 25, 2007

Jack Koraleski, Executive VP – Marketing & Sales
Commodity Highlights
   Fourth Quarter                        2006 Full Year Records
        Volume (000)
                                    • Volume, Up 3%
    2,419     1%           2,440
                                      – Record Year in Automotive,
                                        Energy & Intermodal

  4Q-2005                 4Q-2006
  Average Revenue Per Car           • Average Revenue per Car, Up 11%
                           1,547
                                      – Record Year in Every Business
    1,428     8%
                                        Group Except Automotive


  4Q-2005
    Commodity Revenue
                          4Q-2006   • Revenue, Up 15% to $14.9 Billion
            In Millions
                           3,775      – Record Year in Every Business
               9%
    3,455                               Group


  4Q-2005                 4Q-2006


                                                      7
Mexico

                                                                                                     Revenue Growth
                                                                                                       ($ Millions)
                                                                                                                        $1,372




                                                                                                                 %
                                                                                                               23
                                                                                                               $1,112
Calexico
           Nogales
                               El Paso                                                                 $974
              Hermosillo               Eagle Pass                                             $893
                            Chihuahua
                                       Monclova
                                                        Laredo
                             Torreón                             Brownsville                  2003      2004   2005      2006
                                         Saltillo    Monterrey
                       Culiacán

                                                    San
                                                    Luis
                                                    Potosí
                      Aguascalientes
                                                                 Tampico
                                                     Querétaro                       Mérida
                           Guadalajara
                                                                      Veracruz
                                              Mexico                      Coatzacoalcos
                              Manzanillo      City           Puebla

                                 Lázaro
                                 Cárdenas
                                                                                                8
                                                                           Salina Cruz
Agricultural Products

                                  Fourth Quarter
                         •   $670 MM Revenue: +20%
     Revenue Mix
                         •   Volume: +4%
                         •   Average Revenue Per Car: +15%
      Food/
      Refrig.   Whole
       21%      Grains
                 38%
                                Quarterly Drivers
        Grain            •   Demand for Ethanol, DDGS &
      Products               Export Feed Grains
        41%
                         •   Mexico Markets: Strength in Feed
                             Grains, Import Beer, Meals and
                             DDGS




                                        9
Automotive

                                  Fourth Quarter
                         •   $359 MM Revenue: +2%
     Revenue Mix
                         •   Volume: Flat

      Auto               •   Average Revenue Per Car: +2%
      Parts
      20%
                                Quarterly Drivers
              Finished
              Vehicles   •   Finished Vehicle Shipments
                80%          Declined 5%
                         •   Automobile Parts Up 10%




                                       10
Chemicals

                                          Fourth Quarter
                                 •   $520 MM Revenue: +9%
       Revenue Mix
                                 •   Volume: -1%

                Petro &          •   Average Revenue Per Car: +11%
       Plastics Other
         20%     18%
                    Fertilizer          Quarterly Drivers
   Liquid & Dry       17%
    Chemicals                    •   Weak Fall Fertilizer Season
       25%     Soda Ash          •   Slowdown in Construction
                  20%
                                     Impacts Chemical Feedstocks




                                               11
Energy

                                Fourth Quarter
                        •   $757 MM Revenue: +20%
    Revenue Mix
                        •   Volume: +10%
                        •   Average Revenue Per Car: +9%
            CO/UT
             24%
                    Other      Quarterly Drivers
                     8% •   SPRB Tonnage Up 14%, Setting
         SPRB
          68%               New All-Time Record
                        •   CO/UT Volumes Up 3%




                                     12
 Industrial Products

                                             Fourth Quarter
                                    •   $744 MM Revenue: Flat
            Revenue Mix
Consumer/                           •   Volume: -11%
  Gov’t/
Waste 12%      Paper                •   Average Revenue Per Car: +12%
                15%    Steel
                       19%

                           Lumber          Quarterly Drivers
         Non-               22%
        Ferrous                     •   Significant Downturn in Lumber &
         15%                            Panel Products
                                    •   Slowdown in Construction Market
                                        Also Impacting Stone & Roofing
            Construction                Granules
             Products               •   Shedding Low Margin Paper &
               17%                      Newsprint Business



                                                  13
Intermodal

                                          Fourth Quarter
                                 •   $724 MM Revenue: +4%
     Revenue Mix
                                 •   Volume: Flat
                                 •   Average Revenue Per Unit: +4%
       International
            57%
                                        Quarterly Drivers
     Domestic                    •   Strength in Imports
       36%
                                 •   Softer Domestic Demand

                       Premium
                          7%




                                               14
Customer Satisfaction Index
                                                    Good



                                                                75
                                          74

            70             69
                                                      67
                                66
                 63
  60




       Q1             Q2             Q3                    Q4
  2005
  2006


                                               15
Commodity Outlook
         Revenue
        ($ Billions)
                              +6-7%

                       14.9                    Key Drivers
                                      • Volume: 2-3%
                                      • Significant Volume Growth in
              13.0                      Only Intermodal and Energy
                                      • Yield Gains
       11.7
11.0                                  • Revenue Growth in All Groups


2003   2004   2005     2006   2007




                                                  16
Fourth Quarter Operating Review




January 25, 2007

Dennis Duffy, Executive VP - Operations
Safety - Incidents & Reportables
Full Year Ended December 31
  Employee                               Rail Equipment
  Per 200,000 Work Hours          Good   Per Million Train Miles           Good


   3.19       3.16
                                         19.42
                           2.68                        17.16
                                                                   13.98
              1.86
   1.75

                           1.69
                                          4.80          4.57        4.19



   2004       2005         2006           2004         2005        2006

                           Incidents         Reportables

                                                        18
Network Performance Update                                             Q4-2005
2006
   Avg. 7-Day Carloadings                       AAR Velocity              Good
                   (000)                                  MPH
                                  Good
                                                                         22.0
           194             194
                                  192    21.3                   21.3
                                  190             21.2
  187                                                                   20.5



  Q1        Q2             Q3     Q4      Q1       Q2           Q3       Q4


       AAR Terminal Dwell         Good          Industry Spot/Pull
  29.0
                  Hours           29.8                   Percentage
                                                                          Good
           27.6                                                          90
                                                                89
                           26.2   25.9            88
                                         87
                                                                         82


   Q1       Q2             Q3     Q4      Q1       Q2           Q3       Q4



                                                         19
Productivity Update                                                    Q4-2005
2006

       Freight Car Utilization                   AAR Inventory             Good
                    Days          Good                      (000)
                                          328
  11.0                            11.2                 325                       326

             10.5          10.4
                                  10.0                               320

                                                                             314


  Q1          Q2            Q3    Q4      Q1           Q2            Q3          Q4


   Train Plan Compliance                  Fuel Consumption Rate
              Percentage           Good          Gallons per Thousand GTMs Good

                                   97     1.31                                   1.30
                             95
   92         93                                      1.27                       1.27
                                   90                               1.26




   Q1         Q2            Q3    Q4      Q1           Q2            Q3          Q4


                                                       20
2006 Record Production
Southern Powder River Basin Coal
  Trains Per Day

          35.5                  35.6
                  35.0   35.0


  32.8



  2005    Q1      Q2     Q3     Q4
Cars Per Train                          Coal Tonnage
                                         In Millions
                                128.3                                        49.6
                  127.9 127.9                                         48.6
                                                   47.8        48.0
  127.3   127.3

                                           44.8


   2005    Q1      Q2     Q3     Q4        2005    Q1          Q2     Q3     Q4


                                                          21
  2007 Capital Spending                                                 2006 Progress
  Key Infrastructure Investments                                        •      Sunset Double Track
                                                                        •      Iowa Signal Project
                                                                        •      Joint Line 3rd Main
                                                                               Track
                                                              Chicago   •      San Antonio
                                        North Platte
                       Salt Lake                                        2007 Highlights
                       City
                                       Denver
                                                                        •      Sunset Corridor
                                                         Kansas
                                                         City      St. Louis    – Double Track
                                                                                – Terminals
              Yuma
Los Angeles
                                                Ft.                             – Texas & Pacific Route to
                                                Worth
                                   El Paso
                                                                                  Southeast
                     Tucson                                Shreveport
                                                                                – San Antonio Intermodal
       Terminal                                                                   Terminal
                                             San
       Improvements                          Antonio    Angleton
                                                                        •      Central Corridor
       Corridor
       Improvements                                                             – Joint Line
                                                                                – Complete Iowa Signaling

                                                                               22
2007 Operating Areas Of Focus

• Safety
  – Employee, Customer, Public

• Continued Service Improvements
• Resource Productivity            • Customer Service
  – Unit Costs                     • Asset Utilization
  – Failure Cost Reduction
                                   • Financial
  – Train Size                       Performance
• Network Throughput
  – Unified Plan & CIMS
  – Inventory Management
  – Capital Effectiveness



                                   23
Fourth Quarter Financial Review




January 25, 2007

Rob Knight, CFO
Income Statement Summary
Fourth Quarter – In Millions


                                2006     2005     Pct Chg
Operating Revenues              $3,962   $3,621      + 9%

Operating Expenses
 Salaries and Benefits           1,169    1,108      + 6
 Fuel and Utilities                705      753      - 6
 Equipment and Other Rents         346      353      - 2
 Depreciation                      315      300      + 5
 Materials and Supplies            171      143      + 20
 Purchased Services and Other      446      431      + 3
   Total Operating Expenses      3,152    3,088      + 2

Operating Income                $ 810    $ 533       +52



                                          25
Commodity Revenue Growth
Fourth Quarter - In Millions



                                            +6%        $3,775

                                +2%                             +9%
                   +1%
      $3,455




     2005         Volume         Fuel     Price/Mix     2006
                               Recovery


                                                  26
Salaries & Benefits
Fourth Quarter – In Millions




             + $61      $1,169   • Wage Inflation
  $1,108                         • Larger Workforce
                                 • Volume Costs
                                 • 2007 Outlook
                                    – Workforce Level Flat with 2006
                                    – Productivity
                                    – Wage Inflation
   2005     Change      2006




                                             27
Fuel & Utilities
Fourth Quarter


 Fourth Quarter Fuel Price
 Dollars Per Gallon

  $2.08
                      $1.94
                              • Moderating Fuel Prices
                              • Full Year Recovery = 90%
                              • 2007 Outlook
                                 – Full Year Planning Assumption =
                                   $2.00/gallon
                                 – January Average   ~ $1.85/gallon
                                                     ~
                                 – Continue Recovery Improvement
  2005                2006




                                                28
Equipment & Other Rents
Fourth Quarter – In Millions




   $353       - $7
                        $346
                               • Improved Car Cycle Times
                               • Lower Car Hire Payments




   2005     Change      2006




                                           29
Materials & Supplies
Fourth Quarter – In Millions




             + $28       $171
                                • Inflation
   $143
                                • Increased Program
                                  Maintenance
                                • Category Shift from
                                  Purchased Services & Other


   2005     Change      2006




                                              30
Purchased Services & Other
Fourth Quarter – In Millions


             + $15       $446

    $431
                                • 2005 West Coast Storm
                                  Settlement
                                • Increased Casualty
                                  Expense
                                • Expense Shift to Materials
                                  & Supplies

   2005     Change      2006




                                            31
Operating Ratio Improvement
  90.1%




                  86.0%           86.1%
                                                  85.3%

          83.7%

                          81.7%
                                          81.1%

                                                          79.6%



     Q1               Q2              Q3              Q4
  2005
  2006


                                             32
Income Statement
Fourth Quarter – In Millions


 ($ Millions Except EPS)         2006        2005      Pct Chg
Operating Revenues             $ 3,962     $ 3,621        + 9%
Operating Expenses               3,152       3,088        + 2
Operating Income                   810         533        + 52
Other Income – Net                  57          54        + 6
Interest Expense                  (118 )      (120 )      - 2
Income Before Income Taxes         749         467        + 60
Income Tax Expense                (264 )      (171 )      +54
Net Income                     $ 485       $ 296          + 64
Diluted EPS                    $ 1.78      $ 1.10         + 62




                                              33
  Income Statement
  Full Year – In Millions

                                                               Adjusted*
     ($ Millions Except EPS)                       2006            2005               Pct Chg
  Operating Revenues                            $ 15,578           $13,578               + 15%
  Operating Expenses                              12,694            11,783               + 8
  Operating Income                                 2,884             1,795               + 61
  Other Income – Net                                 118               145               - 19
  Interest Expense                                  (477)             (504 )             - 5
  Income Before Income Taxes                       2,525             1,436               + 76
  Income Tax Expense                                (919)             (528 )                U
  Net Income                                    $ 1,606            $ 908                 + 77
  Diluted EPS                                   $ 5.91             $ 3.41                + 73

                                                                                U = Unfavorable
* See Union Pacific web site under Investor Relations for a reconciliation to GAAP.


                                                                         34
Capital Spending
In Millions
                                                 $3,200 +/-
                  $2,863
                                   $2,729



                  $2,169           $2,242




                  2005             2006            2007
         Cash Capital & Capital Leases
         Long-Term & Flexible Operating Leases


                                                      35
Free Cash Flow*
After Dividends – In Millions
                                 $516
                                                 2006 Recap
                                                 •   $150M Voluntary Pension
                                                     Contributions
                                                 •   Increased Cash Taxes
                                                 •   Cash Capital
        $234
                                                 2007 Outlook
                                                 •   Growing Cash from Operations


        2005                     2006


* See Union Pacific web site under Investor Relations for a reconciliation to GAAP.


                                                                      36
Increasing Returns
Balance Sheet Strength
Lease Adjusted Debt to Cap*                        Lease Adjusted Debt / EBITDA*
Percentage

51.7



                                                                            3.6x
          44.8       45.1                                                             3.1x
                               43.6                  3.1x
                                                                2.9x

                                         40.3                                                2.3x




 2002      2003     2004      2005       2006        2002      2003         2004      2005   2006


* See Union Pacific web site under Investor Relations for a reconciliation to GAAP.


                                                                       37
2007 Outlook

Full Year
• Revenue Growth = 6 to 7%
• Operating Ratio below 80
• EPS Growth = 10 to 15%
• ROIC Improvement


1st Quarter 2007 Outlook:
• EPS = $1.25 to $1.35




                             38
Fourth Quarter Earnings Release




January 25, 2007

Jim Young, President & CEO
Cautionary Information
This press release and related materials contain statements about the Corporation’s future that are not statements of historical fact, including
statements regarding future operational and financial improvements and views regarding economic indicators and the Corporation’s outlook
regarding future performance and financial results. These statements are, or will be, forward-looking statements as defined by the Securities
Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements also include, without limitation, information or statements
regarding: expectations as to continued or increasing demand for rail transportation services; expectations regarding operational
improvements, including the effectiveness of network management initiatives that have been or will be implemented to improve operations,
customer service, and shareholder returns; expectations as to increased returns, cost savings, revenue growth, and earnings; expectations
regarding fuel price and our ability to mitigate fuel costs; the time by which certain objectives will be achieved, including expected
improvements in operations and implementation of network management initiatives; 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; 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 should not be read as a guarantee of future performance or results, and will not necessarily be accurate
indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations
regarding operational and financial improvements and the Corporation’s future performance or results are subject to risks and uncertainties
that could cause actual performance or results to differ materially from those expressed in the statement.

Important factors that could affect the Corporation’s and its subsidiaries’ future results and could cause those results or other outcomes to
differ materially from those expressed or implied in the forward-looking statements include, but are not limited to: whether the Corporation and
its subsidiaries are fully successful in implementing their financial and operational initiatives, including those plans and management initiatives
to improve system velocity and network performance or otherwise improve operations; the outcome of claims and litigation, environmental
contamination, personal injuries, and occupational illnesses arising from hearing loss, repetitive motion and exposure to asbestos and diesel
fumes; the impact of a rail accident involving the release of hazardous materials, which we are required to transport under federal law;
legislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail industry; changes in labor costs,
labor stoppages, and the availability of qualified personnel required for our operations; the impact of ongoing track maintenance, upgrades,
and restoration work being performed in the Southern Powder River Basin of Wyoming; natural events such as severe weather, fire, floods,
hurricanes and earthquakes; changes in fuel prices or changes to our ability to recover fuel costs, including any changes resulting from
regulatory or legislative activities; adverse economic conditions affecting customer demand and the industries and geographic areas that
produce and consume the commodities we carry; industry competition, conditions, performance and consolidation; legislative, regulatory and
legal developments involving taxation, including enactment of new federal or state income tax rates, revisions of controlling authority and the
outcome of tax claims and litigation; changes in securities and capital markets; the effects of adverse general economic conditions, both
within the United States and globally; any adverse economic or operational repercussions from terrorist activities and any governmental
response thereto; and war or risk of war. More information regarding risk factors and other cautionary information are available in the
Corporation’s Annual Report on Form 10-K for 2005, which was filed with the SEC on February 24, 2006. The Corporation updates
information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q and its subsequent Annual
Reports on Form 10-K (or such other reports that may be filed with the SEC).

Forward-looking statements speak only as of, and are based only upon information available on, 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. References
to our Web site are provided for convenience and, therefore, information on or available through the website is not, and should not be
deemed to be, incorporated by reference herein.

								
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