First Quarter Earnings Release

Transcription

1 First Quarter Earnings Release April 19, 2007 Jim Young, Chairman and CEO

2 First Quarter Results Diluted Earnings per Share Operating Income In Millions + 23% $ % $719 $1.15 $

3 First Quarter Summary Record Operating Revenue Lower Carloadings Economic Drivers Weather Impact on Coal Loads Difficult Operating Environment Improved Recoverability Operating Ratio and Efficiency Improvements Customer Service Value 3

4 First Quarter Marketing & Sales Review April 19, 2007 Jack Koraleski, Executive VP Marketing & Sales

5 First Quarter Overview Volume (000) 2,393 2% 2,334 Revenue 1Q06 Average Revenue Per Car $1,481 1Q06 6% Commodity Revenue In Millions $3,543 3% 1Q07 $1,565 1Q07 $3,652 Record Quarter: Chemicals Record First Quarter: Ag Products, Energy & Intermodal Average Revenue Per Car Record Quarter: Automotive, Chemicals, Energy & Industrial Products Record First Quarter: Ag Products & Intermodal Year-over-Year Improvement In Customer Satisfaction 1Q06 1Q07 5

6 Chemicals First Quarter Revenue Mix Plastics 21% Petro & Other 22% Fertilizer Liquid & Dry 14% Chemicals 26% Soda Ash 17% $544 MM Revenue: +9% Volume: +3% Average Revenue Per Car: +6% Quarterly Drivers Export Potash and Overall Strong Market Demand for Fertilizer Strong Soda Ash Exports 6

7 Intermodal Revenue Mix International 57% Domestic 36% First Quarter $669 MM Revenue: +4% Volume: +1% Average Revenue Per Unit: +3% Quarterly Drivers Strength in Imports Softer Domestic Demand Premium 7% 7

8 Energy Daily Southern Powder River Basin Trainloads NE Ice Storm Winter Weather Winter Weather 0 1/1/07 2/1/07 3/1/07 4/1/07 SPRB Blizzard 8

9 Energy Revenue Mix SPRB 70% CO/UT 23% Other 7% First Quarter $730 MM Revenue: +4% Volume: Flat Average Revenue Per Car: +4% Quarterly Drivers Severe Winter Weather Drives 2% Decline In SPRB Tonnage CO/UT Tonnage Up 5% 9

10 Other Commodity Highlights Volume Growth Ag Prod Autos Ind. Prod. -4% -6% -13% Average Revenue Per Car 15% 11% 2% Ag Prod Autos Ind. Prod. Commodity Revenue 8% First Quarter Continued Growth in Ethanol and DDGS, But Whole Grains Volume Drops Decline in Finished Vehicle Shipments Partially Offset By Parts Growth Soft Housing Market and Winter Weather Impacts Construction- Related Shipments Ag Prod Autos Ind. Prod. -2% -3% 10

11 Customer Satisfaction Index 79 Good Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q

12 Commodity Outlook Second Quarter Carloadings (000) 2,368 2,391 2,511 Second Quarter Volume: -2% to Flat Revenue: +3 to +5% Full Year Volume: Flat to +2% Revenue: +4 to +6% Est. 12

13 First Quarter Operating Review April 19, 2007 Dennis Duffy, Executive VP Operations

14 Safety - Incidents & Reportables First Quarter Employee Per 200,000 Work Hours Good Rail Equipment Per Million Train Miles Good Incidents Reportables 14

15 Network Performance Update First Quarter 21.1 AAR Velocity MPH Good AAR Terminal Dwell 29.5 Hours 29.0 Good AAR Inventory (000) 328 Good Freight Car Utilization Days Good

16 Manifest Network Performance First Quarter Industry Spot/Pull Percentage 92 Good Car Connection Percentage 85 Good Train Plan Compliance % +/- 8 Hour Window Good 91 Work Event Rate* Per Thousand Carloads 29.3 Good *Excludes Energy Carloads

17 Productivity -- Train Size Initiatives Coal and Intermodal Operations First Quarter SPRB Coal Train Size Average Cars/Train +2 cars = 225 Coal Trains / Year Intermodal Train Size Boxes/Train +10 boxes = 1,900 Trains / Year

18 2007 Capital Allocation - $3.2 Billion Capital Investment Safety Growth Throughput Maintainability Portland Hinkle Total Capital Plan* ($ in Millions) Oakland Salt Lake City North Platte Chicago St. Louis KC Locomotives $677 Capacity $550 Los Angeles Yuma Commercial Facilities $195 Tucson El Paso San Antonio Ft. Worth Shreveport Houston Angleton Maintenance Of Way $1,500 Freight Cars $115 Information Technology $100 Safety/Other $63 Terminal Improvements Corridor Improvements *Includes Cash Capital and Lease Financings 18

19 2007 Operating Areas Of Focus First Quarter Achievements Safety and Security Employee, Customer, Public Continued Service Improvements Resource Productivity Unit Costs Failure Cost Reduction Train Size Network Throughput Unified Plan & CIMS Inventory Management Capital Effectiveness Customer Service Asset Utilization Financial Performance 19

20 First Quarter Financial Review April 19, 2007 Rob Knight, CFO

21 Income Statement Summary First Quarter In Millions Pct Chg Operating Revenues $3,849 $3,710 +4% Operating Expenses Salaries and Benefits 1,180 1, Fuel and Utilities Equipment & Other Rents Depreciation Materials and Supplies Purchased Services & Other Total Operating Expenses 3,130 3, Operating Income $ 719 $

22 Commodity Revenue Growth First Quarter - In Millions +7% $3,652 $3,543 (3.5%) +3% (.5%) 2006 Volume Fuel Price 2007 & Mix Recovery 22

23 Salaries & Benefits First Quarter In Millions $1,129 +5% $1,180 Wage Inflation Workforce Timing Lower Volume Costs Increased Train Crew Productivity

24 Fuel & Utilities First Quarter Fuel Price Dollars Per Gallon $1.87 $ Fuel Consumption Gallons (in millions) Reduced Diesel Consumption Lower Volumes Better Efficiency New Mileage-based Fuel Surcharge Estimated Second Quarter Diesel Price $2.20 per gallon+/

25 Rent Expense First Quarter In Millions $367-4% $353 Lower Volume Related Costs Improved Car Utilization

26 Materials & Supplies First Quarter In Millions $164 +7% $176 Inflation Increased Maintenance Activity

27 Purchased Services & Other First Quarter In Millions $450-8% $413 Casualty Expense Reduction Semi-annual Actuarial Study Lower Volume-Related Costs

28 Operating Ratio (%) Good Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q

29 Full Income Statement First Quarter In Millions ($ Millions Except EPS) Pct Chg Operating Revenues $3,849 $3, % Operating Expenses 3,130 3, Operating Income $ 719 $ Other Income Net Interest Expense (113) (120) - 6 Income Before Income Taxes Income Tax Expense (235) (184) +28 Net Income Diluted EPS $1.41 $

30 Share Repurchase Program Program Details 20 million shares Approximately 7% outstanding shares Open market purchases First Quarter Purchases 2.04 million shares $98.68 average price/share 2,040 1% 1Q ,000 7% Shares Repurchased (000 s) % of Outstanding 30

31 2007 Capital Outlook In Millions $2,729 $2,242 $3,200 $2, E Cash Capital Capital & Long-Term Operating Leases 31

32 Growing Cash from Operations In Millions $2,880 Double Digit Growth $2,595 $2, E 32

33 2007 Outlook 2 nd Quarter 2007 Outlook: EPS Growth = 10 to 15% Full Year: Revenue Growth = 4 to 6% Volume Growth = Flat to 2% Operating Ratio below 80 EPS Growth = 10 to 15% ROIC Improvement 33

34 Cautionary Information This press release and related materials contain statements about the Corporation s future that are not statements of historical fact, including specifically statements regarding improving the Corporation s financial returns through productivity initiatives and operational efficiency. These statements are, or will be, forwardlooking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of Forwardlooking 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, including risk factors, 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 forwardlooking statements. Information regarding risk factors and other cautionary information are available in the Corporation s Annual Report on Form 10-K for 2006, which was filed with the SEC on February 23, 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.