Second Quarter 2009 Results - PDF Free Download

1 Second Quarter 2009 Results

Second Quarter 2009 Results Donald W. Seale Executive Vice President and Chief Marketing Officer

Railway Operating Revenue Second Quarter 2009 vs. 2008 Revenue Total $1.86 Billion Down $908 Million, 33% vs. 2Q 2008 Coal $511 (34%) Intermodal $368 (31%) Merchandise $978 (33%) Components of Revenue Variance Volume ($711) Fuel Revenue ($348) Mix ($53) Price $204 Total Change ($908) Rev. $Millions

Revenue Per Unit Second Quarter 2009 vs. 2008 2Q 2009 vs. 2Q 2008 Rev/Unit Abs. % Chg. Agriculture $2,125 $48 2% Declining fuel related revenue MetCon $1,460 ($215) (13%) Chemicals $3,047 ($48) (2%) Paper $2,239 239 ($22) (1%) Automotive $1,798 ($156) (8%) Merchandise $2,093 ($22) (1%) Intermodal $600 ($98) (14%) Negative mix and RCAF-U impact 7% pricing gain Coal $1,538 ($191) (11%) Total $1,315 ($140) (10%)

Railway Volume Second Quarter 2009 vs. 2008 2Q 2009 vs. 2Q 2008 Units Abs. % Chg Agriculture 135,037 (21,597) (14%) MetCon 117,199 (93,172) (44%) Chemicals 80,501 (23,395) (23%) Paper 74,077 (28,320) (28%) Automotive 60,852 (55,472) (48%) Merchandise 467,666 (221,956) (32%) Intermodal 612,765 (150,308) (20%) Coal 331,911 (116,401) (26%) Declines across all business units Very weak integrated steel and automotive traffic Falling consumer demand & associated Intermodal volume Weak export met coal Weak domestic met and utility coal Total 1,412,342 (488,665) (26%)

Coal Variance Analysis Second Quarter 2009 vs. 2008 (11%) (26%) (34%) Revenue Carloads Rev/Car 2Q 2009 2Q 2008 Change Revenue ($Millions) $511 $775 ($264) Volume 331,911 448,312 (116,401) Rev/Car $1,538 $1,729 ($191)

Coal Markets Second Quarter 2009 vs. 2008 Steel 24,848 (50%) Export 22,238 (62%) Industrial 17,780 (19%) Total 331,911 Units Down 116,401 Units, 26% vs. 2Q 2008 Lower electricity demand & higher stockpiles Utility 267,045 (16%) Competition from natural gas Decline in domestic & global steel production Volume

Intermodal Variance Analysis Second Quarter 2009 vs. 2008 (20%) (14%) (31%) Revenue Units Rev/Unit 2Q 2009 2Q 2008 Change Revenue ($Millions) $368 $532 ($164) Volume 612,765 763,073 (150,308) Rev/Unit $600 $698 ($98)

Intermodal Markets Second Quarter 2009 vs. 2008 Total 612,765 Units Triple Crown 69,057 (17%) Premium 48,215 (18%) Domestic 258,145 (2%) Down 150,308 Units, 20% vs. 2Q 2008 Excess truck supply Continued highway diversions International 237,348 (34%) Global recession continues to impact International volume Volume

Intermodal Network Enhancements Second Quarter 2009 Mechanicville Bethlehem Boston New Services Harrisburg NY/NJ Philadelphia Savannah, GA Rutherford, PA Columbus, OH Croxton, NJ Memphis Huntsville East Tennessee Charlotte Huntsville, AL Titusville, FL EMP expanded to Toledo, OH Meridian Speedway Shreveport Meridian Atlantat Birmingham Reefer Trailer Service from California to Atlanta New Orleans

Merchandise Variance Analysis Second Quarter 2009 vs. 2008 (1%) (33%) (32%) Revenue Carloads Rev/Car 2Q 2009 2Q 2008 Change Revenue ($Millions) $978 $1,458 ($480) Volume 467,666666 689,622622 (221,956) Rev/Car $2,093 $2,115 ($22)

Merchandise Revenue & Volume Second Quarter 2009 vs. 2008 Total - $978 Million Down $480 Million, 33% vs. 2Q 2008 Total 467,666 Units Down 221,956 Units, 32% vs. 2Q 2008 Automotive $110 (52%) Agriculture $287 (12%) MetCon $171 (51%) Paper $165 (29%) Chemicals $245 (24%) Agriculture 135,037 (14%) Paper 74,077 (28%) Automotive 60,852 (48%) Chemicals 80,501 MetCon (23%) 117,199 (44%) Rev. $Millions Volume

Merchandise Revenue & Volume Second Quarter 2009 vs. 2008 Total - $978 Million Down $480 Million, 33% vs. 2Q 2008 Total 467,666 Units Down 221,956 Units, 32% vs. 2Q 2008 Automotive $110 (52%) Agriculture $287 (12%) MetCon $171 (51%) Chemicals $245 (24%) Paper $165 (29%) Automotive 60,852 (48%) Agriculture 135,037 (14%) MetCon 117,199 (44%) Paper 74,077 (28%) Chemicals 80,501 (23%) Rev. $Millions Volume

Merchandise Revenue & Volume Second Quarter 2009 vs. 2008 Total - $978 Million Down $480 Million, 33% vs. 2Q 2008 Total 467,666 Units Down 221,956 Units, 32% vs. 2Q 2008 Automotive $110 (52%) Agriculture $287 (12%) MetCon $171 (51%) Paper $165 (29%) Chemicals $245 (24%) Agriculture 135,037 (14%) Paper 74,077 (28%) Automotive 60,852 (48%) MetCon 117,199 (44%) Chemicals 80,501 (23%) Rev. $Millions Volume

Merchandise Revenue & Volume Second Quarter 2009 vs. 2008 Total - $978 Million Down $480 Million, 33% vs. 2Q 2008 Total 467,666 Units Down 221,956 Units, 32% vs. 2Q 2008 Automotive $110 (52%) MetCon $171 (51%) Agriculture $287 (12%) Paper $165 (29%) Chemicals $245 (24%) Agriculture 135,037 (14%) Paper 74,077 (28%) Automotive 60,852 (48%) Chemicals 80,501 MetCon (23%) 117,199 (44%) Rev. $Millions Volume

Outlook Merchandise Weak, but improving Automotive volumes Continued ramp-up of ethanol network Increased fertilizer traffic Firming up of steel order books New fly ash unit train business Restocking in plastics Ongoing impact of weak housing market Continued volume declines year-over-year

Outlook Intermodal No obvious peak season Continued product development and network enhancement Weak International volume Coal Mild weather results in high utility stockpiles Competition from low priced natural gas Some improvement in export and domestic So e poe et epotaddo estc metallurgical coal

Outlook 1,901,007 2Q 2008 2Q 2009 Volume 1,895,292 1,725,177 Bottom of the economy at hand 1,455,567 1,412,342 Weak year-over-year volumes in 2 nd half Strong comps from 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 Continued favorable pricing trend

Second Quarter 2009 Results Mark Manion Executive Vice President and Chief Operating Officer

2 Rail Industry Safety 6 Months 2009 Preliminary (Injury Ratio per 200,000 Employee-Hours)

Road & Yard Crew Starts By Quarters 2009 vs. 2008 Change from Prior Period: -14% -20% Road Trains Change from Prior Period: -11% -19% Yard Assignments 178,370 153,618 180,514 143,707 178,212 167,569 61,818 54,864 62,880 51,177 63,213 58,888 3 2008 2009

Train & Engine Employees By Quarters 2009 vs. 2008 Change from Prior Period: - 8% - 14%

Composite Service Performance By Quarters 2009 vs. 2008 Change from Prior Period: +4 pts. +5 pts. 5

Service Metrics Percent Improvement (2 nd Qtr 2009 over 2 nd Qtr 2008) Train Performance 14.7% Connection Performance 0.9% Plan Adherence 37% 3.7% 6

Train Speed & Terminal Dwell Quarterly Comparison - 2007 to 2009 Change from Prior Period: Train Speed +6% +13% Terminal Dwell Change from Prior Period: +4% +2% 21.0 21.7 23.1 21.2 21.1 23.9 22.0 21.5 22.0 22.1 22.5 22.0 22.8 22.0 21.4 21.8 21.3 21.9 21.3 21.6 7 2007 2008 2009

Car Hire Days per Carload By Quarters 2009 vs. 2008 Change from Prior Period: -1.0% + 0.8%

Cars Stored Merchandise (offline) 922 Coal 10,525 Merchandise (online) 18,011 Intermodal 1,283 Automotive 4,301 9 Total: 35,042

Locomotives Stored January 2008 June 2009 750 700 650 600 550 500 450 400 350 300 250 200 150 100 50 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 10

Locomotive Fuel Consumption By Quarters 2009 vs. 2008 Change from Prior Period: -19% -26%

Going Forward Safety, Service, and Operating Efficiency Keep all employees focused on safety Monitor traffic volumes and business expectations to correctly size the operating plan Maintain network velocity Drive for service improvement Align asset base with business demand 12

Second Quarter 2009 Results James A. Squires Executive Vice President Finance and Chief Financial Officer 1

Operating Results Second Quarter 2009 vs. 2008 ($ Millions) Second Qtr 2009 Second Qtr 2008 Favorable (Unfavorable) $ % Railway Operating Revenues $ 1,857 $ 2,765 $ (908) (33%) 2

Operating Results Second Quarter 2009 vs. 2008 ($ Millions) Second Qtr 2009 Second Qtr 2008 Favorable (Unfavorable) $ % Railway Operating Revenues $ 1,857 $ 2,765 $ (908) (33%) Railway Operating Expenses 1,389 1,966 577 29% Income From Railway Operations $ 468 $ 799 $ (331) (41%) Railway Operating Ratio 74.8 71.11 (3.7) (5%) 3

Railway Operating Expense Analysis Second Quarter 2009 vs. 2008 ($ Millions) Fuel Compensation and Materials and Other Purchased Services and Rents Benefits + $8 Depreciation - $70 - $66 - $111 - $338 4 Net Decrease $ 577 Million / 29%

Locomotive Fuel Consumption 2008 vs. 2009 Comparison -19% -26% Total Fuel Consumption Savings ($ Millions) 1Q $70 2Q $126 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 5 2008 2009

Fuel Expense Analysis Second Quarter 2009 vs. 2008 ($ Millions) $ 491 - $ 126 - $ 212 $ 153 Second Qtr Decreased Lower Second Qtr 2008 Consumption Prices 2009 6

Locomotive Diesel Fuel Average Prices 2007-20092009 $3.50 $3.58 $3.59 $3.00 $2.50 $2.00 $1.50 $1.00 $1.69 $1.98 $2.18 $2.56 $2.79 $2.19 $1.39 $1.55 $0.50 $0.00 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 7

Compensation and Benefits Analysis Second Quarter 2009 vs. 2008 ($ Millions) Increase (Decrease) T&E and Other Volume-Related Payroll $ (66) Stock-Based and Incentive Compensation (58) Payroll Taxes (13) Wage Rates 12 Pension 11 Medical Benefits 7 Other (4) Net Decrease $(111) 9

Crew Starts and T&E Volume-Related Savings 2008 vs. 2009 Comparison T&E Volume-Related Savings ($ Millions) 1Q $29 16% 2Q $41 22% -13% -20% 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 10 2008 2009 Road and Yard Crew Starts

Materials and Other Expense Analysis Second Quarter 2009 vs. 2008 ($ Millions) (Decrease) Materials $ (20) Casualties and Other Claims (21) Other (29) Total Decrease $ (70) 12

Purchased Services and Rents Analysis Second Quarter 2009 vs. 2008 ($ Millions) (Decrease) Intermodal $ (19) Transportation Services and Operations (16) Equipment Rents (14) Mechanical (5) Other (12) Total Decrease $ (66) 14

Other Income Net Second Quarter 2009 vs. 2008 ($ Millions) Second Qtr 2009 Second Qtr 2008 2009 vs. 2008 Favorable (Unfavorable) Gains on Property Sales $ 2 $ 17 $ (15) Interest on Tax Deficiencies 5 9 (4) Interest Income 3 5 (2) Corporate-Owned Life Insurance 7 (7) 14 All Other 19 22 (3) Other Income net $ 36 $ 46 $ (10) Interest Expense on Debt $ 113 $ 112 $ (1) 15

Income Before Income Taxes Second Quarter ($ Millions) $ 733 $ 391 16 2008 2009 Change vs. Prior Period - 47%

Income Taxes Second Quarter ($ Millions) $ 280 $ 144 2008 2009 Change vs. Prior Period - 49% 17

Net Income and Diluted Earnings per Share Second Quarter ($ Millions except per share) Net Income Diluted Earnings per Share $ 453 $ 1.18 $ 247 $ 0.66 18 2008 2009 2008 2009 Change vs. Prior Period - 45% - 44%