Key questions and answers from the second quarter fiscal 2008 earnings call conducted by Burlington Northern Santa Fe Corp. on July 24, 2008.

Ken Hoexter (Merrill Lynch): Gross ton miles looked relatively flat. Going back to a couple of years you used to be at 4% to 6% productivity improvement run rate. Is that something you think you can get back to? Is that due to the 0% CAGR because of the floods and recent incidents or can we see that re-engage itself?

Carl R. Ice: We'll see more improvement than we saw this quarter. It was up a little compared to the second quarter last year, flat compared to two years ago and this is why you saw the zero CAGR. We'll improve it in the third and fourth quarters. I doubt we'll get back to the 4% to 6% in the near term but we expect to drive improvement on this measure.

Ken Hoexter (Merrill Lynch): You mentioned that 6% of that 20% or so is pure pricing. What percent of legacy contracts we've seen renew in this quarter and what's left to come in the second half of the year? Is that over 6% that you're targeting in the estimates for the back half?

John P. Lanigan, Jr: Typically contracts in our business in the rail industry are back end loaded from a standpoint of negotiation. They take effect the following year. From a contract perspective, we're done for this year in any contracts and so that will have any impact on this year's revenues.

Ken Hoexter (Merrill Lynch): On fuel surcharge, is that mostly on highway diesel or there is a component on WTI?

Matthew K. Rose: 100% highway diesel.

Randy Cousins (BMO Capital Markets): Can you comment on earnings sensitivity to oil prices?

Matthew K. Rose: If oil came down to let's say $125 from $138 to $140, that would probably benefit us couple of cents a share for the quarter. That's probably a little more than $10 drop and $10 probably is a penny or two.

Randy Cousins (BMO Capital Markets): Can you give us guidance as to how to think about materials and other for the second half?

Matthew K. Rose: There were less land sales than it was a year ago. It probably is at least in the third quarter at a reasonably low level to what it was at in the second quarter rather.

William Green (Morgan Stanley): Can you comment about the inter-modal in the second half and once you've lapped the loss for Transpacific business that went all water?

Unidentified Company Representative: The big thing to watch in the second half of the year is the import numbers into the West Coast because even though we're lapping that loss of the customer who withdrew, the fact is in the first half of the year and the projections for the second half of the year show that the gross imports in the West Coast are going to be down significantly.
Lapping that comp just gets us back to that baseline from last year. We're going to be watching those imports very closely to see if there is any strengthening demand with the typical holiday season. However, we're not getting any indications at this point if there is going to be any significant peak season this year.
On the flip side, our domestic business had a very nice quarter and we have a very nice trend going on the domestic business. As the domestic trucking companies are looking at all of their input costs and activities, clearly J.B. Hunt led the way in their recent call by saying that they were aggressively pushing more to inter-modal from the road. We're hopeful for that to continue on the second half of the year.

William Green (Morgan Stanley): How should we think about the growth and also if imports don't rebound anytime soon, have you over built the inter-modal system or how do you think about the cost of utilization of that?

Matthew K. Rose: As far as your heavy over-build the answer is no. We just won't be expanding as quickly as we otherwise would have until that volume does rebound.

William Green (Morgan Stanley): In terms of operating leverage in your business, you had very impressive top line growth. Fuel is obviously some of this. However, the operating earnings grew 7% to 8%. How do we get back to operating leverage? Is it just the fuel has to stabilize or volume growth has to be there? Is there something more you can do on productivity?

Thomas N. Hund: The biggest thing is if fuel stabilized, you'd see significant operating leverage. In the quarter you're right. Revenue ex-fuel, ex the surcharge was up about 6-ish percent. Most of that was price. EPS was up about 11%. I would expect we'd typically do better than that. If you carve out the fuel headwind, that 6% actually turns into an EPS of about a 25% increase. That adds good leverage. What we're saying is if fuel had stabilized, you'd have seen significant leverage here.

William Green (Morgan Stanley): You mentioned the PRB stockpiles, were you referring to the stockpiles of the mines or are you seeing stockpiles in your regional utilities high?

Matthew K. Rose: Stockpiles at the utilities are at about a five year high at the end of June. However, the last several weeks, in the self and even up in the upper mid west, it has gotten a lot harder. We think that the burn rate has picked up so far this month. Hopefully, that will continue on for the quarter.

Thomas Watewitz (J.P. Morgan): From an ag perspective, it's been such a tremendous story for several years. Do you have at this point, any visibility to what realistic volumes might be in terms of the next ag year? Can you still see high single digit volumes or should it be lower single digit volumes?