Union Pacific Reports Record Third Quarter Earnings

Operating Income Gains 34 Percent

Omaha, Neb., October 18, 2007 – Union Pacific Corporation (NYSE: UNP) today reported third quarter 2007 net income of $532 million or $2.00 per diluted share, compared to $420 million, or $1.54 per diluted share in the same quarter last year. Operating income during the third quarter 2007 was $1.0 billion, up from $752 million reported in the third quarter of 2006.

Third Quarter 2007 Highlights

  • Operating revenue totaled $4.2 billion, up 5 percent.
  • Operating income increased 34 percent to $1.0 billion.
  • Operating ratio improved by 5.1 points versus third quarter 2006 to 76 percent.

"Our third quarter performance was driven by strong results on both sides of the earnings equation, setting volume and revenue records while at the same time improving safety and productivity," said Jim Young, Chairman and Chief Executive Officer. "I’m particularly pleased that our operating initiatives, along with the capital investments we are making for growth and efficiency, enabled us to improve customer service in the face of record volume."

2007 Third Quarter Summary

  • Operating revenue set an all-time quarterly record, growing 5 percent to $4.2 billion compared to $4.0 billion in the third quarter 2006. Three business teams, Chemicals, Energy and Intermodal, achieved all-time record revenue in the third quarter 2007.
  • Operating ratio improved 5.1 points versus the third quarter 2006 to 76 percent. The Company’s ongoing safety performance improvement was recognized in a periodic actuarial study, driving a $47 million casualty expense reduction ($29 million after tax). This contributed 1.1 points to the operating ratio improvement.
  • An Illinois tax law change during the third quarter 2007 resulted in a non-cash after tax reduction to earnings of $27 million. This change will increase our future Illinois income taxes.
  • The Company’s third quarter 2007 fuel consumption rate, as measured by gallons per thousand gross ton-miles, was a best-ever quarterly rate of 1.22 versus 1.26 in the third quarter 2006.
  • While quarterly carload volume grew 1 percent, average terminal dwell, as reported to the Association of American Railroads, improved 4 percent year-over-year to 25.2 hours and average third quarter train speed improved slightly to 21.5 mph from 21.3 mph in 2006.
  • The Company repurchased more than 4.5 million common shares at an average share price of $115.93 in the third quarter of 2007. Year-to-date purchases total 10.2 million common shares or 51 percent of the 20 million share repurchase program.

Third Quarter Railroad Commodity Revenue Summary versus 2006

  • Agricultural up 12 percent
  • Chemicals up 9 percent
  • Energy up 8 percent
  • Automotive up 7 percent
  • Intermodal up 3 percent
  • Industrial Products down 4 percent

Looking Forward

"Near-term, we remain cautious on the economy and see challenges from rapidly increasing diesel fuel prices," Young said. "However, we are confident regarding Union Pacific’s opportunities to further improve returns through profitable revenue growth and greater productivity. I believe our future is bright because of the men and women of Union Pacific who are dedicated to working safely to improve customer service and shareholder value."

Union Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country and serves the fastest-growing U.S. population centers. Union Pacific’s diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad offers competitive long-haul routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada’s rail systems and is the only railroad serving all six major gateways to Mexico, making it North America’s premier rail franchise.

Supplemental financial information is attached.

Additional information is available at our Web site: www.up.com.
Our contact for investors is Jennifer Hamann at (402) 544-4227.
Our media contact is Kathryn Blackwell at (402) 544-3753.

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This press release and related materials contain statements about the Corporation’s future that are not statements of historical fact, including specifically statements regarding the impact of operating initiatives and capital investments on the Corporations operations and financial returns, including growth and efficiency; management’s outlook on the economy and diesel fuel prices, including the impact of rising diesel prices; and the Corporation’s ability or opportunities to improve returns, customer service, and shareholder value. 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 generally 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 forward-looking 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, 2007. 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 Web site is not, and should not be deemed to be, incorporated by reference herein.

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