Union Pacific Reports Fourth Quarter and Full-Year Earnings

Omaha, Neb., January 24, 2008 – Union Pacific Corporation (NYSE: UNP) today reported 2007 fourth quarter net income of $491 million, or $1.86 per diluted share, compared to $485 million, or $1.78 per diluted share in the fourth quarter of 2006.

Fourth Quarter 2007 Records

  • Operating revenue totaled $4.2 billion, up 6 percent.
  • Operating income grew 7 percent to $864 million.

Full Year 2007 Records

  • Operating revenue totaled $16.3 billion, up 5 percent.
  • Operating income grew 17 percent to $3.4 billion.
  • Net income increased 16 percent to $1.86 billion.
  • Return on invested capital grew to 8.7 percent.

"The drivers of our quarterly performance were revenue growth on flat volume and improved operational efficiency," said Jim Young, Chairman and Chief Executive Officer. "Despite record-high diesel fuel prices and winter weather challenges, we turned in a solid fourth quarter performance to post another record year for our shareholders and improved service for our customers."

2007 Fourth Quarter Summary

In the fourth quarter of 2007, Union Pacific reported operating income of $864 million compared to $810 million in fourth quarter 2006, a 7 percent improvement.

  • Operating ratio improved to 79.4 percent versus 79.6 percent in 2006.
  • The Company’s commodity revenue grew 6 percent in 2007 to a fourth quarter best of $4.0 billion. All six business groups posted record fourth quarter revenue, and Agricultural revenue set an all-time mark. The main component of the growth was a 6 percent increase in average revenue per car (ARC), which reached an all-time quarterly record of $1,638 per car in the fourth quarter 2007, driven primarily by yield gains.
  • Business volumes in fourth quarter 2007, as measured by total revenue carloads, were flat at 2.4 million.
  • The Railroad’s 2007 average quarterly fuel price, including transportation and taxes, was up 34 percent to $2.59 per gallon compared to $1.94 in 2006.
  • The Company’s fuel consumption rate, as measured by gallons per thousand gross ton-miles, was a fourth quarter-best rate of 1.25 versus 1.27 in the fourth quarter 2006.
  • The Company repurchased nearly 2.4 million common shares at an average share price of $127.35 in the fourth quarter of 2007.

Fourth Quarter 2007 Commodity Revenue Summary versus 2006

  • Chemicals up 12 percent
  • Energy up 8 percent
  • Agricultural up 7 percent
  • Automotive and Intermodal each up 4 percent
  • Industrial Products up 1 percent

2007 Full Year Summary

"In 2007, we were able to achieve a Company best 79.3 percent operating ratio, while posting best-ever customer satisfaction marks," Young said. "We operated our network more safely and efficiently, while improving our return on invested capital."

Full year 2007 net income was $1.86 billion, or $6.91 per diluted share, versus $1.6 billion, or $5.91 per diluted share reported in 2006.

Railroad commodity revenue totaled a record $15.5 billion in 2007, a 4 percent increase compared with 2006. Five of the six business groups set all-time revenue records in 2007. The main driver of this growth was a 6 percent increase in ARC to a record $1,594 per car, driven primarily by yield gains.

  • Operating ratio improved 2.2 points to 79.3 percent in 2007 versus 81.5 percent in 2006.
  • Business volumes in 2007, as measured by total revenue carloads, decreased 1 percent to 9.7 million.
  • Operating income was a record $3.4 billion in 2007, a 17 percent increase from $2.9 billion in 2006.
  • The Railroad’s average yearly fuel price was $2.24 per gallon in 2007 compared to $2.06 in 2006, a 9 percent increase.
  • The Company’s fuel consumption rate was a full-year best at 1.26 versus 1.28 in 2006.
  • The Company repurchased more than 12.6 million common shares at an average share price of $115.44 in 2007. This represents 63 percent of the 20 million share repurchase program authorized in January 2007.

2008 Outlook

"We see both challenges and opportunities ahead in 2008," Young said. "Although external factors such as the U.S. economy and high fuel prices will challenge us, Union Pacific employees have created positive momentum for our Company that will lead to further improvements in operational efficiency and customer service. Overall, we remain optimistic that our superior franchise will enable us to overcome economic weakness and post another record year in 2008."

Union Pacific Corporation owns one of America’s leading transportation companies. Its principal operating company, Union Pacific Railroad, is the largest railroad in North America, covering 23 states across the western two-thirds of the United States. A strong focus on quality and a strategically advantageous route structure enable the company to serve customers in critical and fast growing markets. It is a leading carrier of low-sulfur coal used in electrical power generation and has broad coverage of the large chemical-producing areas along the Gulf Coast. With competitive long-haul routes between all major West Coast ports and eastern gateways, and as the only railroad to serve all six major gateways to Mexico, Union Pacific has the premier rail franchise in North America.

Supplemental financial information is attached.

Additional information is available at our Web site: www.up.com.

Contact for investors is Jennifer Hamann at (402) 544-4227.
Contact for media is Kathryn Blackwell at (402) 544-3753 or (402) 319-4288.

 

**********

This press release and related materials contain statements about the Corporation’s future that are not statements of historical fact, including specifically statements of management regarding the challenges that the Corporation may face due to overall economic conditions and higher diesel fuel prices; management’s outlook on the strength of the economy and the opportunities for the Corporation, including improving operational efficiency and customer service; and the ability of the Corporation to overcome economic weakness and achieve record financial performance. 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.

The statements and information contained in the news releases provided by Union Pacific speak only as of the date issued. Such information by its nature may become outdated, and investors should not assume that the statements and information contained in Union Pacific's news releases remain current after the date issued. Union Pacific makes no commitment, and disclaims any duty, to update any of this information.