High Demand and Operational Improvement Drive 64 Percent Gain in Union Pacific's Second Quarter Earnings Per Share

Omaha, Neb., July 20, 2006

  • Second quarter 2006 earnings per share grew 64 percent to $1.44 per diluted share.
  • Commodity revenue was an all-time quarterly record of $3.7 billion, up 17 percent.
  • Operating Income increased 53 percent to $717 million.
  • Second quarter 2006 operating ratio improved by 4.3 points to 81.7 percent.
Union Pacific Corporation (NYSE: UNP) today reported second quarter 2006 net income of $390 million or $1.44 per diluted share, compared to $233 million, or $.88 per diluted share in the same quarter last year. Operating income during the second quarter of 2006 was $717 million, up from $468 million reported in the second quarter of 2005.

"Quarterly operating income was the best ever in the history of the railroad," said Jim Young, President and Chief Executive Officer. "Reaching this milestone so early in the year is a clear indication that the demand environment remains very strong, and that we are moving volume more efficiently. The accomplishment I’m most pleased with is that we converted strong demand and yield gains into our best operating ratio in over two years. In addition, customers are seeing our service reliability improve."

Second Quarter 2006 Overview

  • Quarterly operating revenue was an all-time record $3.9 billion compared to $3.3 billion in the second quarter of 2005.
  • Commodity revenue set an all-time quarterly record, up 17 percent to $3.7 billion. This compares to $3.2 billion in the second quarter of 2005 and was driven by improved yields, higher fuel surcharge recoveries and a 5 percent increase in volume.
  • The second quarter 2006 operating ratio improved to 81.7 percent compared to 86 percent in 2005. This was the best operating ratio in over two years.
  • The Railroad’s average quarterly fuel price increased 29 percent versus the year ago quarter, from $1.67 per gallon in 2005 to $2.15 per gallon in the second quarter of 2006. The fuel surcharge recovered 80 percent of the cost in excess of the Railroad’s $.75 per gallon base fuel price.
  • Employee productivity, as measured by gross ton-miles per employee, gained 3 percent versus the year ago quarter.
  • In the face of record volume, operating metrics remained stable. Average terminal dwell time increased slightly and average quarterly train speed remained flat versus a year ago.

Second Quarter Railroad Commodity Revenue Summary versus 2005

  • Agricultural up 22 percent
  • Automotive up 18 percent
  • Chemicals up 17 percent
  • Intermodal up 16 percent
  • Energy up 16 percent
  • Industrial Products up 15 percent

Looking Forward

"We expect the volume strength we saw in the first half of the year to continue through the upcoming peak shipping season," Young said. "The biggest challenge ahead for us will be to continue to make progress on our operating initiatives, productivity and service reliability in the face of record volume."

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) 319-4288 or (402) 544-3753.


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Important factors that 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 include, but are not limited to: whether the Corporation and its subsidiaries are fully successful in implementing their financial and operational initiatives, including those plans and management initiatives to improve system velocity and network performance or otherwise improve operations; the impact of ongoing track maintenance and restoration work being performed in the Southern Powder River Basin of Wyoming; the outcome of claims and litigation, including those related to environmental contamination, personal injuries, and occupational illnesses arising from hearing loss, repetitive motion and exposure to asbestos and diesel fumes; legislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail industry; the impact of a rail accident involving the release of hazardous materials; natural events such as severe weather, fire, floods, hurricanes and earthquakes; changes in fuel prices; changes in labor costs, labor stoppages, and the availability of qualified personnel required for our operations; industry competition, conditions, performance and consolidation; legislative, regulatory and legal developments involving taxation, including enactment of new federal or state income tax rates, revisions of controlling authority and the outcome of tax claims and litigation; changes in securities and capital markets; the effects of adverse general economic conditions, both within the United States and globally; any adverse economic or operational repercussions from terrorist activities and any governmental response thereto; and war or risk of war. More information regarding risk factors is available in the Corporation’s Annual Report on Form 10-K for 2005, which was filed with the SEC on February 24, 2006. The Corporation updates information regarding risk factors if circumstances require such updates in its periodic reports on Form 10-Q (or such other reports that may be filed with the SEC).

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