10-KPeriod: FY2007

UNION PACIFIC CORP Annual Report, Year Ended Dec 31, 2007

Filed February 28, 2008For Securities:UNP

Summary

Union Pacific Corporation (UNP) reported a strong financial performance in 2007, achieving record operating income of $3.4 billion, a 17% increase year-over-year, despite a 1% decrease in volume. This was driven by yield increases, network management initiatives, and improved productivity, resulting in a 2.2 point improvement in their operating ratio to 79.3%. Net income reached $1.86 billion, or $6.91 per diluted share. Commodity revenue also hit a record $15.5 billion, up 4%, primarily due to better pricing and fuel surcharges. The company also made significant strides in safety, with a notable reduction in employee injuries and grade crossing incidents. Looking ahead to 2008, Union Pacific anticipates continued revenue growth and further operational improvements, projecting earnings per diluted share between $7.75 and $8.25. The company plans substantial capital investments of $3.1 billion focused on infrastructure maintenance, capacity expansion, and fleet upgrades. While acknowledging economic uncertainties, Union Pacific remains optimistic about its ability to deliver value to shareholders through strategic investments and operational efficiencies.

Financial Highlights

28 data points
Beta

Revenue

$16.28B

Net Income

$1.85B

11.4% Net Margin

EPS (Diluted)

$1.73

Cash & Equivalents

$878.00M

Free Cash Flow

$781.00M

Financial Statements
Beta
Revenue$16.28B
Operating Expenses$12.91B
Operating Income$3.38B
Interest Expense$482.00M
Net Income$1.85B
EPS (Basic)$1.75
EPS (Diluted)$1.73
Shares Outstanding (Basic)1.06B
Shares Outstanding (Diluted)1.07B

Key Highlights

  • 1Record operating income of $3.4 billion in 2007, a 17% increase from 2006.
  • 2Operating ratio improved by 2.2 points to 79.3% in 2007.
  • 3Net income reached $1.86 billion, or $6.91 per diluted share, in 2007.
  • 4Commodity revenue grew 4% to a record $15.5 billion in 2007, driven by pricing and fuel surcharges.
  • 5Significant safety improvements were noted, including reduced employee injury rates and fewer grade crossing incidents.
  • 6The company plans to invest approximately $3.1 billion in capital expenditures in 2008.
  • 7Union Pacific expects continued revenue growth and improved financial results in 2008, with projected earnings per diluted share between $7.75 and $8.25.

Frequently Asked Questions

Union Pacific's revenue growth in 2007 was primarily driven by yield increases (better pricing) and fuel surcharges across its commodity groups. Despite a slight decrease in overall volume, the company achieved record commodity revenue of $15.5 billion.

Union Pacific experienced a 9% increase in fuel prices in 2007, adding $242 million to operating expenses. The company utilized fuel surcharge programs to offset these costs and also implemented fuel conservation efforts, improving their consumption rate by 2% through initiatives like locomotive simulator training and operational practices.

Union Pacific plans to invest approximately $3.1 billion in capital expenditures in 2008. These investments are allocated towards maintaining and improving track infrastructure ($1.6 billion), expanding network and terminal capacity ($840 million), upgrading the locomotive and freight car fleet ($490 million), and enhancing information technology systems ($170 million).

The improvement in Union Pacific's operating ratio to 79.3% in 2007 was attributed to a combination of factors including yield increases, effective network management initiatives (such as reduced terminal dwell time and improved car utilization), and enhanced employee productivity. These efforts helped offset increased operating expenses like fuel and wages.