UNP » Topics » Outlook

This excerpt taken from the UNP 10-K filed Feb 5, 2010.

2010 Outlook

 

 

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted approach to safety, utilizing technology, risk assessment, quality control, and training, and by engaging our employees. We will continue implementing Total Safety Culture (TSC) throughout our operations. TSC is designed to establish, maintain, reinforce, and promote safe practices among co-workers. This process allows us to identify and implement best practices for employee and operational safety. Reducing grade-crossing incidents is a critical aspect of our safety programs, and we will continue our efforts to maintain, upgrade, and close crossings; install video cameras on locomotives; and educate the public about crossing safety through our own programs, various industry programs, and other activities.

 

 

Transportation Plan – To build upon our success in recent years, we will continue evaluating traffic flows and network logistic patterns, which can be quite dynamic from year-to-year, to identify additional opportunities to simplify operations, remove network variability and improve network efficiency and asset utilization. We plan to adjust manpower and our locomotive and rail car fleets to

 

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meet customer needs and put us in a position to handle demand changes. We will also continue utilizing industrial engineering techniques to improve productivity.

 

 

Fuel Prices – Uncertainty about the economy makes fuel price projections difficult, and we could see volatile fuel prices during the year, as they are sensitive to global and U.S. domestic demand, refining capacity, geopolitical issues and events, weather conditions and other factors. To reduce the impact of fuel price on earnings, we will continue to seek recovery from our customers through our fuel surcharge programs and to expand our fuel conservation efforts.

 

 

Capital Plan – In 2010, we plan to make total capital investments of approximately $2.5 billion, including expenditures for PTC, which may be revised if business conditions or new laws or regulations affect our ability to generate sufficient returns on these investments. See further discussion in this Item 7 under Liquidity and Capital Resources – Capital Plan.

 

 

Positive Train Control (PTC) – In response to a legislative mandate to implement PTC by the end of 2015, we expect to spend approximately $200 million during 2010 on the development of PTC. We currently estimate that PTC will cost us approximately $1.4 billion to implement by the end of 2015, in accordance with rules issued by the FRA. This includes costs for installing the new system along our tracks, upgrading locomotives to work with the new system, and adding digital data communication equipment so all the parts of the system can communicate with each other.

 

 

Financial Expectations – We remain cautious about economic conditions but expect volume to increase from 2009 levels. In addition, we anticipate continued pricing opportunities and further productivity improvements.

This excerpt taken from the UNP 8-K filed Jan 21, 2010.

Outlook

“Although still uncertain, the economic picture for 2010 looks somewhat more favorable than it did a year ago,” Young said. “We will continue executing Union Pacific’s long-term strategy to improve safety, customer service, productivity and efficiency. Our network management initiatives and strategic growth investments should position us to take full advantage of new business opportunities. The new safety and service records set in 2009 give customers increasing confidence that UP will serve their business needs in a safe, timely and efficient manner. As volumes return, these efforts provide us with opportunities to generate significant margin leverage and strong financial returns for our shareholders.”

This excerpt taken from the UNP 8-K filed Oct 22, 2009.

Outlook

“As we enter the final quarter of 2009, business volumes seem to have stabilized, but at very low levels for Union Pacific,” Young said. “In this weak economic environment, we remain committed to maintaining a strong balance sheet and a solid cash position. Operationally, we are dedicated to leveraging the competitive advantages of our network as a safe, fuel efficient and environmentally friendly freight transportation provider, to attract new business, increase productivity and offer excellent customer service.”

 

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This excerpt taken from the UNP 8-K filed Jul 23, 2009.

Outlook

“Although we expect it will be some time before the economy recovers, it appears that volume levels may have hit the bottom as the economy seems to have stabilized,” Young said. “Despite these economic challenges, we are dedicated to running a safe and productive network, maintaining our competitive advantages that come from excellent customer service and being a fuel efficient and an environmentally friendly railroad.”

This excerpt taken from the UNP 8-K filed Apr 23, 2009.

Outlook

“The difficult economic conditions continue to affect our business volumes,” Young said. “During this challenging time, we are reducing costs across the board, strengthening our operations and offering competitive supply chain solutions to our customers. We offer a safe, fuel-efficient, environmentally friendly transportation product that delivers value for our customers and the nation’s economy.”

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These excerpts taken from the UNP 10-K filed Feb 6, 2009.

2009 Outlook

 

 

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted approach to safety, utilizing technology, risk assessment, quality control, and training and engaging our employees. We plan to continue implementation of Total Safety Culture (TSC) throughout our operations. TSC, an employee-focused initiative that has helped improve safety, is a process designed to establish, maintain, and promote safety among co-workers. With respect to public safety, we will continue our efforts to maintain, upgrade, and close crossings, install video cameras on locomotives, and educate the public about crossing safety through various Railroad and industry programs, along with other activities.

 

 

Transportation Plan – In 2009, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to simplify operations and improve network efficiency and asset utilization. We plan to maintain adequate manpower and locomotives, and improve productivity using industrial engineering techniques.

 

 

Fuel Prices – On average, we expect fuel prices to decrease substantially from the average price we paid in 2008. However, due to economic uncertainty, other global pressures, and weather incidents, fuel prices again could be volatile during the year. To reduce the impact of fuel price on earnings, we

 

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will continue to seek recovery from our customers through our fuel surcharge programs and expand our fuel conservation efforts.

 

 

Capital Plan – In 2009, we expect our total capital investments to be approximately $2.8 billion (which may be revised if business conditions or new laws or regulations affect our ability to generate sufficient returns on these investments). See further discussion in this Item 7 under Liquidity and Capital Resources – Capital Plan.

 

 

Financial Expectations – We are cautious about the economic environment; however, we anticipate continued pricing opportunities, network improvement, and increased productivity in 2009.

2009 Outlook

 






 

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted
approach to safety, utilizing technology, risk assessment, quality control, and training and engaging our employees. We plan to continue implementation of Total Safety Culture (TSC) throughout our operations. TSC, an employee-focused initiative that
has helped improve safety, is a process designed to establish, maintain, and promote safety among co-workers. With respect to public safety, we will continue our efforts to maintain, upgrade, and close crossings, install video cameras on
locomotives, and educate the public about crossing safety through various Railroad and industry programs, along with other activities.

 






 

Transportation Plan – In 2009, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to
simplify operations and improve network efficiency and asset utilization. We plan to maintain adequate manpower and locomotives, and improve productivity using industrial engineering techniques.

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 






 

Fuel Prices – On average, we expect fuel prices to decrease substantially from the average price we paid in 2008. However, due to economic
uncertainty, other global pressures, and weather incidents, fuel prices again could be volatile during the year. To reduce the impact of fuel price on earnings, we

 


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will continue to seek recovery from our customers through our fuel surcharge programs and expand our fuel conservation efforts.


 






 

Capital Plan – In 2009, we expect our total capital investments to be approximately $2.8 billion (which may be revised if business conditions or new
laws or regulations affect our ability to generate sufficient returns on these investments). See further discussion in this Item 7 under Liquidity and Capital Resources – Capital Plan.

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 






 

Financial Expectations – We are cautious about the economic environment; however, we anticipate continued pricing opportunities, network improvement,
and increased productivity in 2009.

This excerpt taken from the UNP 8-K filed Jan 22, 2009.

Outlook

 

“Although we expect 2009 will be a difficult year for our Company, our customers and our employees, we are challenging ourselves to deliver an even higher level of performance,” Young said. “In this tough economic environment, we remain dedicated to providing excellent service to our customers, making strategic investments for long-term growth and producing strong financial returns.”

 

 

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This excerpt taken from the UNP 8-K filed Oct 23, 2008.

Outlook

 

“UP expects to produce strong year-over-year earnings growth in the fourth quarter despite the continuing effect of the economic slowdown on our business,” Young said. “Although today’s freight demand is soft, customers are continuing to realize the value of freight rail transportation, making UP’s reliable service offerings an attractive choice.”

 

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This excerpt taken from the UNP 8-K filed Jul 24, 2008.

2008 Outlook

 

“We expect that our diverse business mix will continue to provide us with opportunities through the year,” Young added. “Although high fuel prices and a soft economy present challenges, we remain committed to ongoing productivity and customer service initiatives as we look forward to achieving a record year.”

 

This excerpt taken from the UNP 8-K filed Apr 24, 2008.

Second Quarter Outlook

 

“Although we expect continued challenges from a soft economy and high diesel fuel prices in the Second Quarter and beyond, we’re confident about our future,” Young said. “Union Pacific’s ongoing focus on yield, productivity and service should result in a record 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.

 

These excerpts taken from the UNP 10-K filed Feb 28, 2008.

2008 Outlook

 

 

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted approach to safety, utilizing technology, risk assessment, quality control, and training for, and engaging with our employees. We plan to implement Total Safety Culture (TSC) throughout our operations. TSC, an employee-focused initiative that has helped improve safety, is a process designed to establish, maintain, and promote safety among co-workers. With respect to public safety, we will continue our efforts to maintain, upgrade, and close crossings, install video cameras on locomotives, and educate the public about crossing safety through various internal and industry programs, along with other activities.

 

 

Commodity Revenue – Despite uncertainty regarding the U.S. economy, we expect record revenue in 2008 based on current economic indicators, forecasted demand, improved customer service, and additional opportunities to reprice certain of our business. Yield increases and fuel surcharges will be the primary drivers of commodity revenue growth in 2008. We expect that overall volume will fall within a range of 1% higher to 1% lower than 2007, with continued softness in some market sectors.

 

 

Transportation Plan – In 2008, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to simplify operations and improve network efficiency and asset utilization. We plan to maintain adequate manpower and locomotives, improve productivity using industrial engineering techniques, and improve our operating margins.

 

 

Fuel Prices – Fuel prices should remain volatile, with crude oil prices and conversion and regional spreads fluctuating throughout the year. On average, we expect fuel prices to increase 15% to 20% above the average price in 2007. To reduce the impact of fuel price on earnings, we will continue to seek recovery from our customers through our fuel surcharge programs and expand our fuel conservation efforts.

 

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Capital Plan – In 2008, we expect to make capital investments of approximately $3.1 billion (which may be revised if revenue, tax, or business conditions require changing, or new laws or regulations affect our ability to generate sufficient returns on, these investments). Major investment categories include $1.6 billion to maintain and improve track infrastructure; $840 million to increase network and terminal capacity; $490 million to upgrade our locomotive and freight car fleet, including the acquisition of 175 high-horsepower locomotives and new covered hoppers; and $170 million primarily to upgrade information technology systems, including the testing of positive train control, and other capital projects. We expect to fund our 2008 cash capital investments through cash generated from operations, the sale or lease of various operating and non-operating properties, debt issuances, and cash on hand at December 31, 2007. Our annual capital plan is a critical component of our long-term strategic plan, which we designed to enhance the long-term value of the Corporation for our shareholders by providing sufficient resources to (i) maintain and improve our existing track infrastructure to provide safe and fluid operations, (ii) increase network efficiency by adding or improving facilities and track, and (iii) make investments that meet customer demand and take advantage of opportunities for long-term growth.

 

 

Financial Expectations – We are cautious about the economic environment; however, we anticipate revenue growth and continued network improvement in 2008, which should produce financial results that exceed 2007. We expect to generate earnings of $7.75 to $8.25 per diluted share and improve our operating ratio and return on invested capital.

2008 Outlook

 






 

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted
approach to safety, utilizing technology, risk assessment, quality control, and training for, and engaging with our employees. We plan to implement Total Safety Culture (TSC) throughout our operations. TSC, an employee-focused initiative that has
helped improve safety, is a process designed to establish, maintain, and promote safety among co-workers. With respect to public safety, we will continue our efforts to maintain, upgrade, and close crossings, install video cameras on locomotives,
and educate the public about crossing safety through various internal and industry programs, along with other activities.

 






 

Commodity Revenue – Despite uncertainty regarding the U.S. economy, we expect record revenue in 2008 based on current economic indicators, forecasted
demand, improved customer service, and additional opportunities to reprice certain of our business. Yield increases and fuel surcharges will be the primary drivers of commodity revenue growth in 2008. We expect that overall volume will fall within a
range of 1% higher to 1% lower than 2007, with continued softness in some market sectors.

 






 

Transportation Plan – In 2008, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to
simplify operations and improve network efficiency and asset utilization. We plan to maintain adequate manpower and locomotives, improve productivity using industrial engineering techniques, and improve our operating margins.

 






 

Fuel Prices – Fuel prices should remain volatile, with crude oil prices and conversion and regional spreads fluctuating throughout the year. On
average, we expect fuel prices to increase 15% to 20% above the average price in 2007. To reduce the impact of fuel price on earnings, we will continue to seek recovery from our customers through our fuel surcharge programs and expand our fuel
conservation efforts.

 


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Capital Plan – In 2008, we expect to make capital investments of approximately $3.1 billion (which may be revised if revenue, tax, or business
conditions require changing, or new laws or regulations affect our ability to generate sufficient returns on, these investments). Major investment categories include $1.6 billion to maintain and improve track infrastructure; $840 million to increase
network and terminal capacity; $490 million to upgrade our locomotive and freight car fleet, including the acquisition of 175 high-horsepower locomotives and new covered hoppers; and $170 million primarily to upgrade information technology systems,
including the testing of positive train control, and other capital projects. We expect to fund our 2008 cash capital investments through cash generated from operations, the sale or lease of various operating and non-operating properties, debt
issuances, and cash on hand at December 31, 2007. Our annual capital plan is a critical component of our long-term strategic plan, which we designed to enhance the long-term value of the Corporation for our shareholders by providing sufficient
resources to (i) maintain and improve our existing track infrastructure to provide safe and fluid operations, (ii) increase network efficiency by adding or improving facilities and track, and (iii) make investments that meet customer
demand and take advantage of opportunities for long-term growth.

 






 

Financial Expectations – We are cautious about the economic environment; however, we anticipate revenue growth and continued network improvement in
2008, which should produce financial results that exceed 2007. We expect to generate earnings of $7.75 to $8.25 per diluted share and improve our operating ratio and return on invested capital.

STYLE="margin-top:18px;margin-bottom:0px">RESULTS OF OPERATIONS

This excerpt taken from the UNP 8-K filed Jan 24, 2008.

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.

 

This excerpt taken from the UNP 10-K filed Feb 23, 2007.

2007 Outlook

 

·  

Safety – Operating a safe railroad benefits our employees, our customers, our shareholders, and the public. We will continue using a multi-faceted approach to safety, using technology, risk assessment, quality control, and training and education for our new and existing employees. From a public safety standpoint, we will continue our efforts to upgrade and close crossings, install video cameras on locomotives, and educate the public about crossing safety through various internal and industry programs, along with other activities. Additionally, we are working with private and public partners to develop better tank cars for transportation of chemicals.

 

·  

Commodity Revenue Growth – We expect record revenue levels to continue in 2007 based on current economic indicators, forecasted demand, and additional repricing opportunities. We established a target for year-over-year commodity revenue growth of 6% to 7%. We are projecting yield increases in all of our major commodity groups and volume growth ranging from 2% to 3%. We expect volume growth primarily from the energy and intermodal commodity groups. We will continue to monitor the market for changing conditions and adjust our plan accordingly.

 

·  

Transportation Plan – In 2007, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to simplify operations and improve network efficiency. We plan to maintain adequate manpower and locomotives, improve productivity using industrial engineering techniques, and improve our operating margins.

 

·  

Fuel Prices – We expect that fuel prices will remain volatile, with crude oil prices and conversion and regional spreads fluctuating throughout the year. To reduce the impact of fuel price on earnings, we will continue to seek recovery from our customers through our fuel surcharge programs and expand our fuel conservation efforts. As indicated in Item 1 of this report, the STB issued a decision limiting the manner in

 

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which U.S. railroads can calculate fuel surcharges on traffic regulated by the STB. Currently, we do not believe this decision will prevent us from using fuel surcharges or adversely affect our ability to use fuel surcharges to mitigate the impact of rising or elevated fuel prices on most or all of our traffic.

 

·  

Capital Plan – In 2007, we expect to make capital investments of approximately $3.2 billion, which may include long-term leases. These investments will be used to maintain track and structures; continue capacity expansions on our main lines in constrained corridors; remove bottlenecks; upgrade and augment equipment, including locomotives and railcars, to better meet customer needs; build and improve facilities and terminals; and develop and implement new technologies. We designed these investments to maintain infrastructure for safety, enhance customer service, promote growth, and improve operational fluidity. Major capital projects in 2007 include adding more double track on the Sunset Corridor and related line capacity; investing in new and existing facilities and terminals in Phoenix, Tucson, the LA Basin, San Antonio, Dallas/Fort Worth, and Houston; continuing improvements of the SPRB Joint Line; and continuing installation of centralized track control across Iowa and Nebraska, which enables us to increase productivity on these rail lines. We expect to fund our 2007 cash capital investments through cash generated from operations, the sale or lease of various operating and non-operating properties, and cash on hand at December 31, 2006. This focused capital plan is designed to help us improve network velocity and facilitate revenue growth.

 

·  

Financial Expectations – We are somewhat cautious about the economic environment; however, we anticipate revenue growth and continued network improvement in 2007, with financial results exceeding 2006 levels. Our expectations include generating earnings growth of 10% to 15% and an operating ratio below 80%.

 

This excerpt taken from the UNP 8-K filed Jan 25, 2007.

2007 Outlook

 

“While economic indicators are mixed, we are optimistic about what we see ahead for Union Pacific in 2007,” Young said.

 

This excerpt taken from the UNP 10-K filed Feb 24, 2006.

2006 Outlook

 

·  

Safety – Operating a safe railroad benefits our employees, our customers, and the public. Our 2006 employee safety program addresses the key drivers of 2005 performance. The large number of new employees and managers will be trained, tested, and participate in quality assurance activities. We continue to apply technology to enhance safety. From a public safety standpoint, we will continue our efforts to upgrade and close crossings, install video cameras on locomotives, and educate the public on crossing safety, along with other activities. We will continue our derailment prevention efforts, emphasizing the use of key factor analysis.

 

·  

Commodity Revenue Growth – We expect record revenue levels to continue in 2006 based on current economic indicators, forecasted demand, and the opportunity to reprice 13% of our business. We have established a target for year-over-year commodity revenue growth over 10% percent. We are projecting yield increases in all of our major commodity groups and we intend to manage total volume growth to 3% in an effort to improve returns. Volume growth is expected to occur in the energy, intermodal, and industrial products commodity groups.

 

·  

Transportation Plan – In 2005, we continued to implement the Unified Plan, which streamlined segments of our transportation plan. In 2006, we will continue to evaluate traffic flows and network logistic patterns to identify additional opportunities to simplify operations and improve network efficiency. We plan to maintain adequate manpower and locomotives, improve productivity using industrial engineering techniques, and improve our operating margins.

 

·  

Fuel Prices – We expect that fuel prices will remain high, with crude oil prices hovering in the range of $60 to $65 per barrel throughout the year. To reduce the impact of fuel price on earnings, we will continue to increase the amount of traffic subject to fuel surcharge programs.

 

·  

Capital Plan – In 2006, we expect our cash capital expenditures to be approximately $2.2 billion and the net present value of additional long-term operating leases to be approximately $500 million. These expenditures will be used to maintain track and structures, continue capacity expansions on our main lines in constrained corridors, remove bottlenecks, upgrade and augment equipment to better meet customer needs, build and improve facilities and terminals, and develop and implement new technologies. Major capital projects in 2006 include expanding double track on the Sunset Corridor; continuing enhancements on the SPRB Joint Line; improving the freight car terminal infrastructure in San Antonio, Dallas/Fort Worth, and Houston; and continuing installation of centralized track control across Iowa. We expect to fund our 2006 cash capital expenditures through cash generated from operations, the sale or lease of various operating and

 

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non-operating properties, and cash on hand at December 31, 2005. This focused capital plan will help us improve network velocity and facilitate revenue growth.

 

·  

Financial Expectations – We anticipate revenue growth and continued network improvement in 2006, and financial results should exceed 2005 levels. Our expectations include generating diluted earnings per share in the range of $4.60 to $4.80 and improving our operating ratio by 2.5 to 3.0 percentage points compared to 2005. Free cash flow for the year should exceed $300 million. Our free cash flow target reflects approximately $450 to $500 million of higher cash tax payments resulting from the impact of higher cash tax rates and higher expected earnings.

 

This excerpt taken from the UNP 8-K filed Jan 19, 2006.

2006 Outlook

 

“Looking ahead, we are optimistic about 2006. Our network is more resilient than it was at this time last year and we are continuing to build momentum,” Young said. “We expect demand will continue to be strong, particularly in the areas of coal and intermodal.

 

“In 2006, we will focus on providing better service to our customers, improving the efficiency of our network and increasing the financial returns on our business.”

 

This excerpt taken from the UNP 10-K filed Feb 25, 2005.

2005 Outlook

 

·   Safety In 2005, operating safety will continue to be our first priority. With our extensive hiring efforts, our approach to safety for our new employees incorporates training, communication, and quality assurance. With respect to public safety, we will continue our efforts to upgrade and close crossings, improve visibility at crossings, install video cameras on locomotives, and educate the public on crossing safety. We will also continue our focus on derailment prevention.

 

·   Revenue Growth – Record revenue levels are expected to continue in 2005. We have established a target for year-over-year commodity revenue growth of five to seven percent. We intend to manage total volume growth to one to two percent, and we are projecting yield increases in all of our major commodity groups. We expect the largest percentage increases in revenue from the energy, intermodal, and industrial products groups, and we should see steady but more modest increases in revenue from automotive, chemical, and agricultural shipments.

 

·   Energy Prices – We expect that fuel prices will remain volatile throughout the year. To help reduce the impact of fuel price volatility on earnings, we will continue to increase the amount of traffic subject to a fuel surcharge.

 

·  

Capital Plan – In 2005, we expect our cash capital expenditures to be approximately $2 billion. These expenditures will be used to maintain track and structures, continue capacity expansions on our main lines in constrained corridors, remove bottlenecks, upgrade and augment equipment to better meet customer

 

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needs, build and improve facilities and terminals, and develop and implement new technologies. We expect to fund our 2005 capital expenditures through cash generated from operations, additional debt financings, the sale or lease of various operating and non-operating properties, and cash on hand at December 31, 2004. In addition to cash capital expenditures, we expect to acquire locomotives and certain other equipment through short- and long-term operating leases. This focused capital plan is designed to assist in expanding capacity, improving network velocity, and facilitating revenue growth.

 

·   Transportation Plan – In the latter part of 2004, we initiated a comprehensive redesign of our transportation plan. We expect to fully implement this new Unified Plan by the middle of 2005. The new plan is intended to simplify our operations, improve network velocity, and better manage the volume of traffic flowing on our network in the face of continued strong demand. We are also using industrial engineering techniques to increase throughput and improve terminal processing.

 

·   California Weather Impact – In early January of 2005, a massive storm hit California and Nevada. Our rail system suffered significant damage, resulting in the temporary shutdown of five of six routes in and out of Los Angeles. Two of those routes required extensive reconstruction. Embargos were instituted to restrict traffic to and from Southern California and the Las Vegas area until service could be restored, while a number of trains were rerouted onto other serviceable tracks. We are still assessing the financial impact of the storm. Although we have insurance coverage and are subject to a $50 million deductible, we will not be able to finalize matters with our insurance carriers for some time.

 

This excerpt taken from the UNP 8-K filed Jan 24, 2005.

2005 Outlook

 

“At the top of our list for 2005 is improving service to our customers,” Davidson said.

 

“Over the past year, efforts to increase our train crew and locomotive resources have been

 

successful. The next step, already underway, is to improve our network management processes

 

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to make these resources more productive. We are engaged in a comprehensive redesign of our

 

operating network. We are calling this program our Unified Plan, and we expect to implement

 

this plan by the end of the second quarter. Through these efforts, we believe we can simplify our

 

operations, improve velocity and better manage the volume flowing onto our network in the face

 

of continued strong demand.

 

“The year is off to a difficult start with the recent severe storm in California and Nevada,

 

but we continue to believe that 2005 will be a better year for our company. As we put the

 

weather challenges behind us, and our new network initiatives gain momentum, we expect to see

 

improvements in both our service to customers and returns to our shareholders.”

 

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.

 

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