This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Union Pacific Corp. (UNP) on 22 January, 2009.

Management:

- Chairman, President and CEO: Jim Young
- EVP, Marketing and Sales: Jack Koraleski
- EVP, Operations: Dennis Duffy
- EVP of Finance and CFO: Rob Knight

Key Investors Issues

- Earnings grew 41% to $661 million or $1.31 per share, from $491 million or 93 cents a share in the prior year.
- Revenue grew 2% to $4.3 billion from $4.2 billion in 2007.
- The firm bought back $3.4 million shares, returning nearly $200 million to shareholders.

Full Year Highlights:

- Operating revenue grew 10% to nearly $18 billion.
- Net income grew 26% to a record $2.3 billion or $4.54 a share.
- Share repurchases totaled $1.5 billion bringing the program total up to $3 billion of cash return to shareholders since, January 2007.

Fourth Quarter Highlights

Earnings grew 41% year-over-year to $661 million or $1.31 per share, from $491 million or 93 cents a share in the prior year driven by improved safety, productivity, great service for customers, positive pricing and lower energy cost.

- Falling fuel prices were a nice reversal after paying higher diesel fuel prices over the last seven quarters.
- Revenue grew 2% to $4.3 billion from $4.2 billion in 2007 as price improvement and fuel surcharge tailwinds drove a 16% improvement in average revenue per car more than offsetting the sharp decline in volume.
- The economic problems that dominated the news throughout the quarter clearly impacted volume with the greatest declines in the groups most sensitive to the strength of the overall economy.
- Freight revenue totaled $4.1 billion, a 2% increase from 2007 and against the 12% drop in carloadings, pricing gains and increased fuel surcharge recovery drove the yearly growth.

Core price increased roughly six points and although fuel prices actually declined year-over-year, the two-month lag in fuel cost recovery programs drove higher year-over-year recoveries.

- Operating expenses came in at $3.1 billion, a 6% decrease versus 2007 due to the decline in lower fuel expense, which decreased 19% in the quarter.
- Compensation and benefits expense down 2% to $1.1 billion as increased productivity and a significant decrease in volume were the primary drivers of the year-over-year decline.
- Purchase services and materials expense totaled $458 million, up only $2 million as a result of component price inflation, offset by a lower expenses related to our improved productivity and volume decline.

Equipment and other rents expense decreased $13 million or 4% as lower freight volumes particularly for finished vehicles, industrial products and Intermodal shipments resulted in less car hire expense.

- The firm bought back $3.4 million shares, returning nearly $200 million to shareholders.
- UP’s adjusted debt balances at year-end, which totaled $13.9 billion or a 47.4% adjusted debt-to-capital ratio, consistent with how the ratio is viewed by the credit agencies.
- Increased debt levels as well as higher pension and OPEB liabilities contributed to the year-over-year increase.

- Ag products revenue grew 10%, as a 16% improvement in average revenue per car more than offset a 5% decline in volume.
- Feed and wheat shipments declined in both the domestic and export markets with overall whole grain volumes down 16%.
- On the positive side, growth in ethanol and DDG’s continued with growth up more than 20%.
- Expansion of the produce rail express product with the startup of the California Origin early in the quarter drove volume growth of nearly 70% for this truck competitive refrigerated service.

For the quarter, finished vehicle volumes were down 29%, while parts declined 21% and chemical revenues were down 1% as a 14% decline in volume was nearly offset by a 15% improvement in average revenue per car.

- Liquid and dry, which declined 21% and plastics, which was up 18%, refinery issues resulting from the hurricanes, volatile crude oil prices and economic conditions impacted petroleum products.
- Fertilizer volume was down as industry sales declined driven by tightening credit and unstable market prices that led many farmers to delay or even to skip their fall fertilizer application.
- Volume for carloads increased 26%, largely the result of some new unit train business and a strong export market drove increase soda ash volume even as domestic shipments declined due to continued weakness in the housing and automotive markets.
- Energy revenue grew 20% on the strength of a 22% improvement in average revenue per car.
- Strong demand in continuing productivity improvements in our network performance drove a 2% growth in Southern Powder River Basin tonnage.

- Industrial products saw 15% falloff in volume partially offset by a 14% improvement in average revenue per car, unfortunately mix worked against the firm and resulted in a 3% reduction in revenue overall for the quarter.
- The lumber volume fell 30%, as housing starts dropped to their lowest level since the [census bail] began tracking 50 years ago.
- The slump in housing and commercial construction is also impacting roofing, cement and stone and the ladder too were also hit by reduced funding for highway projects.
- Intermodal revenue was down 7% as a 16% decline in volume offset a 10% improvement in average revenue per unit.
- The weak economy also impacted the domestic side where volume declined 9%, despite the continued success of the EMP revitalization effort, which filled volumes with Intermodal marketing companies up over 20%.

Operating Highlights:

- The 2008 service delivering index, a composite metric of all customer commitments, set all-time records for the year and the fourth quarter 84 and 89 respectively.
- Lower volumes have certainly contributed to these results, but the firm has significantly improved the fundamentals of the railroad, largely due to the evergreen unified plan process, continuous focus on inventory management and technology.
- Increased usage of distributed PRO locomotives, which currently move about 55% of gross ton-miles allowed for a more efficient use of locomotive and crude resources as well as saving fuel.
- On the freight car side, working inventory has been reduced by more than 67,000 or 21% including 48,000 cars and storage.

Proposed 2009 capital plan will total around $2.8 billion, nearly 80% of the spend represents replacement and renewal of existing capital assets, including 125 new locomotives for nearly $290 million.

- The engineering spend continues the commitment to hardening the core infrastructure for safety, productivity and performance business reasons.
- With soft demand, UP is reducing gross spending by more than $300 million in capacity and commercial facilities and slowing down spending on the Sunset Route, while making strategic investments for long-term growth.

Fiscal 2009 Outlook: