Union Pacific 2006 Annual Report Download - page 5

• Net income increased 57 percent to $1.6 billion.
• Operating ratio improved 5.3 points to 81.5 percent.
• Free cash ow totaled $516 million aer paying
$322 million in dividends to our shareholders and
voluntarily adding $150 million to fully fund our
employee retirement plan.*

In January, we took additional steps to create value for
our shareholders with an increased dividend and share
repurchase program. Our Board of Directors approved a
17 percent quarterly dividend increase to $0.35 per share.
e Board also authorized a repurchase of up to 20 million
common shares to be completed by year-end 2009.
While we are somewhat cautious about the economic
outlook at the start of 2007, we remain very optimistic about
the long-term potential for our Company. We expect very
strong demand for coal, international intermodal and
ethanol, but slower housing and auto markets could oset
some of the growth. Operationally, we expect to move
increased tonnage across our network with greater eciency.
Capacity expansion programs are needed to carry the
record growth our customers are projecting. Our
investments are targeted in corridors that support strong
growth opportunities, primarily in coal and intermodal.
ey also allow us to enhance overall network uidity and
eciency. Customers value the increased service reliability
that results from more ecient operations. At the same
time, they understand that today’s transportation rates
must support investments for future growth.
We are condent that our business returns will support
these investments. Our return on invested capital improved
2.5 points in 2006, to 8.2 percent, and we are focused on
further improvement.*

UP’s employees are at the heart of our eorts to provide
quality service, improve nancial returns and support the
communities in which we operate. is will continue to be
true as our workforce changes over the next several years.
Roughly 25 percent of UP’s current employees are new to
the Company since 2003. An ongoing priority for 2007 is
recruiting top candidates with a diversity of experience,
cultural backgrounds and interests to UP. rough eorts
such as UP’s Operations Management Training program,
the U.S. Army’s PaYS (Partnership for Youth Success),
the Marine Civilian Development Program and college
recruiting, we hired more than 6,400 new employees in
2006, and expect to hire another 4,500 in 2007. Recognition
as a top employer by magazines such as G.I. Jobs, Working
Mother and LATINA Style provides evidence that UP is an
“Employer of Choice.”
Although many long-service employees retired from
Union Pacic over the past year, most noteworthy was our
Chairman, Dick Davidson. Dick began his career in 1960 as
a brakeman working his way through college. His retirement
from Union Pacic in January 2007 marks the end of a long
and successful chapter in the Company’s history. We all owe
Dick a huge debt of gratitude for his leadership and vision in
helping create today’s Union Pacic. We wish him a long,
healthy and happy retirement, which is well deserved.
I am pleased to welcome two new board members,
Andrew Card and omas (Mack) McLarty. eir varied
backgrounds and diverse experience will be valued additions
to our board, and I look forward to working with them in
the years ahead.
Coming o a record-setting year in 2006, expectations
for 2007 are high. We will measure success by how well
we increase shareholder returns, deliver customer value,
enhance our reputation in the communities where we
operate and instill employee pride. Our safety initiatives,
growth strategy, capital investments, environmental
initiatives and training programs all are directed at
achieving these goals. Union Pacic has a great history,
and we’re looking forward to a great future.
Jim Young
Chairman, President and Chief Executive Ocer
3
* For reconciliations to GAAP for our 2005 income tax adjusted return on invested capital and free cash ow calculations, please refer to the Union Pacic Web site under Investor Relations.