Union Pacific 2007 Annual Report Download - page 37

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33
Financial Condition
Cash Flows
Millions of Dollars 2007 2006 2005
Cash provided by operating activities ................................................... $ 3,277 $ 2,880 $ 2,595
Cash used in investing activities ............................................................ (2,426) (2,042) (2,047)
Cash used in financing activities ........................................................... (800) (784) (752)
Net change in cash and cash equivalents .............................................. $ 51 $ 54 $ (204)
Cash Provided by Operating Activities – We generated higher income in 2007, which was the primary driver of
the increase of cash provided by operating activities. Pension contributions in 2006 totaling $150 million also
contributed to the year-over-year increase. These increases were partially offset by cash payments representing
prior period wage increases in accordance with recent union contract ratifications and higher income tax
payments.
Higher income in 2006 generated the increased cash provided by operating activities, which was partially offset
by higher income tax payments, $150 million in voluntary pension contributions, higher material and supply
inventories, and higher management incentive payments.
Cash Used in Investing Activities – Higher capital investments and work in process balances drove the increase
in cash used in investing in 2007. The third quarter of 2006 included insurance settlement proceeds for
property damages resulting from the 2005 West Coast storm.
An insurance settlement for the January 2005 West Coast storm and lower balances for work in process
decreased the amount of cash used in investing activities in 2006. Higher capital investments and lower
proceeds from asset sales partially offset this decrease.
Cash Used in Financing Activities – The increase in cash used in financing activities resulted primarily from the
use of $1.4 billion to repurchase common shares, payment of higher dividends, and lower net proceeds from
equity compensation plans ($71 million in 2007 compared to $160 million in 2006). These increases were
mostly offset by debt issuances of $1.6 billion in 2007 compared to no issuances in 2006. The increase in cash
used in financing activities in 2006 resulted primarily from lower net proceeds from equity compensation
plans ($160 million in 2006 compared to $262 million in 2005).
The table below details cash capital investments for the years ended December 31, 2007, 2006, and 2005.
Millions of Dollars 2007 2006 2005
Track........................................................................................................ $1,593 $1,487 $1,472
Capacity and commercial facilities ........................................................ 534 510 509
Locomotives and freight cars ................................................................. 263 135 98
Other ....................................................................................................... 106 110 90
Total ........................................................................................................ $2,496 $2,242 $2,169
In 2008, we expect our total capital investments to be 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