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<div style="font-size:12pt"><p>For purposes of this report, unless the context otherwise requires, all references herein to the “Corporation”, “UPC”, “we”, “us”, and “our” mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which will be separately referred to herein as “UPRR” or the “Railroad”. <br /><br />1. Basis of Presentation – Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP). Our Consolidated Statement of Financial Position at December 31, 2008, is derived from audited financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and notes thereto contained in our 2008 Annual Report on Form 10-K. The results of operations for the nine months ended September 30, 2009, are not necessarily indicative of the results for the entire year ending December 31, 2009. <br /><br />We evaluated the effects of all subsequent events through October 22, 2009, the date of this report, which is concurrent with the date we file this report with the U.S. Securities and Exchange Commission (SEC).</p></div>
<div style="font-size:12pt"><p>2. Stock Split – On May 28, 2008, we completed a two-for-one stock split, effected in the form of a 100% stock dividend. The stock split entitled all shareholders of record at the close of business on May 12, 2008, to receive one additional share of our common stock, par value $2.50 per share, for each share of common stock held on that date. All references to common shares and per share amounts have been restated to reflect the stock split for all periods presented.<br /><br /></p></div>
<div style="font-size:12pt"><p>3. Operations and Segmentation – The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although revenue is analyzed by commodity group, we analyze the net financial results of the Railroad as one segment due to the integrated nature of our rail network. The following table provides freight revenue by commodity group:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="295" align="right" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="162" height="43" colspan="4"><i>   Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="170" height="43" colspan="4"><i>    Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="295" align="left" height="20"><i> Millions of Dollars </i></td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><i> </i></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b><i>2009 </i></b></td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><b><i> </i></b></td><td style="border-bottom: 1px solid #000000;" width="52" 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height="20" align="right"><b> </b></td><td width="52" height="20" align="right"> 659 </td><td width="24" height="20" align="right"><b> </b></td><td width="59" height="20" align="right"><b> 1,563 </b></td><td width="26" height="20" align="right"><b> </b></td><td width="61" height="20" align="right"> 1,916 </td></tr><tr><td width="295" height="20" align="left"> Energy </td><td width="29" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"><b> 831 </b></td><td width="29" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"> 1,051 </td><td width="24" height="20" align="right"><b> </b></td><td width="59" height="20" align="right"><b> 2,353 </b></td><td width="26" height="20" align="right"><b> </b></td><td width="61" height="20" align="right"> 2,827 </td></tr><tr><td width="295" height="20" align="left"> Industrial Products </td><td width="29" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"><b> 557 </b></td><td width="29" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"> 906 </td><td width="24" height="20" align="right"><b> </b></td><td width="59" height="20" align="right"><b> 1,634 </b></td><td width="26" height="20" align="right"><b> </b></td><td width="61" height="20" align="right"> 2,556 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="295" align="left" height="20"> Intermodal </td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b> 656 </b></td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 842 </td><td style="border-bottom: 1px solid #000000;" width="24" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="59" align="right" height="20"><b> 1,802 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="61" align="right" height="20"> 2,318 </td></tr><tr><td style="border-top: 1px solid #000000;" width="295" align="left" height="20"> Total freight revenues </td><td style="border-top: 1px solid #000000;" width="29" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20"><b> 3,471 </b></td><td style="border-top: 1px solid #000000;" width="29" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20"> 4,630 </td><td style="border-top: 1px solid #000000;" width="24" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="59" align="right" height="20"><b> 9,832 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="61" align="right" height="20"> 13,038 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="295" align="left" height="20"> Other revenues </td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b> 200 </b></td><td style="border-bottom: 1px solid #000000;" width="29" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 216 </td><td style="border-bottom: 1px solid #000000;" width="24" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="59" align="right" height="20"><b> 557 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="61" align="right" height="20"> 646 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="295" align="left" height="28"> Total operating revenues </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="29" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"><b> 3,671 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="29" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"> 4,846 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="24" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="59" align="right" height="28"><b> 10,389 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="61" align="right" height="28"> 13,684 </td></tr></table></div>
<div style="font-size:12pt"><p>4. Stock-Based Compensation – We have several stock-based compensation plans under which employees and non-employee directors receive stock options, nonvested retention shares, and nonvested stock units. We refer to the nonvested shares and stock units collectively as “retention awards”. We have elected to issue treasury shares to cover option exercises and stock unit vestings, while new shares are issued when retention shares vest. Information regarding stock-based compensation appears in the table below:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="334" align="right" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="146" height="43" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="145" height="43" colspan="4"><i>   Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="334" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="72" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="334" align="left" height="20"> Stock-based compensation, before tax:</td><td style="border-top: 1px solid #000000;" width="40" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="33" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="40" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="33" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="39" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="33" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="40" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="33" align="right" height="20"> </td></tr><tr><td width="334" height="20" align="left">   Stock options </td><td 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style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="39" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"><b> 41 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"> 48 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="334" align="left" height="28"> Total stock-based compensation, after tax </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="40" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"><b> 10 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"> 11 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="39" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"><b> 25 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28"> 30 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="334" align="left" height="28"> Excess tax benefits from equity compensation plans </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="40" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="33" align="right" height="28"><b> 2 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="33" align="right" height="28"> 12 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="39" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="33" align="right" height="28"><b> 5 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="33" align="right" height="28"> 52 </td></tr></table><p>Stock Options – We estimate the fair value of our stock option awards using the Black-Scholes option pricing model. Groups of employees and non-employee directors that have similar historical and expected exercise behavior are considered separately for valuation purposes. The table below shows the year-to-date weighted-average assumptions used for valuation purposes:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="460" align="right" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="164" height="43" colspan="4"><i>     Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="460" align="left" height="20"><i> Weighted-Average Assumptions</i></td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"><b><i> </i></b></td><td style="border-bottom: 1px solid #000000;" width="54" align="right" height="20"><b><i>2009 </i></b></td><td style="border-bottom: 1px solid #000000;" width="26" align="center" height="20"><b><i> </i></b></td><td style="border-bottom: 1px solid #000000;" width="58" align="right" height="20"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="460" align="left" height="20"> Risk-free interest rate </td><td style="border-top: 1px solid #000000;" width="26" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="54" align="right" height="20"><b>1.9% </b></td><td style="border-top: 1px solid #000000;" width="26" align="left" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="58" align="right" height="20">2.8% </td></tr><tr><td width="460" height="20" align="left"> Dividend yield </td><td width="26" height="20" align="left"> </td><td width="54" height="20" align="right"><b>2.3% </b></td><td width="26" height="20" align="left"><b> </b></td><td width="58" height="20" align="right">1.4% </td></tr><tr><td width="460" height="20" align="left"> Expected life (years) </td><td width="26" height="20" align="left"> </td><td width="54" height="20" align="right"><b>5.1  </b></td><td width="26" height="20" align="left"><b> </b></td><td width="58" height="20" align="right">5.3  </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="460" align="left" height="20"> Volatility</td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="54" align="right" height="20"><b>31.3% </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="58" align="right" height="20">22.2% </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="460" align="left" height="28"> Weighted-average grant-date fair value of options granted </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="54" align="right" height="28"><b>11.33  </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="58" align="right" height="28">13.35  </td></tr></table><p>The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility of our stock price over the expected life of the option.<br /></p><p>A summary of stock option activity during the nine months ended September 30, 2009 is presented below: <br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="259" align="left" height="60"><b><i> </i></b></td><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="60" align="right" height="60"><i>Shares (thous.)</i></td><td align="right" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="97" height="60" colspan="2"><i>Weighted-Average Exercise Price</i></td><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="115" align="right" height="60"><i>Weighted-Average Remaining Contractual Term</i></td><td align="right" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="93" height="60" colspan="2"><i>Aggregate Intrinsic Value (millions)</i></td></tr><tr><td style="border-top: 1px solid #000000;" width="259" align="left" height="20"> Outstanding at January 1, 2009</td><td style="border-top: 1px solid #000000;" width="60" align="right" height="20"> 11,983 </td><td style="border-top: 1px solid #000000;" width="45" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20"> 40.81 </td><td style="border-top: 1px solid #000000;" width="115" align="right" height="20">5.6 yrs.</td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="41" align="right" height="20"> 108 </td></tr><tr><td width="259" height="20" align="left"> Granted </td><td width="60" height="20" align="right"> 1,865 </td><td width="45" height="20" align="right"> </td><td width="52" height="20" align="right"> 47.28 </td><td width="115" height="20" align="right">N/A</td><td width="52" height="20" align="right"> </td><td width="41" height="20" align="right">N/A</td></tr><tr><td width="259" height="20" align="left"> Exercised </td><td width="60" height="20" align="right"> (511)</td><td width="45" height="20" align="right"> </td><td width="52" height="20" align="right"> 34.16 </td><td width="115" height="20" align="right">N/A</td><td width="52" height="20" align="right"> </td><td width="41" height="20" align="right">N/A</td></tr><tr><td style="border-bottom: 1px solid #000000;" width="259" align="left" height="20"> Forfeited or expired </td><td style="border-bottom: 1px solid #000000;" width="60" align="right" height="20"> (14)</td><td style="border-bottom: 1px solid #000000;" width="45" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 56.49 </td><td style="border-bottom: 1px solid #000000;" width="115" align="right" height="20">N/A</td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="41" align="right" height="20">N/A</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="259" align="left" height="28"> Outstanding at September 30, 2009</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="60" align="right" height="28"> 13,323 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="45" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="28"> 41.95 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="115" align="right" height="28">5.5 yrs.</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="41" align="right" height="28"> 225 </td></tr><tr><td style="border-top: 1px solid #000000;" width="259" align="left" height="20"> Vested or expected to vest </td><td align="right" style="border-top: 1px solid #000000;" width="60" height="40" rowspan="2"> 13,224 </td><td align="right" style="border-top: 1px solid #000000;" width="45" height="40" rowspan="2">$</td><td align="right" style="border-top: 1px solid #000000;" width="52" height="40" rowspan="2"> 41.88 </td><td align="right" style="border-top: 1px solid #000000;" width="115" height="40" rowspan="2">5.5 yrs.</td><td align="right" style="border-top: 1px solid #000000;" width="52" height="40" rowspan="2">$</td><td align="right" style="border-top: 1px solid #000000;" width="41" height="40" rowspan="2"> 224 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="259" align="left" height="20">   at September 30, 2009</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="259" align="left" height="28"> Options exercisable at September 30, 2009</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="60" align="right" height="28"> 9,999 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="45" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"> 38.63 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="115" align="right" height="28">4.5 yrs.</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="41" align="right" height="28"> 199 </td></tr></table><p>Stock options are granted at the closing price on the date of grant, have ten-year contractual terms, and vest no later than three years from the date of grant. None of the stock options outstanding at September 30, 2009 are subject to performance or market-based vesting conditions.<br /></p><p>At September 30, 2009, there was $27 million of unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.4 years. Additional information regarding stock option exercises appears in the table below:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="343" align="left" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="140" height="43" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="139" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="343" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="67" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="69" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="70" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="343" align="left" height="20"> Intrinsic value of stock options exercised</td><td style="border-top: 1px solid #000000;" width="22" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="45" align="right" height="20"><b> 7 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="47" align="right" height="20"> 38 </td><td style="border-top: 1px solid #000000;" width="24" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="45" align="right" height="20"><b> 11 </b></td><td style="border-top: 1px solid #000000;" width="24" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="46" align="right" height="20"> 163 </td></tr><tr><td width="343" height="20" align="left"> Cash received from option exercises</td><td width="22" height="20" align="left"> </td><td width="45" height="20" align="right"><b> 12 </b></td><td width="26" height="20" align="right"><b> </b></td><td width="47" height="20" align="right"> 17 </td><td width="24" height="20" align="left"> </td><td width="45" height="20" align="right"><b> 18 </b></td><td width="24" height="20" align="right"><b> </b></td><td width="46" height="20" align="right"> 79 </td></tr><tr><td width="343" height="20" align="left"> Treasury shares repurchased for employee payroll taxes</td><td width="22" height="20" align="left"> </td><td width="45" height="20" align="right"><b> (3)</b></td><td width="26" height="20" align="right"><b> </b></td><td width="47" height="20" align="right"> (3)</td><td width="24" height="20" align="left"> </td><td width="45" height="20" align="right"><b> (3)</b></td><td width="24" height="20" align="right"><b> </b></td><td width="46" height="20" align="right"> (28)</td></tr><tr><td width="343" height="20" align="left"> Tax benefit realized from option exercises</td><td width="22" height="20" align="left"> </td><td width="45" height="20" align="right"><b> 2 </b></td><td width="26" height="20" align="right"><b> </b></td><td width="47" height="20" align="right"> 14 </td><td width="24" height="20" align="left"> </td><td width="45" height="20" align="right"><b> 4 </b></td><td width="24" height="20" align="right"><b> </b></td><td width="46" height="20" align="right"> 61 </td></tr><tr><td style="border-bottom: 2px solid #000000;" width="343" align="left" height="20"> Aggregate grant-date fair value of stock options vested</td><td style="border-bottom: 2px solid #000000;" width="22" align="left" height="20"> </td><td style="border-bottom: 2px solid #000000;" width="45" align="right" height="20"><b> 0 </b></td><td style="border-bottom: 2px solid #000000;" width="26" align="right" height="20"><b> </b></td><td style="border-bottom: 2px solid #000000;" width="47" align="right" height="20"> 0 </td><td style="border-bottom: 2px solid #000000;" width="24" align="left" height="20"> </td><td style="border-bottom: 2px solid #000000;" width="45" align="right" height="20"><b> 29 </b></td><td style="border-bottom: 2px solid #000000;" width="24" align="right" height="20"><b> </b></td><td style="border-bottom: 2px solid #000000;" width="46" align="right" height="20"> 21 </td></tr></table><p>Retention Awards – The fair value of retention awards is based on the closing price of the stock on the grant date. Dividends and dividend equivalents are paid to participants during the vesting periods.<br /><br />Changes in our retention awards during the nine months ended September 30, 2009 were as follows:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="408" align="left" height="40"><b><i> </i></b></td><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="72" align="right" height="40"><i>Shares (thous.)</i></td><td align="right" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="144" height="40" colspan="2"><i>Weighted-Average Grant-Date Fair Value</i></td></tr><tr><td style="border-top: 1px solid #000000;" width="408" align="left" height="20"> Nonvested at January 1, 2009</td><td style="border-top: 1px solid #000000;" width="72" align="right" height="20"> 2,015 </td><td style="border-top: 1px solid #000000;" width="93" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> 49.39 </td></tr><tr><td width="408" height="20" align="left"> Granted </td><td width="72" height="20" align="right"> 980 </td><td width="93" height="20" align="right"> </td><td width="51" height="20" align="right"> 47.28 </td></tr><tr><td width="408" height="20" align="left"> Vested </td><td width="72" height="20" align="right"> (230)</td><td width="93" height="20" align="right"> </td><td width="51" height="20" align="right"> 32.01 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="408" align="left" height="20"> Forfeited </td><td style="border-bottom: 1px solid #000000;" width="72" align="right" height="20"> (32)</td><td style="border-bottom: 1px solid #000000;" width="93" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"> 51.55 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="408" align="left" height="28"> Nonvested at September 30, 2009</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="72" align="right" height="28"> 2,733 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="93" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="51" align="right" height="28"> 50.08 </td></tr></table><p>Retention awards are granted at no cost to the employee or non-employee director and vest over periods lasting up to four years. At September 30, 2009, there was $72 million of total unrecognized compensation expense related to nonvested retention awards, which is expected to be recognized over a weighted-average period of 2.1 years.<br /></p><p>Performance Retention Awards – In February 2009, our Board of Directors approved performance stock unit grants. Other than different performance targets, the basic terms of these performance stock units are identical to those granted in January 2007 and 2008, including using annual return on invested capital (ROIC) as the performance measure. Additionally, a change was made to an underlying assumption used in connection with calculating a component of ROIC. The discount rate used in both the numerator and denominator when calculating the present value of our future operating lease payments may fluctuate to reflect changes to interest rates and our financing costs. Stock units awarded to selected employees under these grants are subject to continued employment for 37 months and the attainment of certain levels of ROIC. We expense the fair value of the units that are probable of being earned based on our forecasted ROIC over the 3-year performance period. We measure the fair value of these performance stock units based upon the closing price of the underlying common stock as of the date of grant, reduced by the present value of estimated future dividends. Dividend equivalents are paid to participants only after the units are earned.</p><p>The assumptions used to calculate the present value of estimated future dividends related to the February 2009 grant were as follows:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="552" align="left" height="20"><i> </i></td><td align="right" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="72" height="20" colspan="2"><i>2009 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="552" align="left" height="20"> Dividend per share per quarter </td><td style="border-top: 1px solid #000000;" width="27" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="45" align="right" height="20"> 0.27 </td></tr><tr><td style="border-bottom: 2px solid #000000;" width="552" align="left" height="20"> Risk-free interest rate at date of grant </td><td style="border-bottom: 2px solid #000000;" width="27" align="right" height="20"> </td><td style="border-bottom: 2px solid #000000;" width="45" align="right" height="20">1.9% </td></tr></table><p>Changes in our performance retention awards during the nine months ended September 30, 2009 were as follows: <br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="408" align="left" height="40"><b><i> </i></b></td><td style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="72" align="right" height="40"><i>Shares (thous.)</i></td><td align="right" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="144" height="40" colspan="2"><i>Weighted-Average Grant-Date Fair Value</i></td></tr><tr><td style="border-top: 1px solid #000000;" width="408" align="left" height="20"> Nonvested at January 1, 2009</td><td style="border-top: 1px solid #000000;" width="72" align="right" height="20"> 873 </td><td style="border-top: 1px solid #000000;" width="93" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> 50.70 </td></tr><tr><td width="408" height="20" align="left"> Granted </td><td width="72" height="20" align="right"> 449 </td><td width="93" height="20" align="right"> </td><td width="51" height="20" align="right"> 47.28 </td></tr><tr><td width="408" height="20" align="left"> Vested </td><td width="72" height="20" align="right"> (240)</td><td width="93" height="20" align="right"> </td><td width="51" height="20" align="right"> 43.23 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="408" align="left" height="20"> Forfeited </td><td style="border-bottom: 1px solid #000000;" width="72" align="right" height="20"> (20)</td><td style="border-bottom: 1px solid #000000;" width="93" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"> 53.75 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="408" align="left" height="28"> Nonvested at September 30, 2009</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="72" align="right" height="28"> 1,062 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="93" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="51" align="right" height="28"> 50.88 </td></tr></table><p>At September 30, 2009, there was $26 million of total unrecognized compensation expense related to nonvested performance retention awards, which is expected to be recognized over a weighted-average period of 1.5 years. A portion of this expense is subject to achievement of the ROIC levels established for the performance stock unit grants.<br /></p></div>
<div style="font-size:12pt"><p>5. Retirement Plans<br /><br />Pension and Other Postretirement Benefits <br /><br />Pension Plans – We provide defined benefit retirement income to eligible non-union employees through qualified and non-qualified (supplemental) pension plans. Qualified and non-qualified pension benefits are based on years of service and the highest compensation during the latest years of employment, with specific reductions made for early retirements.<br /><br />Other Postretirement Benefits (OPEB) – We provide defined contribution medical and life insurance benefits for eligible retirees. These benefits are funded as medical claims and life insurance premiums are paid.<br /> <br />Expense<br /><br />Both pension and OPEB expense are determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Differences in actual experience in relation to assumptions are not recognized in net income immediately, but are deferred and, if necessary, amortized as pension or OPEB expense.</p><p>The components of our net periodic pension cost were as follows:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="324" align="left" height="20"> </td><td align="center" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="304" height="20" colspan="8"><i>Pension</i></td></tr><tr><td width="324" height="39" align="left"> </td><td align="right" style="border-top: 1px solid #000000;" width="152" height="39" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 1px solid #000000;" width="152" height="39" colspan="4"><i>     Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="324" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="324" align="left" height="20"> Service cost</td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"><b> 10 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"> 8 </td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"><b> 29 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"> 26 </td></tr><tr><td width="324" height="20" align="left"> Interest cost</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 35 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 35 </td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 104 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 101 </td></tr><tr><td width="324" height="20" align="left"> Expected return on plan assets</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> (39)</b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> (38)</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> (120)</b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> (114)</td></tr><tr><td width="324" height="20" align="left"> Amortization of:</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="left"><b> </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="left"> </td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="left"><b> </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="left"> </td></tr><tr><td width="324" height="20" align="left">   Prior service cost</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 1 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 1 </td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 4 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 4 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="324" align="left" height="20">   Actuarial loss</td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"><b> 9 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"> 3 </td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"><b> 22 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="left" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"> 6 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="324" align="left" height="28"> Net periodic benefit cost</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="28"><b> 16 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="28"> 9 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="28"><b> 39 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="28"> 23 </td></tr></table><p>The components of our net periodic OPEB cost/(benefit) were as follows:<br /><br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="324" align="left" height="20"> </td><td align="center" style="border-top: 2px solid #000000;border-bottom: 1px solid #000000;" width="304" height="20" colspan="8"><i>OPEB</i></td></tr><tr><td width="324" height="39" align="left"> </td><td align="right" style="border-top: 1px solid #000000;" width="152" height="39" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 1px solid #000000;" width="152" height="39" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="324" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="76" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="324" align="left" height="20"> Service cost</td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"><b> 0 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"> 0 </td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"><b> 2 </b></td><td style="border-top: 1px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="50" align="right" height="20"> 2 </td></tr><tr><td width="324" height="20" align="left"> Interest cost</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 2 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 7 </td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> 15 </b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> 17 </td></tr><tr><td width="324" height="20" align="left"> Amortization of:</td><td width="26" height="20" align="right"><b> </b></td><td width="50" height="20" align="left"><b> </b></td><td width="26" height="20" align="right"> </td><td width="50" height="20" align="left"> </td><td width="26" height="20" align="right"><b> </b></td><td width="50" height="20" align="left"><b> </b></td><td width="26" height="20" align="right"> </td><td width="50" height="20" align="left"> </td></tr><tr><td width="324" height="20" align="left">   Prior service credit</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> (14)</b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> (9)</td><td width="26" height="20" align="left"><b> </b></td><td width="50" height="20" align="right"><b> (31)</b></td><td width="26" height="20" align="left"> </td><td width="50" height="20" align="right"> (26)</td></tr><tr><td style="border-bottom: 1px solid #000000;" width="324" align="left" height="20">   Actuarial loss</td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"><b> 2 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"> 5 </td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"><b> 10 </b></td><td style="border-bottom: 1px solid #000000;" width="26" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="50" align="right" height="20"> 8 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="324" align="left" height="20"> Net periodic benefit cost/(benefit)</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="20"><b> (10)</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="20"> 3 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="20"><b> (4)</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="26" align="right" height="20">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="50" align="right" height="20"> 1 </td></tr></table><p>Cash Contributions <br /><br />For the nine months ended September 30, 2009, we have made $205 million of cash contributions to the qualified pension plan. Any additional contributions made in the fourth quarter will be based on cash generated from operations and financial market considerations. All contributions made to the qualified pension plan during the nine months ended September 30, 2009 were voluntary and were made with cash generated from operations.</p></div>
<div style="font-size:12pt"><p>6. Other Income – Other income included the following:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="341" align="left" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="139" height="43" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="139" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="341" align="left" height="19"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="58" height="19" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="81" height="19" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="58" height="19" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="81" height="19" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="341" align="left" height="20"> Rental income</td><td style="border-top: 1px solid #000000;" width="19" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="39" align="right" height="20"><b> 17 </b></td><td style="border-top: 1px solid #000000;" width="43" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20"> 23 </td><td style="border-top: 1px solid #000000;" width="19" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="39" align="right" height="20"><b> 56 </b></td><td style="border-top: 1px solid #000000;" width="40" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="41" align="right" height="20"> 67 </td></tr><tr><td width="341" height="20" align="left"> Net gain on non-operating asset dispositions</td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> 6 </b></td><td width="43" height="20" align="right"> </td><td width="38" height="20" align="right"> 11 </td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> 138 </b></td><td width="40" height="20" align="right"> </td><td width="41" height="20" align="right"> 30 </td></tr><tr><td width="341" height="20" align="left"> Interest income</td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> 1 </b></td><td width="43" height="20" align="right"> </td><td width="38" height="20" align="right"> 4 </td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> 5 </b></td><td width="40" height="20" align="right"> </td><td width="41" height="20" align="right"> 16 </td></tr><tr><td width="341" height="20" align="left"> Sale of receivables fees</td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> (2)</b></td><td width="43" height="20" align="right"> </td><td width="38" height="20" align="right"> (5)</td><td width="19" height="20" align="right"><b> </b></td><td width="39" height="20" align="right"><b> (7)</b></td><td width="40" height="20" align="right"> </td><td width="41" height="20" align="right"> (17)</td></tr><tr><td style="border-bottom: 1px solid #000000;" width="341" align="left" height="20"> Non-operating environmental costs and other</td><td style="border-bottom: 1px solid #000000;" width="19" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="39" align="right" height="20"><b> (8)</b></td><td style="border-bottom: 1px solid #000000;" width="43" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="38" align="right" height="20"> (10)</td><td style="border-bottom: 1px solid #000000;" width="19" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="39" align="right" height="20"><b> (20)</b></td><td style="border-bottom: 1px solid #000000;" width="40" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="41" align="right" height="20"> (29)</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="341" align="left" height="28"> Total</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="19" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="39" align="right" height="28"><b> 14 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="43" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28"> 23 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="19" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="39" align="right" height="28"><b> 172 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="40" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="41" align="right" height="28"> 67 </td></tr></table><p>In June of 2009, we completed a $118 million sale of land to the Regional Transportation District (RTD) in Colorado, resulting in a $116 million pre-tax gain. The agreement with the RTD involves a 33-mile industrial lead track in Boulder, Colorado.<br /></p></div>
<div style="font-size:12pt"><p>7. Income Taxes – Internal Revenue Service (IRS) examinations have been completed and settled for all years prior to 1999, and the statute of limitations bars any additional tax assessments. Some interest calculations remain open back to 1986. The IRS has completed its examinations and issued notices of deficiency for tax years 1999 through 2006. We disagree with many of their proposed adjustments, and we are at IRS Appeals for these years. Additionally, several state tax authorities are examining our state income tax returns for tax years 2000 through 2006.<br /><br />At September 30, 2009, our liability for unrecognized tax benefits was $50 million, of which we classified a net receivable of $8 million as current, primarily in anticipation of interest refunds we expect to receive within the next 12 months.<br /><br />In February of 2009, California enacted legislation that changed how corporate taxpayers determine the amount of their income subject to California tax. The change reduced our deferred tax expense by $14 million in the first quarter of 2009.</p></div>
<div style="font-size:12pt"><p>8. Earnings Per Share<br /><br />The following table provides a reconciliation between basic and diluted earnings per share for the three and nine months ended September 30:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="338" align="left" height="43"><b><i> </i></b></td><td align="right" style="border-top: 2px solid #000000;" width="146" height="43" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="138" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="338" align="left" height="20"><i> Millions, Except Per Share Amounts</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="73" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="66" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="72" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="338" align="left" height="28"> Net income </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="22" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"><b> 517 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="22" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"> 703 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"><b> 1,347 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="21" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"> 1,677 </td></tr><tr><td style="border-top: 1px solid #000000;" width="338" align="left" height="20"> Weighted-average number of shares outstanding: </td><td style="border-top: 1px solid #000000;" width="22" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="22" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="21" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> </td></tr><tr><td width="338" height="20" align="left">     Basic </td><td width="22" height="20" align="right"><b> </b></td><td width="51" height="20" align="right"><b>503.1 </b></td><td width="22" height="20" align="right"> </td><td width="51" height="20" align="right"> 506.6 </td><td width="15" height="20" align="right"><b> </b></td><td width="51" height="20" align="right"><b>502.9 </b></td><td width="21" height="20" align="right"> </td><td width="51" height="20" align="right"> 513.1 </td></tr><tr><td width="338" height="20" align="left">     Dilutive effect of stock options </td><td width="22" height="20" align="right"><b> </b></td><td width="51" height="20" align="right"><b>2.5 </b></td><td width="22" height="20" align="right"> </td><td width="51" height="20" align="right"> 3.6 </td><td width="15" height="20" align="right"><b> </b></td><td width="51" height="20" align="right"><b>1.3 </b></td><td width="21" height="20" align="right"> </td><td width="51" height="20" align="right"> 3.7 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="338" align="left" height="20">     Dilutive effect of retention shares and units </td><td style="border-bottom: 1px solid #000000;" width="22" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"><b>1.4 </b></td><td style="border-bottom: 1px solid #000000;" width="22" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"> 1.1 </td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"><b>1.2 </b></td><td style="border-bottom: 1px solid #000000;" width="21" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="51" align="right" height="20"> 1.0 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="338" align="left" height="28"> Diluted </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="22" align="right" height="28"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"><b>507.0 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="22" align="right" height="28"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"> 511.3 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"><b>505.4 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="21" align="right" height="28"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="51" align="right" height="28"> 517.8 </td></tr><tr><td style="border-top: 1px solid #000000;" width="338" align="left" height="20"> Earnings per share – basic </td><td style="border-top: 1px solid #000000;" width="22" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"><b> 1.03 </b></td><td style="border-top: 1px solid #000000;" width="22" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> 1.39 </td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"><b> 2.68 </b></td><td style="border-top: 1px solid #000000;" width="21" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="51" align="right" height="20"> 3.27 </td></tr><tr><td width="338" height="20" align="left"> Earnings per share – diluted </td><td width="22" height="20" align="right"><b>$</b></td><td width="51" height="20" align="right"><b> 1.02 </b></td><td width="22" height="20" align="right">$</td><td width="51" height="20" align="right"> 1.38 </td><td width="15" height="20" align="right"><b>$</b></td><td width="51" height="20" align="right"><b> 2.67 </b></td><td width="21" height="20" align="right">$</td><td width="51" height="20" align="right"> 3.24 </td></tr><tr><td style="border-bottom: 2px solid #000000;" width="338" align="left" height="41"> Stock options excluded as their inclusion would be antidilutive</td><td style="border-bottom: 2px solid #000000;" width="22" align="left" height="41"> </td><td style="border-bottom: 2px solid #000000;" width="51" align="right" height="41"><b>2.1 </b></td><td style="border-bottom: 2px solid #000000;" width="22" align="left" height="41"> </td><td style="border-bottom: 2px solid #000000;" width="51" align="right" height="41">0 </td><td style="border-bottom: 2px solid #000000;" width="15" align="left" height="41"> </td><td style="border-bottom: 2px solid #000000;" width="51" align="right" height="41"><b>5.7 </b></td><td style="border-bottom: 2px solid #000000;" width="21" align="left" height="41"> </td><td style="border-bottom: 2px solid #000000;" width="51" align="right" height="41">0.5 </td></tr></table></div>
<div style="font-size:12pt"><p>9. Comprehensive Income/(Loss) – Comprehensive income/(loss) was as follows:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td align="left" style="border-top: 2px solid #000000;" width="350" height="43" colspan="2"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="140" height="43" colspan="4"><i>Three Months Ended September 30,</i></td><td align="right" style="border-top: 2px solid #000000;" width="134" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="350" height="20" colspan="2"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="71" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="69" height="20" colspan="2"><i>2008 </i></td><td align="right" style="border-bottom: 1px solid #000000;" width="67" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="67" height="20" colspan="2"><i>2008 </i></td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="350" height="20" colspan="2"> Net income </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="56" align="right" height="20"><b> 517 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="20">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="54" align="right" height="20"> 703 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b> 1,347 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="20">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 1,677 </td></tr><tr><td align="left" style="border-top: 1px solid #000000;" width="350" height="20" colspan="2"> Other comprehensive income/(loss):</td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="56" align="left" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="54" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="52" align="left" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="52" align="left" height="20"> </td></tr><tr><td align="left" colspan="2" height="20" width="350">   Defined benefit plans </td><td width="15" height="20" align="right"><b> </b></td><td width="56" height="20" align="right"><b> 0 </b></td><td width="15" height="20" align="right"> </td><td width="54" height="20" align="right"> 0 </td><td width="15" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"><b> (11)</b></td><td width="15" height="20" align="right"> </td><td width="52" height="20" align="right"> (4)</td></tr><tr><td align="left" colspan="2" height="20" width="350">   Foreign currency translation </td><td width="15" height="20" align="right"><b> </b></td><td width="56" height="20" align="right"><b> 1 </b></td><td width="15" height="20" align="right"> </td><td width="54" height="20" align="right"> 1 </td><td width="15" height="20" align="right"><b> </b></td><td width="52" height="20" align="right"><b> 2 </b></td><td width="15" height="20" align="right"> </td><td width="52" height="20" align="right"> 10 </td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="350" height="20" colspan="2">   Derivatives</td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="56" align="right" height="20"><b> 0 </b></td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="54" align="right" height="20"> 0 </td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b> 0 </b></td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 0 </td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="350" height="28" colspan="2"> Total other comprehensive income/(loss) [a] </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="56" align="right" height="28"><b> 1 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="54" align="right" height="28"> 1 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="28"><b> (9)</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="52" align="right" height="28"> 6 </td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="350" height="28" colspan="2"> Total comprehensive income </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="56" align="right" height="28"><b> 518 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="54" align="right" height="28"> 704 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"><b> 1,338 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"> 1,683 </td></tr><tr><td style="border-top: 2px solid #000000;" width="30" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="320" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="15" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="56" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="15" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="54" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="15" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="52" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="15" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="52" align="left" height="13"> </td></tr><tr><td width="30" height="20" align="left"><i>[a]</i></td><td align="left" colspan="9" height="20" width="594"><i>Net of deferred taxes of $1 million and $2 million during the three and nine months ended September 30, 2009, respectively, and $1 million and $7 million during the three and nine months ended September 30, 2008, respectively. </i></td></tr></table><p>The after-tax components of accumulated other comprehensive loss were as follows:<br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="463" align="left" height="20"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="83" height="20" colspan="2"><b><i>Sep. 30,</i></b></td><td align="right" style="border-top: 2px solid #000000;" width="81" height="20" colspan="2"><i>Dec. 31,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="463" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="83" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="81" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="463" align="left" height="20"> Defined benefit plans </td><td style="border-top: 1px solid #000000;" width="37" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="46" align="right" height="20"><b> (670)</b></td><td style="border-top: 1px solid #000000;" width="37" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="44" align="right" height="20"> (659)</td></tr><tr><td width="463" height="20" align="left"> Foreign currency translation </td><td width="37" height="20" align="left"><b> </b></td><td width="46" height="20" align="right"><b> (39)</b></td><td width="37" height="20" align="left"> </td><td width="44" height="20" align="right"> (41)</td></tr><tr><td style="border-bottom: 1px solid #000000;" width="463" align="left" height="20"> Derivatives </td><td style="border-bottom: 1px solid #000000;" width="37" align="left" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="46" align="right" height="20"><b> (4)</b></td><td style="border-bottom: 1px solid #000000;" width="37" align="left" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="44" align="right" height="20"> (4)</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="463" align="left" height="28"> Total </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="37" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="46" align="right" height="28"><b> (713)</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="37" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="44" align="right" height="28"> (704)</td></tr></table></div>
<div style="font-size:12pt"><p>10. Properties<br /><br />The following table lists the major categories of property and equipment, as well as the weighted-average composite depreciation rate for each category:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="30" align="left" height="20"> </td><td style="border-top: 2px solid #000000;" width="334" align="left" height="20"> </td><td align="right" style="border-top: 2px solid #000000;" width="81" height="20" colspan="2"><b><i>Sep. 30,</i></b></td><td align="right" style="border-top: 2px solid #000000;" width="81" height="20" colspan="2"><i>Dec. 31,</i></td><td style="border-top: 2px solid #000000;" width="98" align="right" height="20"><i>Depreciation</i></td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="364" height="20" colspan="2"><i> Millions of Dollars, Except Percentages</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="81" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="81" height="20" colspan="2"><i>2008 </i></td><td style="border-bottom: 1px solid #000000;" width="98" align="right" height="20"><i>Rate for 2009</i></td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="364" height="20" colspan="2"> Land </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 4,857 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 4,861 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="98" align="right" height="20">N/A</td></tr><tr><td align="left" style="border-top: 1px solid #000000;" width="364" height="20" colspan="2"> Road:</td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="65" align="left" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="65" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="98" align="left" height="20"> </td></tr><tr><td align="left" colspan="2" height="20" width="364">   Rail and other track material [a]</td><td width="16" height="20" align="right"><b> </b></td><td width="65" height="20" align="right"><b> 11,824 </b></td><td width="16" height="20" align="right"> </td><td width="65" height="20" align="right"> 11,366 </td><td width="98" height="20" align="right">3.6% </td></tr><tr><td align="left" colspan="2" height="20" width="364">   Ties </td><td width="16" height="20" align="right"><b> </b></td><td width="65" height="20" align="right"><b> 7,170 </b></td><td width="16" height="20" align="right"> </td><td width="65" height="20" align="right"> 6,827 </td><td width="98" height="20" align="right">2.7% </td></tr><tr><td align="left" colspan="2" height="20" width="364">   Ballast </td><td width="16" height="20" align="right"><b> </b></td><td width="65" height="20" align="right"><b> 3,812 </b></td><td width="16" height="20" align="right"> </td><td width="65" height="20" align="right"> 3,635 </td><td width="98" height="20" align="right">2.9% </td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="364" height="20" colspan="2">   Other [b] </td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 12,873 </b></td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 12,520 </td><td style="border-bottom: 1px solid #000000;" width="98" align="right" height="20">2.4% </td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="364" height="20" colspan="2">   Total Road </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 35,679 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 34,348 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="98" align="right" height="20">2.9% </td></tr><tr><td align="left" style="border-top: 1px solid #000000;" width="364" height="20" colspan="2"> Equipment:</td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="65" align="left" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="65" align="left" height="20"> </td><td style="border-top: 1px solid #000000;" width="98" align="left" height="20"> </td></tr><tr><td align="left" colspan="2" height="20" width="364">   Locomotives </td><td width="16" height="20" align="right"><b> </b></td><td width="65" height="20" align="right"><b> 6,052 </b></td><td width="16" height="20" align="right"> </td><td width="65" height="20" align="right"> 5,157 </td><td width="98" height="20" align="right">4.9% </td></tr><tr><td align="left" colspan="2" height="20" width="364">   Freight cars </td><td width="16" height="20" align="right"><b> </b></td><td width="65" height="20" align="right"><b> 1,950 </b></td><td width="16" height="20" align="right"> </td><td width="65" height="20" align="right"> 1,985 </td><td width="98" height="20" align="right">4.2% </td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="364" height="20" colspan="2">   Work equipment and other </td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 163 </b></td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 158 </td><td style="border-bottom: 1px solid #000000;" width="98" align="right" height="20">3.6% </td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="364" height="20" colspan="2">   Total Equipment </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 8,165 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 7,300 </td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="98" align="right" height="20">4.7% </td></tr><tr><td align="left" style="border-top: 1px solid #000000;" width="364" height="20" colspan="2"> Technology and other </td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-top: 1px solid #000000;" width="65" align="right" height="20"><b> 510 </b></td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-top: 1px solid #000000;" width="65" align="right" height="20"> 468 </td><td style="border-top: 1px solid #000000;" width="98" align="right" height="20">12.1% </td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="364" height="20" colspan="2"> Construction in progress </td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> 835 </b></td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"> 938 </td><td style="border-bottom: 1px solid #000000;" width="98" align="right" height="20">N/A</td></tr><tr><td align="left" style="border-top: 1px solid #000000;" width="364" height="20" colspan="2"> Total properties </td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="65" align="right" height="20"><b> 50,046 </b></td><td style="border-top: 1px solid #000000;" width="16" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="65" align="right" height="20"> 47,915 </td><td style="border-top: 1px solid #000000;" width="98" align="right" height="20">N/A</td></tr><tr><td align="left" style="border-bottom: 1px solid #000000;" width="364" height="20" colspan="2"> Accumulated depreciation </td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"><b> (12,924)</b></td><td style="border-bottom: 1px solid #000000;" width="16" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="65" align="right" height="20"> (12,214)</td><td style="border-bottom: 1px solid #000000;" width="98" align="right" height="20">N/A</td></tr><tr><td align="left" style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="364" height="28" colspan="2"> Net properties </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="16" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="65" align="right" height="28"><b> 37,122 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="16" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="65" align="right" height="28"> 35,701 </td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="98" align="right" height="28">N/A</td></tr><tr><td style="border-top: 2px solid #000000;" width="30" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="334" align="left" height="13"> </td><td style="border-top: 2px solid #000000;" width="16" align="left" height="13"><b> </b></td><td style="border-top: 2px solid #000000;" width="65" align="right" height="13"><b> </b></td><td style="border-top: 2px solid #000000;" width="16" align="right" height="13"><b> </b></td><td style="border-top: 2px solid #000000;" width="65" align="right" height="13"> </td><td style="border-top: 2px solid #000000;" width="98" align="right" height="13"> </td></tr><tr><td width="30" height="17" align="left"><i>[a]</i></td><td align="left" colspan="6" height="17" width="594"><i>Includes a weighted-average composite rate for rail in high-density traffic corridors, which is depreciated primarily on the basis of use as measured in gross ton-miles.</i></td></tr><tr><td width="30" height="3" align="left"><i> </i></td><td width="334" height="3" align="left"><i> </i></td><td width="16" height="3" align="left"><i> </i></td><td width="65" height="3" align="left"><i> </i></td><td width="16" height="3" align="left"><i> </i></td><td width="65" height="3" align="left"><i> </i></td><td width="98" height="3" align="left"><i> </i></td></tr><tr><td width="30" height="17" align="left"><i>[b]</i></td><td align="left" colspan="6" height="17" width="594"><i>Other includes grading, bridges and tunnels, signals, buildings, and other road assets.</i></td></tr></table></div>
<div style="font-size:12pt"><p>11. Accounts Payable and Other Current Liabilities</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="442" align="left" height="20"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="90" height="20" colspan="2"><b><i>Sep. 30,</i></b></td><td align="right" style="border-top: 2px solid #000000;" width="90" height="20" colspan="2"><i>Dec. 31,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="442" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="90" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="90" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="442" align="left" height="20"> Accounts payable</td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20"><b> 615 </b></td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="52" align="right" height="20"> 629 </td></tr><tr><td width="442" height="20" align="left"> Accrued casualty costs</td><td width="38" height="20" align="left"><b> </b></td><td width="52" height="20" align="right"><b> 382 </b></td><td width="38" height="20" align="right"> </td><td width="52" height="20" align="right"> 390 </td></tr><tr><td width="442" height="20" align="left"> Income and other taxes</td><td width="38" height="20" align="left"><b> </b></td><td width="52" height="20" align="right"><b> 373 </b></td><td width="38" height="20" align="right"> </td><td width="52" height="20" align="right"> 207 </td></tr><tr><td width="442" height="20" align="left"> Accrued wages and vacation</td><td width="38" height="20" align="left"><b> </b></td><td width="52" height="20" align="right"><b> 350 </b></td><td width="38" height="20" align="right"> </td><td width="52" height="20" align="right"> 367 </td></tr><tr><td width="442" height="20" align="left"> Dividends and interest</td><td width="38" height="20" align="left"><b> </b></td><td width="52" height="20" align="right"><b> 282 </b></td><td width="38" height="20" align="right"> </td><td width="52" height="20" align="right"> 328 </td></tr><tr><td width="442" height="20" align="left"> Equipment rents payable </td><td width="38" height="20" align="left"><b> </b></td><td width="52" height="20" align="right"><b> 92 </b></td><td width="38" height="20" align="right"> </td><td width="52" height="20" align="right"> 93 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="442" align="left" height="20"> Other</td><td style="border-bottom: 1px solid #000000;" width="38" align="left" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"><b> 481 </b></td><td style="border-bottom: 1px solid #000000;" width="38" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="52" align="right" height="20"> 546 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="442" align="left" height="28"> Total accounts payable and other current liabilities</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"><b> 2,575 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="52" align="right" height="28"> 2,560 </td></tr></table></div>
<div style="font-size:12pt"><p>12. Financial Instruments<br /><br />Strategy and Risk – We may use derivative financial instruments in limited instances for other than trading purposes to assist in managing our overall exposure to fluctuations in interest rates and fuel prices. We are not a party to leveraged derivatives and, by policy, do not use derivative financial instruments for speculative purposes. Derivative financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period. We formally document the nature and relationships between the hedging instruments and hedged items at inception, as well as our risk-management objectives, strategies for undertaking the various hedge transactions, and method of assessing hedge effectiveness. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are charged to earnings. We may use swaps, collars, futures, and/or forward contracts to mitigate the risk of adverse movements in interest rates and fuel prices; however, the use of these derivative financial instruments may limit future benefits from favorable interest rate and fuel price movements.<br /><br />Market and Credit Risk – We address market risk related to derivative financial instruments by selecting instruments with value fluctuations that highly correlate with the underlying hedged item. We manage credit risk related to derivative financial instruments, which is minimal, by requiring high credit standards for counterparties and periodic settlements. At September 30, 2009 and December 31, 2008, we were not required to provide collateral, nor had we received collateral, relating to our hedging activities. <br /><br />Determination of Fair Value – We determine the fair values of our derivative financial instrument positions based upon current fair values as quoted by recognized dealers or the present value of expected future cash flows. <br /><br />Interest Rate Fair Value Hedges – We manage our overall exposure to fluctuations in interest rates by adjusting the proportion of fixed and floating rate debt instruments within our debt portfolio over a given period. We generally manage the mix of fixed and floating rate debt through the issuance of targeted amounts of each as debt matures or as we require incremental borrowings. We employ derivatives, primarily swaps, as one of the tools to obtain the targeted mix. In addition, we also obtain flexibility in managing interest costs and the interest rate mix within our debt portfolio by evaluating the issuance of and managing outstanding callable fixed-rate debt securities.<br /><br />Swaps allow us to convert debt from fixed rates to variable rates and thereby hedge the risk of changes in the debt’s fair value attributable to the changes in interest rates. We account for swaps as fair value hedges using the short-cut method as required by the Derivatives and Hedging Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC); therefore, we do not record any ineffectiveness within our Condensed Consolidated Financial Statements.</p><p>The following is a summary of our interest rate derivatives qualifying as fair value hedges: </p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="464" align="left" height="20"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="80" height="20" colspan="2"><b><i>Sep. 30,</i></b></td><td align="right" style="border-top: 2px solid #000000;" width="80" height="20" colspan="2"><i>Dec. 31,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="464" align="left" height="20"><i> Millions of Dollars, Except Percentages</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="80" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="80" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="464" align="left" height="20"> Amount of debt hedged</td><td style="border-top: 1px solid #000000;" width="37" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="43" align="right" height="20"><b> 250 </b></td><td style="border-top: 1px solid #000000;" width="37" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="43" align="right" height="20"> 250 </td></tr><tr><td width="464" height="20" align="left"> Percentage of total debt portfolio</td><td width="37" height="20" align="left"><b> </b></td><td width="43" height="20" align="right"><b>3% </b></td><td width="37" height="20" align="left"> </td><td width="43" height="20" align="right">3% </td></tr><tr><td style="border-bottom: 2px solid #000000;" width="464" align="left" height="20"> Gross fair value asset position</td><td style="border-bottom: 2px solid #000000;" width="37" align="right" height="20"><b>$</b></td><td style="border-bottom: 2px solid #000000;" width="43" align="right" height="20"><b> 17 </b></td><td style="border-bottom: 2px solid #000000;" width="37" align="right" height="20">$</td><td style="border-bottom: 2px solid #000000;" width="43" align="right" height="20"> 19 </td></tr></table><p>We determined the fair value of our interest rate derivative based upon current fair values as quoted by recognized dealers. As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, we recognized the fair value as a Level 2 valuation. A Level 2 valuation is defined as observable market-based inputs or unobservable inputs that are corroborated by market data.<br /><br />Interest Rate Cash Flow Hedges – We report changes in the fair value of cash flow hedges in accumulated other comprehensive income/loss until the hedged item affects earnings. At September 30, 2009 and December 31, 2008, we had reductions of $4 million recorded as an accumulated other comprehensive income/loss that is being amortized on a straight-line basis through September 30, 2014. As of September 30, 2009 and December 31, 2008, we had no interest rate cash flow hedges outstanding.</p><p>Earnings Impact – Our use of derivative financial instruments had the following impact on pre-tax income for the nine months ended: <br /></p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="471" align="left" height="20"> </td><td height="40" width="73" align="right" style="border-top: 2px solid #000000;" rowspan="2" colspan="2"><b><i>Sep. 30, 2009</i></b></td><td height="40" width="79" align="right" style="border-top: 2px solid #000000;" rowspan="2" colspan="2"><i>Sep. 30, 2008</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="471" align="left" height="20"><i> Millions of Dollars</i></td></tr><tr><td style="border-top: 1px solid #000000;" width="471" align="left" height="20"> Decrease in interest expense from interest rate hedging</td><td style="border-top: 1px solid #000000;" width="18" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="55" align="right" height="20"><b> 6 </b></td><td style="border-top: 1px solid #000000;" width="41" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20"> 2 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="471" align="left" height="20"> Decrease in fuel expense from fuel derivatives</td><td style="border-bottom: 1px solid #000000;" width="18" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="55" align="right" height="20"><b> 0 </b></td><td style="border-bottom: 1px solid #000000;" width="41" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="38" align="right" height="20"> 1 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="471" align="left" height="28"> Increase in pre-tax income</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="18" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="55" align="right" height="28"><b> 6 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="41" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28"> 3 </td></tr></table><p>Fair Value of Debt Instruments – The fair value of our short- and long-term debt was estimated using quoted market prices, where available, or current borrowing rates. At September 30, 2009, the fair value of total debt was $11.1 billion, approximately $1.3 billion more than the carrying value. At December 31, 2008, the fair value of total debt was $8.7 billion, approximately $247 million less than the carrying value. At September 30, 2009 and December 31, 2008, approximately $320 million of fixed-rate debt securities contained call provisions that allowed us to retire the debt instruments prior to final maturity, with the payment of fixed call premiums, or in certain cases, at par.<br /><br />Sale of Receivables – The Railroad transfers most of its accounts receivable to Union Pacific Receivables, Inc. (UPRI), a bankruptcy-remote subsidiary, as part of a sale of receivables facility. UPRI sells, without recourse on a 364-day revolving basis, an undivided interest in such accounts receivable to investors. The total capacity to sell undivided interests to investors under the facility was $600 million and $700 million at September 30, 2009 and December 31, 2008, respectively. The value of the outstanding undivided interest held by investors under the facility was $400 million and $584 million at September 30, 2009 and December 31, 2008, respectively. During the nine months ended September 30, 2009, UPRI reduced the outstanding undivided interest held by investors due to a decrease in available receivables. The value of the outstanding undivided interest held by investors is not included in our Condensed Consolidated Financial Statements. The value of the undivided interest held by investors was supported by $921 million and $1,015 million of accounts receivable held by UPRI at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009 and December 31, 2008, the value of the interest retained by UPRI was $521 million and $431 million, respectively. This retained interest is included in accounts receivable in our Condensed Consolidated Financial Statements. The interest sold to investors is sold at carrying value, which approximates fair value, and there is no gain or loss recognized from the transaction. <br /><br />The value of the outstanding undivided interest held by investors could fluctuate based upon the availability of eligible receivables and is directly affected by changing business volumes and credit risks, including default and dilution. If default or dilution ratios increase one percent, the value of the outstanding undivided interest held by investors would not change as of September 30, 2009. Should our credit rating fall below investment grade, the value of the outstanding undivided interest held by investors would be reduced, and, in certain cases, the investors would have the right to discontinue the facility. <br /><br />The Railroad services the sold receivables; however, the Railroad does not recognize any servicing asset or liability as the servicing fees adequately compensate the Railroad for these responsibilities. The Railroad collected approximately $3.4 billion and $4.7 billion during the three months ended September 30, 2009 and 2008, respectively, and $10.1 billion and $13.3 billion during the nine months ended September 30, 2009 and 2008, respectively. UPRI used certain of these proceeds to purchase new receivables under the facility. <br /><br />The costs of the sale of receivables program are included in other income and were $2 million and $5 million for the three months ended September 30, 2009 and 2008, respectively, and $7 million and $17 million for the nine months ended September 30, 2009 and 2008, respectively. The costs include interest, program fees paid to banks, commercial paper issuing costs, and fees for unused commitment availability. <br /><br />The investors have no recourse to the Railroad’s other assets except for customary warranty and indemnity claims. Creditors of the Railroad do not have recourse to the assets of UPRI.<br /><br />In August 2009, the sale of receivables facility was renewed for an additional 364-day period at comparable terms and conditions, although the capacity to sell undivided interests was reduced from $700 million to $600 million.</p></div>
<div style="font-size:12pt"><p>13. Debt<br /><br />Credit Facilities – At September 30, 2009, we had $1.9 billion of credit available under our revolving credit facility (the facility). The facility is designated for general corporate purposes and supports the issuance of commercial paper. We did not draw on the facility during the nine months ended September 30, 2009. Commitment fees and interest rates payable under the facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The facility allows for borrowings at floating rates based on London Interbank Offered Rates, plus a spread, depending upon our senior unsecured debt ratings. The facility requires us to maintain a debt-to-net-worth coverage ratio as a condition to making a borrowing. At September 30, 2009 and December 31, 2008 (and at all times during the first, second, and third quarters), we were in compliance with this covenant. <br /><br />The definition of debt used for purposes of calculating the debt-to-net-worth coverage ratio includes, among other things, certain credit arrangements, capital leases, guarantees and unfunded and vested pension benefits under Title IV of ERISA. At September 30, 2009, the debt-to-net-worth coverage ratio allowed us to carry up to $33 billion of debt (as defined in the facility), and we had $10.7 billion of debt (as defined in the facility) outstanding at that date. Under our current capital plans, we expect to continue to satisfy the debt-to-net-worth coverage ratio; however, many factors beyond our reasonable control could affect our ability to comply with this provision in the future. The facility does not include any other financial restrictions, credit rating triggers (other than rating-dependent pricing), or any other provision that could require us to post collateral. The facility also includes a $75 million cross-default provision and a change-of-control provision. The term of the facility will expire in April 2012, and we currently intend to replace the facility with a substantially similar credit agreement on or before the expiration date, which is consistent with our past practices with respect to our credit facilities.<br /><br />At September 30, 2009, we had no commercial paper outstanding. Outstanding commercial paper balances are supported by our revolving credit facility but do not reduce the amount of borrowings available under the facility. During the nine months ended September 30, 2009, we issued $100 million of commercial paper and repaid $200 million. <br /><br />Shelf Registration Statement and Significant New Borrowings – Under our current shelf registration statement, we may issue, from time to time, any combination of debt securities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings.<br /><br />On February 20, 2009, we issued a total of $750 million of unsecured fixed-rate notes under our shelf registration statement. We issued $350 million of 5.125% notes due February 15, 2014 and $400 million of 6.125% notes due February 15, 2020. The net proceeds from this offering are for general corporate purposes.<br /><br />We have no immediate plans to issue equity securities; however, we will continue to explore opportunities to replace existing debt or access capital through issuances of debt securities under our shelf registration, and, therefore, we may issue additional debt securities at any time. At September 30, 2009, we had remaining authority from our Board of Directors to issue up to $2.25 billion of debt securities under our shelf registration.<br /><br />As of September 30, 2009 and December 31, 2008, we have reclassified as long-term debt approximately $320 million and $400 million, respectively, of debt due within one year that we intend to refinance. This reclassification reflects our ability and intent to refinance any short-term borrowings and certain current maturities of long-term debt on a long-term basis.<br /><br />During the second quarter of 2009, we restructured lease agreements for 813 locomotives resulting in a change in lease classification from operating to capital. As part of the restructuring arrangements, we received $87 million in cash consideration. We recorded capital lease assets of approximately $742 million and related capital lease obligations totaling approximately $843 million. Included in our capital lease obligations is the $87 million in cash consideration and $14 million of accrued operating lease payables that were reclassified as part of our capital lease obligations. Capital lease obligations are reported in our Condensed Consolidated Statements of Financial Position as debt.<br /><br />On October 15, 2009, we entered into a capital lease agreement for 44 locomotives with a total equipment cost of $100 million. The lessor purchased the 44 locomotives from the Corporation and subsequently leased the locomotives back to the Railroad. These capital lease obligations will be reported in our Consolidated Statements of Financial Position as debt at December 31, 2009.</p></div>
<div style="font-size:12pt"><p>14. Commitments and Contingencies<br /><br />Asserted and Unasserted Claims – Various claims and lawsuits are pending against us and certain of our subsidiaries. We cannot fully determine the effect of all asserted and unasserted claims on our consolidated results of operations, financial condition, or liquidity; however, to the extent possible, where asserted and unasserted claims are considered probable and where such claims can be reasonably estimated, we have recorded a liability. We do not expect that any known lawsuits, claims, environmental costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on our consolidated results of operations, financial condition, or liquidity after taking into account liabilities and insurance recoveries previously recorded for these matters.<br /><br />Personal Injury – The cost of personal injuries to employees and others related to our activities is charged to expense based on estimates of the ultimate cost and number of incidents each year. We use third-party actuaries to assist us in measuring the expense and liability, including unasserted claims. The Federal Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages are assessed based on a finding of fault through litigation or out-of-court settlements. We offer a comprehensive variety of services and rehabilitation programs for employees who are injured at work. <br /><br />Our personal injury liability is discounted to present value using applicable U.S. Treasury rates. Approximately 86% of the recorded liability related to asserted claims, and approximately 14% related to unasserted claims at September 30, 2009. Cost estimates can vary over time due to evolving trends in litigation. <br /><br />Our personal injury liability activity was as follows:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="485" align="left" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="136" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="485" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="56" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="80" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="485" align="left" height="20"> Beginning balance</td><td style="border-top: 1px solid #000000;" width="9" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="47" align="right" height="20"><b> 621 </b></td><td style="border-top: 1px solid #000000;" width="33" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="47" align="right" height="20">593 </td></tr><tr><td width="485" height="20" align="left"> Accruals</td><td width="9" height="20" align="right"><b> </b></td><td width="47" height="20" align="right"><b> 99 </b></td><td width="33" height="20" align="right"> </td><td width="47" height="20" align="right"> 162 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="485" align="left" height="20"> Payments</td><td style="border-bottom: 1px solid #000000;" width="9" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="47" align="right" height="20"><b> (126)</b></td><td style="border-bottom: 1px solid #000000;" width="33" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="47" align="right" height="20"> (123)</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="485" align="left" height="28"> Ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="9" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="47" align="right" height="28"><b> 594 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="33" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="47" align="right" height="28"> 632 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="485" align="left" height="28"> Current portion, ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="9" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="47" align="right" height="28"><b> 185 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="33" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="47" align="right" height="28"> 204 </td></tr></table><p>Asbestos – We are a defendant in a number of lawsuits in which current and former employees and other parties allege exposure to asbestos. Additionally, we have received claims for asbestos exposure that have not been litigated. The claims and lawsuits (collectively referred to as “claims”) allege occupational illness resulting from exposure to asbestos-containing products. In most cases, the claimants do not have credible medical evidence of physical impairment resulting from the alleged exposures. Additionally, most claims filed against us do not specify an amount of alleged damages. </p><p>Our asbestos-related liability activity was as follows: </p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="480" align="left" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="137" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="480" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="57" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="80" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="480" align="left" height="20"> Beginning balance</td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="42" align="right" height="20"><b> 213 </b></td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="42" align="right" height="20"> 265 </td></tr><tr><td width="480" height="20" align="left"> Accruals</td><td width="15" height="20" align="right"><b> </b></td><td width="42" height="20" align="left"><b>        -</b></td><td width="38" height="20" align="right"> </td><td width="42" height="20" align="left">        -</td></tr><tr><td style="border-bottom: 1px solid #000000;" width="480" align="left" height="20"> Payments</td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="42" align="right" height="20"><b> (8)</b></td><td style="border-bottom: 1px solid #000000;" width="38" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="42" align="right" height="20"> (9)</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="480" align="left" height="28"> Ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="42" align="right" height="28"><b> 205 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="38" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="42" align="right" height="28"> 256 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="480" align="left" height="28"> Current portion, ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="42" align="right" height="28"><b> 12 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="42" align="right" height="28"> 11 </td></tr></table><p>We have insurance coverage for a portion of the costs incurred to resolve asbestos-related claims, and we have recognized an asset for estimated insurance recoveries at September 30, 2009 and December 31, 2008. <br /><br />We believe that our estimates of liability for asbestos-related claims and insurance recoveries are reasonable and probable. The amounts recorded for asbestos-related liabilities and related insurance recoveries were based on currently known facts. However, future events, such as the number of new claims to be filed each year, average settlement costs, and insurance coverage issues, could cause the actual costs and insurance recoveries to be higher or lower than the projected amounts. Estimates also may vary in the future if strategies, activities, and outcomes of asbestos litigation materially change; federal and state laws governing asbestos litigation increase or decrease the probability or amount of compensation of claimants; or there are material changes with respect to payments made to claimants by other defendants. <br /><br />Environmental Costs – We are subject to federal, state, and local environmental laws and regulations. We identified 318 sites at which we are or may be liable for remediation costs associated with alleged contamination or for violations of environmental requirements. This includes 32 sites that are the subject of actions taken by the U.S. government, 17 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes joint and several liability for the remediation of identified sites; consequently, our ultimate environmental liability may include costs relating to activities of other parties, in addition to costs relating to our own activities at each site. <br /><br />When an environmental issue has been identified with respect to property owned, leased, or otherwise used in our business, we and our consultants perform environmental assessments on the property. We expense the cost of the assessments as incurred. We accrue the cost of remediation where our obligation is probable and such costs can be reasonably estimated. We do not discount our environmental liabilities when the timing of the anticipated cash payments is not fixed or readily determinable. At September 30, 2009, approximately 13% of our environmental liability was discounted at 3.59%, while approximately 13% of our environmental liability was discounted at 3.53% at December 31, 2008.</p><p>Our environmental liability activity was as follows: </p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td style="border-top: 2px solid #000000;" width="485" align="left" height="43"><i> </i></td><td align="right" style="border-top: 2px solid #000000;" width="137" height="43" colspan="4"><i>Nine Months Ended September 30,</i></td></tr><tr><td style="border-bottom: 1px solid #000000;" width="485" align="left" height="20"><i> Millions of Dollars</i></td><td align="right" style="border-bottom: 1px solid #000000;" width="57" height="20" colspan="2"><b><i>2009 </i></b></td><td align="right" style="border-bottom: 1px solid #000000;" width="80" height="20" colspan="2"><i>2008 </i></td></tr><tr><td style="border-top: 1px solid #000000;" width="485" align="left" height="20"> Beginning balance</td><td style="border-top: 1px solid #000000;" width="15" align="right" height="20"><b>$</b></td><td style="border-top: 1px solid #000000;" width="42" align="right" height="20"><b> 209 </b></td><td style="border-top: 1px solid #000000;" width="38" align="right" height="20">$</td><td style="border-top: 1px solid #000000;" width="42" align="right" height="20"> 209 </td></tr><tr><td width="485" height="20" align="left"> Accruals</td><td width="15" height="20" align="right"><b> </b></td><td width="42" height="20" align="right"><b> 26 </b></td><td width="38" height="20" align="right"> </td><td width="42" height="20" align="right"> 34 </td></tr><tr><td style="border-bottom: 1px solid #000000;" width="485" align="left" height="20"> Payments</td><td style="border-bottom: 1px solid #000000;" width="15" align="right" height="20"><b> </b></td><td style="border-bottom: 1px solid #000000;" width="42" align="right" height="20"><b> (35)</b></td><td style="border-bottom: 1px solid #000000;" width="38" align="right" height="20"> </td><td style="border-bottom: 1px solid #000000;" width="42" align="right" height="20"> (35)</td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="485" align="left" height="28"> Ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="42" align="right" height="28"><b> 200 </b></td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="38" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 1px solid #000000;" width="42" align="right" height="28"> 208 </td></tr><tr><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="485" align="left" height="28"> Current portion, ending balance at September 30</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="15" align="right" height="28"><b>$</b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="42" align="right" height="28"><b> 60 </b></td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="38" align="right" height="28">$</td><td style="border-top: 1px solid #000000;border-bottom: 2px solid #000000;" width="42" align="right" height="28"> 58 </td></tr></table><p>The environmental liability includes future costs for remediation and restoration of sites, as well as ongoing monitoring costs, but excludes any anticipated recoveries from third parties. Cost estimates are based on information available for each site, financial viability of other potentially responsible parties, and existing technology, laws, and regulations. The ultimate liability for remediation is difficult to determine because of the number of potentially responsible parties, site-specific cost sharing arrangements with other potentially responsible parties, the degree of contamination by various wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs. Estimates of liability may vary over time due to changes in federal, state, and local laws governing environmental remediation. Current obligations are not expected to have a material adverse effect on our consolidated results of operations, financial condition, or liquidity. <br /><br />Guarantees – At September 30, 2009, we were contingently liable for $423 million in guarantees. We have recorded a liability of $4 million for the fair value of these obligations as of both September 30, 2009, and December 31, 2008. We entered into these contingent guarantees in the normal course of business, and they include guaranteed obligations related to our headquarters building, equipment financings, and affiliated operations. The final guarantee expires in 2022. We are not aware of any existing event of default that would require us to satisfy these guarantees. We do not expect that these guarantees will have a material adverse effect on our consolidated financial condition, results of operations, or liquidity. <br /><br />Indemnities – Our maximum potential exposure under indemnification arrangements, including certain tax indemnifications, can range from a specified dollar amount to an unlimited amount, depending on the nature of the transactions and the agreements. Due to uncertainty as to whether claims will be made or how they will be resolved, we cannot reasonably determine the probability of an adverse claim or reasonably estimate any adverse liability or the total maximum exposure under these indemnification arrangements. We do not have any reason to believe that we will be required to make any material payments under these indemnity provisions.</p></div>
<div style="font-size:12pt"><p>15.        Share Repurchase Program – On January 30, 2007, our Board of Directors authorized the repurchase of up to 40 million shares of Union Pacific Corporation common stock through the end of 2009. On May 1, 2008, our Board of Directors authorized the repurchase of an additional 40 million common shares by March 31, 2011. Management’s assessments of market conditions and other pertinent facts guide the timing and volume of all repurchases. During the nine months ended September 30, 2009, we did not repurchase shares under this program. During the three and nine months ended September 30, 2008, we repurchased approximately 5.9 million and 18.8 million shares, respectively, under this program at an aggregate purchase price of approximately $445 million and $1,328 million, respectively. Repurchased shares are recorded in treasury stock at cost, which includes any applicable commissions and fees. <br /><br /></p></div>
<div style="font-size:12pt"><p>16. Accounting Pronouncements – In June 2009, the FASB issued Statement No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (FAS 166). On and after the effective date of FAS 166, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes.   Therefore, formerly qualifying special-purpose entities (as defined under previous accounting standards) should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance.  FAS 166 must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We are in the process of evaluating the impact FAS 166 may have on our consolidated financial position, results of operations, and cash flow.<br /><br />In June 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R) (FAS 167). FAS 167 retains the scope of Interpretation 46(R), Consolidation of Variable Interest Entities, with the addition of entities previously considered qualifying special-purpose entities, as the concept of these entities was eliminated in FASB Statement No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140. FAS 167 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We are in the process of evaluating the impact FAS 167 may have on our consolidated financial position, results of operations, and cash flow.<br />  <br />In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (FAS 168). The Codification will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of FAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. FAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of FAS 168 did not affect our consolidated financial position, results of operations, or cash flows.<br /><br />In May 2009, the FASB issued Statement No. 165, Subsequent Events (FAS 165) (codified as FASB ASC 855-10-50). FAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. FAS 165 was effective for interim or annual financial periods ending after June 15, 2009. The adoption of FAS 165 did not affect our consolidated financial position, results of operations, or cash flows.<br /><br />In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (codified as FASB ASC 820-10-50).  This FSP amends FASB Statement No. 107, to require disclosures about fair values of financial instruments for interim reporting periods as well as in annual financial statements.  The FSP also amends APB Opinion No. 28 to require those disclosures in summarized financial information at interim reporting periods.  This FSP was effective for interim reporting periods ending after June 15, 2009. The adoption of this FSP did not affect our consolidated financial position, results of operations, or cash flows.</p></div>