Union Pacific Second Quarter Earnings Up 47 Percent

Omaha, Neb., July 21, 2005 – Union Pacific Corporation (NYSE: UNP) today reported second quarter 2005 net income of $233 million, or $.88 per diluted share. This is a 47 percent improvement compared to the second quarter of 2004 when the company reported net income of $158 million, or $.60 per diluted share. Operating income during the second quarter of 2005 was $468 million, up 30 percent from $359 million reported in the second quarter of 2004.

"We continue to see strong demand for our services and we are improving our ability to handle the increased volumes more efficiently," said Dick Davidson, chairman and chief executive officer. "This is our first year-over-year operating income growth in six quarters. While we still have a lot of work to do, our progress is encouraging and we look forward to continuing this positive trend as we begin to see the benefits of our network management initiatives."

Second Quarter Overview

  • Quarterly operating revenue was an all-time record $3.3 billion compared to $3.0 billion in the second quarter of 2004.
  • Commodity revenue set an all-time quarterly record, up 10 percent to $3.2 billion. This compares to $2.9 billion in the second quarter of 2004 and was driven by a 1 percent increase in volumes as well as higher fuel surcharge recoveries and improved yields.
  • Second quarter 2005 operating income of $468 million was the highest reported since the fourth quarter of 2003.
  • The second quarter 2005 operating margin increased to 14 percent compared to 11.9 percent in 2004.
  • Two of the Railroad’s three key operating metrics, as reported to the Association of American Railroads, improved in the second quarter of 2005 versus the second quarter of 2004. Average terminal dwell time improved 11 percent from 30.9 hours to 27.4 hours and rail car inventory improved 2 percent to 318,434 cars. Average quarterly train speed fell slightly, from 21.3 mph to 21.2 mph comparing the second quarter of 2004 to 2005.
  • The Railroad’s average quarterly fuel price increased 44 percent versus the year ago quarter, from $1.16 per gallon in 2004 to $1.67 per gallon in the second quarter of 2005.

Second Quarter Railroad Commodity Revenue Summary versus 2004

  • Industrial Products up 19 percent
  • Agricultural up 16 percent
  • Intermodal up 10 percent
  • Chemicals up 7 percent
  • Energy up 5 percent
  • Automotive up 1 percent

Looking Forward

"We are confident that the men and women of Union Pacific are taking the right steps to once again produce improving financial results for our shareholders and better service performance for our customers," Davidson said. "Today our company has more business demand than we are able to fulfill – a situation that I haven’t seen during my 45-year career. We are encouraged by the changes we see in our day-to-day operations and firmly believe that the long-term future of this great Railroad has never been brighter."

Union Pacific Corporation owns one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, links 23 states in the western two-thirds of the country and serves the fastest-growing U.S. population centers. Union Pacific’s diversified business mix includes Agricultural Products, Automotive, Chemicals, Energy, Industrial Products and Intermodal. The railroad offers competitive long-haul routes from all major West Coast and Gulf Coast ports to eastern gateways. Union Pacific connects with Canada’s rail systems and is the only railroad serving all six major gateways to Mexico, making it North America’s premier rail franchise.

Supplemental financial information is attached.

Additional information is available at our Web site: www.up.com. Our contact for investors is Jennifer Hamann at (402) 544-4227. Our media contact is Kathryn Blackwell at (402) 544-3753.

This press release and related materials may contain statements about the Corporation’s future that are not statements of historical fact. These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements include, without limitation, statements regarding: expectations as to continued or increasing demand for rail transportation in excess of supply; expectations as to the timing of completion and impact of ongoing track maintenance and restoration work being performed in the Southern Powder River Basin of Wyoming; expectations regarding operational improvements, including the effectiveness of network management initiatives that have been or will be implemented to improve system velocity, customer service and shareholder returns; expectations as to increased returns, cost savings, revenue growth and earnings; expectations regarding fuel price; the time by which certain objectives will be achieved, including expected improvements in velocity and implementation of network management initiatives; estimates of costs relating to environmental remediation and restoration; proposed new products and services; expectations that claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity; and statements concerning projections, predictions, expectations, estimates or forecasts as to the Corporation’s and its subsidiaries’ business, financial and operational results, and future economic performance; and statements of management’s beliefs, expectations, goals and objectives and other similar expressions concerning matters that are not historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times that, or by which, such performance or results will be achieved. Forward-looking information, including expectations as to operational, service and network fluidity improvements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.

Important factors that could affect the Corporation’s and its subsidiaries’ future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to: whether the Corporation and its subsidiaries are fully successful in implementing their financial and operational initiatives, including those plans and management initiatives to improve system velocity and network performance or otherwise improve operations; industry competition, conditions, performance and consolidation; general legislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail business; legislative, regulatory and legal developments involving taxation, including enactment of new federal or state income tax rates, revisions of controlling authority and the outcome of tax claims and litigation; changes in securities and capital markets; natural events such as severe weather, fire, floods and earthquakes; the effects of adverse general economic conditions, both within the United States and globally; any adverse economic or operational repercussions from terrorist activities and any governmental response thereto; war or risk of war; changes in fuel prices; changes in labor costs; labor stoppages; and the outcome of claims and litigation, including those related to environmental contamination, personal injuries, and occupational illnesses arising from hearing loss, repetitive motion and exposure to asbestos and diesel fumes.

Forward-looking statements speak only as of the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Corporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additional updates with respect thereto or with respect to other forward-looking statements. References to our website are provided for convenience and, therefore, information on the website is not, and should not be construed to be, incorporated by reference herein.

The statements and information contained in the news releases provided by Union Pacific speak only as of the date issued. Such information by its nature may become outdated, and investors should not assume that the statements and information contained in Union Pacific's news releases remain current after the date issued. Union Pacific makes no commitment, and disclaims any duty, to update any of this information.