Union Pacific Reports Fourth Quarter Earnings

Omaha, Neb., January 24, 2005 – Union Pacific Corporation (NYSE: UNP) today reported 2004 fourth quarter income from continuing operations of $79 million, or $0.30 per diluted share compared to $333 million, or $1.28 per diluted share in the fourth quarter of 2003. Included in the 2004 results is the impact of the $154 million after-tax, or $0.58 per diluted share, non-cash charge for unasserted asbestos claims that the company announced in December.

For the full year 2004, income from continuing operations was $604 million, or $2.30 per diluted share compared to $1.1 billion, or $4.07 per diluted share in 2003. The 2004 full year results also include the impact of the non-cash asbestos charge.

"High fuel prices and increased operating costs continued to impact earnings," Dick Davidson, chairman and chief executive officer, said. "However, we continue to be encouraged by the unprecedented demand we have experienced over the past year. In 2004, our operating revenue grew to a record $12.2 billion – a six percent increase over 2003 and our first year over the $12 billion mark. We believe this trend will continue as demand for transportation service exceeds the available supply, giving us an opportunity to improve returns and grow with our customers."

2004 Fourth Quarter Summary

In the fourth quarter of 2004, Union Pacific Corporation reported operating income of $204 million, which includes the $247 million pre-tax, non-cash asbestos charge. This compares to $589 million during the same period in 2003.

  • The Railroad’s Commodity Revenue was up 8 percent to a quarterly best $3.1 billion, with all commodities except Energy posting increases for the quarter. The main component of the growth was a six percent increase in Average Revenue per Car, which reached an all-time record of $1,282 per car in the fourth quarter.
  • Business volumes, as measured by total carloads, grew 1 percent to a fourth quarter record 2.4 million.
  • Operating margin was 6.3 percent versus 19.9 percent last year with 7.7 points of the decline attributable to the asbestos charge. Operating margin was also impacted by higher fuel costs and slower operational velocity.
  • The Railroad’s average quarterly fuel price of $1.46 per gallon compares to $0.89 per gallon paid a year ago, increasing quarterly diesel fuel costs by $195 million.
  • Quarterly average system speed, as reported to the Association of American Railroads, declined 1.3 mph versus the prior quarter and was 2.2 mph slower than the fourth quarter of 2003.

Fourth Quarter Commodity Revenue Summary versus 2003

  • Industrial Products up 17 percent
  • Agricultural up 12 percent
  • Intermodal and Chemicals were each up 11 percent
  • Automotive up 2 percent
  • Energy down 5 percent

2004 Full Year Summary

  • Total Operating Revenue increased 6 percent to a record $12.2 billion.
  • Railroad Commodity Revenue totaled a record $11.7 billion, a 6 percent increase. Half of this growth is attributable to a $41 increase in Average Revenue per Car to a record $1,236 per car.
  • Business volumes, as measured by total carloads, increased 2 percent to a record level of 9.5 million.
  • Operating margin was 10.6 percent versus 18.5 percent last year with 2.0 points of the year-over-year margin decline attributable to the asbestos charge. Full year operating margin was also impacted by higher fuel costs and slower operational velocity.
  • The Railroad’s average yearly fuel price was $1.22 per gallon compared to $0.92 per gallon in 2003, increasing diesel fuel costs by $416 million.
  • Average system speed, as reported to the Association of American Railroads, declined 2.2 mph in 2004 to 21.4 mph. This compares to an average system speed of 23.6 mph in 2003.

2005 Outlook

"At the top of our list for 2005 is improving service to our customers," Davidson said. "Over the past year, efforts to increase our train crew and locomotive resources have been successful. The next step, already underway, is to improve our network management processes to make these resources more productive. We are engaged in a comprehensive redesign of our operating network. We are calling this program our Unified Plan, and we expect to implement this plan by the end of the second quarter. Through these efforts, we believe we can simplify our operations, improve velocity and better manage the volume flowing onto our network in the face of continued strong demand.

"The year is off to a difficult start with the recent severe storm in California and Nevada, but we continue to believe that 2005 will be a better year for our company. As we put the weather challenges behind us, and our new network initiatives gain momentum, we expect to see improvements in both our service to customers and returns to our shareholders."

Union Pacific Corporation owns one of America’s leading transportation companies. Its principal operating company, Union Pacific Railroad, is the largest railroad in North America, covering 23 states across the western two-thirds of the United States. A strong focus on quality and a strategically advantageous route structure enable the company to serve customers in critical and fast growing markets. It is a leading carrier of low-sulfur coal used in electrical power generation and has broad coverage of the large chemical-producing areas along the Gulf Coast. With competitive long-haul routes between all major West Coast ports and eastern gateways, and as the only railroad to serve all six major gateways to Mexico, Union Pacific has the premier rail franchise in North America.

Supplemental financial information.

Contact for investors is Jennifer Hamann at (402) 544-4227.
Contact for media 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 demand for rail transportation in excess of supply; expectations regarding operational improvements, including the effectiveness of actions taken and to be undertaken to improve system velocity, customer service and shareholder returns; expectations as to increased returns, cost savings, revenue growth and earnings; 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.

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