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Overview 2
System Map 6
Agricultural Products 7
Automotive 9
Chemicals 11
Energy 13
Industrial Products 15
Intermodal 17
Mexico 19
Financial and Operating Statistics 21
26 Highlights
27 Overview
29 Selected Operating Statistics
30 Financial Statements
32 Cautionary Information
2 0 0 0F I N A N C I A L & O P E R A T I N G S T A T I S T I C S
U N I O N P A C I F I C R A I L R O A D
UNION PACIF IC CORPORATION (excluding Overnite and Skyway)
Financial Summary2000 1999 1998
(a) Includes long-term operating leases2000 excludes the impact of a $115 million pre-tax work force reduction charge
Operating Revenue (millions of dollars) $10,765 $10,175 $9,329
Operating Income (millions of dollars) $1,965 $1,784 $347
Operating Ratio 81.7% 82.5% 96.3%
Total Carloads (thousands) 8,901 8,556 7,998
Average Employees 50,523 52,539 53,121
Capital Investments (a) (millions of dollars) $1,867 $1,942 $2,393
O V E R V I E W
Union Pacific is the largest railroad in North America, covering 23 states
across the western two-thirds of the United States. The merger of Union Pacific,
Southern Pacific and Chicago and North Western created a strategically
advantageous route structure that serves customers in critical and fast-growing
markets. That network, combined with a well-balanced and diverse traffic
mix, makes Union Pacific the premier rail franchise in North America.
A key strength of the franchise is access to the coal fields in the Powder River
Basin (PRB) region of northeastern Wyoming. Growth of PRB coal tonnage hauled
by UP has averaged 8% over the past seven years, reflecting this coal’s low-produc-
tion cost and low-sulfur content. UP’s rail lines in the Midwest and Plains states pro-
vide direct routes from major grain-producing areas to domestic markets, Mexico
and to ports of export in the Gulf Coast and Pacific Northwest. Union Pacific also
has broad coverage of the large chemical-producing areas along the Gulf Coast.
To handle growing east-west intermodal and automotive traffic, Union Pacific
has competitive long-haul routes between all major West Coast ports and eastern gate-
ways. In addition to directly serving all six major gateways to Mexico, the Railroad has
the fastest and most direct route to and from the industrial Midwest and Mexico. UP also
reaches north into Canada through the Eastport gateway, as well as through exchange
points in Minnesota, Wisconsin and Illinois. The merger of Union Pacific and Southern
Pacific routes in the South andSouthwest produced a single-linerail network serving the rapidlygrowing population in this part ofthe country. Leveraging the strengthsof this broad franchise allows UnionPacific to improve customer service,grow market share and achieveimproved financial returns.
F INANCIAL REVIEW
Union Pacific’s 2000 financial per-formance was strong, achievingmany "best-ever" records.Commodity revenue grew 4%, to arecord $10.3 billion as a result ofsignificant increases in automotiveand intermodal carloads. A contin-ued focus on productivity improve-ments and service reliability drove theoperating ratio down from 82.5% in1999 to 81.7% in 2000, excluding a$115 million pre-tax work forcereduction charge, despite the $444million impact of higher fuel prices.
2
15
7
32
1(4)
4
Autom
otive
Carload Growth(% change vs. 1999)
Intermodal
Energy
Industrial
Chemicals
Agricultural
Total
88.5
96.3
82.5 81.7*
*Excludes work force reduction charge1997 1998 1999 2000
Operating Ratio(Percent)
Income from continuing operationswas up 16%, to $871 million,excluding a $72 million after-taxwork force reduction charge.Including the charge, income fromcontinuing operations increased to abest-ever $799 million. Capitalspending at the Railroad, excludinglong-term operating leases,decreased during 2000 to $1.74billion, while free cash flow con-tributed to the Corporation, afterdividends, increased 37% to $302million. These successes wereachieved despite a challenging yearof escalating fuel prices and afourth quarter economic down turn.
QUALITY SERVICE
The Railroad's ability to grow andcompete with other modes of trans-portation depends on providingquality transportation service.
According to monthly customer satis-faction surveys, the definition ofquality service means more thanproviding fast service, it means pro-viding reliable service. Efforts under-taken during 2000 to improve relia-bility include tighter accountabilityin field operations, standardizationof the locomotive fleet and more effi-cient car scheduling. For example,corridor planning and terminalprocess reengineering are keystrategies used in reducing theFreight Car Terminal Dwell Time, ameasurement of how efficiently carsare passed through terminals.
Union Pacific's Mission Statementestablishes customer satisfaction asa top priority. The most direct mea-sure of how well the Railroad ismeeting customer expectations is theService Delivery Index (SDI).Depending on the commodity, the
SDI measures how closely a car followed its scheduled trip plan orhow well a train performed againstcontractual obligations or agreed-upon transit times. The overall SDIfor the Railroad was up 5 percent-age points in 2000 to 70%, led by96% on-time performance out of thePowder River Basin.
Failure to meet standards of opera-tional performance, customer satis-faction or service performanceresults in financial costs to theRailroad in the form of higherexpenses, poor asset utilization orlost revenue opportunities. At UnionPacific, failure costs are captured bythe Cost of Quality system, whichconsists of over 100 separateaccounts for tracking performance.Efforts in 2000 reflected continuedimprovement in reducing these coststo 13.7% of total revenue.
INNOVATION
As operational fluidity and servicequality have improved, Union Pacifichas begun to leverage the strengthof its unparalleled rail franchise toprovide innovative services to exist-ing, as well as new customers.Innovation could also be seen in theform of building partnerships andleveraging technology.
1997 1998 1999 2000
Freight Car Terminal DwellHours
33.635.8
28.2 27.3
61
49
6570
1997 through 1998 results are pro formaUP/SP prior to and during computersystems cutovers.
1997 1998 1999 2000
Service Delivery Index%
18.5
21.4
14.4 13.7
% of Revenue
Cost of Quality
1997 1998 1999 2000
Our Mission:
Union Pacific is committed to bea railroad where:
• Customers want to do business
• Employees are proud to work
• Shareholder value is created
U N I O N P A C I F I C R A I L R O A D
3
U N I O N P A C I F I C R A I L R O A D
4
New Ser v ices
In January, the CascadeConnection program was success-fully launched which moves inter-modal products along the I-5 corri-dor between Seattle and LosAngeles. Northbound service is setby day of the week pricing basedon demand. As a result, customersare shifting some volume to theweekend. Southbound, incentivepricing is used to fill up trains andattract non-traditional customers. Asa result, customers have been ableto better match service withdemand, while the Railroad hasexperienced better equipment uti-lization and improved profitability.
To take further advantage of the truckcompetitive rail service along the I-5corridor, Union Pacific introducedanother customer offering called “5-7-9” service. To meet the cus-tomers needs, the Railroad transportslumber and paper products from thePacific Northwest to NorthernCalifornia in five days, SouthernCalifornia in seven days and LasVegas and Phoenix in nine days. Byimproving the consistency of servicealong this corridor, UP has been ableto capture market share from trucks.
Al l iances
Innovation has also been seen inthe form of alliances within the rail
industry. UP and Canadian Pacificjoined forces to enhance and pro-mote the Canada/West Coast routecalled the Pacific CanAm corridor.Both railroads pulled together toimprove the border crossing proce-dures and field operations. Corridorcapacity improvements were alsomade. This joint effort resulted inincreased business in coal, potash,finished autos and lumber as trafficthrough the corridor increased fromthree to as many as eight trains per day.
Targeting truck market share, UnionPacific worked in partnership withCSX in the East, to introduce thepremium manifest service called
Pacific CanAm
Roseville
Hinkle
Kingsgate Calgary
5-7-9 Manifest Service
Oakland
Los Angeles
Las Vegas
Phoenix
9-Day Service
7-Day Service
5-Day Service
Cascade Connection
Oakland
Portland
Seattle
Los Angeles
5
Al l iances ( cont inued)
Express Lane. Fresh and frozenfoods, canned goods and wine areshipped from Southern Californiaand the Pacific Northwest to desti-nations in the East. This new servicewas 95% on time in 2000 andattracted customers who haven'tused rail service in over a decade.
UP also teamed up with a partner tothe South, TransportacionFerroviaria Mexicana (TFM), tointroduce the AutopartsTransload service. The new serviceincludes transloading radiator sup-ports that are shipped from Iowathrough St. Louis and on to Laredowhere they are interchanged withthe TFM. The parts are then deliv-ered to General Motors assemblyplants in Mexico, all in two daysless than truck transit times. Byimproving the border crossingprocess and providing transload ser-vice, UP was able to capture the pre-vious truck-only business.
e-Commerce
Union Pacific is a rail industryleader in developing innovativebusiness-to-business applications.The MyUPRR.com website wasdeveloped to take advantage of theinternet opportunities by simplifyingtransactions with the customer. Viathe internet, customers can receivereal-time information, such as pric-ing inquiries, ordering freight cars,submitting shipping instructions andtracing car movements all withoutpicking up the telephone. During2000, customers with activeMyUPRR.com accounts increased by97% from 1,479 in January to2,918 in December.
R E V E N U E M I XCommodity Revenue: $10.3 Bil l ion
7 Agricultural Products
9 Automotive
11 Chemicals
13 Energy
15 Industrial Products
17 Intermodal
19 Mexico
IndustrialProducts
19%
Energy21%
Chemicals16%
Intermodal19%
Agricultural Products14%
Automotive11%
6
7
17%
8%32%
12%
6%
5%
11%
9%
A G R I C U L T U R A L P R O D U C T S
2000 Review� Whole grain carloadings
declined 8% as wheat exports fell due to strong competition fromSouthern Hemisphere countries. In addition, cornexports were down significantly in the last half of 2000 due to low commodity prices, Starlinkconcerns and lack offoreign demand.
� Carloads of grain productsdecreased 1% due to a decline ingovernment flour exports and anoversupply of sugar, offsettingstrong soybean meal and oilexports.
� An increased market for importand domestic beer drove a 10%increase in beverage volume. Theintroduction of the Express LaneService increased UP’s share of
the fresh fruits and vegetablesmarket, helping food products vol-ume grow 2% for the year.
� UP invested an additional $3.4million in commercial facilitiesdesigned to improve the efficiency
of the unit-train network. Theresults of investing in the programwere seen in 2000 as strong feedgrain movements were made toCalifornia, Arizona, Idaho, Texasand Mexico.
Arrow colors correspondto pie chart colors.
Note: Grain Products and Foodmove in the same lanes.
Key Market Factors� Union Pacific offers a critical link
between producing areas in theMidwest and West and the PacificNorthwest and primary Gulf ports,as well as to Mexico. UP’s domes-tic markets include grain proces-sors and feeders in the Midwest,South and Rocky Mountain states.
� Food products and beverages constitute another major productline, with producers and con-sumers being distributed broadlyacross the Railroad system.
� Factors affecting export grainmovements include domestic and foreign crop production, differences between Gulf Coastand PNW shipping rates andgrain prices. Domestic business is more stable and driven primarily by the consistency of service performance.
� Grain moves most efficiently in unit trains that shuttle continuouslybetween producers and export terminals or domestic markets.Smaller shipments, along withfood products and beverages, typically move in the manifest train network.
2001 Outlook� Expanding Express Lane Service to
Canada and the Mid-Atlantic stateswill further target the large volumesof service-sensitive food productsand wine that have traditionallymoved by truck from California andthe Pacific Northwest.
� Continued low commodity pricesand increasing competition fromforeign grain-producing countriesare expected to keep the exportgrain market relatively flat in 2001.
� Focus on improving efficiency andcycle times of grain shuttle trainswill continue. In addition, refiningthe Shuttle Train ManagementSystem and expanding websitecapabilities will make it easier forcustomers to do business with UP.
MexicoGulfPacific Northwest
Export Grain by Terminal (percent of total grain traffic)
39 35 29 33Total
20001996 1997 1998 1999
8
4
5
5 917 14
16
18
14
1417
810 10
33
A U T O M O T I V E
9
2000 Review� Automotive shipments increased
significantly as finished vehiclesand auto parts carloads grew 10%and 24%, respectively. The growthwas driven by market share gainsand improved service as NorthAmerican vehicle sales increased3%, another record year.
� UP partnered with ThrallManufacturing and DaimlerChryslerto develop and introduce the Q2autorack. This new technology,which combines the right balanceof capacity and flexibility withoutsacrificing velocity, furtherenhances UP's autorack fleet, thelargest in North America.
� Union Pacific and DaimlerChrysleradded Mexico auto parts shipmentsto their multi-year strategic alliance-- which recognizes UP as its soleprovider of transportation servicesin the West.
� Toyota recognized Union Pacificas its 1999 and 2000 Rail Carrierof the Year. Business levels withToyota have continued to growwith an 11% increase in 2000.
� Business volume to and fromMexico grew 34%, reflectingincreased vehicle production levelsand more reliable and expandedservices. New service offerings,such as the auto parts transloadservice, helped to facilitate theconversion of auto parts shipmentsfrom truck to rail by reducing transittimes by two days.
Key Market Factors� Union Pacific is the largest carrier
of finished vehicles west of theMississippi River. The Railroad hasfacilities that serve 80% of westernU.S. cities, including 42 vehicledistribution centers. Union Pacificalso directly serves six assemblycenters and distributes import vehicles from four West Coastports and two Gulf ports.
� Mexico is an important automotivemarket for the Railroad as companiescontinue to locate both vehiclemanufacturing and material facilitiesthroughout the country. Automotivematerials flow north and southacross the border bound forassembly centers in Mexico, theU.S. and Canada.
2001 Outlook� Because of the slowing economy,
North American vehicle sales areexpected to decline in 2001.Union Pacific anticipates that marketshare gains and strength in certainmarkets will provide some offset tothis industry decline.
� Supply chain logistics services,using VIN Vision as a foundation,will continue to enhance customers'"Fast-to-Market" strategies. Theseproducts, combined with furthertechnology advances, will facilitateimprovements in velocity and reliability for the entire distribution network.
� The auto parts business shouldprovide an opportunity for growthas UP continues to develop supplychain management solutions andnew rail services that help winmarket share from trucks.
6.6%2.4%
Compound Annual Growth Rate
UP Carloadings (thousands) Light Vehicle Sales (millions)
* UP, SP & CNW pro forma for years 1994 through 1996
North American Light Vehicle Sales/UP Finished Vehicle Carloads*
1995 1996 1997 1998 1999 20001994
464
15.114.8
15.1 15.215.6
16.9
17.4
348364
385 395408
512
1 1
C H E M I C A L S
9%
17%31%
27%16%
Arrow colors correspondto pie chart colors.
Liquid and Dry (31%)Plastics (27%)Liquid PetroleumProducts (16%)
Fertilizers and Related Products (17%)
Soda Ash (9%)
2000 Carloads
2000 Review� Despite late-year weakening
in the economy, carloadsincreased 1% as a result of strong export demand andimproved service levels.
� Expanding facilities and upgrad-ing track in the Bloomington,Texas area and the Houston toNew Orleans corridor hasincreased efficiency at switchingyards, removed capacity bottle-necks, and added storage capaci-ty contributing to a 4% increasein plastics carloads.
� The high price of natural gas andpetroleum products, coupled withthe slowing economy during thelast half of 2000 resulted in a 1%decrease in liquid and dry car-loads.
� Soda ash carloads were off by
1% as the slowing economy result-ed in a flat domestic soda ashmarket. During the fall of 2000,a new jointly served soda ashfacility opened in Parachute,Colorado that will add approxi-mately one million tons of produc-tion to the marketplace.
� Increased export demand for soda
ash via Portland and domesticmarket share gains led to an 8%increase in revenue.
� Depressed demand for farm commodities drove fertilizer carloads down 2% for the year. Inaddition, the significant increasein natural gas prices resulted inreduced nitrogen production.
reliable rail service and railroad-provided storage-in-transit (SIT)yards for intermediate storage of plastic resins.
� Fertilizer and related products areproduced and imported in theGulf Coast and the western U.S.and Canada and are shipped tomajor agricultural areas.
� The liquid and dry market consists of 22 different segments of variousintermediate chemicals producedby and shipped to a multitude oflarge and small customers.
� UP directly serves Green River,Wyoming, the primary soda ashproducing region in the UnitedStates. Domestic demand for soda ash is relatively constant.Export markets to Asia, Europe and Mexico, though volatile, provide growth opportunity.
2001 Outlook� Plastics shipments are expected
to weaken due to the weakeningU.S. economy --- specifically,reduced auto sales and lowerhousing starts.
� Fertilizer business is expected tobe flat, due to crop surpluses, production cutbacks, and weakagricultural markets.
� Rising export demand for sodaash should increase shipmentsabove 2000 levels. The primarydriver is increased demand fromboth Asia and Europe which willbe supplied from the Portland export terminal.
� To optimize capacity and meetexpected plastics growth in the LosAngeles chemical region, UP isbuilding the Valla, Californiatransload facility. This facility willraise UP's transload capacity inthe Los Angeles Basin by 1,600cars annually.
UPRR Tons Hauled (thousands)Plastic Resin Production (billions of pounds)
18.0
19.1
19.720.1
22.4
23.3
78.7
84.3
88.8
91.7
97.5
Note: 2000 industry data not available
1995 1996 1997 1998 1999 2000
Plastics Growth
E N E R G Y
1 3
2000 Review� In 2000, Union Pacific coal
volume grew 3% to 212 milliontons. Growth in Wyoming'sPowder River Basin (PRB) coal led the way with a record 144 million tons originated, a 7% increase over 1999.
� Colorado/Utah coal volume wasflat due to mine production issuesduring the first half of 2000.
� PRB coal train productivityimproved slightly to 13,645 tonsper train in 2000. Since 1995,PRB train productivity has grownnearly 14%, reflecting theincreased use of longer trains andhigh-capacity aluminum cars.
� Track capacity expansion between Gibbon, Nebraska andMarysville, Kansas was completedin 2000, resulting in a 46%increase in train speed and a20% increase in daily trains moving through this coal corridor.
� Coal train cycle performance continued its strong improvementduring 2000, averaging 96.3%,compared to 86.5% in 1999.
Key Market Factors� Union Pacific provides transportation
service between most of the coal-producing regions in the westernU.S. and utilities and industrialfacilities in 27 states. The PRB represents the largest and fastestgrowing segment of the market, asutilities continue to favor the lowcost and low-sulfur content of thecoal mined there.
� The Railroad also moves high-BTU,low-sulfur coal from Colorado andUtah to domestic utilities andthrough West Coast ports forexport to the Pacific Rim.Colorado coal is exported toMexico via Eagle Pass, Texas, and PRB coal is exported toEurope through Mississippi Riverbarge terminals.
2001 Outlook� Continued improvement is expect-
ed for PRB coal volumes, as recentcapacity improvements and strongservice performance support grow-ing demand for low-sulfur westerncoal. Growth is expected bothfrom new and existing customers.
� Productivity improvement shouldcontinue as more and longer dis-tributed-power (DP) trains are uti-lized. Radio-controlled locomotivesare placed at the rear of DP trainsto allow train size to be expandedand asset utilization to be increased.
� Capital spending in 2001 willfocus on increasing the capacity atthe South Morrill, Nebraska rail yard.In addition, double track projectswill be completed between SouthMorrill and Shawnee Junction,Wyoming – the line south of thePRB coal mines.
OtherOriginated
Powder River Basin Coal Moved by UPRR (millions of tons)
14
14
15 1515
1513 13
7486
101110 113
119
135
71
1992 1993 1994 1995 1996 1997 1998 1999
86 89 101 116 123 126 133 149Total
16
144
160
2000
I N D U S T R I A L P R O D U C T S
1 5
2000 Review� A strong economy in the first half
of the year contributed to 5% rev-enue growth. First half revenueswere up 10% due to a rebound inthe steel market and continuedstrength in the construction market.
� Improved service levels, particu-larly due to the successful imple-mentation of the 5-7-9 Strategy,enabled UP to capture truck sharein lumber, paper and cement.
� Consumer products volumesincreased 17% due primarily toimproved cotton production, ascrop conditions in 2000improved significantly over 1999.
� The steel market rebounded inearly 2000 resulting in a 16%increase in carloads, despite a
weak fourth quarter reflecting theslowing U.S. economy.
� Paper and lumber revenues wereup 10% in the first half of the yeardue to a strong domestic econo-my. Second half revenues were
essentially flat as a result of theeconomic slowdown. High naturalgas prices in the PNW and histori-cally low lumber prices resulted innumerous customer plant shut-downs in the fourth quarter.
20%
37% 14%
8%
16%
5%
Arrow colors correspondto pie chart colors.
Minerals (37%)
Metals & Ores (20%)
Paper/Paper Products (16%)
Lumber/Building Materials (14%)
Consumer/Government (8%)
Waste (5%)
2000 Carloads
I N D U S T R I A L P R O D U C T S ( c o n t i n u e d )
Key Market Factors� Industrial Products covers a broad
range of commodities – from bulkproducts like stone, cement, minerals,waste and scrap to higher-valueshipments like lumber, paper and consumer goods. For most commodities, trucks provide acompetitive transportation alternative.Market share growth hinges onproviding consistent, reliable service.
� Bulk commodities like rock often movein unit train service from origin toa transload facility in major metro-politan areas. Demand is drivenby construction activity and peaksduring the warmer months.
� Most other commodities move inmanifest train service and rely onUP’s extensive network of rail terminals to move between thousandsof shippers and customers acrossNorth America. Demand is drivenprimarily by macro-economic conditions but experiences seasonal peaks.
2001 Outlook� In general, the slowing economy
is expected to impact demand in2001, with volumes improving asthe economy rebounds.
� Continued strength in highwayconstruction projects in the south-west should continue to creategrowth opportunity in the stone,sand and gravel business.
� High crude oil prices should con-tinue to create demand for tubularsteel and non-metallic minerals. Inaddition, higher natural gas priceshave reinvigorated the transmissionpipe market. However, reducedautomotive demand and othereconomic factors are expected toadversely affect shipments frommany of our steel customers.
� Population growth in key marketsserved by the UP system shouldcontinue to grow lumber, cement,roofing products and metals markets,somewhat offsetting the impactfrom the overall slowing housingmarket.
Industrial Products: Western Market Share
A majority of the western
industrial products market
currently moves by truck.
This provides significant
opportunity to increase
market share through new
service offerings and
improvements in cycle time
and service variability.
Rail 15%
Truck 78%
Water7%
Western Rail Share Transportation Mode
OtherRail43%
UP 57%
1 7
I N T E R M O D A L
2000 Review� Economic strength, cycle time
improvements and strong demandcombined to produce a 7%increase in intermodal volumeand an 11% increase in revenue.
� Average revenue per car increased4% due to longer hauls anddemand-driven price increases.
� In 2000, the international marketsegment enjoyed double-digitgrowth, which was fueled by astrong U.S. economy and contin-ued recovery of Asian markets.
� Less-Than-Truckload and Premiumintermodal volume was up 14%,led by a new premium serviceoffering between the Southeastand California.
7%
50% 43%
Domestic
Container and Trailer (43%)Premium (7%)
International (50%)
2000 Carloads
� Third party and Truckload revenuegrew 7%, primarily due to strongEMP growth and demand-drivenprice increases.
� The Railroad went 164 consecu-tive days without missing a singlesort for UPS, breaking the previ-ous industry record by over two months.
� Terminal expansion during 2000in the Los Angeles, Oakland,Seattle and Chicago areasenabled Union Pacific to supportthe increased demand from ourcustomers while positioning theRailroad for future growth.
Key Market Factors� International: Consists of inter-
national container traffic handledby steamship customers.
� Domestic: Two key domestic market segments:
� Domestic Container and Trailer:Includes domestic container traf-fic handled by IntermodalMarketing Companies (IMC)and Truckload carriers. The EMPproduct line continues to grow inthis market segment due to oursuccess in converting trailer busi-ness to EMP containers (seegraph below).
� Premium: Primarily Less-Than-Truckload and package carrierswith time-sensitive businessneeds. Service performance andreliability drive premium busi-ness growth.
2001 Outlook� Continued import/export
growth is anticipated in ourInternational segment.
� Premium, Third-Party andTruckload Domestic market seg-ments offer opportunities forgrowth, contingent upon U.S. economic conditions and contin-ued service performance.
� New products and market expansion activities through UP's Outreach Programs willextend our market reach and provide market penetration and growth opportunities.
EMP Domestic Container Loads (in thousands)
20001999199819971996
EMP is an equipment management program sponsored by Union Pacific and Norfolk Southernthat provides intermodal containers to shippers using an Internet reservation system. EMP offerscustomers a truck-equivalent container and the economic benefits of double-stack train service.Full-year utilization of last year’s fleet additions and improvements in cycle times are expected tohelp meet projected growth in demand in 2001.
111163
196
289
376
11%
4%
20%
2%
14%49%
Kansas City
Fort Worth
Brownsville
Mexico City
Guadalajara
Monterrey
El Paso
Los Angeles
Chicago
Memphis
Minneapolis
Dallas
Little Rock
St. LouisDenverSaltLake CityOakland
Seattle
Omaha
NewOrleans
Calexico
Nogales
EaglePass
Laredo
Houston
M E X I C O
1 9
2000 Review� Rail business with Mexico
increased 19% to $850 million in2000, driven by significantimprovements in service perfor-mance both north and south of theborder. Top gainers include Autos,up 39%; Agricultural Products, up20%; and Intermodal, up 12%.
� UP and Transportacion FerroviariaMexicana (TFM), in cooperationwith the automotive industry,implemented a new run-throughtrain of finished autos and autoparts from Mexico through St.Louis, to Chicago and eastern destinations, improving transittimes by approximately two days.
� Trans-Border Express was introduced in connection with TFMoffering 48' EMP doublestack con-tainer service in and out ofMexico. The entire process isautomated, including customsclearance and equipment order-ing. For the Mexico portion of themove, per diem and door deliveryare bundled in the rate, whichmakes equipment managementeasier for the customer.
� UP and TFM began a run-throughintermodal train between MexicoCity and Chicago, whichimproved the service by over oneday each direction. The train is
pre-cleared at the border and provides our customers faster service in this important corridor.
� Improvements in cycle time andservice increased the customer satisfaction index for Mexican customers from 82 to 85 year-over-year.
Arrow colors correspondto pie chart colors.
Automotive (49%)
Intermodal (20%)
Industrial Products (14%)
Agricultural Products (11%)
Chemicals (4%)
Energy (2%)
2000 Carloads
SouthboundNorthbound
286 297317
281
311
370
229 243 252 248278
329
Mexico Traffic (carloads in thousands)
1995 1996 1997 1998 1999 2000
699515 540 569 529 589Total
M E X I C O ( c o n t i n u e d )
2 0
Key Market Factors� Union Pacific serves all six major
gateways to Mexico, connectingto the two largest Mexican rail-ways. Union Pacific has the mostefficient route between Mexicoand the Chicago connections toCanada and the eastern railroads.
� The Mexican rail network comprisesfive railroads (see map) and is now90% privatized. The privatizationprocess has resulted in a more effi-cient transportation system well-posi-tioned to compete for the north-bound and southbound businessopportunities created by the NorthAmerican Free Trade Agreement(NAFTA). The Mexican railroadsare and have been making substan-tial investments in track structure,equipment and facilities to improveservice, equipment utilization, safetyand damage prevention.
� The Mexico land transportation mar-ket is estimated to be over $6 billionper year in size and consists of abroad range of commodities fromraw materials to finished goods.Trucks are the dominant transporta-tion mode with a 63% share.
� The rail market is well-positionedfor growth as the Mexican econo-my expands and rail service with-in the country continues toimprove. Continued foreign invest-ment in manufacturing and furtherprivatization in the petrochemicaland utility industries provideopportunities.
� Additional progress is expected in2001 to facilitate Mexico growth,including implementation of morerun-though trains and electronicdata interchange between U.S.and Mexican carriers.
� Implementation of AutomaticManifest System (AMS), continues,which automates the customsclearance process for rail import
shipments and permits rail carri-ers, customs brokers and U.S.Customs to electronicallyexchange shipment information ---allowing advance review of ship-ments for release or examination.
� Ferrocarril Mexicano (FXE), a 26%owned subsidiary of UP, continuesimplementation of DespachoAnticipado at key gateways. Whenfully implemented, northbound railshipments will be cleared with U. S.
MéridaGuadalajara
Manzanillo
San LuisPotosí
MexicoCity Puebla
Veracruz
Coatzacoalcos
Tampico
TorreónMonterrey
Chihuahua
LázaroCárdenas
Saltillo
Salina Cruz
Hermosillo
Monclova
Culiacán
Queretaro
Aguascalientes
FXE (Pacific North)TFM (Northeast)FSE (Southeast)ShortlinesFXE Trackage Rights on TFMTFM Trackage Rights on FXE
Brownsville
Laredo
Eagle Pass
Calexico
Nogales
Presidio
El Paso
Customs and billed with the con-necting U. S. rail carrier prior to theinterchange of the shipments at theMexican gateways. TFM has begunimplementation of a similar process.
� UP, TFM and FXE have been work-ing with receivers of grain prod-ucts to improve their facilities toreceive trainload quantities ofagricultural products --- so theycan benefit from improved serviceand economies of rail.
2 1
F INANCIAL AND OPERATING STATIST ICS
U N I O N P A C I F I C C O R P O R A T I O N (excluding Overnite Transportation Co.)
for the year ended December 31 2 0 0 0 1 9 9 9
1 2 3 4 T O T A L 1 2 3 4 T O T A L
F I N A N C I A L A N D R E V E N U E S T A T I S T I C S
Total Freight Cars 108,669 114,729 119,776 119,767 121,329
Work Equipment 6,616 9,927 9,218 10,045 11,631
Bad Order Ratio (percent) 5.5 5.4 4.5 4.4 4.1
A V E R A G E A G E O F E Q U I P M E N T (years)
Locomotives 14.9 15.4 14.4 14.4 13.7
Freight Cars 20.9 19.3 20.1 19.3 19.2
T R A C K M I L E S A T Y E A R - E N D
Main Line 26,914 26,963 27,197 27,421 27,406
Branch Line 6,121 6,378 6,509 7,526 8,431
Yards, Sidings, and Other Main Line 21,564 21,660 21,597 21,588 21,915
Total 54,599 55,001 55,303 56,535 57,752
Track Miles of Continuous Welded Rail at Year-End 24,855 24,771 23,647 23,392 23,172
Track Miles Under Centralized Traffic-Control at Year-End 17,163 16,199 15,944 15,590 15,277
T R A C K M I L E S O F R A I L I N S T A L L E D A N D R E P L A C E D
� New 943 950 858 716 451
� Used 242 444 341 273 362
Track Miles Ballasted 6,967 4,579 3,259 3,557 4,503
Ties Installed and Replaced (thousands) 3,332 3,293 2,961 3,853 2,919
(a) Includes owned and leased freight cars with Union Pacific system marks.
Capital Expenditure amounts and Equipment and Track statistics include the effects of the Southern Pacific and Chicago & North Western acquisitions as of October 1, 1996 and May 1, 1995, respectively.
Refer to the Union Pacific Corporation 2000 Annual Report for additional information. 2 5
F INANCIAL AND OPERATING STATIST ICS
2 6
Shipments (thousands) 7,495
Tonnage (thousands) 4,012
Revenue (per hundredweight) $13.25
Total Revenue (millions) $1,113
Operating Ratio (%) 95.2
Capital Expenditures (millions) $33
Employees 11,000
Fleet:
Tractors 4,900
Trailers 19,000
O V E R N I T E
VISION STATEMENT: To be the most successful company in the industry,with the best equipment and facili-ties. With this success, over time,comes the best jobs in the industry interms of job security, wages, benefits and job satisfaction.
OVERNITE TRANSPORTATION
Overnite Transportation is one of the
nation’s largest less-than-truckload
(LTL) carriers. With 11,000 full-time
equivalent employees, 19,000 trail-
ers and 4,900 tractors, Overnite
serves over 45,000 points in all 50
states, Canada, Mexico, and U.S.
territories. More than 90 percent of
the company’s revenues are derived
from its LTL business, with the
remainder derived from truckload
services and value-added services
that support the core LTL business.
Through more than 160 service cen-
ters, Overnite offers customized
intrastate, regional, national, next-
day and two-day major-market
transportation services.
O V E R V I E W
By continuing to build upon its basic strengths in 2000, Overnite delivered its
best results in six years. Throughout 2000, Overnite enhanced its transit times,
improved its services and expanded its coverage area. With a combination of
cost control measures, a strong customer base and a dedicated work force, the
company provided the fastest and most reliable service in its history and con-
cluded the year with an outstanding on-time performance level of 98 percent.
F INANCIAL REVIEW
Operating revenues grew $51 mil-lion or 5 percent in 2000 to over$1.1 billion. This revenue growthwas attributable to yield-enhancinginitiatives, such as contract renegoti-ations, a general rate increase, anda fuel surcharge, which all helpedto offset lower volumes. Operatingexpenses grew 2 percent or $18million. Operating income grew
165 percent to $53 million, and theoperating ratio fell to 95.2 percentfrom 98.1 percent in 1999. In addi-tion, free cash flow contributed tothe Corporation, after dividends,increased 74 percent to $47 million.
Salaries, Wages, and Benefitsexpense decreased slightly due tolighter volumes. Fuel and utilitiesexpense increased 47 percent or$23 million due to higher fuel
2 7
prices and miles driven. Equipmentand other rent expense increased 2percent or $2 million due to addi-tional purchased transportationexpense as a result of the Teamsters’activity, as well as increased use oflong term tractor leases. Materialsand Supplies dropped slightly due toa reduction in maintenance costsassociated with a smaller fleet. Othercosts decreased $7 million due tobetter management of additional costsassociated with the Teamsters’ activity.
DEL IVERING VALUE INTRANSPORTATION:
Over the past several years,Overnite has expanded its efforts toimprove service and focus on high-er-margin business segments. Theresult is a series of innovative trans-portation products that better meetthe demands of customers for sim-pler, faster and more reliable ser-vice. In 2000, Overnite introducedservice into Mexico and expandeddirect coverage to Canada. In addi-tion, it was the first LTL carrier tointroduce a guaranteed pickup ser-vice. As evidence of Overnite’s suc-cess, on-time performance reached arecord 97.5 percent for full year2000. Its services include:
Advantage Overnite is Overnite’sstandard dependable service whichprovides nationwide coverage tomore than 45,000 points including100 percent direct full-state cover-age in 32 states, more than 15,000one- and two-day lanes and three-and four-day "Quantum Leap"transcontinental sleeper service.
Overnite AdvantageGuaranteed is for time-sensitiveshipments; Advantage Guaranteedservice will guarantee deliverybased on the Company’s publishedtransit times. It’s on-time, or it’s free.
Overnite Advantage Expeditedis for customers needing expeditedservice for emergency, time-criticalshipments to any point in the worldthrough a single transportationprovider. Overnite’s team of freightspecialists coordinate and trackexpedited shipments from origin todestination.
Special Services Division isOvernite’s dedicated truckload ser-vice division, which utilizesOvernite’s LTL expertise to expandinto niche segments of the growingtruckload market.
Assembly & Distribution is aspecial logistical function for ship-pers that need consolidation anddistribution services. Overnite’sAssembly and Distribution serviceprovides these functions by leverag-ing the broad distribution capabili-ties of the Overnite network.
International and OceanShipping services provide singlecarrier contact for transportationservices to Alaska, Hawaii, Guam,Canada, Puerto Rico, the U.S.Virgin Islands and Mexico with
competitive transit times and price.
LABOR RELAT IONS:
A Teamster campaign to organizeall Overnite employees culminatedin the union calling for a nation-wide walkout on October 24,1999. The job action, which contin-ued through 2000, was ignored by96 percent of Overnite employees.The union is the certified and recog-nized bargaining agent for about1,800 Overnite drivers and freighthandlers out of an 11,000 full-timeequivalent employee work force.Employees at 15 of the 22Teamster- represented service centershave petitioned the National LaborRelations Board to decertify theTeamsters as their bargaining agent.
Despite the walkout, all locationscontinue to be served and on-timeservice levels continue to improve.The Company is currently engagedin negotiations with the Teamsters,but has not entered into any bar-gaining agreements.
For more information concerningOvernite’s products and servicesvisit www.overnite.com.
Refer to the Union Pacific Corporation 2000 Annual Report for additional information.
3 0
STATEMENTS OF CONSOLIDATED INCOME
O V E R N I T E T R A N S P O R T A T I O N C O M P A N Y (millions of dollars, unaudited)
for the year ended December 31, 2000 1 2 3 4 T O T A L
O P E R A T I N G R E V E N U E S Transportation $269 $283 $287 $274 $1,113
O P E R A T I N G E X P E N S E S Salaries and Benefits 165 165 164 156 650
Equipment and Other Rents 23 24 26 24 97
Depreciation 12 12 12 12 48
Fuel and Utilities 18 17 18 19 72
Materials and Supplies 11 12 12 13 48
Other Costs 39 36 35 35 145
Total Operating Expenses 268 266 267 259 1,060
Operating Income $1 $17 $20 $15 $53
Net Income $2 $13 $15 $13 $43
for the year ended December 31, 1999
1 2 3 4 T O T A L
O P E R A T I N G R E V E N U E S Transportation $253 $273 $277 $259 $1,062
O P E R A T I N G E X P E N S E S Salaries and Benefits 158 167 169 157 651
Equipment and Other Rents 18 22 24 31 95
Depreciation 11 12 12 11 46
Fuel and Utilities 11 11 13 14 49
Materials and Supplies 11 12 13 13 49
Other Costs 34 34 38 46 152
Total Operating Expenses 243 258 269 272 1,042
Operating Income (Loss) $10 $15 $8 $(13) $20
Net Income $9 $11 $8 $1 $29
Refer to the Union Pacific Corporation 2000 Annual Report for additional information.
O V E R N I T E T R A N S P O R T A T I O N C O M P A N Y (millions of dollars, unaudited)
as of December 31 2 0 0 0 1 9 9 9 1 9 9 8
A S S E T S
Current Assets $438 $393 $358
Net Properties 441 459 461
Other Assets 52 51 39
Total Assets $931 $903 $858
L I A B I L I T I E S A N D S H A R E H O L D E R S ' E Q U I T Y
Current Liabilities $160 $164 $144
Debt Due After One Year - Third Parties – – 3
Other Liabilities 159 154 139
Shareholders' Equity 612 585 572
Total Liabilities and Shareholders' Equity $931 $903 $858
STATEMENTS OF CONSOLIDATED F INANCIAL POSIT ION
3 1
O V E R N I T E T R A N S P O R T A T I O N C O M P A N Y (millions of dollars, unaudited)
as of December 31 2 0 0 0 1 9 9 9 1 9 9 8
Cash Provided by Operating Activities $93 $89 $82
Cash Used In Investing Activities (30) (46) (52)
Cash Used In Financing Activities (63) (46) (27)
Net Change In Cash and Temporary Investments $ – $(3) $3
Refer to the Union Pacific Corporation 2000 Annual Report for additional information.
STATEMENTS OF CONSOLIDATED CASH FLOWS
3 2
Certain statements in this report areforward-looking within the meaningof the Securities Act of 1933 andthe Securities Exchange Act of1934. These forward-looking state-ments include, without limitation,statements regarding: expectationsas to operational improvements;expectations as to market growth,cost savings, revenue growth andearnings; the time by which certainobjectives will be achieved; esti-mates of costs relating to environ-mental remediation and restoration;proposed new products and ser-vices; expectations that claims, law-suits, environmental costs, commit-ments, contingent liabilities, labornegotiations or agreements, or othermatters will not have a materialadverse effect on the financial posi-tion, results of operations or liquidi-ty; and statements concerning pro-jections, predictions, expectations,estimates or forecasts as to theCorporation’s and its subsidiaries’business, financial and operationalresults, and future economic perfor-mance, statements of management’sgoals and objectives and other simi-lar expressions concerning mattersthat are not historical facts.
Forward-looking statements should
not be read as a guarantee of futureperformance or results, and will notnecessarily be accurate indicationsof the times at, or by which, suchperformance or results will beachieved. Forward-looking informa-tion is based on information avail-able at the time and/or manage-ment’s good faith belief with respectto future events, and is subject torisks and uncertainties that couldcause actual performance or resultsto differ materially from thoseexpressed in the statements.
Important factors that could causesuch differences include, but are notlimited to, whether the Corporationand its subsidiaries are fully success-ful in implementing their financialand operational initiatives; industrycompetition, conditions, performanceand consolidation; legislativeand/or regulatory developments,including possible enactment of ini-tiatives to re-regulate the rail busi-ness; natural events such as severeweather, floods and earthquakes;the effects of adverse general eco-nomic conditions, both within theUnited States and globally; changesin fuel prices; changes in laborcosts; labor stoppages; and the out-come of claims and litigation.
Forward-looking statements speakonly as of the date the statementwas made. The Corporationassumes no obligation to update for-ward-looking information to reflectactual results, changes in assump-tions or changes in other factorsaffecting forward-looking informa-tion. If the Corporation does updateone or more forward-looking state-ments, no inference should be drawnthat the Corporation will make addi-tional updates with respect thereto orwith respect to other forward-lookingstatements.
CAUTIONARY INFORMATION
CONTACT FOR PORTFOLIO
MANAGERS AND F INANCIAL
ANALYSTS
Union Pacific’s analyst relations are coordinated by the CorporateTreasurer at the executive offices.Requests for interviews, general information, offering memoranda,bond circulars and other publications should be directed to: