Union Pacific Reports Fourth Quarter Earnings

OMAHA, Neb., Jan. 19 /PRNewswire-FirstCall/ -- Union Pacific Corporation today reported 2005 fourth quarter net income of $296 million, or $1.10 per diluted share, compared to $79 million, or $0.30 per diluted share in the fourth quarter of 2004. The 2004 results include the impact of a non-cash charge for unasserted asbestos claims of $154 million after-tax, or $0.58 per diluted share. Excluding the asbestos charge, 2005 fourth quarter diluted earnings per share increased by 25 percent.

"Union Pacific is operating more efficiently, allowing us to handle record volumes and recover more rapidly from challenges such as hurricanes, the Kansas washouts and severe winter storms," said Jim Young, President and Chief Executive Officer. "We have gained traction throughout the year with our operating initiatives. I am particularly pleased that we converted strong revenue growth into a significant increase in operating income."

2005 Fourth Quarter Summary

In the fourth quarter of 2005, Union Pacific Corporation reported operating income of $533 million compared to 2004's $451 million, which excludes the $247 million pre-tax, non-cash asbestos charge.

* The Railroad's commodity revenue was up 13 percent to a quarterly best $3.5 billion, with all commodities posting increases for the quarter. The main component of the growth was an 11 percent increase in average revenue per car (ARC), which reached an all-time record of $1,428 per car in the fourth quarter. Growth in ARC can be attributed to fuel cost recovery under the Company's surcharge programs and yield improvements. * Business volumes, as measured by total carloads, grew one percent to a fourth quarter record 2.4 million. * Operating margin improved to 14.7 percent versus 14.0 percent in 2004. The 2004 fourth quarter results exclude the impact of the non-cash asbestos charge. Including the charge, the reported fourth quarter 2004 operating margin was 6.3 percent. * The Railroad's average quarterly fuel price including transportation and taxes was $2.08 compared to $1.46 per gallon in 2004, a 42 percent increase. * Quarterly average train speed, as reported to the Association of American Railroads, was 20.5 mph, the same as the fourth quarter of 2004. Quarterly terminal dwell time improved 4 percent to 29.8 hours versus 31.2 hours reported in the fourth quarter of 2004. Fourth Quarter Commodity Revenue Summary versus 2004 * Industrial Products up 19 percent * Agricultural up 18 percent * Intermodal up 14 percent * Automotive up 8 percent * Chemicals and Energy each up 6 percent 2005 Full Year Summary

Full year 2005 net income was $1.0 billion or $3.85 per diluted share, versus $604 million, or $2.30 per diluted share in 2004. The 2005 full year results include a non-cash income tax expense reduction of $118 million after-tax, or $.44 per diluted share. The 2004 full year results include the impact of the non-cash asbestos charge. The comparison of 2005 and 2004 earnings, excluding the tax and asbestos items, would be $3.41 per diluted share versus $2.89 per diluted share, an 18 percent increase.

* Railroad commodity revenue totaled a record $13.0 billion, an 11 percent increase. The main driver of this growth was a $122 increase in ARC to a record $1,358 per car. Growth in ARC can be attributed to fuel cost recovery under the Company's surcharge programs and yield improvements. * Business volumes, as measured by total carloads, increased 1 percent to a record level of 9.5 million. * Operating income was $1.8 billion, a 16 percent increase from $1.5 billion in 2004, which excluded the non-cash asbestos charge. The reported 2004 operating income was $1.3 billion. * Operating margin improved to 13.2 percent versus 12.6 percent in 2004, excluding the non-cash asbestos charge. The reported 2004 full year operating margin was 10.6 percent. * The Railroad's average yearly fuel price including transportation and taxes was $1.77 compared to $1.22 per gallon in 2004, a 45 percent increase. * Average system speed, as reported to the Association of American Railroads, declined 0.3 mph in 2005 to 21.1 mph. This compares to an average system speed of 21.4 mph in 2004. Average terminal dwell time improved 6 percent versus 2004, to 28.7 hours from 30.5 hours. 2006 Outlook

"Looking ahead, we are optimistic about 2006. Our network is more resilient than it was at this time last year and we are continuing to build momentum," Young said. "We expect demand will continue to be strong, particularly in the areas of coal and intermodal.

"In 2006, we will focus on providing better service to our customers, improving the efficiency of our network and increasing the financial returns on our business."

Non-GAAP Reconciliation

The fourth quarter 2004 operating income, full year 2004 operating income, and diluted earnings per share of $451 million, $1.5 billion and $2.89, respectively, exclude the non-cash charge for unasserted asbestos claims and are non-GAAP measures. The asbestos charge was made to reflect an increase in the Company's estimated liability, which had previously recognized asserted asbestos claims, to also include unasserted claims.

In addition, the full year 2005 net income of $908 million and earnings per diluted share of $3.41 exclude the income tax reduction item reported in the third quarter of 2005 and are also non-GAAP measures. Management believes these measures provide an alternative presentation of results that more accurately reflects on-going Company operations, without the distorting effects of the asbestos charge and income tax expense reduction items. These measures should be considered in addition to, not as a substitute for, operating income, net income and diluted earnings per share.

The following table provides reconciliations for the fourth quarter 2004, full year 2004 and full year 2005 for operating income, net income, diluted earnings per share and operating margin, excluding the asbestos charge and income tax expense reduction, to reported operating income, net income, diluted earnings per share and operating margin:

Dollars in millions, except per share amounts Fourth Quarter Full Year 2005 2004 Pct Chg 2005 2004 Pct Chg Operating Income As reported $533 $204 F $1,795 $1,295 39% Asbestos Charge -- 247 -- -- 247 -- Income Tax Expense Reduction -- -- -- -- -- -- Adjusted $533 $451 18% $1,795 $1,542 16% Net Income As reported $296 $79 F $1,026 $604 70% Asbestos Charge -- 154 -- -- 154 -- Income Tax Expense Reduction -- -- -- (118) -- -- Adjusted $296 $233 27% $908 $758 20% Diluted EPS As reported $1.10 $0.30 F $3.85 $2.30 67% Asbestos Charge -- 0.58 -- -- 0.59 -- Income Tax Expense Reduction -- -- -- (0.44) -- -- Adjusted $1.10 $0.88 25% $3.41 $2.89 18% Operating Margin As reported 14.7% 6.3% 8.4 pts 13.2% 10.6% 2.6 pts Asbestos Charge -- 7.7% -- -- 2.0% -- Income Tax Expense Reduction -- -- -- -- -- Adjusted 14.7% 14.0% 0.7 pts 13.2% 12.6% 0.6 pts

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 is attached.

Additional information is available at our Web site: http://www.up.com/. Contact for investors is Jennifer Hamann at 402-544-4227. Contact for media is Kathryn Blackwell at 402-544-3753 or 402-319-4288.

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 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; the impact of ongoing track maintenance and restoration work being performed in the Southern Powder River Basin of Wyoming; industry competition, conditions, performance and consolidation; general legislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail industry; 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, hurricanes 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.

UNION PACIFIC CORPORATION STATEMENTS OF CONSOLIDATED INCOME Periods Ended December 31 (Dollars in Millions, Except Per Share Amounts) (Unaudited) Fourth Quarter Full Year 2005 2004 Pct Chg 2005 2004 Pct Chg Operating Revenues $3,621 $3,217 13 $13,578 $12,215 11 Operating Expenses Salaries, Wages, and Employee Benefits 1,108 1,051 5 4,375 4,167 5 Equipment and Other Rents 353 331 7 1,402 1,374 2 Depreciation 300 282 6 1,175 1,111 6 Fuel and Utilities 753 533 41 2,562 1,816 41 Materials and Supplies 143 129 11 546 488 12 Purchased Services and Other 431 687 (37) 1,723 1,964 (12) Total Operating Expenses 3,088 3,013 2 11,783 10,920 8 Operating Income 533 204 F 1,795 1,295 39 Other Income - Net 54 22 F 145 88 65 Interest Expense (120) (130) (8) (504) (527) (4) Income Before Income Taxes 467 96 F 1,436 856 68 Income Tax Expense (171) (17) U (410) (252) 63 Net Income $296 $79 F $1,026 $604 70 Basic Earnings Per Share $1.11 $0.30 F $3.89 $2.33 67 Diluted Earnings Per Share $1.10 $0.30 F $3.85 $2.30 67 UNION PACIFIC RAILROAD REVENUE DETAIL Periods Ended December 31 (Unaudited) Fourth Quarter Full Year 2005 2004 Pct Chg 2005 2004 Pct Chg Commodity Revenue (000): Agricultural $558,358 $471,259 18 $1,971,210 $1,675,054 18 Automotive 351,572 324,410 8 1,273,188 1,235,083 3 Chemicals 475,723 446,806 6 1,849,623 1,718,841 8 Energy 629,418 592,839 6 2,577,551 2,404,525 7 Industrial Products 746,266 627,220 19 2,819,441 2,418,659 17 Intermodal 693,602 607,134 14 2,465,975 2,239,815 10 Total $3,454,939 $3,069,668 13 $12,956,988 $11,691,977 11 Revenue Carloads: Agricultural 227,456 228,912 (1) 882,861 883,844 -- Automotive 208,135 210,280 (1) 796,577 825,745 (4) Chemicals 218,444 232,586 (6) 912,734 934,843 (2) Energy 532,537 529,826 1 2,177,881 2,171,520 -- Industrial Products 368,259 368,304 -- 1,509,081 1,514,466 -- Intermodal 864,586 824,337 5 3,264,303 3,127,385 4 Total 2,419,417 2,394,245 1 9,543,437 9,457,803 1 Average Revenue per Car: Agricultural $2,455 $2,059 19 $2,233 $1,895 18 Automotive 1,689 1,543 9 1,598 1,496 7 Chemicals 2,178 1,921 13 2,026 1,839 10 Energy 1,182 1,119 6 1,184 1,107 7 Industrial Products 2,026 1,703 19 1,868 1,597 17 Intermodal 802 737 9 755 716 5 Total $1,428 $1,282 11 $1,358 $1,236 10 UNION PACIFIC CORPORATION STATEMENTS OF CONSOLIDATED FINANCIAL POSITION As of December 31 (Dollars in Millions) (Unaudited) 2005 2004 Assets: Cash and Temporary Investments $773 $977 Other Current Assets 1,552 1,320 Investments 806 767 Properties - Net 31,975 31,014 Other Assets 514 518 Total $35,620 $34,596 Liabilities and Shareholders' Equity: Current Portion of Long Term Debt $656 $150 Other Current Liabilities 2,728 2,381 Long Term Debt 6,760 7,981 Deferred Income Taxes 9,482 9,180 Other Long Term Liabilities 2,287 2,249 Common Shareholders' Equity 13,707 12,655 Total $35,620 $34,596 UNION PACIFIC CORPORATION STATEMENTS OF CONSOLIDATED CASH FLOWS For the Twelve Months Ended December 31 (Dollars in Millions) (Unaudited) 2005 2004 Operating Activities: Net Income $1,026 $604 Depreciation 1,175 1,111 Deferred Income Taxes 320 359 Other 74 183 Cash Provided by Operating Activities 2,595 2,257 Investing Activities: Capital Investments (2,169) (1,876) Other 122 144 Cash Used in Investing Activities (2,047) (1,732) Financing Activities: Dividends Paid (314) (310) Debt Repaid (699) (588) Financings and Other - Net 261 823 Cash Used in Financing Activities (752) (75) Net Change in Cash and Temporary Investments $(204) $450 APPENDIX UNION PACIFIC CORPORATION OPERATING AND FINANCIAL STATISTICS Periods Ended December 31 (Unaudited) Fourth Quarter Full Year 2005 2004 Pct Chg 2005 2004 Pct Chg Operating Statistics: Revenue Carloads (Thousands) 2,419 2,394 1 9,543 9,458 1 Revenue Ton-Miles (Billions) 136.3 137.0 (1) 548.8 546.3 -- Gross Ton-Miles (GTMs) (Billions) 262.1 262.2 -- 1,043.9 1,037.5 1 Operating Margin 14.7% 6.3% 8.4 pt 13.2% 10.6% 2.6 pt Operating Ratio 85.3% 93.7% (8.4)pt 86.8% 89.4% (2.6)pt Average Employees 49,494 49,067 1 49,747 48,329 3 GTMs (Millions) per Average Employee 5.30 5.34 (1) 20.98 21.47 (2) Average Fuel Price Per Gallon $2.08 $1.46 42 $1.77 $1.22 45 Fuel Consumed in Gallons (Millions) 340 343 (1) 1,353 1,377 (2) Fuel Consumption Rate (Gal per 000 GTM) 1.30 1.31 (1) 1.30 1.33 (2) AAR Reported Performance Measures: Average Train Speed (Miles per Hour) 20.5 20.5 -- 21.1 21.4 (1) Average Terminal Dwell Time (Hours) 29.8 31.2 (4) 28.7 30.5 (6) Average Rail Car Inventory (a) 326,486 N/A N/A N/A N/A N/A Financial: Weighted Average Shares - Basic (Millions) 265.6 259.8 2 263.4 259.1 2 Weighted Average Shares - Diluted (Millions) 268.9 263.1 2 266.5 262.2 2 Effective Tax Rate 36.6% 17.7% 18.9 pt 28.6% 29.4% (0.8)pt Debt to Capital (b) 35.1% 39.1% (4.0)pt Lease Adjusted Debt to Capital (c) 43.6% 45.1% (1.5)pt Free Cash Flow (Millions) (d) $234 $215 9 (a) On October 1, 2005, the rail car inventory measurement was standardized for all reporting railroads. Rail car inventory for prior periods was not recalculated. (b) Debt to capital is computed as follows: total debt divided by total debt plus equity. (c) Lease adjusted debt to capital is computed as follows: total debt plus net present value of operating leases divided by total debt plus equity plus net present value of operating leases. (d) Free cash flow is a non-GAAP measure; however, we believe that it is important in evaluating our financial performance and measures our ability to generate cash without incurring additional external financings. The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow: Full Year 2005 2004 Cash Provided by Operating Activities $2,595 $2,257 Cash Used in Investing Activities (2,047) (1,732) Dividends Paid (314) (310) Free Cash Flow $234 $215 UNION PACIFIC CORPORATION STATEMENTS OF CONSOLIDATED INCOME By Quarter and Full Year 2005 (Dollars in Millions, Except Per Share Amounts) (Unaudited) Period Ended Year Ended March 31 June 30 Sept. 30 Dec. 31 Dec. 31 Operating Revenues $3,152 $3,344 $3,461 $3,621 $13,578 Operating Expenses Salaries, Wages, and Employee Benefits 1,099 1,075 1,093 1,108 4,375 Equipment and Other Rents 353 340 356 353 1,402 Depreciation 289 292 294 300 1,175 Fuel and Utilities 539 597 673 753 2,562 Materials and Supplies 135 128 140 143 546 Purchased Services and Other 424 444 424 431 1,723 Total Operating Expenses 2,839 2,876 2,980 3,088 11,783 Operating Income 313 468 481 533 1,795 Other Income - Net 20 29 42 54 145 Interest Expense (132) (128) (124) (120) (504) Income Before Income Taxes 201 369 399 467 1,436 Income Tax Expense (73) (136) (30) (171) (410) Net Income $128 $233 $369 $296 $1,026 Basic Earnings Per Share $0.49 $0.89 $1.40 $1.11 $3.89 Diluted Earnings Per Share $0.48 $0.88 $1.38 $1.10 $3.85 UNION PACIFIC RAILROAD REVENUE DETAIL By Quarter and Full Year 2005 (Unaudited) Period Ended Year Ended March 31 June 30 Sept. 30 Dec. 31 Dec. 31 Commodity Revenue (000): Agricultural $447,902 $463,261 $501,689 $558,358 $1,971,210 Automotive 293,105 329,166 299,345 351,572 1,273,188 Chemicals 441,019 458,880 474,001 475,723 1,849,623 Energy 667,783 629,437 650,913 629,418 2,577,551 Industrial Products 630,196 718,977 724,002 746,266 2,819,441 Intermodal 523,927 596,755 651,691 693,602 2,465,975 Total $3,003,932 $3,196,476 $3,301,641 $3,454,939 $12,956,988 Revenue Carloads: Agricultural 215,755 215,257 224,393 227,456 882,861 Automotive 192,317 210,321 185,804 208,135 796,577 Chemicals 227,742 235,889 230,659 218,444 912,734 Energy 573,987 525,470 545,887 532,537 2,177,881 Industrial Products 358,560 397,418 384,844 368,259 1,509,081 Intermodal 731,843 806,633 861,241 864,586 3,264,303 Total 2,300,204 2,390,988 2,432,828 2,419,417 9,543,437 Average Revenue per Car: Agricultural $2,076 $2,152 $2,236 $2,455 $2,233 Automotive 1,524 1,565 1,611 1,689 1,598 Chemicals 1,936 1,945 2,055 2,178 2,026 Energy 1,163 1,198 1,192 1,182 1,184 Industrial Products 1,758 1,809 1,881 2,026 1,868 Intermodal 716 740 757 802 755 Total $1,306 $1,337 $1,357 $1,428 $1,358

FCMN Contact: mpbendon@up.com