Union Pacific Corporation consists of one reportable segment, rail transportation, and UPC's other product lines (Other Operations). The rail segment includes the operations of the Corporation's wholly owned subsidiary, Union Pacific Railroad Company (UPRR) and UPRR's subsidiaries and rail affiliates (collectively, the Railroad). Other Operations include the trucking product line (Overnite Transportation Company or Overnite), as well as the "other" product lines that include the corporate holding company (which largely supports the Railroad), Fenix LLC and affiliated technology companies (Fenix), self-insurance activities, and all appropriate consolidating entries.

Rail

Operations – The Corporation's only reportable segment is the Railroad, including as of October 1, 1996, Southern Pacific Rail Corporation (Southern Pacific or SP). In addition, during 1997, the Railroad and a consortium of partners were granted a 50-year concession to operate the Pacific-North and Chihuahua Pacific lines in Mexico. The Railroad made an additional investment in the consortium in 1999.

The Railroad has approximately 34,000 route miles linking Pacific Coast and Gulf Coast ports to the Midwest and eastern United States gateways and providing several north/south corridors to key Mexican gateways. The Railroad serves the western two-thirds of the country and maintains coordinated schedules with other carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada and Mexico. Export and import traffic is moved through Gulf Coast and Pacific Coast ports and across the Mexican and (primarily through interline connections) Canadian borders. The Railroad is subject to price and service competition from other railroads, motor carriers and barge operators. The Corporation expects to complete the integration of the operations of SP in 2001.

Employees – Approximately 87% of the Railroad's nearly 50,000 employees are represented by rail unions. Under the conditions imposed by the Surface Transportation Board (STB) in connection with the Southern Pacific acquisition, labor agreements between the Railroad and the unions had to be negotiated before the UPRR and Southern Pacific rail systems could be fully integrated. The Railroad has successfully reached agreements with the shopcraft, carmen, clerical, and maintenance-of-way unions, and also implemented "hub-and-spoke" agreements with the train operating crafts. Under the hub-and-spoke concept, all operating employees in a central "hub" are placed under a common set of collective bargaining agreements with the ability to work on the "spokes" running into and out of the hub. Negotiations under the Railway Labor Act to revise the national labor agreements for all crafts began in late 1999 and are still in progress.

Other Operations

Trucking Product Line

Operations – Overnite Transportation Company, a wholly owned subsidiary of the Corporation, is a major interstate trucking company specializing in less-than-truckload shipments. Overnite serves all 50 states and portions of Canada and Mexico through 166 service centers located throughout the United States. Overnite transports a variety of products including machinery, tobacco, textiles, plastics, electronics and paper products. Overnite experiences intense service and price competition from both regional and national motor carriers.

Employees – Overnite continues to oppose the efforts of the International Brotherhood of Teamsters (Teamsters) to unionize Overnite service centers. Since the Teamsters began their efforts at Overnite in 1994, Overnite has received 90 petitions for union elections at 67 of its 166 service centers, although there have been only nine elections since August 1997, and Teamsters representation was rejected in seven of those nine elections. Twenty-two service centers, representing approximately 14% of Overnite's 13,000 nationwide employee work force, have voted for union representation, and the Teamsters have been certified and recognized as the bargaining representative for such employees. Fifteen of these 22 locations filed decertification petitions in 1999 and 2000. Elections affecting approximately 400 additional employees are unresolved, and there are no elections currently scheduled. Additionally, proceedings are pending in certain cases where a Teamsters' local union lost a representation election. To date, Overnite has not entered into any collective bargaining agreements with the Teamsters, who began a job action on October 24, 1999 that has continued into 2001.

Operational Initiatives – During 2000, 1999 and 1998, Overnite benefited from several initiatives aimed at better matching its operations to the trucking industry environment. These actions included work force reductions, service center consolidations, centralization of the linehaul management process and pricing initiatives targeting Overnite's lowest margin customers. Overnite has also benefited from growth in its customer base generated by continuing improvements in its service levels.

Attempted Sale of Overnite – In May 1998, the Corporation's Board of Directors approved a formal plan to divest of UPC's investment in Overnite through an initial public offering. However, market conditions deteriorated to the point that UPC decided not to consummate the offering.

Goodwill Revaluation – During 1998, the Corporation changed its method of measuring impairment of enterprise level goodwill from an undiscounted cash flow method to a fair value method based on discounted cash flows. The Corporation believes that a discounted cash flow approach is preferable since it provides a more current and realistic valuation than the undiscounted method and more closely matches Overnite's fair value. In connection with the change in accounting policy with respect to measurement of goodwill impairment described above, $547 million of goodwill related to the acquisition of Overnite was written off during 1998. Generally accepted accounting principles preclude the recognition of tax benefits associated with goodwill charges to income until the tax benefits are realized. Should the Corporation realize a tax benefit associated with the goodwill write-down in the future, this benefit may be recognized.

Other Product Lines

Other – Included in the "other" product lines are the results of the corporate holding company, Fenix, self-insurance activities, and all appropriate consolidating entries.

The following table details reportable financial information for the Corporation's Rail segment and Other Operations:

Millions of Dollars			2000		1999		1998
Operating revenues:[a]
	Rail		$10,731		$10,140		$9,329
	Trucking		1,113		1,062		1,034
	Other		34		35		151
	Consolidated		$11,878		$11,237		$10,514
Depreciation:
	Rail		$1,089		$1,034		$1,003
	Trucking		48		46		60
	Other		3		3		7
	Consolidated		$1,140		$1,083		$1,070
Operating income (loss):[b]
	Rail		$1,903		$1,822		$ 433
	Trucking		53		20		(508)
	Other		(53)		(38)		(96)
	Consolidated		$1,903		$1,804		$ (171)
Interest income:
	Rail		$ 7		$ 10		$ 20
	Trucking		18		16		13
	Other		(14)		(8)		(5)
	Consolidated		$ 11		$ 18		$ 28
Interest expense:
	Rail		$ 592		$ 618		$ 603
	Trucking		1		1		1
	Other		130		114		110
	Consolidated		$ 723		$ 733		$ 714
Income tax expense (benefit):
	Rail		$ 511		$ 465		$ (11)
	Trucking		28		8		24
	Other		(71)		(54)		(76)
	Consolidated		$ 468		$ 419		$ (63)
Earnings of nonconsolidated affiliates:[c]
	Rail		$ 78		$ 55		$ 52
	Trucking		–		–		–
	Other		–		–		–
	Consolidated		$ 78		$ 55		$ 52
Net income (loss):[d]
	Rail		$ 926		$ 854		$ 27
	Trucking		43		29		(522)
	Other		(127)		(73)		(138)
	Consolidated		$ 842		$ 810		$ (633)
Investments in nonconsolidated affiliates:[c]
	Rail		$ 644		$ 657		$ 520
	Trucking		–		–		–
	Other		–		–		–
	Consolidated		$ 644		$ 657		$ 520
Assets:
	Rail		$29,581		$28,880		$28,357
	Trucking		651		670		655
	Other		267		338		362
	Consolidated		$30,499		$29,888		$29,374
Capital investments:
	Rail		$1,735		$1,777		$2,044
	Trucking		33		55		59
	Other		15		2		8
	Consolidated		$1,783		$1,834		$2,111

[a] The Corporation has no significant intercompany sales activities.

[b] Included the one-time revaluation of Overnite's goodwill of $547 million in 1998 and goodwill amortization at Overnite of $15 million in 1998 and the $115 million pre-tax ($72 million after-tax) work force reduction charge in 2000.

[c] The Railroad has equity interests in several railroad-related and other businesses.

[d] "Other" included the $43 million pre-tax ($27 million after-tax) adjustment of a liability related to the discontinued operations of a former subsidiary in 1999 (note 3).

Consolidated

Risk Factors – The Corporation's future results may be affected by changes in the economic environment, fluctuations in fuel prices and external factors such as weather. Several of the commodities transported by both the Railroad and Overnite come from industries with cyclical business operations. As a result, prolonged negative changes in U.S. and global economic conditions can have an adverse effect on the Corporation's operating results. In addition, to the extent that diesel fuel costs are not recovered through increased revenues, improved fuel conservation or mitigated by hedging activity, operating results at the Railroad and Overnite can also be adversely affected.