FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

- OR -

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________________ to ________________

Commission file number 1-6075

UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)

UTAH 13-2626465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1416 DODGE STREET, OMAHA, NEBRASKA
(Address of principal executive offices)

68179
(Zip Code)

(402) 271-5777
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES X NO
------- -----

As of April 30, 2002, there were 251,852,020 shares of the Registrant's
Common Stock outstanding.

UNION PACIFIC CORPORATION
INDEX

PART I. FINANCIAL INFORMATION

<Table>
<Caption>
PAGE NUMBER
-----------

Item 1: Consolidated Financial Statements:

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
For the Three Months Ended March 31, 2002 and 2001............................................ 3

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
At March 31, 2002 (Unaudited) and December 31, 2001............................................ 4

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2002 and 2001............................................. 5

CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 2002...................................................... 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)............................................ 7-12

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations............. 13-21

Item 3: Quantitative and Qualitative Disclosures About Market Risk........................................ 21

PART II. OTHER INFORMATION

Item 1: Legal Proceedings................................................................................. 22-23

Item 4: Submission of Matters to a Vote of Security Holders............................................... 23

Item 6: Exhibits and Reports on Form 8-K.................................................................. 23

Signature................................................................................................. 24
</Table>

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income (Unaudited)
Union Pacific Corporation and Subsidiary Companies

Millions, Except Share and Per Share Amounts,
For the Three Months Ended March 31, 2002 2001
--------------------------------------------- -------- --------

OPERATING REVENUES Rail, trucking and other............................ $ 2,967 $ 2,943
------- -------

OPERATING EXPENSES Salaries, wages and employee benefits............... 1,105 1,085
Equipment and other rents........................... 341 329
Depreciation........................................ 299 292
Fuel and utilities.................................. 240 352
Materials and supplies.............................. 133 139
Casualty costs...................................... 96 98
Other costs......................................... 254 209
------- -------
Total............................................... 2,468 2,504
------- -------
INCOME Operating income.................................... 499 439
Other income ....................................... 21 30
Interest expense.................................... (163) (181)
------- -------
Income before income taxes.......................... 357 288
Income taxes........................................ (135) (107)
------- -------
Net income.......................................... $ 222 $ 181
------- -------
SHARE AND PER SHARE Basic - earnings per share.......................... $ 0.89 $ 0.73
Diluted - earnings per share........................ $ 0.86 $ 0.72
------- -------
Weighted average number of shares (Basic)........... 251.0 246.9
Weighted average number of shares (Diluted)......... 276.2 271.0
------- -------
Dividends .......................................... $ 0.20 $ 0.20
------- -------
Ratio of earnings to fixed charges.................. 3.0 2.4
------- -------
</Table>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Union Pacific Corporation and Subsidiary Companies

(Unaudited)
Mar. 31, Dec. 31,
Millions of Dollars 2002 2001
------------------- ----------- --------
ASSETS

Current Assets Cash and temporary investments................. $ 110 $ 113
Accounts receivable, net....................... 676 604
Inventories.................................... 259 265
Current deferred income taxes.................. 400 400
Other current assets........................... 201 160
-------- --------
Total.......................................... 1,646 1,542
-------- --------
Investments Investments in and advances to affiliated
companies................................... 744 708
Other investments.............................. 57 78
-------- --------
Total.......................................... 801 786
-------- --------
Properties Cost........................................... 36,686 36,436
Accumulated depreciation....................... (7,831) (7,644)
-------- --------
Net............................................ 28,855 28,792
-------- --------
Other Other assets................................... 578 431
-------- --------
Total assets................................... $ 31,880 $ 31,551
-------- --------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities Accounts payable............................... $ 535 $ 567
Accrued wages and vacation..................... 409 394
Accrued casualty costs......................... 401 398
Income and other taxes......................... 266 286
Dividends and interest......................... 232 255
Debt due within one year....................... 203 194
Other current liabilities...................... 516 598
-------- --------
Total.......................................... 2,562 2,692
Other Liabilities and Debt due after one year........................ 8,006 7,886
Shareholders' Equity Deferred income taxes.......................... 7,990 7,882
Accrued casualty costs......................... 739 750
Retiree benefits obligation.................... 812 812
Other long-term liabilities.................... 435 454
Company-obligated mandatorily redeemable
convertible preferred securities.......... 1,500 1,500
Commitments and contingencies
Common shareholders' equity.................... 9,836 9,575
-------- --------
Total liabilities and shareholders' equity..... $ 31,880 $ 31,551
-------- --------
</Table>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Union Pacific Corporation and Subsidiary Companies

<Table>
<Caption>
Millions of Dollars,
For the Three Months Ended March 31, 2002 2001
------------------------------------ -------- ---------

OPERATING ACTIVITIES Net income........................................... $ 222 $ 181
Non-cash charges to income:
Depreciation...................................... 299 292
Deferred income taxes............................. 90 77
Other, net........................................ (20) (97)
Changes in current assets and liabilities, net....... (246) (237)
-------- ---------
Cash provided by operating activities................ 345 216
-------- ---------
INVESTING ACTIVITIES Capital investments.................................. (359) (361)
Other investing activities, net...................... (126) (144)
-------- ---------
Cash used in investing activities.................... (485) (505)
-------- ---------
FINANCING ACTIVITIES Dividends paid....................................... (50) (49)
Debt repaid.......................................... (301) (214)
Financings, net...................................... 488 520
-------- ---------
Cash provided by financing activities................ 137 257
-------- ---------
Net change in cash and temporary investments......... (3) (32)
Cash and temporary investments at beginning of
period............................................ 113 105
-------- ---------
Cash and temporary investments at end of period ..... $ 110 $ 73
-------- ---------
CHANGES IN CURRENT Accounts receivable, net............................. $ (72) $ (34)
ASSETS AND LIABILITIES, NET Inventories.......................................... 6 20
Other current assets................................. (41) (15)
Accounts, wages and vacation payable................. (17) (137)
Other current liabilities............................ (122) (71)
-------- ---------
Total................................................ $ (246) $ (237)
-------- ---------
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest...................................... $ 189 $ 197
Income taxes, net............................. 47 --
-------- ---------
</Table>

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY (UNAUDITED)
Union Pacific Corporation and Subsidiary Companies

<Table>
<Caption>
Accumulated Other
Comprehensive Income (Loss)
--------------------------------------------------------
Minimum Foreign
Millions of Dollars, [a] Paid- [b] Pension Currency
For the Three Months Ended Common in- Retained Treasury Liability Translation Derivative
March 31, 2002 Shares Surplus Earnings Stock Adjustments Adjustments Adjustments Total Total
- ----------------------------------- ------ ------- -------- -------- ----------- ----------- ----------- ----- ---------

Balance at December 31, 2001...... $ 689 $ 3,980 $ 6,466 $ (1,549) $ (7) $ 3 $ (7) $ (11) $ 9,575
------ ------- -------- -------- ----------- ----------- ----------- ------ ---------
Net income........................ -- -- 222 -- -- -- -- -- 222
Other comprehensive income,
net of tax...................... -- -- -- -- -- 3 26 29 29
---------
Comprehensive income.............. 251
Conversion, exercises of
stock options, forfeitures
and other....................... -- (31) -- 91 -- -- -- -- 60
Dividends declared ($0.20 per
share).......................... -- -- (50) -- -- -- -- -- (50)
------ ------- -------- -------- ----------- ----------- ----------- ------ ---------
Balance at March 31, 2002......... $ 689 $ 3,949 $ 6,638 $ (1,458) $ (7) $ 6 $ 19 $ 18 $ 9,836
------ ------- -------- -------- ----------- ----------- ----------- ------ ---------
</Table>

[a] Common stock $2.50 par value; 500,000,000 shares authorized;
275,499,087 shares issued at beginning of period; 275,566,662 shares
issued at end of period.

[b] 23,742,374 treasury shares at end of period, at cost.

The accompanying notes are an integral part of these Consolidated Financial
Statements.

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. RESPONSIBILITIES FOR FINANCIAL STATEMENTS - The Consolidated Financial
Statements are unaudited and reflect all adjustments (consisting only of normal
and recurring adjustments) that are, in the opinion of management, necessary for
a fair presentation of the financial position and operating results for the
interim periods presented. The Statement of Consolidated Financial Position at
December 31, 2001 is derived from audited financial statements. The Consolidated
Financial Statements should be read in conjunction with the Consolidated
Financial Statements and notes thereto contained in the Annual Report on Form
10-K for the year ended December 31, 2001, of Union Pacific Corporation (the
Corporation or UPC). The results of operations for the three months ended March
31, 2002 are not necessarily indicative of the results for the entire year
ending December 31, 2002. Certain prior year amounts have been reclassified to
conform to the 2002 financial statement presentation.

2. SEGMENTATION - Union Pacific Corporation consists of two reportable segments,
rail and trucking, and UPC's other product lines (Other). The rail segment
includes the operations of the Corporation's indirect wholly owned subsidiary,
Union Pacific Railroad Company (UPRR) and UPRR's subsidiaries and rail
affiliates (collectively, the Railroad). The trucking segment includes Overnite
Transportation Company (OTC) and Motor Cargo Industries, Inc. (Motor Cargo),
both operating as separate and distinct subsidiaries of Overnite Corporation
(Overnite), an indirect wholly owned subsidiary of UPC. The Corporation's other
operations are comprised of the corporate holding company (which largely
supports the Railroad), Fenix LLC and affiliated technology companies and
self-insurance activities, in addition to all appropriate consolidating entries.

The following table details reportable financial information for UPC's
segments and other operations for the three months ended March 31, 2002 and
2001:

<Table>
<Caption>
Millions of Dollars 2002 2001
- ------------------- ------- -------

Operating revenues [a]:

Rail............................................................. $ 2,649 $ 2,655
Trucking......................................................... 305 280
Other............................................................ 13 8
------- -------
Consolidated..................................................... $ 2,967 $ 2,943
------- -------
Operating income (loss):
Rail............................................................. $ 508 $ 449
Trucking......................................................... 10 9
Other............................................................ (19) (19)
------- -------
Consolidated..................................................... $ 499 $ 439
------- -------
Assets:
Rail............................................................. $30,752 $30,076
Trucking......................................................... 756 666
Other............................................................ 372 408
------- -------
Consolidated..................................................... $31,880 $31,150
------- -------
</Table>

- --------

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

3. FINANCIAL INSTRUMENTS

STRATEGY AND RISK - The Corporation and its subsidiaries use derivative
financial instruments in limited instances for other than trading purposes to
manage risk related to changes in fuel prices and to achieve the Corporation's
interest rate objectives. The Corporation uses swaps, futures and/or forward
contracts to mitigate the downside risk of adverse price movements and hedge the
exposure to variable cash flows. The use of these instruments also limits future
gains from favorable movements. The Corporation uses interest rate swaps to
manage its exposure to interest rate changes. The purpose of these programs is
to protect the

Corporation's operating margins and overall profitability from adverse fuel
price changes or interest rate fluctuations.

The Corporation may also use swaptions to secure near-term swap prices.
Swaptions are swaps that are extendable past their base period at the option of
the counterparty. Swaptions do not qualify for hedge accounting treatment.

MARKET AND CREDIT RISK - The Corporation addresses market risk related to
derivative financial instruments by selecting instruments whose value
fluctuations highly correlate with the underlying item being hedged. Credit risk
related to derivative financial instruments, which is minimal, is managed by
requiring high credit standards for counterparties and periodic settlements. At
March 31, 2002, the Corporation has not been required to provide collateral, nor
has UPC received collateral relating to its hedging activity.

DETERMINATION OF FAIR VALUE - The fair values of the Corporation's derivative
financial instrument positions at March 31, 2002 and December 31, 2001, detailed
below, were determined based upon current fair values as quoted by recognized
dealers or developed based upon the present value of expected future cash flows
discounted at the applicable U.S. Treasury rate, London Interbank Offered Rates
(LIBOR) or swap spread.

INTEREST RATE STRATEGY - The Corporation manages its overall exposure to
fluctuations in interest rates by adjusting the proportion of fixed and floating
rate debt instruments within its debt portfolio over a given period. The mix of
fixed and floating rate debt is largely managed through the issuance of targeted
amounts of each as debt matures or as incremental borrowings are required.
Derivatives are used as one of the tools to obtain the targeted mix. In
addition, the Corporation also obtains flexibility in managing interest costs
and the interest rate mix within its debt portfolio by issuing callable
fixed-rate debt securities.

Swaps allow the Corporation to convert debt from fixed rates to variable
rates and thereby hedge the risk of changes in the debt's fair value
attributable to the changes in the benchmark interest rate (LIBOR). The swaps
have been accounted for using the short-cut method as allowed by Financial
Accounting Standard (FAS) 133; and therefore, no ineffectiveness has been
recorded within the Corporation's Consolidated Financial Statements. In January
2002, the Corporation entered into an interest rate swap on $250 million of debt
with a maturity date of December 2006.

FUEL STRATEGY - Fuel costs are a significant portion of the Corporation's total
operating expenses. As a result of the significance of fuel costs and the
historical volatility of fuel prices, the Corporation's transportation
subsidiaries use swaps, futures and/or forward contracts to mitigate the impact
of adverse fuel price changes. In addition, the Corporation at times may use
swaptions to secure near-term swap prices.

The following is a summary of the Corporation's derivative financial
instruments at March 31, 2002 and December 31, 2001:

<Table>
<Caption>
Millions, Mar. 31, Dec. 31,
Except Percentages and Average Commodity Prices 2002 2001
- ----------------------------------------------- ---------- ----------

Interest rate hedging:
Amount of debt hedged ......................................... $ 848 $ 598
Percentage of total debt portfolio ............................ 10% 7%
Rail fuel hedging/swaptions:
Number of gallons hedged for 2001[a] .......................... -- 407
Average price of 2001 hedges (per gallon)[b] .................. $ -- $ 0.66
Number of gallons hedged for the remainder of 2002[c] ......... 425 567
Average price of 2002 hedges outstanding (per gallon)[b] ...... $ 0.57 $ 0.56
Number of gallons hedged for 2003[c] .......................... 63 63
Average price of 2003 hedges outstanding (per gallon)[b] ...... $ 0.56 $ 0.56
Trucking fuel hedging:
Number of gallons hedged for 2001 ............................. -- --
Average price of 2001 hedges outstanding (per gallon)[b] ...... -- --
Number of gallons hedged for the remainder of 2002 ............ 9 9
Average price of 2002 hedges outstanding (per gallon)[b] ...... $ 0.58 $ 0.58
Number of gallons hedged for 2003 ............................. 3 3
Average price of 2003 hedges outstanding (per gallon)[b] ...... $ 0.58 $ 0.58
---------- ----------
</Table>

[a] Rail fuel hedges expired December 31, 2001. Rail fuel hedges included the
swap portion of a swaption with a base term expiring December 31, 2001, and
they excluded the option portion of the swaption to extend the swap through
December 31, 2002.

[b] Excluding taxes, transportation costs and regional pricing spreads.

[c] Rail fuel hedges expire December 31, 2002. Rail fuel hedges include the
swap portions of the swaptions with base terms expiring December 31, 2002,
and they exclude the option portions of the swaptions to extend the swaps
through December 31, 2003.

The fair value asset and liability positions of the Corporation's
outstanding derivative financial instruments at March 31, 2002 and December 31,
2001 were as follows:

<Table>
<Caption>
Mar. 31, Dec. 31,
Millions of Dollars 2002 2001
- ------------------- ---------- ----------
Interest rate hedging:

Gross fair value asset position ........................................... $ 13 $ 13
Gross fair value (liability) position ..................................... (4) --

Rail fuel hedging:
Gross fair value asset position ........................................... 32 --
Gross fair value (liability) position ..................................... (2) (11)
Rail fuel swaptions:
Gross fair value asset position ........................................... 2 --
Gross fair value (liability) position ..................................... (13) (24)
Trucking fuel hedging:
Gross fair value asset position ........................................... 1 --
Gross fair value (liability) position .................................... -- --
---------- ----------
Total fair value asset (liability) position, net ............................... $ 29 $ (22)
---------- ----------
</Table>

Fuel hedging positions will be reclassified from accumulated other
comprehensive income to fuel expense over the life of the hedge as fuel is
consumed. Rail fuel swaption positions will be reflected in the Consolidated
Statements of Income as fuel expense over the life of the swap and as other
income as the fair value of the outstanding option fluctuates.

The Corporation's use of derivative financial instruments had the following
impact on pre-tax income for the three months ended March 31, 2002 and 2001:

<Table>
<Caption>
Three Months
Ended March 31,
Millions of Dollars 2002 2001
---------- ----------

Decrease (increase) in interest expense from interest rate hedging.............. $ 5 $ --
Decrease (increase) in fuel expense from rail fuel hedging...................... (6) 2
Decrease (increase) in fuel expense from rail fuel swaptions.................... 10 --
Decrease (increase) in fuel expense from trucking fuel hedging.................. -- --
---------- ----------
Decrease (increase) in operating expenses....................................... 9 2
Increase (decrease) in other income, net from rail fuel swaptions............... 3 --
---------- ----------
Increase (decrease) in pre-tax income........................................... $ 12 $ 2
---------- ----------
</Table>

At March 31, 2002 , there was no ineffectiveness recorded within fuel
expense for hedging.

SALE OF RECEIVABLES - The Railroad has sold, on a revolving basis, an undivided
percentage ownership interest in a designated pool of accounts receivable to
third parties through a bankruptcy-remote subsidiary. Receivables are sold at
carrying value, which approximates fair value. The amount of receivables sold
fluctuates based upon the availability of the designated pool of receivables and
is directly affected by changing business volumes and credit risks. At March 31,
2002 and December 31, 2001, accounts receivable are presented net of
approximately $600 million receivables sold. During May, the sale of receivables
program was renewed for one year without any significant term changes.

4. DEBT

facilities, which were entered into during March 2002 and March 2000,
respectively, are designated for general corporate purposes. None of the credit
facilities were used as of March 31, 2002. Commitment fees and interest rates
payable under the facilities are similar to fees and rates available to
comparably rated investment-grade borrowers.

CONVERTIBLE PREFERRED SECURITIES - Union Pacific Capital Trust (the Trust), a
statutory business trust sponsored and wholly owned by the Corporation, has
issued $1.5 billion aggregate liquidation amount of 6-1/4% Convertible Preferred
Securities (the CPS). Each of the CPS has a stated liquidation amount of $50 and
is convertible, at the option of the holder, into shares of UPC's common stock,
par value $2.50 per share (the Common Stock), at the rate of 0.7257 shares of
Common Stock for each of the CPS, equivalent to a conversion price of $68.90 per
share of Common Stock, subject to adjustment under certain circumstances. The
CPS accrue and pay cash distributions quarterly in arrears at the annual rate of
6-1/4% of the stated liquidation amount. The Corporation owns all of the common
securities of the Trust. The proceeds from the sale of the CPS and the common
securities of the Trust were invested by the Trust in $1.5 billion aggregate
principal amount of the Corporation's Convertible Junior Subordinated Debentures
due 2028, which debentures represent the sole assets of the Trust. For financial
reporting purposes, the Corporation has recorded distributions payable on the
CPS as an interest charge to earnings in the consolidated statements of income.

SHELF REGISTRATION STATEMENT AND SIGNIFICANT NEW BORROWINGS - Under the current
shelf registration statement, the Corporation may issue, from time to time, any
combination of debt securities, preferred stock, common stock or warrants for
debt securities or preferred stock in one or more offerings. During January
2002, under the shelf registration, the Corporation issued $300 million of
6-1/8% fixed rate debt with a maturity of January 15, 2012. The proceeds from
the issuance were used for repayment of debt and other general corporate
purposes. At March 31, 2002, the Corporation had $400 million remaining for
issuance under the shelf registration.

In April 2002, the Corporation called its $150 million, 8-5/8% debentures
due May 15, 2022 for redemption in May 2002. The Corporation issued $350 million
of 6-1/2% fixed rate debt with a maturity of April 15, 2012, in order to fund
the redemption. The Corporation used the remaining proceeds to repay other debt
and for other general corporate purposes. The Corporation intends to issue the
remaining $50 million of debt under the shelf registration statement on May 17,
2002. The debt will be issued as 5-3/4% fixed rate debt with a maturity of
October 15, 2007. The Corporation intends to file a new shelf registration
statement in the second quarter of 2002.

5. EARNINGS PER SHARE - The following table provides a reconciliation between
basic and diluted earnings per share for the three months ended March 31, 2002
and 2001:

<Table>
<Caption>
Three Months
Ended March 31,
Millions, Except Per Share Amounts 2002 2001
- ---------------------------------- ---------- ----------
Income statement data:

Net income available to common shareholders - basic ......... $ 222 $ 181
Dilutive effect of interest associated with the CPS ......... 15 15
---------- ----------
Net income available to common shareholders - diluted ....... $ 237 $ 196
---------- ----------
Weighted average number of shares outstanding:
Basic ....................................................... 251.0 246.9
Dilutive effect of common stock equivalents ................. 25.2 24.1
---------- ----------
Diluted ..................................................... 276.2 271.0

Earnings per share
Basic ....................................................... $ 0.89 $ 0.73
Diluted ..................................................... $ 0.86 $ 0.72
---------- ----------
</Table>

6. OTHER INCOME - Other income included the following for the three months ended
March 31, 2002 and 2001:

<Table>
<Caption>
Three Months
Ended March 31,
Millions of Dollars 2002 2001
------------------- ---------- ----------

Net gain on non-operating asset dispositions ..... $ 8 $ 17
Rental income .................................... 12 17
Interest income .................................. 2 2
Other, net ....................................... (1) (6)
---------- ----------
Total ............................................ $ 21 $ 30
---------- ----------
</Table>

7. RATIO OF EARNINGS TO FIXED CHARGES - The ratio of earnings to fixed charges
has been computed on a consolidated basis. Earnings represent net income less
equity in undistributed earnings of unconsolidated affiliates, plus income taxes
and fixed charges. Fixed charges represent interest, amortization of debt
discount and the estimated interest portion of rental charges.

8. COMMITMENTS AND CONTINGENCIES

CLAIMS AND LITIGATION - There are various claims and lawsuits pending against
the Corporation and certain of its subsidiaries, in addition to unasserted
claims. It is not possible at this time for the Corporation to determine fully
the effect of all such claims on its consolidated financial condition, results
of operations or liquidity; however, to the extent possible, where unasserted
claims can be estimated and where such claims are considered probable, the
Corporation has recorded a liability. The Corporation does not expect that any
known lawsuits or claims, including unasserted claims, will have a material
adverse effect on its consolidated financial condition, results of operations or
liquidity.

Western Resources (Western) filed a complaint on January 24, 2000 in the
U.S. District Court for the District of Kansas alleging that UPRR and The
Burlington Northern Santa Fe Railway Company (BNSF) materially breached their
service obligations under the transportation contract to deliver coal in a
timely manner to Western's Jeffrey Energy Center. The original complaint sought
recovery of consequential damages and termination of the contract, excusing
Western from further performance. In an amended complaint filed September 1,
2000, Western claimed the right to retroactive termination and added a claim for
restitution. On October 23, 2001, Western moved for leave to file a second
amendment to its complaint to add counts for innocent misrepresentation and
negligent misrepresentation and to request rescission of the contract. During
the period covered by this report, Western's motion for leave to amend the
complaint was denied by the magistrate on grounds that the motion was not
timely. Western has requested the judge to reconsider this ruling by the
magistrate, and the railroads will object to this motion. Additionally, by
motion of the court, the trial date for this action, originally set for May of
2002, has been rescheduled to August 6, 2002. The railroads are vigorously
defending this lawsuit, and UPRR and BNSF have filed two motions seeking
dismissal of the termination and restitution claims, both of which are still
pending. The railroads believe they have substantial defenses in the cases and
intend to continue to defend it aggressively.

ENVIRONMENTAL - The Corporation generates and transports hazardous and
nonhazardous waste in its current and former operations, and is subject to
federal, state and local environmental laws and regulations. The Corporation has
identified approximately 370 active sites at which it is or may be liable for
remediation costs associated with alleged contamination or for violations of
environmental requirements. This includes 48 sites that are the subject of
actions taken by the U.S. government, 28 of which are currently on the Superfund
National Priorities List. Certain federal legislation imposes joint and several
liability for the remediation of identified sites; consequently, the
Corporation's ultimate environmental liability may include costs relating to
other parties, in addition to costs relating to its own activities at each site.

When environmental issues have been identified with respect to the property
owned, leased or otherwise used in the conduct of the Corporation's business,
the Corporation and its consultants perform environmental assessments on such
property. The Corporation expenses the cost of the assessments as incurred. The
Corporation accrues the cost of remediation where its obligation is probable and
such costs can be reasonably estimated.

As of March 31, 2002, the Corporation has a liability of $166 million accrued
for future environmental costs. The liability includes future costs for
remediation and restoration of sites, as well as for ongoing monitoring costs,
but excludes any anticipated recoveries from third parties. Cost estimates are
based on information available for each site, financial viability of other
potentially responsible parties, and existing technology, laws and regulations.
The Corporation believes that it has adequately accrued for its ultimate share
of costs at sites subject to joint and several liability. However, the ultimate
liability for remediation is difficult to determine because of the number of
potentially responsible parties involved, site-specific cost sharing
arrangements with other potentially responsible parties, the degree of
contamination by various wastes, the scarcity and quality of volumetric data
related to many of the sites, and/or the speculative nature of remediation
costs. The Corporation expects to pay out the majority of the March 31, 2002,
environmental liability over the next five years, funded by cash generated from
operations. The impact of current obligations is not expected to have a material
adverse effect on the results of operations or financial condition of the
Corporation.

PURCHASE OBLIGATIONS AND GUARANTEES - The Corporation and its subsidiaries
periodically enter into financial and other commitments in connection with their
businesses. At March 31, 2002, the Corporation had unconditional purchase
obligations of $418 million for the purchase of locomotives as part of the
Corporation's multi-year capital asset acquisition plan. In addition, the
Corporation was contingently liable for $336 million in guarantees and $41
million in letters of credit at March 31, 2002. These contingent guarantees were
entered into in the normal course of business and include guaranteed obligations
of affiliated operations. The Corporation is not aware of any existing event of
default which would require it to satisfy these guarantees.

OTHER MATTERS - The Corporation and its subsidiaries periodically enter into
financial and other commitments in connection with their businesses. It is not
possible at this time for the Corporation to determine fully the effect of all
unasserted claims on its consolidated financial condition, results of operations
or liquidity; however, to the extent possible, where unasserted claims can be
estimated and where such claims are considered probable, the Corporation has
recorded a liability. The Corporation does not expect that any known lawsuits,
claims, environmental costs, commitments, contingent liabilities or guarantees
will have a material adverse effect on its consolidated financial condition,
results of operations or liquidity.

9. ACCOUNTING PRONOUNCEMENTS - In July 2001, the Financial Accounting Standards
Board (FASB) issued FAS 142, "Goodwill and Other Intangible Assets". FAS 142
revises the method of accounting for goodwill and other intangible assets. FAS
142 eliminates the amortization of goodwill, but requires goodwill to be tested
for impairment at least annually at a reporting unit level. FAS 142 became
effective for the Corporation on January 1, 2002. The adoption of FAS 142 did
not have a significant impact on the Corporation's Consolidated Financial
Statements. In accordance with FAS 142, the Railroad eliminated annual goodwill
amortization of $2 million. At March 31, 2002, the Railroad had $50 million of
goodwill remaining.

In August 2001, the FASB issued FAS 143, "Accounting for Asset Retirement
Obligations". FAS 143 requires the Corporation to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and is effective for the Corporation's fiscal year beginning January 1,
2003. Management is in the process of evaluating the impact this standard will
have on the Corporation's Consolidated Financial Statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO
THREE MONTHS ENDED MARCH 31, 2001

Union Pacific Corporation (UPC or the Corporation) consists of two reportable
segments, rail and trucking, and UPC's other product lines (Other). The rail
segment includes the operations of the Corporation's indirect wholly owned
subsidiary, Union Pacific Railroad Company (UPRR) and UPRR's subsidiaries and
rail affiliates (collectively, the Railroad). The trucking segment includes
Overnite Transportation Company (OTC) and Motor Cargo Industries, Inc. (Motor
Cargo), both operating as separate and distinct subsidiaries of Overnite
Corporation (Overnite), an indirect wholly owned subsidiary of UPC. The
Corporation's other product lines are comprised of the corporate holding company
(which largely supports the Railroad), Fenix LLC and affiliated technology
companies (Fenix), and self-insurance activities, in addition to all appropriate
consolidating entries (see note 2 to the Consolidated Financial Statements).

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations addresses Union Pacific Corporation's Consolidated Financial
Statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions. Management
bases its estimates on historical experience and on various other factors that
are believed to be reasonable under the circumstances. Actual results may vary
under different assumptions or conditions.

Management believes the following accounting policies are among the most
critical in the preparation of the Consolidated Financial Statements, in that
they depend upon the application of judgements and the extensive use of
estimates.

Revenue recognition - The Corporation recognizes transportation revenues on a
percentage-of-completion basis as freight moves from origin to destination.
Other revenue is recognized as service is performed or contractual obligations
are met.

Environmental costs - When environmental issues have been identified with
respect to the property owned, leased or otherwise used in the conduct of the
Corporation's business, the Corporation and its consultants perform
environmental assessments on such property. The Corporation expenses the cost
for the assessments as incurred. The Corporation accrues the cost of remediation
where its obligation is probable and such costs can be reasonably estimated.

Personal injury - The cost of injuries to employees and others on Railroad
property or in accidents involving the trucking segment is charged to expense
based on actuarial estimates of the ultimate cost and number of incidents each
year.

CONSOLIDATED

NET INCOME - The Corporation reported a first quarter record net income of $222
million ($0.89 per basic share and $0.86 per diluted share) in the first quarter
of 2002 compared to $181 million ($0.73 per basic share and $0.72 per diluted
share) in the first quarter of 2001. The increase in net income was the result
of lower fuel prices, productivity gains and cost control, which offset the
effects of wage and benefit inflation. Productivity is measured as total output
during the quarter. Total output is measured by both gross ton miles per
inflation-adjusted expense dollar and gross ton miles per employee. Cost control
is defined as focused actions to reduce discretionary spending and to minimize
failure costs.

OPERATING REVENUES - Operating revenues increased $24 million (1%) to a first
quarter record of $3.0 billion. This increase reflects a 9% revenue growth in
the trucking segment due to the acquisition of Motor Cargo in November 2001.
Excluding Motor Cargo in the current period, operating revenues were down $8
million. The Corporation recognizes transportation revenues on a
percentage-of-completion basis as

freight moves from origin to destination. Other revenue is recognized as service
is performed or contractual obligations are met.

OPERATING EXPENSES - Operating expenses decreased $36 million (1%) to $2.5
billion in 2002. Excluding Motor Cargo in the current period, operating expenses
decreased $67 million (3%) compared to 2001, reflecting lower fuel prices, a 3%
reduction in employment levels and cost control efforts. These decreases were
partially offset by wage and benefit inflation, higher locomotive lease expense
and higher other costs due to decreased spending in 2001 at the Railroad.

Salaries, wages and employee benefits increased $20 million (2%) compared
to 2001. Excluding Motor Cargo in the current period, expenses increased $3
million as wage and benefit inflation and volume costs exceeded savings from
lower employment levels and improved productivity. Equipment and other rents
expense increased $12 million (4%). Excluding Motor Cargo in the current period,
equipment and other rents expense increased $8 million (2%) as a result of
additional locomotive lease expense and higher contract transportation costs at
OTC. Depreciation expense increased $7 million (2%). Excluding Motor Cargo in
the current period, depreciation increased $5 million (2%) as a result of the
Railroad's capital spending in recent years which increased the total value of
the Corporation's assets subject to depreciation. Fuel and utilities costs were
down $112 million (32%) compared to 2001. Excluding Motor Cargo in the current
period, costs were down $114 million (32%) due to lower fuel prices and a lower
fuel consumption rate, partially offset by increased volume related expense due
to higher gross ton miles at the Railroad. Materials and supplies expense
decreased $6 million (4%). Excluding Motor Cargo in the current period, expenses
decreased $7 million (5%) primarily due to reduced locomotive repairs and cost
control actions. Casualty costs decreased $2 million (2%) over 2001. Excluding
Motor Cargo in the current period, costs decreased $3 million (3%) primarily due
to lower costs for damaged freight cars. Other costs increased $45 million
(22%). Excluding Motor Cargo in the current period, other costs increased $41
million (20%) due to decreased spending in the first quarter of 2001 and higher
state and local taxes.

OPERATING INCOME - Operating income increased $60 million (14%) to a first
quarter record of $499 million in 2002. Excluding Motor Cargo in the current
period, 2002 operating income increased $59 million (13%) as lower fuel prices
and productivity more than offset inflation, higher other costs, and slight
increases in lease expense and depreciation.

NON-OPERATING ITEMS - Interest expense decreased $18 million (10%) compared to
2001 primarily due to lower interest rates and a lower average debt level in
2002. In the three months ended March 31, 2002, the Corporation's average debt
level decreased to $9,713 million in 2002 from $10,047 million for the same
period in 2001. The Corporation's weighted-average interest rate was 6.7% during
the first quarter of 2002 as compared to 7.2% in 2001. Other income decreased $9
million (30%) in 2002 compared to 2001 due primarily to lower real estate sales.
Income tax expense increased $28 million (26%) in 2002 over 2001, which is
primarily the result of higher pre-tax income levels in 2002.

OTHER KEY MEASURES - Operating income as a percentage of operating revenues
increased to 16.8% in the first quarter of 2002 from 14.9% in the first quarter
of 2001. The Corporation's operating ratio was 83.2% in 2002 compared to 85.1%
in 2001.

RAIL SEGMENT

NET INCOME - Rail operations reported record net income in the first quarter of
2002 of $243 million, compared to net income of $209 million in 2001, an
increase of $34 million (16%). The increase in earnings resulted primarily from
lower fuel prices and lower interest expense combined with productivity gains
and cost control efforts. These improvements were partially offset by inflation,
lower real estate sales and higher other costs due primarily to decreased
spending in the first quarter of 2001.

OPERATING REVENUES - Operating revenues of $2.6 billion is comprised of
Commodity Revenue and other revenues. Other revenues primarily include
subsidiary revenue from various companies that are wholly owned or majority
owned by the Railroad, revenue from the Chicago commuter rail operations and
accessorial revenue earned due to customer detainment of railroad owned or
controlled equipment. Rail

operating revenues decreased $6 million compared to 2001 to $2.6 billion.
Revenue carloads were essentially flat with increases in the energy and
automotive commodity groups offset by decreases in the other four commodity
groups of agricultural, chemicals, industrial products and intermodal. The
decrease in other revenue was the result of lower accessorial and subsidiary
revenues.

The following tables summarize the year-over-year changes in rail commodity
revenue, revenue carloads and average revenue per car by commodity type:

<Table>
<Caption>
Commodity Revenue Three Months Ended March 31, %
Millions of Dollars 2002 2001 Change
- ------------------- ------------ ------------ ------------

Agricultural ............................................... $ 369 $ 370 --
Automotive ................................................. 283 276 2
Chemicals .................................................. 385 390 (1)
Energy ..................................................... 582 593 (2)
Industrial Products ........................................ 474 472 --
Intermodal ................................................. 455 450 1
------------ ------------ ------------
Total ...................................................... $ 2,548 $ 2,551 --
------------ ------------ ------------
</Table>

Revenue Carloads Three Months Ended March 31, %
Thousands 2002 2001 Change
- ---------------- ------------ ------------ ------------

Agricultural ............................................... 219 219 --
Automotive ................................................. 193 185 4
Chemicals .................................................. 217 219 (1)
Energy ..................................................... 545 537 2
Industrial Products ........................................ 323 336 (4)
Intermodal ................................................. 681 683 --
------------ ------------ ------------
Total ...................................................... 2,178 2,179 --
------------ ------------ ------------
</Table>

Average Revenue Three Months Ended March 31, %
Per Car 2002 2001 Change
- --------------- ------------ --------------- ------------

Agricultural .............................................. $ 1,688 $ 1,688 --
Automotive ................................................ 1,462 1,486 (2)
Chemicals ................................................. 1,771 1,778 --
Energy .................................................... 1,068 1,106 (3)
Industrial Products ....................................... 1,469 1,405 5
Intermodal ................................................ 668 659 1
------------ --------------- ------------
Total ..................................................... $ 1,170 $ 1,171 --
------------ --------------- ------------
</Table>

Agricultural - Revenue, carloads and average revenue per car were consistent
with 2001. Domestic wheat shipments declined substantially, due to weak demand
and fewer exports of flour and sacked wheat for the U.S. Government Food for
Peace program. Offsetting the decline were gains from increased demand for
livestock feed and meals and oils combined with increased shipments of frozen
food products.

Automotive - Revenue increased 2%, as a 4% increase in carloads was partially
offset by a 2% decrease in average revenue per car. Finished vehicle shipments
increased 9%, primarily due to market share gains. Materials shipments declined
5% due to reduced production in Mexico. Average revenue per car declined due to
a combination of competitive pressures and changes in the equipment mix.

Chemicals - Revenue declined 1%, due to a 1% decrease in carloads. Volume
declines were primarily the result of the soft economy as weak demand for
industrial production reduced liquid and dry chemical shipments. Fertilizer
shipments declined due to timing and full warehouse inventories, as many
shipments moved in the fourth quarter of 2001. This decline was partially offset
by an increase in revenue for domestic soda ash and petroleum products.

Energy - Revenue decreased 2%, as a 2% increase in carloads was more than offset
by a 3% decline in average revenue per car. First quarter records were set for
total coal carloads and total tons hauled. Coal trains loaded per day in the
Southern Powder River Basin in Wyoming also set a record as the highest quarter
ever. These increases were driven by efficient train performance and favorable
weather conditions compared to 2001. However, the mild winter weather reduced
demand late in the quarter. Average revenue per car declined primarily due to
the impact of contract price negotiations on expiring long term contracts with
certain major customers.

Industrial Products - Revenue was flat, as a 4% decline in carloads was offset
by a 5% increase in average revenue per car. The volume decline was mainly the
result of the soft economy, which had a negative effect on many economically
sensitive commodities including steel and paper products. Steel producers were
adversely impacted by high levels of low-cost imported steel which forced plant
shutdowns and bankruptcies. Ferrous scrap and metallic minerals shipments were
also negatively impacted by the weak steel market. Offsetting these declines
were volume increases in construction-related commodities, led by cement and
stone, as strong building and road construction activity continued in the South
and Southwestern regions of the country. Lumber volumes increased due to strong
housing construction and demand for lumber production. Average revenue per car
increased due to price increases and a greater mix of longer average length of
haul business, mainly lumber.

Intermodal - Revenue increased 1% and was a first quarter record due to a 1%
increase in average revenue per car. Volume declined in the domestic business
segments as the result of soft economic demand. In addition, the voluntary
action of reducing low-margin trailer business in favor of higher-margin
containers contributed to the decline. Offsetting the domestic decline was an
increase in international shipments, due to higher import demand and increased
market share. The increase in average revenue per car was due to a greater mix
of longer average length of haul business and price increases.

OPERATING EXPENSES - Operating expenses decreased $65 million (3%) to $2.1
billion in 2002. Lower fuel prices and savings from lower force levels and
productivity improvements more than offset inflation, higher other costs due to
decreased spending in 2001 and increased lease and depreciation expense.

Salaries, Wages and Employee Benefits - Salaries, wages and employee benefits
decreased $3 million in 2002 to $891 million. A 3% reduction in employee force
levels and improvements in worker productivity more than offset wage and
employee benefits inflation. Volume related costs also increased due to 3%
growth in gross ton miles.

Equipment and Other Rents - Equipment and other rents primarily includes rental
expense UPRR pays for freight cars owned by other railroads or private
companies; freight car, intermodal, and locomotive leases; other specialty
equipped vehicle leases; and office and other rentals. Expenses increased $6
million (2%) compared to 2001 due primarily to higher expenses for locomotive
leases and office and miscellaneous rentals partially offset by the decrease in
car cycle times (the average number of accumulated days that loaded and empty
cars from other railroads spend on the Railroad's system during a month) and
lower volume-related cost. The higher locomotive lease expense is due to the
Railroad's increased leasing of new, more reliable and fuel efficient
locomotives. These new locomotives replaced older, non-leased models in the
fleet, which helped reduce expenses for depreciation, labor, materials and fuel
during the year. The decrease in car cycle times is partially attributable to
improved train speed and reduced online inventories. The decrease in volume
costs was attributable to a decline in carloads in business segments such as
industrial products and chemicals that utilize a high percentage of rented
freight cars.

Depreciation - The majority of depreciation relates to road property, with the
balance for locomotives, freight cars, and computer equipment and other.
Depreciation expense increased $3 million (1%) over 2001, resulting from capital
spending in recent years. Capital spending totaled $352 million in the first
quarter 2002 compared to $355 million in 2001. Capital spending for the year
totaled $1.7 billion in 2001 and in 2000 and $1.8 billion in 1999.

Fuel and Utilities - Fuel and utilities is comprised of locomotive fuel,
utilities other than telephone, and gasoline and other fuels. Expenses decreased
$109 million (33%). The decrease was driven by both lower

fuel prices and a lower fuel consumption rate, as measured by gallons consumed
per thousand gross ton miles. Fuel prices averaged 61 cents per gallon in 2002
compared to 92 cents per gallon in 2001, including taxes, transportation costs
and regional pricing spreads of 9 cents and 17 cents in 2002 and 2001,
respectively. Lower fuel prices in 2002 resulted in a $99 million reduction in
fuel expense. The lower consumption rate decreased fuel expense by $11 million
but was partially offset by a 3% increase in gross ton miles which increased
fuel expense by $10 million. The Railroad hedged approximately 44% of its fuel
consumption for the first quarter, which decreased fuel costs by $4 million. As
of March 31, 2002, expected fuel consumption for the remainder of 2002 is 43%
hedged at 57 cents per gallon (excluding taxes, transportation costs and
regional pricing spreads) and is 5% hedged at 56 cents per gallon (excluding
taxes, transportation costs and regional pricing spreads) for 2003. Utilities,
gasoline, and propane expenses decreased $9 million primarily due to lower rates
and fuel prices.

Materials and Supplies - Materials used for the maintenance of the railroad's
lines, structures, and equipment is the principle component of materials and
supplies expense. Office, small tools, and other supplies, and the costs of
freight services purchased to ship company materials are also included. Expenses
decreased $5 million, primarily reflecting locomotive overhaul reductions.
Locomotive overhauls decreased due to acquisition of new, more-reliable
locomotives during the past year and the sale of older units, which required
higher maintenance.

Casualty Costs - The largest component of casualty costs is expenses associated
with personal injury. Freight and property damage; and bad debt, insurance, and
environmental matters are also included in casualty costs. Costs decreased $1
million (1%) compared to 2001, as lower costs for damaged freight cars were
partially offset by slightly higher costs for bad debt and personal injury.

Other Costs - Other costs includes the costs of services purchased from outside
contractors, state and local taxes, net costs of operating facilities jointly
used by UPRR and other railroads, transportation and lodging for train crew
employees, leased automobile maintenance expenses, telephone and cellular
expense, employee travel expense, and computer and other general expenses
partially offset by credits for overhead expenses charged to capital projects.
Expenses increased $44 million (24%) compared to 2001 primarily due to decreased
spending for contract services and other work in the first quarter of 2001 and
higher state and local taxes in 2002. Contract services and other work was
delayed in the first quarter of 2001 in an effort to offset the effects of the
slowing economy which, at the time, was expected to quickly recover in the later
half of the year.

OPERATING INCOME - Operating income increased $59 million (13%) to a first
quarter record of $508 million. The operating ratio for 2002 was a first quarter
record of 80.8%, compared to 83.1% in 2001.

NON-OPERATING ITEMS - Non-operating expense increased $2 million (2%) compared
to 2001. Net other income decreased $10 million (34%) due to lower real estate
sales of $8 million in the first quarter of 2002 compared to $17 million in the
same period of 2001. Interest expense decreased $8 million (5%) primarily as a
result of lower average debt levels and lower weighted-average interest rates in
2002. Income taxes increased $23 million (19%) in 2002 compared to 2001, which
was primarily the result of higher pre-tax income in 2002.

TRUCKING SEGMENT

OPERATING REVENUES - In 2002, trucking revenues rose $25 million (9%) to $305
million. The acquisition of Motor Cargo accounted for $32 million of incremental
revenue. Excluding Motor Cargo in the current period, revenues declined $7
million (3%) due to a 2% decline in volume and lower fuel surcharge revenue as a
result of lower fuel prices in 2002.

OPERATING EXPENSES - Trucking operating expenses rose $24 million (9%) to $295
million in 2002. The acquisition of Motor Cargo accounted for $31 million of
incremental expense. Excluding Motor Cargo in the current period, expenses
decreased $7 million (3%) as lower other costs and fuel prices were only
partially offset by wage and benefit inflation.

Salaries, Wages and Employee Benefits - Salaries, wages and employee benefits
increased $21 million (12%). Excluding Motor Cargo in the current period,
expenses increased $4 million (3%) due to wage and benefit inflation partially
offset by a 2% decrease in employee force levels and productivity improvements.

Equipment and Other Rents - Equipment and other rents increased $4 million
(18%). Excluding Motor Cargo in the current period, expenses increased $1
million (5%) due to increased use of linehaul contract transportation during the
quarter, partially offset by decreased local purchased transportation costs.

Depreciation - Depreciation expense increased $3 million (25%). Excluding Motor
Cargo in the current period, expenses increased $1 million (8%) due to a higher
depreciable asset base resulting from lower salvage value for surplus revenue
equipment due to a depressed resale market.

Fuel and Utilities - Fuel and utilities costs decreased $3 million (17%).
Excluding Motor Cargo in the current period, expenses decreased $5 million
(28%), as a result of lower fuel prices during the quarter (63 cents per gallon
average in 2002 compared to 90 cents per gallon average in 2001, including
transportation costs and regional pricing spreads, and excluding taxes),
combined with an 8% decrease in gallons consumed. Overnite did not hedge any
fuel volume for the first quarter of 2002. As of March 31, 2002, Overnite had
hedged approximately 19% of its expected fuel consumption for the remainder of
2002 at an average of 58 cents per gallon, excluding taxes, transportation costs
and regional pricing spreads and had hedged approximately 5% of its expected
fuel consumption for 2003 at an average of 58 cents per gallon excluding taxes,
transportation costs and regional pricing spreads.

Materials and Supplies - Materials and supplies expense decreased $1 million
(8%). Excluding Motor Cargo in the current period, expenses decreased $2 million
(16%) due to lower maintenance and operating supplies expense as a result of
lower volumes, fleet maintenance productivity and cost control measures.

Casualty Costs - Casualty costs increased $1 million (9%). Excluding Motor Cargo
in the current period, expenses were flat due to a reduction in bad debt
expense, offset by higher insurance and cargo loss and damage expenses.

Other Costs - Other costs decreased $1 million (4%). Excluding Motor Cargo in
the current period, expenses decreased $5 million (21%) due to lower expenses
related to decreased security (related to Teamsters' matters), employee travel
expenses, legal expense and cost control measures.

OPERATING INCOME - Trucking operations generated operating income of $10 million
in 2002, compared to $9 million for 2001. Excluding Motor Cargo in the current
period, operating income was essentially flat. The operating ratio decreased 0.3
points to 96.6%, compared to 96.9% in 2001. Motor Cargo had no impact on the
operating ratio in 2002.

OTHER PRODUCT LINES

OTHER - Operating losses were flat in 2002 compared to 2001. Operating revenues
increased $5 million year over year but were offset by a $5 million increase in
operating expenses. Interest expense decreased $10 million in the first quarter
due to lower interest rates and a lower average debt level compared to 2001.

LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION

Cash from operations was $345 million in the first quarter of 2002 compared to
$216 million in 2001. The increase is the result of higher net income and
deferred taxes, as well as better working capital performance and payments for
the workforce reduction plan in 2001.

Cash used in investing activities was $485 million in the first quarter of
2002 compared to a use of $505 million in 2001. The decreased use of cash is due
to the receipt of $34 million related to a warranty refund from a vendor in 2002
as well as the acquisition of fewer locomotives in the first quarter of 2002.
This was partially offset by lower real estate sale proceeds in 2002.

Cash provided by financing activities was $137 million in the first quarter
of 2002 compared to $257 million in 2001. The decrease in cash provided is due
to lower net borrowings ($428 million in 2002 compared to $502 million in 2001)
and higher debt repayments ($301 million in 2002 compared to $214 million in
2001), offset by higher proceeds from the exercise of stock options ($60 million
in 2002 compared to $18 million in 2001).

Including the Convertible Preferred Stock as an equity instrument, the
ratio of debt to total capital employed was 42.0% at March 31, 2002 compared to
42.2% at December 31, 2001.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

As described in the notes to the Consolidated Financial Statements, as
referenced in the tables below, the Corporation has contractual obligations and
commercial commitments that may affect the financial condition of the
Corporation. However, based on management's assessment of the underlying
provisions and circumstances of the material contractual obligations and
commercial commitments of the Corporation, including material sources of
off-balance sheet and structured finance arrangements, there is no known trend,
demand, commitment, event or uncertainty that is reasonably likely to occur
which would have a material effect on the Corporation's financial condition or
results of operations. In addition, the commercial obligations, financings and
commitments made by the Corporation are customary transactions which are similar
to those of other comparable industrial corporations, particularly within the
transportation industry.

The following tables identify material obligations and commitments as of
March 31, 2002:

Contractual Obligations Payments Due by Period
Millions of Dollars ---------------------------------------------------------
- ----------------------- Less Than After
Total 1 Year 2-3 Years 4-5 Years 5 Years
--------- --------- --------- --------- ---------

Debt[a] .......................................... $ 6,801 $ 93 $ 1,426 $ 1,075 $ 4,207
Operating leases ................................. 3,282 403 683 558 1,638
Capital lease obligations [b] .................... 2,336 217 409 358 1,352
Unconditional purchase obligations [c] ........... 418 26 392 -- --
--------- --------- --------- --------- ---------
Total contractual obligations .................... $ 12,837 $ 739 $ 2,910 $ 1,991 $ 7,197
--------- --------- --------- --------- ---------
</Table>

[a] Excludes capital lease obligations of $1,408 million.

[b] Represents total obligations, including interest component.

[c] Unconditional purchase obligations represent multi-year contractual
commitments to purchase assets at fixed prices and fixed volumes. These
commitments are made in order to take advantage of pricing
opportunities and to insure availability of assets to meet quality and
operational requirements. Excluded are contracts made in the normal
course of business for performance of routine services, as well as
commitments where contract provisions allow for cancellation.

Other Commercial Commitments Amount of Commitment Expiration
Millions of Dollars Per Period
- ---------------------------- ------------------------------------------------

Total Less
Amounts Than After
Committed 1 Year 2-3 Years 4-5 Years 5 Years
--------- ---------- ---------- --------- --------

Credit facilities ...................... $ 1,825 $ 825 $ 1,000 $ -- $ --
Convertible preferred securities ....... 1,500 -- -- -- 1,500
Sale of receivables .................... 600 600 -- -- --
Guarantees[a] .......................... 350 12 25 13 300
Standby letters of credit .............. 41 41 -- -- --
--------- ---------- ---------- --------- --------
Total commercial commitments ........... $ 4,316 $ 1,478 $ 1,025 $ 13 $ 1,800
--------- ---------- ---------- --------- --------
</Table>

[a] Includes guaranteed obligations of affiliated operations.

FINANCING ACTIVITIES

CREDIT FACILITIES - On March 31, 2002, the Corporation had $1.825 billion in
revolving credit facilities, of which $825 million expires in March 2003, with
the remaining $1.0 billion expiring in 2005. The credit facilities, which were
entered into during March 2002 and March 2000, respectively, are designated for
general corporate purposes. None of the credit facilities were used as of March
31, 2002. Commitment fees and interest rates payable under the facilities are
similar to fees and rates available to comparably rated investment-grade
borrowers.

OTHER MATTERS

COMMITMENTS AND CONTINGENCIES - There are various claims and lawsuits pending
against the Corporation and certain of its subsidiaries. The Corporation is also
subject to various federal, state and local environmental laws and regulations,
pursuant to which it is currently participating in the investigation and
remediation of various sites. A discussion of certain claims, lawsuits,
contingent liabilities and guarantees is set forth in note 8 to the Consolidated
Financial Statements, which is incorporated herein by reference.

MOTOR CARGO ACQUISITION - On October 15, 2001, the Corporation announced that it
had entered into an Agreement and Plan of Merger, dated October 15, 2001 (the
Agreement), with Motor Cargo Industries, Inc., a Utah corporation, and Motor
Merger Co., a Utah corporation and wholly owned subsidiary of UPC, pursuant to
which the Corporation agreed to offer to exchange for each share of Motor Cargo
common stock, no par value (Motor Cargo Stock), at the election of the holder,
either 0.26 of a share of common stock, par value $2.50 per share, of the
Corporation or $12.10 in cash. On October 31, 2001, the Corporation announced
the commencement of its offer to acquire the shares of Motor Cargo Stock, which
was completed on November 29, 2001. As of the closing of the offer, the
Corporation acquired 99.7% of the outstanding shares of Motor Cargo. The merger
between Motor Cargo and Motor Merger Co. was completed on February 14, 2002
pursuant to which the remaining shares of Motor Cargo were converted into a
right to receive $12.10 per share. Under the purchase method of accounting, the
purchase price was approximately $85 million. Motor Cargo is a western regional
less than truckload (LTL) carrier providing comprehensive service throughout 10
western states.

ACCOUNTING PRONOUNCEMENTS - In July 2001, the Financial Accounting Standards
Board (FASB) issued FAS 142, "Goodwill and Other Intangible Assets". FAS 142
revises the method of accounting for goodwill and other intangible assets. FAS
142 eliminates the amortization of goodwill, but requires goodwill to be tested
for impairment at least annually at a reporting unit level. FAS 142 became
effective for the Corporation on January 1, 2002. The adoption of FAS 142 did
not have a significant impact on the Corporation's Consolidated Financial
Statements. In accordance with FAS 142, the Railroad eliminated annual goodwill
amortization of $2 million. At March 31, 2002, the Railroad had $50 million of
goodwill remaining.

CAUTIONARY INFORMATION

Certain statements in this report are, and statements in other material filed or
to be filed with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Corporation) are, or will be, forward-looking within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934. These
forward-looking statements include, without limitation, statements regarding:
expectations as to operational improvements; expectations as to cost savings,
revenue growth and earnings; the time by which certain objectives will be
achieved; 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 its 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, statements
of management's 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 at, or by which, such performance or results will be achieved.
Forward-looking information is based on information available at the time and/or
management's good faith belief with respect to future events, and is 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
cause such differences include, but are not limited to, whether the Corporation
and its subsidiaries are fully successful in implementing their financial and
operational initiatives; industry competition, conditions, performance and
consolidation; legislative and/or regulatory developments, including possible
enactment of initiatives to re-regulate the rail business; natural events such
as severe weather, 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
government response thereto; changes in fuel prices; changes in labor costs;
labor stoppages; and the outcome of claims and litigation.

Forward-looking statements speak only as of the date the statement was
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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided
in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2001.
Disclosure concerning market risk-sensitive instruments is set forth in note 3
to the Consolidated Financial Statements included in Item 1 of Part I of this
Report and is incorporated herein by reference.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

LABOR MATTERS

As previously reported in the Annual Report on Form 10-K for 2001 filed by the
Corporation, the General Counsel of the National Labor Relations Board (NLRB) is
seeking a bargaining order remedy in 11 cases involving OTC where a Teamsters
local union lost a representation election. A bargaining order remedy would
require OTC to recognize and bargain with the union as if the union had won
instead of lost the election and would be warranted only if the following
findings are made: (1) the petitioning Teamsters' local had obtained valid
authorization cards from a majority of the employees in an appropriate unit; (2)
OTC committed serious unfair labor practices; and (3) those unfair labor
practices would preclude the holding of a fair election despite the application
of less drastic remedies. In these 11 cases, an administrative law judge and the
NLRB ruled that the bargaining order remedy is warranted. OTC appealed the
NLRB's ruling to the United States Court of Appeals for the Fourth Circuit. By a
two-one decision, the Fourth Circuit initially enforced the first four
bargaining orders. Last year, the full Fourth Circuit agreed to rehear that
case. On February 11, 2002, the full Fourth Circuit issued its ruling in favor
of OTC on the bargaining order remedy in the first four cases and remanded the
cases to the NLRB for new representation elections. The time period for seeking
review of the decision in the United States Supreme Court will expire in June of
2002. Appeal of the seven cases has been held in abeyance pending this decision
and now will be heard by the Fourth Circuit if the NLRB does not withdraw the
bargaining orders on its own. OTC believes that Supreme Court review of the
first four cases is unlikely and that there is no substantial basis to
distinguish the seven remaining cases from the four recently decided by the
Fourth Circuit. In a twelfth case, the administrative law judge found that a
bargaining order remedy was not warranted.

ENVIRONMENTAL MATTERS

As previously reported in the Annual Report on Form 10-K for 2001 filed by the
Corporation, the State of Illinois filed a complaint against the Railroad with
the Illinois Pollution Board on May 14, 2001 seeking penalties for an alleged
violation of state air pollution laws arising out of a release of styrene from a
tank car near Cora, Illinois, which occurred on August 29, 1997. The car
contained styrene monomer, a hazardous substance, stabilized by an inhibitor by
the origin shipper. The car was delayed in transit for a number of different
reasons including rerouting and reconsignment by the shipper. The Railroad was
not notified that such delays could jeopardize the shipment. Eventually the
effect of the inhibitor wore off and the styrene went into a reactive state
resulting in pressure and venting near Cora, Illinois. A sparsely-populated area
was evacuated for a few hours. The situation was controlled and remediated
promptly. Styrene has since been put on the Railroad's list of time sensitive
shipments for special monitoring. The State of Illinois seeks to assess a
penalty in excess of $100,000. The Railroad believes the penalty should be
significantly less than $100,000 and is vigorously defending the case. The
hearing on this matter has been rescheduled from its original March 22, 2002
date and should take place during the second or third quarter of 2002.

On April 26, 2002, UPRR received written notice of a proposed $250,000
penalty from the Illinois Environmental Protection Agency relating to a
collision between trains from Conrail and the Railroad. The collision occurred
near Momence, Illinois on March 23, 1999 when an eastbound Conrail train failed
to stop at a signal and struck a UPRR train which was properly occupying a
crossing. The collision resulted in a release of diesel fuel from the fuel tanks
of a Union Pacific locomotive, which was promptly reported and remediated. The
Railroad will vigorously oppose this proposed penalty.

The District Attorneys of Merced, Madera, Stanislaus, San Joaquin and
Sacramento counties in the state of California have threatened to file criminal
charges against the Railroad in connection with the release of calcium oxide
(lime) which leaked from an unidentified railcar between Chowchilla and
Sacramento, California on December 27, 2001. They contend that criminal
violations occurred by virtue of the alleged failure by the Railroad to timely
report the release of a hazardous material, its alleged disposal of hazardous
waste and the alleged release of material into the waters of the State of
California. The Company disputes both the factual and legal bases for these
claims and intends to vigorously defend any action that might be filed.

OTHER MATTERS

As previously reported in the Annual Report on Form 10-K for 2001 filed by the
Corporation, Western Resources (Western) filed a complaint on January 24, 2000
in the U.S. District Court for the District of Kansas alleging that UPRR and The
Burlington Northern Santa Fe Railway Company (BNSF) materially breached their
service obligations under the transportation contract to deliver coal in a
timely manner to Western's Jeffrey Energy Center. The original complaint sought
recovery of consequential damages and termination of the contract, excusing
Western from further performance. In an amended complaint filed September 1,
2000, Western claimed the right to retroactive termination and added a claim for
restitution. On October 23, 2001, Western moved for leave to file a second
amendment to its complaint to add counts for innocent misrepresentation and
negligent misrepresentation and to request rescission of the contract. During
the period covered by this report, Western's motion for leave to amend the
complaint was denied by the magistrate on grounds that the motion was not
timely. Western has requested the judge to reconsider this ruling by the
magistrate, and the railroads will object to this motion. Additionally, by
motion of the court, the trial date for this action, originally set for May of
2002, has been rescheduled to August 6, 2002. The railroads are vigorously
defending this lawsuit, and UPRR and BNSF have filed two motions seeking
dismissal of the termination and restitution claims, both of which are still
pending. The railroads believe they have substantial defenses in the cases and
intend to continue to defend it aggressively.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The annual meeting of shareholders of the Corporation was held on
April 19, 2002.

(b) At the Annual Meeting, the Corporation's shareholders voted for the
election of Philip F. Anschutz (216,980,919 shares in favor; 6,102,409
shares withheld), Richard K. Davidson (218,841,950 shares in favor;
4,241,378 shares withheld), Thomas J. Donohue (219,240,663 shares in favor;
3,842,665 shares withheld), A. W. Dunham (219,316,687 shares in favor;
3,766,641 shares withheld), Spencer F. Eccles (219,191,892 shares in favor;
3,891,436 shares withheld), Ivor J. Evans (219,054,370 shares in favor;
4,028,958 shares withheld), Elbridge T. Gerry, Jr. (219,239,891 shares in
favor; 3,843,437 shares withheld), Judith Richards Hope (217,695,765 shares
in favor; 5,387,563 shares withheld), Richard J. Mahoney (219,291,408
shares in favor; 3,791,920 shares withheld), Steven R. Rogel (219,284,769
shares in favor; 3,798,559 shares withheld), and E. Zedillo (219,010,288
shares in favor; 4,073,040 shares withheld), as directors of the
Corporation. In addition, the Corporation's shareholders voted to ratify
the appointment of Deloitte & Touche LLP as independent auditors of the
Corporation (218,417,154 shares in favor; 3,460,872 shares against,
1,205,301 shares withheld) and voted not to approve a shareholder proposal
regarding Chairman of the Board (54,453,309 shares in favor; 137,785,402
shares against, 2,883,214 shares withheld and 27,961,403 shares not voted
by brokers).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

12 Computation of ratio of earnings to fixed charges.

(b) REPORTS ON FORM 8-K

On January 24, 2002, UPC filed a Current Report on Form 8-K announcing
UPC's financial results for the fourth quarter of 2001.

On April 25, 2002, UPC filed a Current Report on Form 8-K announcing
UPC's financial results for the first quarter of 2002.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: May 14, 2002

UNION PACIFIC CORPORATION
(Registrant)

By /s/ Richard J. Putz
----------------------------------
Richard J. Putz
Vice President and Controller
(Chief Accounting Officer and
Duly Authorized Officer)

UNION PACIFIC CORPORATION
EXHIBIT INDEX

<Table>
<Caption>
Exhibit No. Description of Exhibits Filed with this Statement
----------- ----------------------------------------------------

12 Computation of ratio of earnings to fixed charges for the
Three Months Ended March 31, 2002.
</Table>