Fuel, Service Nail UP
October 21, 2004

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Union Pacific Railroad profits plunged 36 percent in the third quarter due to poor service and soaring fuel costs.

"Our $3.1 billion in third quarter operating revenue marks the second consecutive quarter of railroad revenue over the $3 billion mark and our best total revenue performance ever as a company," said UP chairman and chief executive officer Dick Davidson. "However, unprecedented fuel prices and high operating costs resulting from our service inefficiencies out-weighed the revenue growth."

Third quarter net income dropped from $317 million in 2003 to $202 million this year. Operating income for the quarter fell 29 percent from $592 million to $418 million on a year-over-year comparison.

Four of six business units registered revenue increases in the quarter driven by strong economic demand: industrial products, up 9 percent; chemicals, up 8 percent; intermodal, up 7 percent; and automotive, up 4 percent. Energy was flat and agricultural was down 4 percent.

"Unfortunately, operational challenges associated with these record volumes and our resource shortages, are preventing us from making the most of this increasing demand," Davidson said. "We are focused on making improvements and we continue to believe the resource plans we are implementing will make a difference."

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