<PAGE>   1
                                    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 June 30, 2001

                                     - 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 1-6146

                         UNION PACIFIC RAILROAD COMPANY
             (Exact name of Registrant as specified in its charter)

<Table>
<S>                                                                                   <C>
          DELAWARE                                                                          94-6001323
(State or other jurisdiction of                                                          (I.R.S. Employer
 incorporation or organization)                                                         Identification No.)
</Table>

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

                                      68179
                                   (Zip Code)

                                 (402) 271-5000
              (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 July 31, 2001 the Registrant had outstanding 7,130 shares of
Common Stock, $10 par value, and 620 shares of Class A Stock, $10 par value.

         THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.


<PAGE>   2



                         UNION PACIFIC RAILROAD COMPANY
                                      INDEX

<Table>
<Caption>
                                                                                               Page Number
                                                                                               -----------
<S>                                                                                            <C>
                                  PART I. FINANCIAL INFORMATION

Item 1:      Consolidated Financial Statements:
             CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                   For the Three Months Ended June 30, 2001 and 2000........................         1

             CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                   For the Six Months Ended June 30, 2001 and 2000..........................         2

             CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                   At June 30, 2001 (Unaudited) and December 31, 2000.......................         3

             CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                   For the Six Months Ended June 30, 2001 and 2000..........................         4

             CONSOLIDATED STATEMENT OF CHANGES IN COMMON
             SHAREHOLDERS' EQUITY (Unaudited)
                   For the Six Months Ended June 30, 2001...................................         5

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited).........................       6-10

Item 2:      Management's Narrative Analysis of the Results of Operations...................      11-15

Item 3:      Quantitative and Qualitative Disclosures About Market Risk.....................        15


                                    PART II. OTHER INFORMATION

Item 1:      Legal Proceedings..............................................................        16

Item 6:      Exhibits and Reports on Form 8-K...............................................        16

Signatures...............................................................................           17
</Table>



                                      (i)

<PAGE>   3




PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies For the Three Months Ended June 30,

<Table>
<Caption>
                   Millions of Dollars, Except Ratios                2001             2000
                                                                  ----------       ----------
<S>                                                               <C>              <C>
OPERATING REVENUES Rail ....................................      $    2,700       $    2,674
                                                                  ----------       ----------
OPERATING EXPENSES Salaries, wages and employee benefits ...             874              857
                   Equipment and other rents ...............             306              286
                   Depreciation ............................             279              271
                   Fuel and utilities ......................             321              294
                   Materials and supplies ..................             131              142
                   Casualty costs ..........................              75               74
                   Other costs .............................             223              211
                                                                  ----------       ----------
                   Total ...................................           2,209            2,135
                                                                  ----------       ----------
INCOME             Operating Income ........................             491              539
                   Other income - net ......................              74               22
                   Interest expense ........................            (146)            (147)
                                                                  ----------       ----------
                   Income before Income Taxes ..............             419              414
                   Income taxes ............................            (157)            (150)
                                                                  ----------       ----------
                   Net Income ..............................      $      262       $      264
                   Ratio of Earnings to Fixed Charges ......             3.7              3.1
                                                                  ----------       ----------
</Table>

              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                      -1-
<PAGE>   4




CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies For the Six Months Ended June 30,

<Table>
<Caption>
                   Millions of Dollars, Except Ratios                2001             2000
                                                                  ----------       ----------
<S>                                                               <C>              <C>
OPERATING REVENUES Rail ....................................      $    5,355       $    5,304
                                                                  ----------       ----------
OPERATING EXPENSES Salaries, wages and employee benefits ...           1,768            1,741
                   Equipment and other rents ...............             613              575
                   Depreciation ............................             558              540
                   Fuel and utilities ......................             654              587
                   Materials and supplies ..................             254              286
                   Casualty costs ..........................             161              158
                   Other costs .............................             407              413
                                                                  ----------       ----------
                   Total ...................................           4,415            4,300
                                                                  ----------       ----------
INCOME             Operating Income ........................             940            1,004
                   Other income - net ......................             103               42
                   Interest expense ........................            (293)            (298)
                                                                  ----------       ----------
                   Income before Income Taxes ..............             750              748
                   Income taxes ............................            (279)            (270)
                                                                  ----------       ----------
                   Net Income ..............................      $      471       $      478
                   Ratio of Earnings to Fixed Charges ......             3.3              3.1
                                                                  ----------       ----------
</Table>

              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                      -2-
<PAGE>   5




CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies

<Table>
<Caption>
                                                                                          (Unaudited)
                                                                                            June 30,        Dec. 31,
                           Millions of Dollars                                                2001             2000
                                                                                           ----------       ----------
ASSETS

<S>                                                                                        <C>              <C>
Current Assets             Cash and temporary investments ...........................      $       40       $       88
                           Accounts receivable - net ................................             461              393
                           Inventories ..............................................             289              347
                           Current deferred tax asset ...............................              30               30
                           Other current assets .....................................             137              121
                                                                                           ----------       ----------
                           Total ....................................................             957              979
                                                                                           ----------       ----------
Investments                Investments in and advances to affiliated companies ......             667              644
                           Other investments ........................................              87               84
                                                                                           ----------       ----------
                           Total ....................................................             754              728
                                                                                           ----------       ----------
Properties                 Cost .....................................................          34,911           34,613
                           Accumulated depreciation .................................          (6,931)          (6,881)
                                                                                           ----------       ----------
                           Net ......................................................          27,980           27,732
                                                                                           ----------       ----------
Other                      Other assets .............................................             136              142
                                                                                           ----------       ----------
                           Total Assets .............................................      $   29,827       $   29,581
                                                                                           ----------       ----------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities        Accounts payable .........................................      $      496       $      558
                           Accrued wages and vacation ...............................             390              388
                           Accrued casualty costs ...................................             355              345
                           Income and other taxes ...................................             253              220
                           Debt due within one year .................................             200              207
                           Interest .................................................              71               82
                           Other current liabilities ................................             577              712
                                                                                           ----------       ----------
                           Total ....................................................           2,342            2,512
                                                                                           ----------       ----------
Other Liabilities and      Intercompany borrowing from UPC ..........................           5,111            5,082
Shareholders' Equity       Third-party debt due after one year ......................           2,277            2,397
                           Deferred income taxes ....................................           7,902            7,705
                           Accrued casualty costs ...................................             749              811
                           Retiree benefits obligations .............................             633              632
                           Other long-term liabilities ..............................             437              440
                           Redeemable preference shares .............................              22               23
                           Commitments and contingencies
                           Common shareholders' equity ..............................          10,354            9,979
                                                                                           ----------       ----------
                           Total Liabilities and Shareholders' Equity ...............      $   29,827       $   29,581
                                                                                           ----------       ----------
</Table>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      -3-
<PAGE>   6



CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies For the Six Months Ended June 30

<Table>
<Caption>
                             Millions of Dollars                                            2001             2000
                                                                                         ----------       ----------
<S>                                                                                      <C>              <C>
OPERATING ACTIVITIES         Net Income ...........................................      $      471       $      478
                             Non-cash charges to income:
                                 Depreciation .....................................             558              540
                                 Deferred income taxes ............................             194              200
                                 Other - net ......................................            (144)            (156)
                             Changes in current assets and liabilities ............            (196)              (9)
                                                                                         ----------       ----------
                             Cash Provided by Operating Activities ................             883            1,053
                                                                                         ----------       ----------
INVESTING ACTIVITIES         Capital investments ..................................            (780)            (812)
                             Proceeds from sale of assets and other investing
                              activities ..........................................              46               59
                                                                                         ----------       ----------
                             Cash Used in Investing Activities ....................            (734)            (753)
                                                                                         ----------       ----------
FINANCING ACTIVITIES         Debt repaid ..........................................            (126)            (123)
                             Dividends paid to parent .............................            (100)            (100)
                             Advances from affiliated companies - net .............              29             (114)
                                                                                         ----------       ----------
                             Cash Used in Financing Activities ....................            (197)            (337)
                                                                                         ----------       ----------
                             Net Change in Cash and Temporary Investments .........      $      (48)      $      (37)
                             Cash and Temporary Investments at Beginning of
                             Period ...............................................              88               83
                                                                                         ----------       ----------
                             Cash and Temporary Investments at End of Period ......      $       40       $       46
                                                                                         ----------       ----------
CHANGES IN CURRENT           Accounts receivable ..................................      $      (68)      $       28
ASSETS AND LIABILITIES       Inventories ..........................................              58               14
                             Other current assets .................................             (16)             (10)
                             Accounts, wages and vacation payable .................             (60)              57
                             Debt due within one year .............................              (7)              (4)
                             Other current liabilities ............................            (103)             (94)
                                                                                         ----------       ----------
                             Total ................................................      $     (196)      $       (9)
                                                                                         ----------       ----------
SUPPLEMENTAL CASH            Cash paid during the year for:
FLOW INFORMATION                  Interest ........................................      $      310       $      323
                                  Income taxes - net ..............................              10               49
                                                                                         ----------       ----------
</Table>

              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                      -4-
<PAGE>   7




CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies For the Six Months Ended June 30, 2001


<Table>
<Caption>
                                            [a]           [b]
                                          Common        Class A-        Paid-in-      Retained
Millions of Dollars                       Shares         Shares         Surplus       Earnings
                                       ------------   ------------   ------------   ------------
<S>                                    <C>            <C>            <C>            <C>
Balance at December 31, 2000 .......   $         --   $         --   $      4,782   $      5,197
Net Income .........................             --             --             --            471
Other Comprehensive Income
(Loss), net of tax:
     Minimum Pension Liability
        Adjustment .................             --             --             --             --
     Foreign Currency Translation
        Adjustments ................             --             --             --             --
     Derivative Adjustments ........             --             --             --             --

Comprehensive Income ...............
Dividends declared .................             --             --             --           (100)
                                       ------------   ------------   ------------   ------------
Balance at June 30, 2001 ...........   $         --   $         --   $      4,782   $      5,568
                                       ------------   ------------   ------------   ------------




<Caption>
                                                             Accumulated Other
                                                         Comprehensive Income (Loss)
                                       -----------------------------------------------------------
                                          Minimum         Foreign
                                          Pension        Currency
                                         Liability      Translation     Derivative
Millions of Dollars                      Adjustment     Adjustments     Adjustments      Total           Total
                                        ------------    ------------   ------------   ------------   ------------
<S>                                     <C>             <C>            <C>            <C>            <C>
Balance at December 31, 2000 .......    $         (2)   $          2   $         --   $         --   $      9,979
Net Income .........................              --              --             --             --            471
Other Comprehensive Income
(Loss), net of tax:
     Minimum Pension Liability
        Adjustment .................              --              --             --             --             --
     Foreign Currency Translation
        Adjustments ................              --               4             --              4              4
     Derivative Adjustments ........              --              --             --             --             --
                                                                                                     ------------
Comprehensive Income ...............                                                                          475
Dividends declared .................              --              --             --             --           (100)
                                        ------------    ------------   ------------   ------------   ------------
Balance at June 30, 2001 ...........    $         (2)   $          6             --   $          4   $     10,354
                                        ------------    ------------   ------------   ------------   ------------
</Table>



[a]      Common stock, $10.00 par value; 9,200 shares authorized, 4,465
         outstanding.

[b]      Class A stock, $10.00 par value; 800 shares authorized, 388
         outstanding.

              The accompanying notes are an integral part of these
                       consolidated financial statements.





                                      -5-
<PAGE>   8




                UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED
                       SUBSIDIARY AND AFFILIATE COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


1.   RESPONSIBILITIES FOR FINANCIAL STATEMENTS - Union Pacific Railroad Company
     (the Registrant), a Class I railroad incorporated in Delaware and a
     wholly-owned subsidiary of Union Pacific Corporation (the Corporation or
     UPC), together with a number of wholly-owned and majority-owned
     subsidiaries, certain affiliates and various minority-owned companies
     (collectively, the Company or Railroad), operates various railroad and
     railroad-related businesses. The Company's rail operations include for all
     periods the operations of Union Pacific Railroad Company, a Utah
     corporation and predecessor to the Registrant (UPRR), and the rail
     operating subsidiaries of Southern Pacific Rail Corporation (Southern
     Pacific or SP). The consolidated financial statements of the Company 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 consolidated financial statements should
     be read in conjunction with the consolidated financial statements and notes
     thereto contained in the Company's Annual Report on Form 10-K for the year
     ended December 31, 2000. The results of operations for the three months and
     six months ended June 30, 2001 are not necessarily indicative of the
     results for the year ending December 31, 2001. Certain prior year amounts
     have been reclassified to conform to the 2001 financial statement
     presentation.

2.   ACQUISITIONS

     SOUTHERN PACIFIC - UPC consummated the acquisition of Southern Pacific in
     September 1996. Southern Pacific was acquired for $4.1 billion (sixty
     percent of the outstanding Southern Pacific common shares were converted
     into UPC common stock, and the remaining 40% of the outstanding shares were
     acquired for cash). UPC's investment in Southern Pacific was subsequently
     pushed down to the Railroad. The acquisition of Southern Pacific has been
     accounted for using the purchase method and was fully consolidated into the
     Company's results beginning October 1996.

     Merger Consolidation Activities - In connection with the acquisition and
     continuing integration of UPRR and Southern Pacific's rail operations, the
     Company will complete the elimination of 5,200 duplicate positions in 2001,
     primarily employees involved in activities other than train, engine and
     yard activities. The Company will also complete the relocation of 4,700
     positions, merging or disposing of redundant facilities, and disposing of
     certain rail lines. In addition, the Company will cancel and settle the
     remaining uneconomical and duplicative SP contracts, including
     payroll-related contractual obligations in accordance with the original
     merger plan.

     Merger Liabilities - In 1996, the Company recognized a $958 million pre-tax
     liability in the SP purchase price allocation for costs associated with
     SP's portion of these activities. Merger liability activity reflected cash
     payments for merger consolidation activities and reclassification of
     contractual obligations from merger liabilities to contractual liabilities.
     In addition, where merger implementation has varied from the original
     merger plan, the Company has adjusted the merger liability and the fair
     value allocation of SP's purchase price to fixed assets to eliminate the
     variance. Where the merger implementation has caused the Company to incur
     more costs than were envisioned in the original merger plan, such costs are
     charged to expense in the period incurred. For the three months and six
     months ended June 30, 2001, the Company charged $9 million and $11 million
     against the merger liability, respectively. The remaining merger payments
     will be made during 2001 as labor negotiations are implemented, and related
     merger consolidation activities are finalized.



                                      -6-
<PAGE>   9



     The components of the merger liability as of June 30, 2001 were as follows:

<Table>
<Caption>
                                                                      Original      Cumulative    June 30, 2001
     Millions of Dollars                                              Liability      Activity       Liability
                                                                    ------------   ------------   -------------
<S>                                                                 <C>            <C>            <C>
     Labor protection related to legislated and contractual
          obligations ...........................................   $        361   $        361   $         --
     Severance and related costs ................................            343            281             62
     Contract cancellation fees and facility and line
     closure costs ..............................................            145            141              4
     Relocation costs ...........................................            109             97             12
                                                                    ------------   ------------   ------------
     Total ......................................................   $        958   $        880   $         78
                                                                    ------------   ------------   ------------
</Table>

3.   FINANCIAL INSTRUMENTS

     ADOPTION OF STANDARD - Effective January 1, 2001, the Company adopted
     Financial Accounting Standards Board Statement No. 133, "Accounting for
     Derivative Instruments and Hedging Activities" (FAS 133) and Financial
     Accounting Standards Board Statement No. 138, "Accounting for Certain
     Derivative Instruments and Certain Hedging Activities" (FAS 138). FAS 133
     and FAS 138 requires that the changes in fair value of all derivative
     financial instruments the Company uses for fuel hedging purposes be
     recorded in the Company's consolidated statements of financial position. In
     addition, to the extent fuel hedges are ineffective due to pricing
     differentials resulting from the geographic dispersion of the Company's
     operations, income statement recognition of the ineffective portion of the
     hedge position will be required. The adoption of FAS 133 and FAS 138
     resulted in the recognition of a $2 million asset on January 1, 2001.
     Activity through June 30, 2001 is disclosed within the following narrative
     and tables.

     STRATEGY AND RISK - The Company uses derivative financial instruments in
     limited instances and for other than trading purposes to manage risk as it
     relates to changes in fuel prices. The Company 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 price movements. The purpose of
     this program is to protect the Company's operating margins and overall
     profitability from adverse fuel price changes.

     MARKET AND CREDIT RISK - The Company addresses market risk related to these
     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. There was no credit risk associated with the Company's
     counterparties at June 30, 2001. There was a $2 million credit risk
     associated with the Company's counterparties at December 31, 2000. The
     Company has not been required to provide collateral; however, the Company
     has received collateral relating to its hedging activity where the
     concentration of credit risk was substantial.

     DETERMINATION OF FAIR VALUE - The fair market values of the Company's
     derivative financial instrument positions at June 30, 2001 and December 31,
     2000 were determined based upon current fair market 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 and swap
     spread.

     FUEL STRATEGY - Fuel costs are a significant portion of the Company's total
     operating expenses. As a result of the significance of fuel costs and the
     historical volatility of fuel prices, the Company periodically uses





                                      -7-
<PAGE>   10

     swaps, futures and/or forward contracts to mitigate the impact of adverse
     fuel price changes.

         The following is a summary of the Company's derivative financial
     instruments at June 30, 2001 and December 31, 2000:

<Table>
<Caption>
     Millions                                                                June 30,     December 31,
     Except Percentages and Average Commodity Prices                          2001            2000
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
     Fuel Hedging:
          Number of gallons hedged for the remainder of 2001[a] .......             50             101
          Percentage of forecasted 2001 fuel consumption hedged .......              8%              8%
          Average price of 2001 hedges outstanding (per gallon)[b] ....   $       0.68    $       0.68
                                                                          ------------    ------------
</Table>

     [a]  Fuel hedges expire December 31, 2001.

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

         The asset and liability positions of the Company's outstanding
     derivative financial instruments at June 30, 2001 and December 31, 2000 are
     as follows:

<Table>
<Caption>
                                                         June 30,     December 31,
     Millions of Dollars                                   2001           2000
                                                       ------------   ------------
<S>                                                    <C>            <C>
     Fuel Hedging:
          Gross fair market asset position .........   $         --   $          2
          Gross fair market (liability) position ...             --             --
                                                       ------------   ------------
     Total net asset position ......................   $         --   $          2
                                                       ------------   ------------
</Table>

         Positions will be reclassified from accumulated other comprehensive
     income to fuel expense over the next six months as fuel is consumed.

         The Company's use of derivative financial instruments for fuel hedging
     decreased fuel costs by $2 million and $10 million for the three months
     ended June 30, 2001 and 2000, respectively, and decreased fuel costs by $4
     million and $20 million for the six months ended June 30, 2001 and 2000,
     respectively. At June 30, 2001, there was no ineffectiveness recorded
     within fuel expense for fuel 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. 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 June 30, 2001 and December 31, 2000,
     accounts receivable are presented net of approximately $600 million of
     receivables sold.

4.   CAPITAL STOCK - The number of shares shown in the Common Stock section of
     the Consolidated Statement of Changes in Common Shareholders' Equity on
     page 5 excludes 2,665 shares of Common Stock and 232 shares of Class A
     Stock owned by Southern Pacific, an affiliate of the Registrant, whose
     results are included in the Company's consolidated financial statements.



                                      -8-
<PAGE>   11
5.   OTHER INCOME - Other income included the following for the three months and
     six months ended June 30, 2001 and 2000:

<Table>
<Caption>
                                                              Three Months Ended                   Six Months
                                                                    June 30,                      Ended June 30,
                                                          ----------------------------    ----------------------------
     Millions of Dollars                                      2001            2000            2001            2000
                                                          ------------    ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>             <C>
     Net gain on non-operating asset dispositions .....   $         64    $         12    $         81    $         22
     Rental income ....................................             19              15              36              29
     Interest income ..................................              2               2               3               3
     Other - net ......................................            (11)             (7)            (17)            (12)
                                                          ------------    ------------    ------------    ------------
     Total ............................................   $         74    $         22    $        103    $         42
                                                          ------------    ------------    ------------    ------------
</Table>


6.   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.

7.   COMMITMENTS AND CONTINGENCIES - There are various claims and lawsuits
     pending against the Company and certain of its subsidiaries. The Company is
     also subject to federal, state and local environmental laws and
     regulations, pursuant to which it is currently participating in the
     investigation and remediation of numerous sites. For environmental sites
     where remediation costs can be reasonably determined, and where such
     remediation is probable, the Company has recorded a liability. At June 30,
     2001, the Company had accrued $176 million for estimated future
     environmental costs and believes it is reasonably possible that actual
     environmental costs may differ from such estimate.

         In addition, the Company and its subsidiaries periodically enter into
     financial and other commitments in connection with their businesses. It is
     not possible at this time for the Company 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
     Company has recorded a liability. The Company 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.

8.   ACCOUNTING PRONOUNCEMENTS - In September 2000, the Financial Accounting
     Standards Board issued Statement No. 140, "Accounting for Transfers and
     Servicing of Financial Assets and Extinguishments of Liabilities" (FAS
     140), replacing Statement No. 125, "Accounting for Transfers and Servicing
     of Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS 140
     revises criteria for accounting for securitizations, other financial asset
     transfers and collateral, and introduces new disclosures. FAS 140 was
     effective for fiscal 2000 with respect to the new disclosure requirements
     and amendments of the collateral provisions originally presented in FAS
     125. All other provisions are effective for transfers of financial assets
     and extinguishments of liabilities occurring after March 31, 2001. The
     provisions are to be applied prospectively with certain exceptions. The
     adoption of FAS 140 did not have a significant impact on the Company's
     consolidated financial statements.




                                      -9-
<PAGE>   12


             In July 2001, the Financial Accounting Standards Board issued
     Statement No. 141, "Business Combinations" (FAS 141). FAS 141 revises the
     method of accounting for business combinations and eliminates the pooling
     method of accounting. FAS 141 is effective for all business combinations
     that are initiated or completed after June 30, 2001. Management believes
     the financial impact that FAS 141 will have on the Company's consolidated
     financial statements will not be significant.

             Also in July 2001, the Financial Accounting Standards Board issued
     Statement No. 142, "Goodwill and Other Intangible Assets" (FAS 142). FAS
     142 revises the method of accounting for goodwill and other intangible
     assets. FAS 142 does not allow the amortization of goodwill, but requires
     goodwill to be tested for impairment at least annually at a reporting unit
     level. FAS 142 is effective for the Company's fiscal year beginning January
     1, 2002. Management believes the financial impact that FAS 142 will have on
     the Company's consolidated financial statements will not be significant.

             In addition, in July 2001, the Financial Accounting Standards Board
     voted to issue Statement No. 143, "Accounting for Asset Retirement
     Obligations" (FAS 143). FAS 143 requires the Company 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 Company's fiscal year
     beginning January 1, 2003. Management is currently in the process of
     evaluating the impact this standard will have on the Company's consolidated
     financial statements.

9.   WORK FORCE REDUCTION PLAN - Prompted by signs of an economic slowdown, the
     Corporation's Board of Directors approved a work force reduction plan (the
     Plan) in the fourth quarter of 2000. The Plan calls for the elimination of
     approximately 2,000 Railroad positions during 2001. The positions will be
     eliminated through a combination of attrition, subsidized early retirement
     and involuntary layoffs and will affect agreement and non-agreement
     employees across the entire 23-state Railroad system. As of June 30, 2001,
     1,336 positions had been identified for elimination in accordance with the
     Plan. Of those eliminations, 895 will be made through subsidized early
     retirements and involuntary layoffs with the remaining coming through
     attrition.

             The Company accrued $115 million pre-tax or $72 million after-tax
     in the fourth quarter of 2000 for costs related to the Plan. The expense
     was charged to salaries, wages and employee benefits in the Company's 2000
     consolidated statement of income. Plan liability activity in 2001 includes
     $30 million paid in cash or reclassified to contractual liabilities for
     severance benefits to 390 employees. The remaining $60 million of plan
     liability activity reflects subsidized early retirement benefits covering
     480 employees.

         Plan liability activity for 2001 is as follows:

<Table>
<Caption>
                                             Original      Cumulative    June 30, 2001
     Millions of Dollars                     Liability      Activity       Liability
                                           ------------   ------------   ------------

<S>                                        <C>            <C>            <C>
     Severance and related costs .......   $        115   $         90   $         25

                                           ------------   ------------   ------------
</Table>

It is expected that the Plan will be completed during the remainder of 2001.




                                      -10-
<PAGE>   13



ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

           UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY
                             AND AFFILIATE COMPANIES
                              RESULTS OF OPERATIONS
              THREE AND SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO
                    THREE AND SIX MONTHS ENDED JUNE 30, 2000

Union Pacific Railroad Company (the Registrant), a Class I railroad incorporated
in Delaware and a wholly owned subsidiary of Union Pacific Corporation (the
Corporation or UPC), together with a number of wholly owned and majority-owned
subsidiaries, certain affiliates and various minority-owned companies
(collectively, the Company or Railroad), operates various railroad and
railroad-related businesses.

NET INCOME - Rail operations reported net income of $262 million and $471
million for the three and six month periods ended June 30, 2001, respectively,
compared to net income of $264 million for the second quarter of 2000 and $478
million for the six month period in 2000. Higher fuel prices, labor costs, and
rent expense were partially offset by higher commodity revenue, productivity
gains, and higher real estate sales income.

OPERATING REVENUES - Rail operating revenues increased $26 million (1%) to a
second-quarter record $2.7 billion and $51 million (1%) to a record $5.4 billion
for the three and six month periods ended June 30, 2001, respectively, over the
comparable periods in 2000. Revenue carloads were flat for the three and six
month periods over the comparable periods in 2000 as strong Energy demand offset
weakness in the economically sensitive commodities of Automotive, Chemicals,
Industrial Products and Intermodal. Second quarter 2001 operating revenue was
also adversely affected by flooding in the upper Midwest and in the Houston
area.

The following tables summarize rail commodity revenue, revenue carloads and
average revenue per car for the periods indicated:

<Table>
<Caption>
      Three Months Ended June 30,                                        Six Months Ended June 30,
---------------------------------     %      Commodity Revenue       -----------------------------     %
            2001            2000    Change   In Millions                       2001          2000    Change
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
<S>               <C>             <C>        <C>                     <C>             <C>           <C>
          $  345          $  334       3     Agricultural                    $  715        $  684       4
             301             307      (2)    Automotive                         577           597      (3)
             388             424      (9)    Chemicals                          778           836      (7)
             577             490      18     Energy                           1,170         1,019      15
             522             525      (1)    Industrial Products                994         1,017      (2)
             462             471      (2)    Intermodal                         912           912      --
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
          $2,595          $2,551       2     Total                           $5,146        $5,065       2
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
</Table>


<Table>
<Caption>
       Three Months Ended June 30,                                      Six Months Ended June 30,
---------------------------------      %     Revenue Carloads        -----------------------------      %
            2001            2000    Change   In Thousands                      2001          2000     Change
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
<S>               <C>             <C>        <C>                     <C>             <C>           <C>
             211             213        (1)  Agricultural                       430           434        (1)
             199             214        (7)  Automotive                         384           413        (7)
             222             244        (9)  Chemicals                          441           476        (7)
             516             439        18   Energy                           1,053           919        15
             374             376        --   Industrial Products                710           731        (3)
             689             727        (5)  Intermodal                       1,372         1,414        (3)
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
           2,211           2,213        --   Total                            4,390         4,387        --
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
</Table>





                                      -11-
<PAGE>   14


<Table>
<Caption>
   Three Months Ended June 30,                                         Six Months Ended June 30,
---------------------------------      %     Average Revenue         -----------------------------      %
            2001            2000    Change   Per Car                           2001          2000     Change
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
<S>               <C>             <C>        <C>                     <C>             <C>           <C>
          $1,632          $1,568       4     Agricultural                    $1,660        $1,575       5
           1,514           1,437       5     Automotive                       1,501         1,446       4
           1,749           1,741      --     Chemicals                        1,764         1,759      --
           1,117           1,115      --     Energy                           1,111         1,109      --
           1,396           1,398      --     Industrial Products              1,400         1,392       1
             671             647       4     Intermodal                         665           645       3
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
          $1,173          $1,153       2     Total                           $1,172        $1,155       1
----------------- --------------- ---------- ----------------------- --------------- ------------- ----------
</Table>


Agricultural - Agricultural revenue increased for both the three and six month
periods of 2001 over the comparable periods in 2000 despite a 1% decline in
carloads. Wheat carloads were strong in the first quarter due to Mexico and Gulf
exports, however, declined in the second quarter as a result of soft domestic
and overseas export demand. Meals and oils shipments showed market share gains
from barge traffic and strong European demand. Beverages and fruits and
vegetables grew from strong domestic demand and new railroad services introduced
last year. Year-to-date, carloads decreased as a result of reduced export demand
for corn. Average revenue per car increased primarily due to longer hauls and
less low average revenue per car corn shipments.

Automotive - Automotive revenue declined for both the three and six month
periods of 2001 over the comparable periods in 2000 as carload volumes fell 7%.
These declines were the result of soft consumer demand for vehicles, leading to
supplier plant shutdowns to adjust inventories, which also reduced auto
materials shipments. Partially offsetting the weak demand was an increase in
market share. Average revenue per car increased due to price increases, greater
use of boxcars, rather than containers, to support materials shipments and the
positive mix impact of fewer materials shipments.

Chemicals - Chemicals revenue and carloads decreased for both the three and six
month periods of 2001 over the comparable periods in 2000 as a slowing economy
and lower industrial production reduced demand for plastics and liquid and dry
chemicals. High natural gas-based raw materials costs reduced production and
demand for plastics and fertilizer. Phosphate rock shipments also declined in
the second quarter due to a customer production shutdown. Average revenue per
car was flat as the positive impact of fewer low average revenue per car
phosphate rock shipments was offset by decreased long-haul plastics shipments.

Energy - The Railroad recorded consecutive quarterly records for revenue,
carloads, and average coal trains per day out of the Southern Powder River
Basin. The growth for both the three and six month periods was the result of
high utility demand and market share gains. Cool winter weather and high prices
for natural gas and Eastern-sourced coal reduced utility stockpiles compared to
a year ago. Delays due to severe weather in the first quarter and flooding in
the second quarter partially offset these increases.

Industrial Products - Industrial Products revenue decreased for both the three
and six month periods of 2001 over the comparable periods in 2000 as the slowing
economy reduced demand for metallic minerals, newsprint and ferrous scrap. In
the second quarter, demand for lumber, stone and cement increased over second
quarter





                                      -12-
<PAGE>   15

2000 levels due to improving construction demand. All three of these commodities
were down in the first quarter compared to 2000. Average revenue per car for the
six month period increased slightly as price increases offset growth in low
average revenue per car stone and cement carloads.

Intermodal - Intermodal revenue was flat for the six month period of 2001 over
the comparable period in 2000, as a 2% increase in the first quarter was offset
by a 2% decrease in the second quarter. Total carloads year-to-date declined due
to the slow economy that reduced both domestic and import demand. Offsetting the
loss of carloads was a higher average revenue per car resulting from price
increases.

OPERATING EXPENSES - Operating expenses increased $74 million (3%) and $115
million (3%) for the three and six month periods ended June 30, 2001,
respectively. Operating expense comparisons by category for the quarter and
six-month period ending June 30, 2001 and 2000 are discussed below. The factors
primarily responsible for the increase or decrease in each category are
substantially the same for both the three and six month periods, except as
noted.

Salaries, Wages and Employee Benefits - Labor costs increased $17 million (2%)
and $27 million (2%) for the three and six month periods, respectively, over the
comparable periods in 2000. The higher expenses were driven primarily by wage
and benefit inflation and costs associated with flooding in the Midwest and
Houston area. Partially offsetting these cost increases was a reduction in
employees and higher train crew productivity.

Equipment and Other Rents - Expenses increased $20 million (7%) and $38 million
(7%) for the three and six month periods, respectively, due primarily to
increased cycle times and higher locomotive leases. Lower automotive carloads
were a driver of the increased cycle time as excess cars were temporarily stored
at assembly plants and unloading facilities. Second quarter flooding and
resulting lower train speeds also contributed to the cycle time deterioration.
Locomotive leases increased due to the acquisition of new, more reliable and
fuel efficient units to replace older models in the fleet.

Depreciation - Depreciation increased $8 million (3%) and $18 million (3%) for
the three and six month periods, respectively, over comparable periods in 2000,
as a result of the Railroad's capital program in 2000 and the first half of
2001. Capital spending was $780 million in the six months ended June 30, 2001,
compared to $812 million in the six months ended June 30, 2000.

Fuel and utilities - Expenses were up $27 million (9%) and $67 million (11%) for
the three and six month periods, respectively. Higher fuel prices added $25
million of expense in the second quarter and $61 million of expense in the first
six months of 2001 over comparable periods in 2000. Additional costs due to
higher gross ton miles were offset by a lower diesel fuel consumption rate. In
2001, the Railroad's fuel consumption was 32% hedged at an average of 69 cents
per gallon in the first quarter and 8% hedged at 68 cents per gallon in the
second quarter (excluding taxes, transportation charges, and regional pricing
spreads), which decreased fuel costs by $2 million each quarter. In 2000, the
Railroad hedged approximately 10% of its fuel consumption for the three and six
month periods, which decreased fuel costs by $10 million and $20 million,
respectively. As of June 30, 2001, expected fuel consumption for the remaining
six months of 2001 is 8% hedged at 68 cents per gallon excluding taxes,
transportation costs and regional pricing spreads (see note 3 to the
consolidated financial statements).

Materials and Supplies - Expenses decreased $11 million (8%) and $32 million
(11%) for the three and six month periods, respectively, reflecting decreases in
locomotive overhauls as well as freight car repairs and purchasing costs. The
decrease in locomotive overhauls is due to the acquisition of newer, more
reliable units and the retirement of older models in the fleet.




                                      -13-
<PAGE>   16

Casualty Costs - Expenses increased $1 million (1%) and $3 million (2%) for the
three and six month periods, respectively, primarily due to slightly higher
settlement costs.

Other Costs - Expenses increased $12 million (6%) for the second quarter of 2001
and decreased $6 million (1%) for the first six months compared to the same
periods in 2000. Cost control and productivity gains for the first six months
were partially offset by flooding-related costs, higher state and local taxes
and joint facilities expenses in the second quarter.

OPERATING INCOME - Operating income decreased $48 million (9%) to $491 million
and $64 million (6%) to $940 million for the three and six months ended June 30,
2001, respectively. The operating ratio for the second quarter of 2001 was
81.8%, 2.0 percentage points worse than 2000's 79.8% operating ratio. The
operating ratio for the six months ended June 30, 2001 was 82.4%, 1.3 percentage
points worse than 2000's 81.1%.

NON-OPERATING ITEMS - Non-operating expense decreased $53 million and $66
million for the three and six months ended June 30, 2001, respectively. The
gains were primarily the result of higher income from real estate sales and
lower interest expense. Income taxes increased $7 million for the second quarter
and $9 million for the first six months of 2001 reflecting higher pre-tax income
and a higher effective state tax rate in 2001.

                                  OTHER MATTERS

COMMITMENTS AND CONTINGENCIES - There are various claims and lawsuits pending
against the Company and certain of its subsidiaries. In addition, the Company
and its subsidiaries are subject to various Federal, state and local
environmental laws and are currently participating in the investigation and
remediation of various sites. A discussion of certain claims, lawsuits,
guarantees and contingencies is set forth in note 7 to the consolidated
financial statements, which is incorporated herein by reference.

ACCOUNTING PRONOUNCEMENTS - In September 2000, the Financial Accounting
Standards Board issued Statement No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (FAS 140),
replacing Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS 140 revises
criteria for accounting for securitizations, other financial asset transfers and
collateral, and introduces new disclosures. FAS 140 was effective for fiscal
2000 with respect to the new disclosure requirements and amendments of the
collateral provisions originally presented in FAS 125. All other provisions are
effective for transfers of financial assets and extinguishments of liabilities
occurring after March 31, 2001. The provisions are to be applied prospectively
with certain exceptions. The adoption of FAS 140 did not have a significant
impact on the Company's consolidated financial statements.

     In July 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" (FAS 141). FAS 141 revises the method of accounting
for business combinations and eliminates the pooling method of accounting. FAS
141 is effective for all business combinations that are initiated or completed
after June 30, 2001. Management believes the financial impact that FAS 141 will
have on the Company's consolidated financial statements will not be significant.

     Also in July 2001, the Financial Accounting Standards Board issued
Statement No. 142, "Goodwill and Other Intangible Assets" (FAS 142). FAS 142
revises the method of accounting for goodwill and other intangible assets. FAS
142 does not allow the amortization of goodwill, but requires goodwill to be
tested for impairment at least annually at a reporting unit level. FAS 142 is
effective for the Company's fiscal year beginning January 1, 2002. Management
believes the financial impact that FAS 142 will have on the





                                      -14-
<PAGE>   17

Company's consolidated financial statements will not be significant.

     In addition, in July 2001, the Financial Accounting Standards Board voted
to issue Statement No. 143, "Accounting for Asset Retirement Obligations" (FAS
143). FAS 143 requires the Company 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 Company's fiscal year beginning January 1, 2003. Management is
in the process of evaluating the impact this standard will have on the Company's
consolidated financial statements.

                             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 Company) 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 the Company's consolidated financial position, results of operations
or liquidity; and statements concerning projections, predictions, expectations,
estimates or forecasts as to the Company'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 Company 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; 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 Company 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 Company does update one or more
forward-looking statements, no inference should be drawn that the Company 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
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
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.



                                      -15-
<PAGE>   18



PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS - ENVIRONMENTAL MATTERS

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 small 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 Railroad is vigorously defending the case.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  EXHIBITS

              12(a) - Computation of ratio of earnings to fixed charges for the
                      Three Months Ended June 30, 2001.

              12(b) - Computation of ratio of earnings to fixed charges for the
                      Six Months Ended June 30, 2001.

         (b)  REPORTS ON FORM 8-K

              On April 26, 2001, the Registrant filed a Current Report on Form
              8-K announcing UPC's financial results for the first quarter of
              2001.

              On July 19, 2001, the Registrant filed a Current Report on Form
              8-K announcing UPC's financial results for the second quarter of
              2001.



                                      -16-
<PAGE>   19






                                   SIGNATURES


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: August 14, 2001



                     UNION PACIFIC RAILROAD COMPANY
                     (Registrant)

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




                                      -17-
<PAGE>   20




           UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY
                             AND AFFILIATE COMPANIES

                                  EXHIBIT INDEX



    Exhibit No.   Description of Exhibits Filed with this Statement

         12(a)    Computation of ratio of earnings to fixed charges for the
                  Three Months Ended June 30, 2001.

         12(b)    Computation of ratio of earnings to fixed charges for the Six
                  Months Ended June 30, 2001.