<PAGE>

                                   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, 2000

                                    - 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)

          DELAWARE                                              94-6001323
(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) 271-5000
             (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 April 28, 2000 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>

                        UNION PACIFIC RAILROAD COMPANY
                                     INDEX


                        PART I.  FINANCIAL INFORMATION
                        ------------------------------

<TABLE>
<CAPTION>
                                                                     Page Number
                                                                     -----------
<S>                                                                  <C>
Item 1: Consolidated Financial Statements:

        STATEMENT OF CONSOLIDATED INCOME
          For the Three Months Ended March 31, 2000 and 1999........          1

        STATEMENT OF CONSOLIDATED FINANCIAL POSITION
          At March 31, 2000 and December 31, 1999...................          2

        STATEMENT OF CONSOLIDATED CASH FLOWS
          For the Three Months Ended March 31, 2000 and 1999........          3

        STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
          For the Three Months Ended March 31, 2000.................          4

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................        5-9

Item 2: Management's Narrative Analysis of the Results of Operations      10-13

Item 3: Quantitative and Qualitative Disclosures About Market Risk..         13



                              PART II.  OTHER INFORMATION
                              ---------------------------

Item 1: Legal Proceedings...........................................         14

Item 6: Exhibits and Reports on Form 8-K............................         15

Signatures..........................................................         16
</TABLE>

                                      (i)
<PAGE>

PART I - FINANCIAL INFORMATION
------------------------------

Item 1.  Consolidated Financial Statements

--------------------------------------------------------------------------------
Statement of Consolidated Income (Unaudited)

Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies

For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                     Millions of Dollars, Except Ratios                2000     1999
-------------------------------------------------------------------------------------
<S>                  <C>                                              <C>      <C>
Operating Revenues   Rail .........................................   $2,637   $2,479
                     ----------------------------------------------------------------
Operating Expenses   Salaries, wages and employee benefits ........      884      905
                     Equipment and other rents ....................      301      311
                     Depreciation .................................      269      258
                     Fuel and utilities  (Note 3) .................      293      178
                     Materials and supplies .......................      144      133
                     Casualty costs ...............................       84      100
                     Other costs ..................................      197      230
                     ----------------------------------------------------------------
                     Total ........................................    2,172    2,115
                     ----------------------------------------------------------------
Income               Operating Income .............................      465      364
                     Other income - net (Note 5) ..................       20       23
                     Interest expense .............................     (151)    (156)
                     ----------------------------------------------------------------
                     Income before Income Taxes ...................      334      231
                     Income taxes .................................     (120)     (82)
                     ----------------------------------------------------------------
                     Net Income ...................................   $  214   $  149
                     ----------------------------------------------------------------
                     Ratio of Earnings to Fixed Charges (Note 6) ..      2.7      2.1
-------------------------------------------------------------------------------------
</TABLE>

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

                                      -1-
<PAGE>

------------------------------------------------------------------------
Statement of Consolidated Financial Position (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies
------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   March 31,       Dec. 31,
                         Millions of Dollars                                            2000           1999
-----------------------------------------------------------------------------------------------------------
<S>                      <C>                                                      <C>            <C>
Assets
                       ------------------------------------------------------------------------------------
Current Assets           Cash and temporary investments.......................       $    43        $    83
                         Accounts receivable (Note 3).........................           438            418
                         Inventories..........................................           315            329
                         Current deferred tax asset...........................            48             48
                         Other current assets.................................            94             78
                       ------------------------------------------------------------------------------------
                         Total................................................           938            956
                       ------------------------------------------------------------------------------------
Investments              Investments in and advances to affiliated companies..           584            657
                         Other investments....................................            94             95
                       ------------------------------------------------------------------------------------
                         Total................................................           678            752
                       ------------------------------------------------------------------------------------
Properties               Cost.................................................        33,847         33,536
                         Accumulated depreciation.............................        (6,681)        (6,490)
                       ------------------------------------------------------------------------------------
                         Net..................................................        27,166         27,046
                       ------------------------------------------------------------------------------------
Other                    Other assets.........................................           132            126
                       ------------------------------------------------------------------------------------
                         Total Assets.........................................       $28,914        $28,880
-----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
                       ------------------------------------------------------------------------------------
Current Liabilities      Accounts payable.....................................       $   473        $   496
                         Accrued wages and vacation...........................           373            377
                         Accrued casualty costs...............................           348            344
                         Income and other taxes...............................           252            252
                         Debt due within one year.............................           224            210
                         Interest.............................................            85             97
                         Other current liabilities (Note 2)...................           628            669
                       ------------------------------------------------------------------------------------
                         Total................................................         2,383          2,445
                       ------------------------------------------------------------------------------------
Other Liabilities and    Intercompany borrowing from UPC......................         5,282          5,357
Stockholders' Equity     Third-party debt due after one year..................         2,364          2,419
                         Deferred income taxes................................         7,352          7,266
                         Accrued casualty costs...............................           891            911
                         Retiree benefit obligations..........................           678            677
                         Other long-term liabilities (Notes 2 and 7)..........           534            533
                         Redeemable preference shares.........................            25             25
                         Common stockholders' equity (Page 4).................         9,405          9,247
                       ------------------------------------------------------------------------------------
                         Total Liabilities and Stockholders' Equity...........       $28,914        $28,880
-----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.

                                      -2-
<PAGE>

------------------------------------------------------------------------
Statement of Consolidated Cash Flows (Unaudited)
Union Pacific Railroad Company and Consolidated Subsidiary and Affiliate
Companies
For the Three Months Ended March 31, 2000 and 1999
------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S>                      <C>                                                      <C>            <C>
------------------------------------------------------------------------------------------------------
                         Millions of Dollars                                        2000          1999
------------------------------------------------------------------------------------------------------
Cash Provided by         Net Income...........................................     $ 214         $ 149
Operations               Non-cash charges to income:
                             Depreciation.....................................       269           258
                             Deferred income taxes............................        87            63
                             Other - net......................................       (73)          (30)
                         Changes in current assets and liabilities............       (84)          (15)
                       -------------------------------------------------------------------------------
                         Cash Provided by Operations..........................       413           425
                       -------------------------------------------------------------------------------
Investing Activities     Capital investments..................................      (359)         (363)
                         Other - net (Note 2).................................        79           (91)
                       -------------------------------------------------------------------------------
                         Cash Used in Investing Activities....................      (280)         (454)
                       -------------------------------------------------------------------------------
Equity and Financing     Debt repaid..........................................       (40)          (37)
Activities               Dividends paid to parent.............................       (57)          (50)
                         Advances from affiliated companies - net.............       (76)          147
                       -------------------------------------------------------------------------------
                         Cash Provided by (Used in) Equity and
                             Financing Activities.............................      (173)           60
                       -------------------------------------------------------------------------------
                         Net Change in Cash and Temporary Investments.........       (40)           31
                         Cash at Begining of Period...........................        83            35
                       -------------------------------------------------------------------------------
                         Cash at End of Period................................     $  43         $  66
------------------------------------------------------------------------------------------------------
Changes in Current       Accounts receivable..................................     $ (20)        $  14
Assets and Liabilities   Inventories..........................................        14            (6)
                         Other current assets.................................       (16)           (2)
                         Accounts, wages and vacation payable.................       (27)           55
                         Debt due within one year.............................        14            (2)
                         Other current liabilities............................       (49)          (74)
                       -------------------------------------------------------------------------------
                         Total................................................     $ (84)        $ (15)
------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.

                                      -3-
<PAGE>

--------------------------------------------------------------------------------
Statement of Changes in Common Stockholders' Equity (Unaudited)
Union Pacific Railroad and Consolidated Subsidiary and Affiliate Companies
For the Three Months Ended March 31, 2000
--------------------------------------------------------------------------------
                              Millions of Dollars
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                              Accumulated
                                      [a]       [b]                                 Other
                                   Common   Class A   Paid-in-   Retained   Comprehensive
                                   Shares    Shares    Surplus   Earnings          Income    Total
---------------------------------------------------------------------------------------------------
<S>                                <C>      <C>       <C>        <C>        <C>             <C>
Balance at December 31, 1999....        -         -    $4,782    $4,471              $(6)   $9,247
---------------------------------------------------------------------------------------------------
Net Income......................                                    214                        214
Other Comprehensive Income:
 Foreign Currency Translation...                                                       1         1
                                                                                            -------
Comprehensive Income............                                                               215
                                                                                            -------
Dividends declared..............                                    (57)                       (57)
---------------------------------------------------------------------------------------------------
Balance at March 31, 2000.......        -         -    $4,782       $4,628           $(5)   $9,405
---------------------------------------------------------------------------------------------------
[a]  Common stock $10.00 par value; 9,200 shares authorized; 4,465 shares issued
     at beginning and end of period.
[b]  Class A Stock, $10.00 par value; 800 shares authorized; 388 shares issued
     at beginning and end of period.
---------------------------------------------------------------------------------------------------
</TABLE>

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

                                      -4-
<PAGE>

        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, 1999.
     The results of operations for the three months ended March 31, 2000 are not
     necessarily indicative of the results for the year ending December 31,
     2000. Certain prior year amounts have been reclassified to conform to the
     2000 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 (60% 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 is in the process of eliminating 5,200 duplicate positions, which
     are primarily employees involved in activities other than train, engine and
     yard activities. In addition, the Company is relocating 4,700 positions,
     merging or disposing of redundant facilities, and disposing of certain rail
     lines. The Company is also canceling uneconomical and duplicative SP
     contracts.

          To date the Company has eliminated 3,500 positions and relocated 4,400
     employees due to merger implementation activities. The Company recognized a
     $958 million pre-tax liability as part of the SP purchase price allocation
     for costs associated with SP's portion of these activities. In addition,
     the Railroad expects to incur between $20 million and $40 million over the
     remaining merger implementation period in pre-tax, acquisition-related
     costs for severing or relocating UPRR employees, disposing of certain UPRR
     facilities, training and equipment upgrading. Earnings for the three months
     ending March 31, 2000 and 1999 included $6 million and $9 million after-
     tax, respectively, for acquisition-related costs for UPRR consolidation
     activities.

                                      -5-
<PAGE>

          The components of the merger liability as of March 31, 2000 were as
     follows:

     <TABLE>
     <CAPTION>
     ------------------------------------------------------------------------------------------------------
                                                                             Original  Cumulative   Current
     Millions of Dollars                                                      Reserve    Activity   Reserve
     ------------------------------------------------------------------------------------------------------
     <S>                                                                     <C>       <C>          <C>
     Labor protection related to legislated and contractual obligations..        $361        $361       $ -
     Severance costs.....................................................         343         268        75
     Contract cancellation fees and facility and line closure costs......         145         141         4
     Relocation costs....................................................         109          93        16
     ------------------------------------------------------------------------------------------------------
     Total...............................................................        $958        $863       $95
     ------------------------------------------------------------------------------------------------------
     </TABLE>

     Merger Liabilities - 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 ended
     March 31, 2000, the Company charged $4 million against the merger
     liability. The Company expects that the remaining merger payments will be
     made over the course of the next 21 months as labor negotiations are
     completed and implemented, and related merger consolidation activities are
     finalized.

     Mexican Railway Concession - During 1997, the Company and a consortium of
     partners were granted a 50-year concession to operate the Pacific-North and
     Chihuahua Pacific lines in Mexico and a 25% stake in the Mexico City
     Terminal Company at a price of $525 million. The consortium assumed
     operational control of both lines in 1998. In March 1999, the Company
     purchased an additional 13% ownership interest for $87 million from one of
     its partners. The Company now holds a 26% ownership share in the
     consortium. The investment is accounted for under the equity method. The
     Company's portion of the consortium's assets and liabilities is translated
     into U.S. dollars using the exchange rate in effect at the balance sheet
     date. The Company's portion of the consortium's net income is translated
     into U.S. dollars at weighted-average exchange rates prevailing during the
     year. The resulting translation adjustments are reflected within the
     stockholders' equity component, accumulated other comprehensive income.

3.   Financial Instruments

     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;
     however, 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
     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. The
     total credit risk associated with the Company's counterparties was $24
     million at March 31, 2000. The Company has not been required to provide

                                      -6-
<PAGE>

     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 March 31, 2000 and
     December 31, 1999 were determined based upon current fair market values as
     quoted by recognized dealers or developed based upon the present value of
     future cash flows discounted at the applicable U.S. treasury rate and swap
     spread.

          The following is a summary of the Company's derivative financial
     instruments at March 31, 2000 and December 31, 1999:

     <TABLE>
     <CAPTION>
     ------------------------------------------------------------------------------------------------------
     Millions                                                                    March 31,     December 31,
     Except Percentages and Average Commodity Prices                                  2000             1999
     ------------------------------------------------------------------------------------------------------
     <S>                                                                         <C>           <C>
     Fuel Hedging:
         Number of gallons hedged for 2000.................................            95              126
         Percentage of forecasted 2000 fuel consumption hedged.............             9%              10%
         Average price of 2000 hedges outstanding (per gallon) [a].........         $0.40            $0.40
     ------------------------------------------------------------------------------------------------------
     </TABLE>

     [a]  Excluded taxes, transportation costs, and regional pricing spreads.

          The asset and liability positions of the Company's outstanding
     derivative financial instruments at March 31, 2000 and December 31, 1999
     are as follows:

     <TABLE>
     <CAPTION>
     ------------------------------------------------------------------------------------------------------
                                                                                 March 31,     December 31,
     Millions of Dollars                                                              2000             1999
     ------------------------------------------------------------------------------------------------------
     <S>                                                                         <C>           <C>
     Fuel Hedging:
         Gross fair market asset position..................................          $  24            $  22
         Gross fair market (liability) position............................              -                -
     ------------------------------------------------------------------------------------------------------
     Total net asset position..............................................          $  24            $  22
     ------------------------------------------------------------------------------------------------------
     </TABLE>

          The Company's use of derivative financial instruments for fuel hedging
     decreased fuel costs by $10 million for the three months ended March 31,
     2000 and increased fuel costs by $19 million for the three months ended
     March 31, 1999.

     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
     Subsidiary). The Subsidiary is collateralized by a $66 million note from
     the Registrant. 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, 2000 and
     December 31, 1999, accounts receivable are presented net of $576 million of
     receivables sold.

4.   Capital Stock - The number of shares shown in the Common Stock section of
     the Statement of Changes in Common Stockholders' Equity on page 4 excludes
     2,665 shares of Common Stock and 232 shares of Class A Stock owned by
     Southern Pacific Rail Corporation, an affiliate of the Registrant, whose
     results are included in the consolidated financial statements.

5.   Other Income - Other income included the following for the three months
     ended March 31, 2000 and 1999:

                                      -7-
<PAGE>

     <TABLE>
     <CAPTION>
          --------------------------------------------------------------------------------------------------
                                                                                Three Months Ended March 31,
                                                                                ----------------------------
          Millions of Dollars                                                         2000           1999
          --------------------------------------------------------------------------------------------------
     <S>                                                                             <C>            <C>
          Net gain on asset dispositions......................................       $  10          $  11
          Rental income.......................................................          14             12
          Interest income.....................................................           1              2
          Other - net.........................................................          (5)            (2)
          --------------------------------------------------------------------------------------------------
          Total...............................................................       $  20          $  23
          --------------------------------------------------------------------------------------------------
     </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. 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. In addition, the Company periodically enters into financial and
     other commitments in connection with its business, and has retained certain
     contingent liabilities upon the disposition of formerly owned operations.
     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 or
     guarantees will have a material adverse effect on its consolidated
     financial condition, results of operations or liquidity. Certain
     potentially significant contingencies relating to the Company are detailed
     below:

     Customer Claims - Some customers have submitted claims for damages related
     to shipments delayed by the Railroad as a result of congestion problems in
     1997 and 1998, and certain customers have filed lawsuits seeking relief
     related to such delays. Some customers also asserted that they have the
     right to cancel contracts as a result of alleged material breaches of such
     contracts by the Railroad. The Company accrued amounts for these claims in
     1997 and 1998. No additional amounts were accrued in 1999 or the three
     months ended March 31, 2000.

     Environmental Issues - For environmental sites where remediation costs can
     be reasonably determined, and where such remediation is probable, the
     Company has recorded a liability.

     Shareholder Lawsuits - The Corporation and certain of its directors and
     officers (who are also directors of the Railroad) are defendants in two
     purported class actions that have been consolidated into one proceeding.
     The consolidated complaint alleges, among other things, that the
     Corporation violated the federal securities laws by failing to disclose
     material facts and making materially false and misleading statements
     concerning the service, congestion and safety problems encountered
     following the Corporation's acquisition of Southern Pacific in 1996. These
     lawsuits were filed in late 1997 in the United States District Court for
     the Northern District of Texas and seek to recover unspecified amounts of
     damages. Management believes that the plaintiffs' claims are without merit
     and has been defending them vigorously. The defendants moved to dismiss
     this action, and the motion was briefed and submitted to the Court for
     decision in 1998. In February 2000, prior to a ruling on the motion, the
     parties jointly advised the Court that they were engaged in discussions
     concerning the possible settlement of the action and asked the Court to
     defer ruling on the

                                      -8-

<PAGE>

     motion to dismiss pending the outcome of these discussions. The Court
     entered an order dated February 29, 2000, agreeing to such deferral,
     subject to the motion of either party to reactivate the action and the
     pending motion to dismiss at any time. Although settlement discussions are
     proceeding in good faith, there can be no assurance that they will be
     successful.

          In addition to the class action litigation, a purported derivative
     action was filed on behalf of the Corporation and the Railroad in September
     1998 in the District Court for Tarrant County, Texas, naming as defendants
     the then-current and certain former directors of the Corporation and the
     Railroad and, as nominal defendants, the Corporation and the Railroad. The
     derivative action alleges, among other things, that the named directors
     breached their fiduciary duties to the Corporation and the Railroad by
     approving and implementing the Southern Pacific merger without informing
     themselves of its impact or ensuring that adequate controls were put in
     place and by causing UPC and the Railroad to make misrepresentations about
     the Railroad's service problems to the financial markets and regulatory
     authorities. The Corporation's Board of Directors established a special
     litigation committee consisting of three independent directors to review
     the plaintiff's allegations and determine whether it is in UPC's best
     interest to pursue them. In February 1999, the committee rendered its
     report, in which it unanimously concluded that further prosecution of the
     derivative action on behalf of the Corporation and the Railroad is not in
     the best interest of either such company. Accordingly, the Corporation and
     the Railroad have filed a motion with the Court to dismiss the derivative
     action. The plaintiff has not yet responded to the motion. The individual
     defendants also believe that these claims are without merit and intend to
     defend them vigorously.

8.   Accounting Pronouncements - In June 1998, the Financial Accounting
     Standards Board issued Statement No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" (FAS 133), that would have been
     effective January 1, 2000. In June 1999, the Financial Accounting Standards
     Board issued Statement No. 137, "Accounting for Derivatives Instruments and
     Hedging Activities--Deferral of the Effective Date of FASB Statement No.
     133" postponing the effective date for implementing FAS 133 to fiscal years
     beginning after June 15, 2000. Management has determined that FAS 133 will
     increase the volatility of the Company's asset, liability and equity
     (comprehensive income) positions as the change in the fair market value of
     all financial instruments the Company uses for fuel hedging purposes will,
     upon adoption of FAS 133, be recorded in the Company's Statement of
     Financial Position (Note 3). 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. Management does
     not anticipate that the final adoption of FAS 133 will have a material
     impact on Company's consolidated financial statements.

                                      -9-
<PAGE>

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 Months ended March 31, 2000 Compared to Three Months ended March 31, 1999


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 - First quarter 2000 net income of $214 million exceeded 1999 by $65
million (44%).  Higher commodity and other revenue, combined with productivity
gains, offset higher fuel prices and volume-related costs.

Operating Revenues - Rail operating revenues increased $158 million (6%) to a
record $2.6 billion on the strength of a 5% commodity revenue gain. Other
revenue gains were the result of higher subsidiary revenues and reduced billing
claims from customers and other railroads.

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

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------
Commodity Revenue                        Three Months Ended March 31,
                                         ----------------------------
In Millions of Dollars                       2000              1999      Change
-------------------------------------------------------------------------------
<S>                                        <C>               <C>         <C>
Agricultural.............................  $  350            $  347          1 %
Automotive...............................     290               253         15 %
Chemicals................................     412               401          3 %
Energy...................................     529               564         (6)%
Industrial Products......................     492               449         10 %
Intermodal...............................     441               388         14 %
-------------------------------------------------------------------------------
Total....................................  $2,514            $2,402          5 %
-------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Revenue Carloads                         Three Months Ended March 31,
                                         ----------------------------
In Thousands                                 2000              1999      Change
-------------------------------------------------------------------------------
<S>                                        <C>               <C>         <C>
Agricultural.............................     221               223         (1)%
Automotive...............................     199               170         17 %
Chemicals................................     232               225          3 %
Energy...................................     480               477          1 %
Industrial Products......................     355               327          8 %
Intermodal...............................     687               626         10 %
-------------------------------------------------------------------------------
Total....................................   2,174             2,048          6 %
-------------------------------------------------------------------------------
</TABLE>

                                      -10-
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                   Three Months Ended March 31,
                                   ----------------------------
Average Revenue Per Car                2000              1999      Change
-------------------------------------------------------------------------
<S>                                  <C>               <C>         <C>
Agricultural.......................  $1,582            $1,552          2 %
Automotive.........................   1,456             1,491         (2)%
Chemicals..........................   1,777             1,781          --
Energy.............................   1,103             1,183         (7)%
Industrial Products................   1,387             1,373          1 %
Intermodal.........................     642               620          4 %
-------------------------------------------------------------------------
Total..............................  $1,156            $1,173         (1)%
-------------------------------------------------------------------------
</TABLE>

Agricultural - Revenue increased despite a slight carload decline. Carloads
decreased primarily due to reduced demand across most markets - principally
wheat and sweeteners.  Partially offsetting these declines was strong export
demand for corn, especially to the Pacific Northwest. Average revenue per car
was up $30 due primarily to longer hauls.

Automotive - The Railroad recorded its best quarter ever for revenue and
carloads.  The year-over-year gain resulted from increased share in a market
characterized by record vehicle sales.  Average revenue per car decreased 2%
principally due to greater use of containers, rather than boxcars, to support
materials shipments.

Chemicals - Carloads increased due to improved service and increased demand for
plastics, liquid and dry chemicals, sulfur, and petroleum gas, partially offset
by a decline in fertilizer moves resulting from depressed demand for U.S. farm
commodities and the temporary shutdown of a Canadian export facility.  Average
revenue per car was flat, reflecting lower volumes of high average revenue per
car soda ash and low average revenue per car fertilizer.

Energy - The Railroad recorded its best quarter ever for carloads and average
trains per day out of the Powder River Basin despite warm winter weather
constraining demand.  Revenue was down due to lower average revenue per car
which was affected by contract pricing provisions with a few major customers
which are expected to impact year-over-year revenue comparisons through the
third quarter of 2000.

Industrial Products - Revenue increases resulted in the best first quarter ever
due to stronger overall demand and improved service. Carloads of steel and
ferrous scrap increased as import trade quotas on steel took hold. Increases in
lumber, stone, and cement moves resulted from strong construction activity and
mild weather.

Intermodal - Revenue increased as a result of increased carloads and higher
average revenue per car, a best first quarter ever for revenue and carloads.
Carloads improved due to strong growth in imports from Asia and service
improvements. Average revenue per car increased as a result of positive mix
shifts and demand-driven price increases.

Operating Expenses - Operating expenses were up $57 million (3%), reflecting
higher fuel prices and volume costs, partly offset by improved productivity.

Salaries, Wages, and Employee Benefits - Labor costs decreased $21 million (2%)
despite a 6% increase in gross ton-miles and a nearly 6% increase in wage and
benefit costs.  Offsetting these cost increases were merger-related workforce
reductions, higher train crew productivity, and lower training expenses.

                                      -11-
<PAGE>

Equipment and Other Rents - Expenses decreased $10 million (3%), due primarily
to improvements in cycle times, lower prices, and increased rent receipts from
other railroads. Higher volume costs partially offset the decreases.

Depreciation - Expenses increased $11 million (4%), reflecting the 1999 and
first quarter 2000 capital programs. Capital spending totaled $359 million in
the first quarter 2000 compared to $363 million in 1999.

Fuel and Utilities - Expenses were up $115 million (65%), driven by higher fuel
prices and, to a lesser degree, volume growth. In the first quarter 2000, the
Railroad hedged 10% of its fuel consumption at an average of 40 cents per gallon
(excluding taxes, transportation charges and regional pricing spreads), lowering
fuel costs by $10 million. For the first quarter 1999, fuel consumption was 70%
hedged at 41 cents per gallon, which resulted in a $19 million increase in fuel
expense. As of March 31, 2000, fuel consumption for the remainder of 2000 is 9%
hedged at 40 cents per gallon (see Note 3 to the Consolidated Financial
Statements).

Materials and Supplies - Costs increased $11 million (8%), reflecting volume-
related increases in locomotive overhauls and running repairs.

Casualty Costs - Costs declined $16 million (16%), primarily due to the effect
of lower than expected settlement costs.

Other Costs - Costs decreased $33 million (14%), reflecting cost control
initiatives, lower joint facility expenses and productivity gains.

Operating Income - Operating income increased $101 million to $465 million for
the first quarter of 2000. The operating ratio in 2000 was 82.4%, 2.9 percentage
points better than 1999's 85.3%.

Non-Operating Items - Non-operating income improved $2 million (1%) in 2000 as
lower interest expense offset reductions in real estate sales. Income taxes
increased $38 million in 2000 reflecting higher income levels partially offset
by favorable state tax incentive credits.

                                 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 June 1998, the Financial Accounting Standards
Board issued Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (FAS 133), that would have been effective January 1, 2000.
In June 1999, the Financial Accounting Standards Board issued Statement No. 137,
"Accounting for Derivatives Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133" postponing the effective date for
implementing FAS 133 to fiscal years beginning after June 15, 2000. Management
has determined that FAS 133 will increase the volatility of the Company's asset,
liability and equity (comprehensive income) positions as the change in the fair
market value of all financial instruments the Company uses for fuel hedging
purposes will, upon adoption of FAS 133, be recorded in the Company's Statement
of Financial Position (Note 3). 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

                                      -12-
<PAGE>

recognition of the ineffective portion of the hedge position will be required.
Management does not anticipate that the final adoption of FAS 133 will have a
material impact on 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; expectations as to product applications; 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 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; the impact of latent year 2000 systems problems; 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, 1999.
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.

                                      -13-
<PAGE>

PART II.  OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings

Surface Transportation Board Matters

Western Coal Traffic League v. Union Pacific Railroad Company.  In March 1999,
the Western Coal Traffic League ("WCTL"), an association of coal receivers,
filed a complaint at the Surface Transportation Board ("STB") alleging that the
Railroad's 1997 annual report filed with the STB improperly accounted for
certain costs associated with the acquisition of SP and the Railroad's service
difficulties.  Claiming that this resulted in an overstatement of the Railroad's
regulatory variable costs, WCTL asked the STB to direct the Railroad to restate
certain  schedules in the report.  The STB dismissed WCTL's complaint on May 12,
2000. The STB found that the Railroad's accounting had conformed to both
applicable generally accepted accounting principles and the Uniform System of
Accounts that rail carriers are required to follow.

FMC v. Union Pacific Railroad Company.  In October 1997, FMC filed a complaint
with the STB challenging 16 different tariff rates, claiming the rates exceeded
a reasonable maximum.  On May 12, 2000, the STB served a decision finding 15 of
the rates  excessive.  For rates applicable to certain movements of sodium
compounds, phosphorus and phosphate rock, the STB found there was no effective
modal competition and, with one exception, that the rates exceeded the
jurisdictional threshold. The jurisdictional threshold is a statutory
restriction against the STB prescribing a rate that results in a
revenue-to-variable cost percentage that is less than 180%. Applying its
stand-alone cost standard, the STB determined the rates were excessive and
prescribed rates from the third quarter of 1997 through 2017 that are the higher
of the stand-alone cost or the jurisdictional threshold. The STB ordered the
Railroad to pay as reparations for past shipments the difference between the
prescribed rates and the tariff rates. For the remaining movement of coke, the
STB found that truck competition limits the rate UP can charge and dismissed the
complaint as to that rate.

The decision will not have a significant impact on the Railroad's current
earnings because the Railroad had accrued for potential reparations. The impact
on future revenue is uncertain, as most of the traffic at issue in the decision
is now moving under contracts and traffic moving under contract is not affected
by the decision.  The Railroad is continuing to analyze the decision, including
whether to appeal.

Environmental Matters

The U.S. Environmental Protection Agency (EPA) brought a civil action against
certain subsidiaries of Southern Pacific, which have been merged into the
Company, in the U.S. District Court for the District of Colorado alleging
violation of the Clean Water Act and the Oil Pollution Act. The complaint
identified seven incidents involving the alleged release of hazardous substances
into the waters of the United States and sought civil penalties of $25,000 per
day and unspecified injunctive relief to prevent future violations. Six of the
seven incidents are related to derailments dating back to 1992. Six of the
incidents involve alleged releases from ruptured locomotive fuel tanks, and one
incident in 1996 involves an alleged release of sulfuric acid near the Tennessee
Pass.


                                     -14-
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits
          --------

          12   -   Computation of ratio of earnings to fixed charges.
          27   -   Financial data schedule.

     (b)  Reports on Form 8-K
          -------------------

       On January 20, 2000, the Registrant filed a Current Report on Form 8-K
       announcing UPC's financial results for the fourth quarter of 1999.

       On April 20, 2000, the Registrant filed a Current Report on Form 8-K
       announcing UPC's financial results for the first quarter of 2000.


                                     -15-
<PAGE>

                              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: May 15, 2000



                         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)



                                     -16-
<PAGE>

           UNION PACIFIC RAILROAD COMPANY AND CONSOLIDATED SUBSIDIARY
                            AND AFFILIATE COMPANIES

                                 EXHIBIT INDEX



 Exhibit No.       Description of Exhibits Filed with this Statement
 -----------       -------------------------------------------------

     12            Computation of ratio of earnings to fixed charges

     27            Financial data schedule