MerrillLynch

Dick Davidson

June 17, 2004

Disclosure StatementThis presentation and related materials may contain statements about the Corporation's future that are not statements of historical fact.These statements are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Securities Exchange Act of1934. Forward-looking statements include, without limitation, statements regarding: expectations as to operational or service improvements;statements concerning expectations of the effectiveness of steps taken or to be taken to improve operations or service, including the hiringand training of train crews, acquisition of additional locomotives, infrastructure improvements and management of customer traffic on thesystem to meet demand; expectations as to cost savings, revenue growth and earnings; the time by which certain objectives will be achieved;proposed new products and services; estimates of costs relating to environmental remediation and restoration; expectations that claims,lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a materialadverse effect on our consolidated financial position, results of operations or liquidity; and statements or information concerning projections,predictions, expectations, estimates or forecasts as to the Corporation's and its subsidiaries' business, financial and operational results andfuture economic performance, statements of management's goals and objectives and other similar expressions concerning matters that arenot historical facts.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurateindications of the times that, or by which, such performance or results will be achieved, including expectations of operational and serviceimprovements. Forward-looking information is based on information available at the time and/or management's good faith belief with respectto future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from thoseexpressed in the statements. Important factors that could affect the Corporation's and its subsidiaries' future results and could cause thoseresults or other outcomes to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to:whether the Corporation and its subsidiaries are fully successful in implementing their financial and operational initiatives, including gainingnew customers and retaining existing ones, along with containment of costs; whether the Corporation and its subsidiaries are successful inimproving network operations and service by hiring and training train crews, acquiring additional locomotives, improving infrastructure andmanaging customer traffic on the system to meet demand; material adverse changes in economic and industry conditions, both within theUnited States and globally; the effects of adverse general economic conditions affecting customer demand and the industries and geographicareas that produce and consume commodities carried by us; industry competition, conditions, performance and consolidation; generallegislative and regulatory developments, including possible enactment of initiatives to re-regulate the rail industry; legislative, regulatory andlegal developments involving taxation, including enactment of new federal or state income tax rates, revisions of controlling authority and theoutcome of tax claims and litigation; changes in securities and capital markets; natural events such as severe weather, fire, floods andearthquakes or other disruptions of our operating systems, structures and equipment; any adverse economic or operational repercussionsfrom terrorist activities and any governmental response thereto; war or risk of war; changes in fuel prices; changes in labor costs and labordifficulties, including stoppages affecting either our operations or our customers’ abilities to deliver goods to us for shipment; and the outcomeof claims and litigation, including those related to environmental contamination, personal injuries, and occupational illnesses arising fromhearing loss, repetitive motion and exposure to asbestos and diesel fumes.

Forward-looking statements speak only as of the date the statements were made. The Corporation assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If theCorporation does update one or more forward-looking statements, no inference should be drawn that the Corporation will make additionalupdates with respect thereto or with respect to other forward-looking statements.

Second Quarter Earnings Outlook

• Diluted Earnings per Share of $0.60 to $0.65

• Operating Inefficiencies

– Inflating Costs

– Limiting Revenue Growth

• Record Fuel Prices

2004 Est

$0.88

$1.15

2003

Fuel Price$ per Gallon – 2nd Qtr

Fuel

+31%

• Record Crude Oil Prices

• Above Average Western Spreads

• Expanding Surcharge Program

– 60%+/- Recovery in 2004

– Lag Effect of Recovery Mechanism

Network Status

Velocity AAR Reported MPH

Terminal DwellAAR Reported Hours

Freight Cars On LineAAR Reported in 000’s – Includes Foreign & Private

Mar

330

Jan Feb Apr

320 327

May

324

Jun*

320

* Weekly average through June 11th.

MarJan Feb Apr May Jun*

31.936.534.8

37.534.4 31733.9

MarJan Feb Apr May Jun*

22.321.422.1 21.4 21.0

21.8

Los Angeles Service Unit2004 Metrics

17.0 16.6

20.522.0

2942

202 209

March April May June

Avg. Daily Train Hours Held for Crews

MPH (AAR Speed Methodology)

Drivers of Improvement

• Aggressive Hiring

• Crew Utilization Improvement

• Supplemental Crews

• Deferred Crew Retirements

*

*Month-to-date through 6/11/04.

Portland Service Unit2004 Metrics

21.1

17.0 17.1

18.9

85

227

115

191

March April May June

Avg. Daily Train Hours Held for Crews

MPH (AAR Speed Methodology)

Key Issues

• Crew Shortage

Actions

• Aggressive Hiring

• Supplemental Crews & Locomotives

*

*Month-to-date through 6/11/04.

Workforce

Locomotives

Freight Cars

Main Lines

Terminals

Network Resources Impact Cycle

Graduates

3,000

2,000+

NewHires

Hiring & GraduationConductors – 1st Half 2004 Estimate

Train Crews

• Qualified Pool of Trainmen– Hiring Partially Offset by Attrition

• Engineer Promotions from Conductor Ranks– Graduate 400 by Peak Season

– “Cutback” Engineer Pool

Locomotives

187

183 167

59

114

350

50

100

150

200

250

Q1 Act Q2 Est Q3 Est Q4 Est

New Units Short-Term Additions

Acquisition Plan

2004 vs 2003

Monthly Carloading Growth

165

175

185

195

J F M A M J J A S O N D

7-Day Average Carloadings

Carloading Performance

2004

Previous MonthlyRecords

Business Volumes

Jan Feb Mar Apr May Jun*

+3%

+1%

+9%

+2%+1%

+7%

*Month-to-date through 6/11/04.

Focused Capacity Improvements

NewOrleans

MemphisMemphis

ChicagoChicago

LA

El Paso

DallasDallas

Houston

KCKC

Southern TierRoutes

Chicago

DexterDexter

SalemSalem

Laredo

DallasDallas

Houston

North-South Routes

Portland

OaklandOakland

OmahaOmaha

LALA

SeattleSeattle

ChicagoChicago

SLCSLC

Central Corridor Routes

Denver Beltline Connection

To Grand Junction

UtahJunction

New Construction

Existing Track

NorthYard

Beltline Connection

Denver

Improving Colorado CoalTrain Efficiency:

• Reduce Locomotive SwitchingTime 65%

• Increase Run Through Capacity 50%

Cost of Quality

0

600

1,200

J F M A M J J A S O N D J F M A M8%

12%

16%

Train HoursHeld

Cost ofQuality

Cost of QualityTrain Hours Held for Crews

2003 2004

10

15

20

25

30

26.8%

11.1%

1988 1991 1994 1997 2000 2003

Historical COQ Trend

Value of Our Franchise

Our Vision: To be aCompany Where

• Customers Want to Do Business

• Employees Are Proud to Work

• Shareholder Value is Created

Our Vision: To be aCompany Where

• Customers Want to Do Business

• Employees Are Proud to Work

• Shareholder Value is Created

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