Net income was $535 million, or $1.37 per diluted share, in 2003. These results include the following:

the cumulative effect of required changes in accounting principles, which increased net income by $114 million, or 29 cents per share;

the costs of a voluntary separation program, which reduced net income by $66 million, or 17 cents per share;

the impairment of certain telecommunications assets, which lowered net income by $53 million, or 13 cents per share; and

a discontinued operations gain of $10 million, or 3 cents per share, related to the 1998 sale of a motor carrier subsidiary.

Absent all of these items, net income would have been $530 million, or $1.35 per share, up $70 million or 15 percent.

Railway operating revenues were $6.5 billion in 2003, up $198 million or 3 percent compared with 2002, a result of increases in traffic volume and average revenue per carload. General merchandise revenues rose $81 million or 2 percent, coal revenues increased $59 million or 4 percent, and intermodal revenues were up $58 million or 5 percent.

Railway operating expenses were $5.4 billion, up $292 million or 6 percent, while traffic volume was up 2 percent. The expense increase reflected higher compensation and benefits, including the $107 million cost of the voluntary separation program, and higher diesel fuel prices.

Income from railway operations was $1.1 billion, down $94 million or
8 percent, reflecting the costs of the voluntary separation program.

The railway operating ratio was 83.5 percent in 2003, two percentage points above the 81.5 percent of 2002. The cost of the voluntary separation program added 1.6 percentage points to the ratio for 2003.