UNION PACIFIC CORP - Quarter Report: 2022 March (Form 10-Q)

unp20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	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 1-6075

UNION PACIFIC CORPORATION

(Exact name of registrant as specified in its charter)

Utah	13-2626465
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1400 Douglas Street, Omaha, Nebraska

(Address of principal executive offices)

68179

(Zip Code)

(402) 544-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each Class	Trading Symbol	Name of each exchange on which registered
Common Stock (Par Value $2.50 per share)	UNP	New York Stock Exchange

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer	☑		Accelerated Filer	☐	Non-Accelerated Filer	☐
	Smaller Reporting Company	☐		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

☐Yes ☒ No

As of April 15, 2022, there were 628,025,156 shares of the Registrant's Common Stock outstanding.

Table of Contents

TABLE OF CONTENTS

UNION PACIFIC CORPORATION

AND SUBSIDIARY COMPANIES

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	For the Three Months Ended March 31, 2022 and 2021	3

	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	For the Three Months Ended March 31, 2022 and 2021	3

	CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
	At March 31, 2022, and December 31, 2021	4

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	For the Three Months Ended March 31, 2022 and 2021	5

	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS’ EQUITY (Unaudited)
	For the Three Months Ended March 31, 2022 and 2021	6

	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

Signatures		31

Certifications		32

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, Except Per Share Amounts, for the Three Months Ended March 31,	*2022*			2021
Operating revenues:
Freight revenues	$	5,440		$	4,649
Other revenues		420			352
Total operating revenues		5,860			5,001
Operating expenses:
Compensation and benefits		1,101			1,026
Fuel		714			411
Purchased services and materials		561			490
Depreciation		555			549
Equipment and other rents		215			212
Other		337			320
Total operating expenses		3,483			3,008
Operating income		2,377			1,993
Other income, net (Note 6)		47			51
Interest expense		(307	)		(290	)
Income before income taxes		2,117			1,754
Income taxes		(487	)		(413	)
Net income	$	1,630		$	1,341
Share and Per Share (Note 7):
Earnings per share - basic	$	2.58		$	2.01
Earnings per share - diluted	$	2.57		$	2.00
Weighted average number of shares - basic		632.2			667.6
Weighted average number of shares - diluted		633.6			669.2

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, for the Three Months Ended March 31,	*2022*		2021
Net income	$	1,630	$	1,341
Other comprehensive income/(loss):
Defined benefit plans		15		25
Foreign currency translation		21		(26	)
Total other comprehensive income/(loss) [a]		36		(1	)
Comprehensive income	$	1,666	$	1,340

[a]

Net of deferred taxes of ($5) million and ($8) million during the three months ended March 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

Union Pacific Corporation and Subsidiary Companies

	*Mar. 31,*			Dec. 31,
Millions, Except Share and Per Share Amounts	*2022*			2021
Assets
Current assets:
Cash and cash equivalents	$	909		$	960
Short-term investments (Note 12)		46			46
Accounts receivable, net (Note 9)		1,958			1,722
Materials and supplies		726			621
Other current assets		237			202
Total current assets		3,876			3,551
Investments		2,279			2,241
Properties, net (Note 10)		55,064			54,871
Operating lease assets		1,727			1,787
Other assets		1,105			1,075
Total assets	$	64,051		$	63,525
Liabilities and Common Shareholders' Equity
Current liabilities:
Accounts payable and other current liabilities (Note 11)	$	3,903		$	3,578
Debt due within one year (Note 13)		1,559			2,166
Total current liabilities		5,462			5,744
Debt due after one year (Note 13)		30,680			27,563
Operating lease liabilities		1,291			1,429
Deferred income taxes		12,739			12,675
Other long-term liabilities		1,982			1,953
Commitments and contingencies (Note 14)
Total liabilities		52,154			49,364
Common shareholders' equity:
Common shares, $2.50 par value, 1,400,000,000 authorized; 1,112,643,596 and
1,112,440,400 issued; 628,202,430 and 638,841,656 outstanding, respectively		2,782			2,781
Paid-in-surplus		4,571			4,979
Retained earnings		55,937			55,049
Treasury stock		(50,515	)		(47,734	)
Accumulated other comprehensive loss (Note 8)		(878	)		(914	)
Total common shareholders' equity		11,897			14,161
Total liabilities and common shareholders' equity	$	64,051		$	63,525

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, for the Three Months Ended March 31,	*2022*			2021
Operating Activities
Net income	$	1,630		$	1,341
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		555			549
Deferred and other income taxes		60			54
Other operating activities, net		(43	)		(131	)
Changes in current assets and liabilities:
Accounts receivable, net		(236	)		(105	)
Materials and supplies		(105	)		(21	)
Other current assets		(43	)		(1	)
Accounts payable and other current liabilities		63			(67	)
Income and other taxes		355			339
Cash provided by operating activities		2,236			1,958
Investing Activities
Capital investments		(848	)		(536	)
Proceeds from asset sales		32			17
Maturities of short-term investments (Note 12)		-			24
Purchases of short-term investments (Note 12)		-			(24	)
Other investing activities, net		(20	)		14
Cash used in investing activities		(836	)		(505	)
Financing Activities
Debt issued (Note 13)		3,490			-
Share repurchase programs (Note 15)		(2,743	)		(1,347	)
Debt repaid		(866	)		(47	)
Dividends paid		(743	)		(650	)
Accelerated share repurchase programs pending final settlement (Note 15)		(440	)		-
Net issued/(paid) commercial paper (Note 13)		(100	)		(15	)
Other financing activities, net		(51	)		(14	)
Cash used in financing activities		(1,453	)		(2,073	)
Net Change in Cash, Cash Equivalents, and Restricted Cash		(53	)		(620	)
Cash, cash equivalents, and restricted cash at beginning of year		983			1,818
Cash, cash equivalents, and restricted cash at end of period	$	930		$	1,198
Supplemental Cash Flow Information
Non-cash investing and financing activities:
Capital investments accrued but not yet paid	$	157		$	99
Common shares repurchased but not yet paid		10			55
Cash (paid for)/received from:
Income taxes, net of refunds	$	(7	)	$	(1	)
Interest, net of amounts capitalized		(382	)		(394	)
*Reconciliation of cash, cash equivalents, and restricted cash*
*to the Condensed Consolidated Statement of Financial Position:*
Cash and cash equivalents	$	909		$	1,183
Restricted cash equivalents in other current assets		17			3
Restricted cash equivalents in other assets		4			12
Total cash, cash equivalents and restricted cash equivalents per above	$	930		$	1,198

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

Condensed Consolidated Statements of Changes in Common Shareholders’ Equity (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions	Common Shares		Treasury Shares			Common Shares		Paid-in-Surplus			Retained Earnings			Treasury Stock			AOCI [a]			Total
Balance at January 1, 2021		1,112.2		(440.9	)	$	2,781	$	4,864		$	51,326		$	(40,420	)	$	(1,593	)	$	16,958
Net income							-		-			1,341			-			-			1,341
Other comprehensive income/(loss)							-		-			-			-			(1	)		(1	)
Conversion, stock option exercises, forfeitures, ESPP, and other [b]		0.3		0.2			-		10			-			(4	)		-			6
Share repurchase programs (Note 15)		-		(6.7	)		-		-			-			(1,402	)		-			(1,402	)
Dividends declared ($0.97 per share)		-		-			-		-			(648	)		-			-			(648	)
Balance at March 31, 2021		1,112.5		(447.4	)	$	2,781	$	4,874		$	52,019		$	(41,826	)	$	(1,594	)	$	16,254

Balance at January 1, 2022		1,112.4		(473.6	)	$	2,781	$	4,979		$	55,049		$	(47,734	)	$	(914	)	$	14,161
Net income							-		-			1,630			-			-			1,630
Other comprehensive income/(loss)							-		-			-			-			36			36
Conversion, stock option exercises, forfeitures, ESPP, and other [b]		0.2		0.2			1		32			-			(28	)		-			5
Share repurchase programs (Note 15)		-		(11.0	)		-		(440	)		-			(2,753	)		-			(3,193	)
Dividends declared ($1.18 per share)		-		-			-		-			(742	)		-			-			(742	)
Balance at March 31, 2022		1,112.6		(484.4	)	$	2,782	$	4,571		$	55,937		$	(50,515	)	$	(878	)	$	11,897

[a]	AOCI = Accumulated Other Comprehensive Income/Loss (Note 8)
[b]	ESPP = employee stock purchase plan (Note 4)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

Table of Contents

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For purposes of this report, unless the context otherwise requires, all references herein to the “Corporation”, “Company”, “UPC”, “we”, “us”, and “our” mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which will be separately referred to herein as “UPRR” or the “Railroad”.

1. Basis of Presentation

Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and notes thereto contained in our 2021 Annual Report on Form 10-K. Our Consolidated Statement of Financial Position at December 31, 2021, is derived from audited financial statements. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results for the entire year ending December 31, 2022.

The Condensed Consolidated Financial Statements are presented in accordance with GAAP as codified in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

2. Accounting Pronouncements

In November 2021, the FASB issued Accounting Standards Update No. (ASU) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to provide certain disclosures when they have received government assistance and use a grant or contribution accounting model by analogy to other accounting guidance. The ASU was effective January 1, 2022, and had no material impact on our consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP principles to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. This guidance was effective beginning on March 12, 2020, and can be adopted on a prospective basis no later than December 31, 2022, with early adoption permitted. The Company is currently evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures.

3. Operations and Segmentation

The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide and analyze revenue by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network. Our operating revenues are primarily derived from contracts with customers for the transportation of freight from origin to destination.

Table of Contents

The following table represents a disaggregation of our freight and other revenues:

Millions, for the Three Months Ended March 31,	*2022*		2021
Bulk	$	1,832	$	1,512
Industrial		1,921		1,656
Premium		1,687		1,481
Total freight revenues	$	5,440	$	4,649
Other subsidiary revenues		205		177
Accessorial revenues		201		161
Other		14		14
Total operating revenues	$	5,860	$	5,001

Although our revenues are principally derived from customers domiciled in the U.S., the ultimate points of origin or destination for some products we transport are outside the U.S. Each of our commodity groups includes revenue from shipments to and from Mexico. Included in the above table are freight revenues from our Mexico business which amounted to $654 million and $565 million, respectively, for the three months ended March 31, 2022 and 2021.

4. Stock-Based Compensation

We have several stock-based compensation plans under which employees receive nonvested stock options, nonvested retention shares, and nonvested stock units. We refer to the nonvested shares and stock units collectively as “retention awards”. Starting in July 2021, employees are also able to participate in our employee stock purchase plan (ESPP).

Information regarding stock-based compensation appears in the table below:

Millions, for the Three Months Ended March 31,	*2022*		2021
Stock-based compensation, before tax:
Stock options	$	4	$	4
Retention awards		22		16
ESPP		4		-
Total stock-based compensation, before tax	$	30	$	20
Excess tax benefits from equity compensation plans	$	17	$	15

Stock Options – Stock options are granted at the closing price on the date of grant, have 10-year contractual terms, and vest no later than 3 years from the date of grant. None of the stock options outstanding at March 31, 2022, are subject to performance or market-based vesting conditions.

The table below shows the annual weighted-average assumptions used for Black-Scholes valuation purposes:

Weighted-Average Assumptions	*2022*			2021
Risk-free interest rate		1.6	%		0.4	%
Dividend yield		1.9	%		1.9	%
Expected life (years)		4.4			4.6
Volatility		28.7	%		28.3	%
Weighted-average grant-date fair value of options granted	$	51.92		$	39.97

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the expected dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and expected volatility is based on the historical volatility of our stock price over the expected life of the stock option.

Table of Contents

A summary of stock option activity during the three months ended March 31, 2022, is presented below:

	Options (thous.)		Weighted-Average Exercise Price			Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2022		2,106		$	149.84		6.3		$	215
Granted		328			244.35		N/A			N/A
Exercised		(322	)		127.49		N/A			N/A
Forfeited or expired		(6	)		206.59		N/A			N/A
Outstanding at March 31, 2022		2,106		$	167.82		6.8		$	222
Vested or expected to vest at March 31, 2022		2,086		$	167.27		6.8		$	221
Options exercisable at March 31, 2022		1,407		$	142.05		5.6		$	185

At March 31, 2022, there was $28 million of unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.7 years. Additional information regarding stock option exercises appears in the following table:

Millions, for the Three Months Ended March 31,	*2022*			2021
Intrinsic value of stock options exercised	$	42		$	23
Cash received from option exercises		15			30
Treasury shares repurchased for employee payroll taxes		(5	)		(6	)
Tax benefit realized from option exercises		5			4
Aggregate grant-date fair value of stock options vested		13			14

Retention Awards – Retention awards are granted at no cost to the employee, vest over periods lasting up to 4 years, and dividends and dividend equivalents are paid to participants during the vesting periods.

Changes in our retention awards during the three months ended March 31, 2022, were as follows:

	Shares (thous.)			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2022		1,287		$	165.10
Granted		232			244.40
Vested		(402	)		125.26
Forfeited		(18	)		187.57
Nonvested at March 31, 2022		1,099		$	196.05

At March 31, 2022, there was $128 million of total unrecognized compensation expense related to nonvested retention awards, which is expected to be recognized over a weighted-average period of 2.2 years.

Performance Retention Awards – In February 2022, our Board of Directors approved performance stock unit grants. This plan is based on performance targets for annual return on invested capital (ROIC) and operating income growth (OIG) compared to companies in the S&P 100 Industrials Index plus the Class I railroads. We define ROIC as net operating profit adjusted for interest expense (including interest on average operating lease liabilities) and taxes on interest divided by average invested capital adjusted for average operating lease liabilities.

The February 2022 stock units awarded to selected employees are subject to continued employment for 37 months, the attainment of certain levels of ROIC, and the relative three-year OIG. We expense two-thirds of the fair value of the units that are probable of being earned based on our forecasted ROIC over the 3-year performance period, and with respect to the third year of the plan, the remaining one-third of the fair value is subject to the relative three-year OIG. We measure the fair value of performance stock units based upon the closing price of the underlying common stock as of the date of grant. Dividend equivalents are accumulated during the service period and paid to participants only after the units are earned.

Table of Contents

Changes in our performance retention awards during the three months ended March 31, 2022, were as follows:

	Shares (thous.)			Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2022		641		$	173.03
Granted		209			244.35
Vested		(54	)		161.57
Unearned		(163	)		161.57
Forfeited		(8	)		200.18
Nonvested at March 31, 2022		625		$	200.51

At March 31, 2022, there was $45 million of total unrecognized compensation expense related to nonvested performance retention awards, which is expected to be recognized over a weighted-average period of 1.9 years. This expense is subject to achievement of the performance measures established for the performance stock unit grants.

5. Retirement Plans

We provide defined benefit retirement income to eligible non-union employees through qualified and non-qualified (supplemental) pension plans. Qualified and non-qualified pension benefits are based on years of service and the highest compensation during the latest years of employment, with specific reductions made for early retirements. Non-union employees hired on or after January 1, 2018, are no longer eligible for pension benefits, but are eligible for an enhanced 401(k) plan.

Expense

Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a 5-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Differences in actual experience in relation to assumptions are not recognized in net income immediately, but are deferred in accumulated other comprehensive income/loss and, if necessary, amortized as pension expense.

The components of our net periodic pension cost were as follows:

Millions, for the Three Months Ended March 31,	*2022*			2021
Service cost	$	26		$	30
Interest cost		31			26
Expected return on plan assets		(73	)		(67	)
Amortization of actuarial loss		22			36
Net periodic pension cost	$	6		$	25

Cash Contributions

For the three months ended March 31, 2022, cash contributions totaled $0 to the qualified pension plans. Any contributions made during 2022 will be based on cash generated from operations and financial market considerations. Our policy with respect to funding the qualified pension plans is to fund at least the minimum required by law and not more than the maximum amount deductible for tax purposes. At March 31, 2022, we do not have minimum cash funding requirements for 2022.

Table of Contents

6. Other Income

Other income included the following:

Millions, for the Three Months Ended March 31,	*2022*			2021
Rental income	$	36		$	33
Environmental remediation and restoration		(26	)		(4	)
Net periodic pension costs		20			5
Other		17			17
Total	$	47		$	51

7. Earnings Per Share

The following table provides a reconciliation between basic and diluted earnings per share:

Millions, Except Per Share Amounts, for the Three Months Ended March 31,	*2022*		2021
Net income	$	1,630	$	1,341
Weighted-average number of shares outstanding:
Basic		632.2		667.6
Dilutive effect of stock options		0.7		0.8
Dilutive effect of retention shares and units		0.7		0.8
Diluted		633.6		669.2
Earnings per share – basic	$	2.58	$	2.01
Earnings per share – diluted	$	2.57	$	2.00
Stock options excluded as their inclusion would be anti-dilutive		0.1		0.3

8. Accumulated Other Comprehensive Income/Loss

Reclassifications out of accumulated other comprehensive income/loss were as follows (net of tax):

Millions	Defined benefit plans			Foreign currency translation			Total
Balance at January 1, 2022		$	(658	)	$	(256	)	$	(914	)
Other comprehensive income/(loss) before reclassifications			-			21			21
Amounts reclassified from accumulated other comprehensive income/(loss) [a]			15			-			15
Net year-to-date other comprehensive income/(loss), net of taxes of ($5) million			15			21			36
Balance at March 31, 2022		$	(643	)	$	(235	)	$	(878	)

Balance at January 1, 2021		$	(1,381	)	$	(212	)	$	(1,593	)
Other comprehensive income/(loss) before reclassifications			(1	)		(26	)		(27	)
Amounts reclassified from accumulated other comprehensive income/(loss) [a]			26			-			26
Net year-to-date other comprehensive income/(loss), net of taxes of ($8) million			25			(26	)		(1	)
Balance at March 31, 2021		$	(1,356	)	$	(238	)	$	(1,594	)

[a]

The accumulated other comprehensive income/loss reclassification components are 1) prior service cost/credit and 2) net actuarial loss which are both included in the computation of net periodic pension cost. See Note 5 Retirement Plans for additional details.

9. Accounts Receivable

Accounts receivable includes freight and other receivables reduced by an allowance for doubtful accounts. At March 31, 2022, and December 31, 2021, our accounts receivable were reduced by $9 million and $10 million, respectively. Receivables not expected to be collected in one year and the associated allowances are classified as other assets in our Condensed Consolidated Statements of Financial Position. At March 31, 2022, and December 31, 2021, receivables classified as other assets were reduced by allowances of $50 million and $51 million, respectively.

Table of Contents

Receivables Securitization Facility – The Railroad maintains an $800 million, 3-year receivables securitization facility (the Receivables Facility) maturing in July 2022, with the intent to renew under comparable terms and conditions. Under the Receivables Facility, the Railroad sells most of its eligible third-party receivables to Union Pacific Receivables, Inc. (UPRI), a consolidated, wholly-owned, bankruptcy-remote subsidiary that may subsequently transfer, without recourse, an undivided interest in accounts receivable to investors. The investors have no recourse to the Railroad’s other assets except for customary warranty and indemnity claims. Creditors of the Railroad do not have recourse to the assets of UPRI.

The amount recorded under the Receivables Facility was $0 and $300 million at March 31, 2022, and December 31, 2021, respectively. The Receivables Facility was supported by $1.6 billion and $1.3 billion of accounts receivable as collateral at March 31, 2022, and December 31, 2021, respectively, which, as a retained interest, is included in accounts receivable, net in our Condensed Consolidated Statements of Financial Position.

The outstanding amount the Railroad maintains under the Receivables Facility may fluctuate based on current cash needs. The maximum allowed under the facility is $800 million with availability directly impacted by eligible receivables, business volumes, and credit risks, including receivables payment quality measures such as default and dilution ratios. If default or dilution ratios increase one percent, the allowable outstanding amount under the Receivables Facility would not materially change.

The costs of the Receivables Facility include interest, which will vary based on prevailing benchmark and commercial paper rates, program fees paid to participating banks, commercial paper issuance costs, and fees of participating banks for unused commitment availability. The costs of the Receivables Facility are included in interest expense and were $1 million for both the three months ended March 31, 2022 and 2021 .

Subsequent Event – On April 14, 2022, the Railroad drew $600 million on the Receivables Facility, increasing the amount recorded to $600 million in the second quarter. We used the net proceeds for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs and the early redemption of one of our outstanding corporate notes.

10. Properties

The following tables list the major categories of property and equipment, as well as the weighted-average estimated useful life for each category (in years):

Millions, Except Estimated Useful Life			Accumulated		Net Book		Estimated
As of March 31, 2022	Cost		Depreciation		Value		Useful Life
Land	$	5,336	$	N/A	$	5,336		N/A
Road:
Rail and other track material		18,102		6,910		11,192		43
Ties		11,455		3,563		7,892		34
Ballast		6,104		1,878		4,226		34
Other roadway [a]		21,791		4,730		17,061		47
Total road		57,452		17,081		40,371		N/A
Equipment:
Locomotives		9,230		3,660		5,570		18
Freight cars		2,339		839		1,500		23
Work equipment and other		1,172		428		744		18
Total equipment		12,741		4,927		7,814		N/A
Technology and other		1,271		523		748		13
Construction in progress		795		-		795		N/A
Total	$	77,595	$	22,531	$	55,064		N/A

[a]

Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets.

Table of Contents

Millions, Except Estimated Useful Life			Accumulated		Net Book		Estimated
As of December 31, 2021	Cost		Depreciation		Value		Useful Life
Land	$	5,339	$	N/A	$	5,339		N/A
Road:
Rail and other track material		17,980		6,844		11,136		44
Ties		11,364		3,516		7,848		34
Ballast		6,070		1,852		4,218		34
Other roadway [a]		21,593		4,657		16,936		47
Total road		57,007		16,869		40,138		N/A
Equipment:
Locomotives		9,371		3,779		5,592		17
Freight cars		2,227		822		1,405		24
Work equipment and other		1,161		411		750		18
Total equipment		12,759		5,012		7,747		N/A
Technology and other		1,209		523		686		12
Construction in progress		961		-		961		N/A
Total	$	77,275	$	22,404	$	54,871		N/A

[a]

Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets.

11. Accounts Payable and Other Current Liabilities

	*Mar. 31,*			Dec. 31,
Millions		*2022*			2021
Income and other taxes payable		$	1,178		$	823
Accounts payable			868			752
Accrued wages and vacation			355			352
Current operating lease liabilities			305			330
Interest payable			237			330
Accrued casualty costs			202			187
Equipment rents payable			96			98
Other			662			706
Total accounts payable and other current liabilities		$	3,903		$	3,578

12. Financial Instruments

Short-Term Investments – All of the Company’s short-term investments consist of time deposits and government agency securities. These investments are considered Level 2 investments and are valued at amortized cost, which approximates fair value. As of March 31, 2022, the Company had $46 million of short-term investments. All short-term investments have a maturity of less than one year and are classified as held-to-maturity.

Fair Value of Financial Instruments – The fair value of our short- and long-term debt was estimated using a market value price model, which utilizes applicable U.S. Treasury rates along with current market quotes on comparable debt securities. All of the inputs used to determine the fair market value of the Corporation’s long-term debt are Level 2 inputs and obtained from an independent source. At March 31, 2022, the fair value of total debt was $32.0 billion, approximately $0.2 billion less than the carrying value. At December 31, 2021, the fair value of total debt was $32.9 billion, approximately $3.2 billion more than the carrying value. The fair value of the Corporation’s debt is a measure of its current value under present market conditions. The fair value of our cash equivalents approximates their carrying value due to the short-term maturities of these instruments.

Table of Contents

13. Debt

Credit Facilities – At March 31, 2022, we had $2.0 billion of credit available under our revolving credit facility (the Facility), which is designated for general corporate purposes and supports the issuance of commercial paper. Credit facility withdrawals totaled $0 during the three months ended March 31, 2022. Commitment fees and interest rates payable under the Facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The Facility allows for borrowings at floating rates based on LIBOR, plus a spread, depending upon credit ratings for our senior unsecured debt. The 5-year facility, set to expire on June 8, 2023, requires UPC to maintain a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) coverage ratio.

The definition of debt used for purposes of calculating the debt-to-EBITDA coverage ratio includes, among other things, certain credit arrangements, finance leases, guarantees, unfunded and vested pension benefits under Title IV of ERISA, and unamortized debt discount and deferred debt issuance costs. At March 31, 2022 , the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $43.0 billion of debt (as defined in the Facility), and we had $34.0 billion of debt (as defined in the Facility) outstanding at that date. The Facility does not include any other financial restrictions, credit rating triggers (other than rating-dependent pricing), or any other provision that could require us to post collateral. The Facility also includes a $150 million cross-default provision and a change-of-control provision.

During the three months ended March 31, 2022, we issued $1.2 billion and repaid $1.3 billion of commercial paper with maturities ranging from 8 to 86 days, and at March 31, 2022, we had $300 million of commercial paper outstanding. Our revolving credit facility supports our outstanding commercial paper balances, and, unless we change the terms of our commercial paper program, our aggregate issuance of commercial paper will not exceed the amount of borrowings available under the Facility.

Shelf Registration Statement and Significant New Borrowings – On February 3, 2022, the Board of Directors renewed its authorization for the Company to issue up to $12.0 billion of debt securities under the Company’s current three-year shelf registration filed on February 10, 2021. This reauthorization replaces the original Board authorization which had $2.5 billion in remaining authority. Under our shelf registration, we may issue, from time to time any combination of debt securities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings.

During the three months ended March 31, 2022, we issued the following unsecured, fixed-rate debt securities under our shelf registration:

Date	Description of Securities
February 14, 2022	$1.25 billion of 2.800% Notes due February 14, 2032
	$0.50 billion of 3.375% Notes due February 14, 2042
	$1.25 billion of 3.500% Notes due February 14, 2053
	$0.50 billion of 3.850% Notes due February 14, 2072

We used the net proceeds from the offerings for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. These debt securities include change-of-control provisions. At March 31, 2022, we had remaining authority to issue up to $8.5 billion of debt securities under our shelf registration.

Receivables Securitization Facility – As of March 31, 2022, and December 31, 2021, we recorded $0 and $300 million, respectively, of borrowings under our Receivables Facility as secured debt. (See further discussion of our receivables securitization facility in Note 9).

Subsequent Event – On April 15, 2022, we redeemed all $750 million of outstanding 4.163% notes due July 15, 2022, at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest.

Table of Contents

14. Commitments and Contingencies

Asserted and Unasserted Claims – Various claims and lawsuits are pending against us and certain of our subsidiaries. We cannot fully determine the effect of all asserted and unasserted claims on our consolidated results of operations, financial condition, or liquidity. To the extent possible, we have recorded a liability where asserted and unasserted claims are considered probable and where such claims can be reasonably estimated. We do not expect that any known lawsuits, claims, environmental costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on our consolidated results of operations, financial condition, or liquidity after taking into account liabilities and insurance recoveries previously recorded for these matters.

Personal Injury – The Federal Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages are assessed based on a finding of fault through litigation or out-of-court settlements. We offer a comprehensive variety of services and rehabilitation programs for employees who are injured at work.

Approximately 94% of the recorded liability is related to asserted claims and approximately 6% is related to unasserted claims at March 31, 2022. Because of the uncertainty surrounding the ultimate outcome of personal injury claims, it is reasonably possible that future costs to settle these claims may range from approximately $332 million to $366 million. We record an accrual at the low end of the range as no amount of loss within the range is more probable than any other. Estimates can vary over time due to evolving trends in litigation.

Our personal injury liability activity was as follows:

Millions, for the Three Months Ended March 31,	*2022*			2021
Beginning balance	$	325		$	270
Current year accruals		23			18
Changes in estimates for prior years		6			21
Payments		(22	)		(16	)
Ending balance at March 31,	$	332		$	293
Current portion, ending balance at March 31,	$	67		$	60

Environmental Costs – We are subject to federal, state, and local environmental laws and regulations. We have identified 367 sites where we are or may be liable for remediation costs associated with alleged contamination or for violations of environmental requirements. This includes 28 sites that are the subject of actions taken by the U.S. government, 18 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes joint and several liability for the remediation of identified sites; consequently, our ultimate environmental liability may include costs relating to activities of other parties, in addition to costs relating to our own activities at each site.

Our environmental liability activity was as follows:

Millions, for the Three Months Ended March 31,	*2022*			2021
Beginning balance	$	243		$	233
Accruals		40			12
Payments		(15	)		(11	)
Ending balance at March 31,	$	268		$	234
Current portion, ending balance at March 31,	$	64		$	63

The environmental liability includes future costs for remediation and restoration of sites, as well as ongoing monitoring costs, but excludes any anticipated recoveries from third parties. Cost estimates are based on information available for each site, financial viability of other potentially responsible parties, and existing technology, laws, and regulations. The ultimate liability for remediation is difficult to determine because of the number of potentially responsible parties, site-specific cost sharing arrangements with other potentially responsible parties, the degree of contamination by various wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs. Estimates of liability may vary over time due to changes in federal, state, and local laws governing environmental remediation. Current obligations are not expected to have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.

Table of Contents

Insurance – The Company has a consolidated, wholly-owned captive insurance subsidiary (the captive), that provides insurance coverage for certain risks including workers compensation, general liability, auto liability, and FELA claims. The captive receives direct premiums, which are netted against the Company’s premium costs in other expenses in the Condensed Consolidated Statements of Income. We record both liabilities and reinsurance receivables using an actuarial analysis based on historical experience in our Condensed Consolidated Statements of Financial Position.

Indemnities – Our maximum potential exposure under indemnification arrangements, including certain tax indemnifications, can range from a specified dollar amount to an unlimited amount, depending on the nature of the transactions and the agreements. Due to uncertainty as to whether claims will be made or how they will be resolved, we cannot reasonably determine the probability of an adverse claim or reasonably estimate any adverse liability or the total maximum exposure under these indemnification arrangements. We do not have any reason to believe that we will be required to make any material payments under these indemnity provisions.

15. Share Repurchase Programs

Effective April 1, 2022, our Board of Directors authorized the repurchase of up to 100 million shares of our common stock by March 31, 2025. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and amount of these transactions.

Our previous authorization, which was effective April 1, 2019, through March 31, 2022, was approved by our Board of Directors for up to 150 million shares of common stock. As of March 31, 2022, we repurchased a total of 83.3 million of our common stock under the 2019 authorization.

The table below represents shares repurchased under the repurchase program in the first quarter of 2022 and 2021:

Number of Shares Purchased

Average Price Paid [a]

2022

2021

2022

2021

First quarter [b]

11,014,201

6,691,421

249.95

209.50

[a]	In the period of the final settlement, the average price paid under the accelerated share repurchase programs is calculated based on the total program value less the value assigned to the initial delivery of shares. The average price of the initial settlement of the 2022 accelerated share repurchase programs was $250.99.
[b]	Includes 7,012,232 shares repurchased in February 2022* under accelerated share repurchase programs.*

Management's assessments of market conditions and other pertinent factors guide the timing and volume of all repurchases. We expect to fund any share repurchases under this program through cash generated from operations, the sale or lease of various operating and non-operating properties, debt issuances, and cash on hand. Open market repurchases are recorded in treasury stock at cost, which includes any applicable commissions and fees.

Accelerated Share Repurchase Programs – The Company has established accelerated share repurchase programs (ASRs) with financial institutions to repurchase shares of our common stock. These ASRs have been structured so that at the time of commencement, we pay a specified amount to the financial institutions and receive an initial delivery of shares. Additional shares may be received at the time of settlement. The final number of shares to be received is based on the volume weighted average price of the Company’s common stock during the ASR term, less a discount and subject to potential adjustments pursuant to the terms of such ASR.

Table of Contents

On February 18, 2022, the Company received 7,012,232 shares of its common stock repurchased under ASRs for an aggregate of $2.2 billion. When the shares were received, the exchange was accounted for as an equity transaction with $1.8 billion of the aggregate amount allocated to treasury stock and the remaining $0.4 billion allocated to paid-in-surplus. This delivery of shares represents the initial and likely minimum number of shares that we may receive under the ASRs initiated in 2022. The final settlement is expected to be completed prior to the end of the third quarter of 2022.

On May 26, 2021, the Company received 7,209,156 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. Upon settlement of these ASRs in the third quarter of 2021, we received 1,983,859 additional shares.

ASRs are accounted for as equity transactions, and at the time of receipt, shares are included in treasury stock at fair market value as of the corresponding initiation or settlement date. The Company reflects shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.

16. Related Parties

UPRR and other North American railroad companies jointly own TTX Company (TTX). UPRR has a 36.79% economic and voting interest in TTX while the other North American railroads own the remaining interest. In accordance with ASC 323 Investments - Equity Method and Joint Venture, UPRR applies the equity method of accounting to our investment in TTX.

TTX is a rail car pooling company that owns rail cars and intermodal wells to serve North America’s railroads. TTX assists railroads in meeting the needs of their customers by providing rail cars in an efficient, pooled environment. All railroads have the ability to utilize TTX rail cars through car hire by renting rail cars at stated rates.

UPRR had $1.6 billion recognized as investments related to TTX in our Condensed Consolidated Statements of Financial Position as of both March 31, 2022, and December 31, 2021. TTX car hire expenses of $94 million and $96 million for the three months ended March 31, 2022 and 2021, are included in equipment and other rents in our Condensed Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $63 million and $57 million as of March 31, 2022, and December 31, 2021, respectively.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

RESULTS OF OPERATIONS

Three Months Ended March 31, 2022, Compared to

Three Months Ended March 31, 2021

For purposes of this report, unless the context otherwise requires, all references herein to “UPC”, “Corporation”, “Company”, “we”, “us”, and “our” shall mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which we separately refer to as “UPRR” or the “Railroad”.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and applicable notes to the Condensed Consolidated Financial Statements, Item 1, and other information included in this report. Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP).

The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although we provide and analyze revenues by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network.

Critical Accounting Estimates

We base our discussion and analysis of our financial condition and results of operations upon our Condensed Consolidated Financial Statements. The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ materially from actual results, the impact on the Condensed Consolidated Financial Statements may be material. Our critical accounting estimates are available in Item 7 of our 2021 Annual Report on Form 10-K. There have not been any significant changes with respect to these policies during the first three months of 2022.

RESULTS OF OPERATIONS

Quarterly Summary

The Company reported earnings of $2.57 per diluted share on net income of $1.6 billion and an operating ratio of 59.4% in the first quarter of 2022 compared to earnings of $2.00 per diluted share on net income of $1.3 billion and an operating ratio of 60.1% for the first quarter of 2021. Freight revenues increased 17% in the quarter compared to the same period in 2021 driven by increases in average revenue per car (ARC) and volume of 12% and 4%, respectively. The ARC increase was due to higher fuel surcharge revenue, core pricing gains, and positive mix of traffic (for example, a relative increase in industrial shipments, which have a higher ARC). As the economy strengthened in the first quarter of 2022, volume growth was seen in all commodity groups except the energy and specialized markets, driven by lower petroleum shipments, and intermodal, due to the on-going supply chain disruptions. Weather events did not have a significant impact on our operations in the first quarter 2022. Revenues and costs improved year-over-year due to the impact of Winter Storm Uri on first quarter 2021, which reduced carloads and increased operating costs.

With the onset of the Russia-Ukraine conflict (the conflict) in late February 2022, crude oil prices rose to over $100 a barrel driving a 59% increase in our average fuel price for the quarter. In addition, in response to the conflict and ensuing Office of Foreign Assets Controls (OFAC) sanctions we evaluated our customer and supplier relationships to safeguard the Company against violations of these sanctions. If any of our business partners with known Russian ties become sanctioned or if we take proactive steps in light of the ongoing conflict, we do not expect such actions to have a material adverse effect on our results of operations, financial condition, and liquidity. Along with the higher cost of fuel, costs increased due to inflation, volume, and the reduced fluidity of our network. These increased costs only partially offset the higher revenue, resulting in a 19% increase in operating income in the first quarter compared to the same period in 2021.

Table of Contents

Operating Revenues

Millions, for the Three Months Ended March 31,	*2022*		2021		Change		%
Freight revenues	$	5,440	$	4,649		17	%
Other subsidiary revenues		205		177		16
Accessorial revenues		201		161		25
Other		14		14		-
Total	$	5,860	$	5,001		17	%

We generate freight revenues by transporting products from our three commodity groups. Freight revenues vary with volume (carloads) and ARC. Changes in price, traffic mix, and fuel surcharges drive ARC. Customer incentives, which are primarily provided for shipping to/from specific locations or based on cumulative volumes, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based on cumulative volumes are estimated using the expected value method, which is based on available historical, current, and forecasted volumes, and recognized as the related performance obligation is satisfied. We recognize freight revenues over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred.

Other subsidiary revenues (primarily logistics and commuter rail operations) are generally recognized over time as shipments move from origin to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Accessorial revenues are recognized at a point in time as performance obligations are satisfied.

Freight revenues increased 17% during the first quarter of 2022 compared to 2021, resulting from higher fuel surcharges, a 4% volume increase, core pricing gains, and positive mix of traffic. Volume growth in coal, metals and minerals, industrial chemicals and plastics, and automotive parts were partially offset by declines in international intermodal and petroleum shipments.

Each of our commodity groups includes revenues from fuel surcharges. Freight revenues from fuel surcharge programs increased to $635 million in the first quarter of 2022 compared to $260 million in the same period of 2021 due to higher fuel prices.

Other subsidiary revenues increased in the first quarter compared to 2021 primarily driven by revenues at our subsidiary that brokers intermodal and transload logistics services as a result of the recovery of automotive parts shipments and contract wins. Accessorial revenue increased in the first quarter compared to 2021 driven by increased intermodal accessorial charges resulting from the ongoing global supply chain disruptions.

Table of Contents

The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:

*Freight Revenues*
Millions, for the Three Months Ended March 31,	*2022*		2021		Change		%
Grain & grain products	$	877	$	766		14	%
Fertilizer		180		170		6
Food & refrigerated		267		235		14
Coal & renewables		508		341		49
Bulk		1,832		1,512		21
Industrial chemicals & plastics		520		435		20
Metals & minerals		485		375		29
Forest products		364		316		15
Energy & specialized markets		552		530		4
Industrial		1,921		1,656		16
Automotive		501		447		12
Intermodal		1,186		1,034		15
Premium		1,687		1,481		14
Total	$	5,440	$	4,649		17	%

*Revenue Carloads*
Thousands, for the Three Months Ended March 31,	*2022*		2021		Change		%
Grain & grain products		205		203		1	%
Fertilizer		45		44		2
Food & refrigerated		47		45		4
Coal & renewables		225		174		29
Bulk		522		466		12
Industrial chemicals & plastics		160		140		14
Metals & minerals		182		146		25
Forest products		64		60		7
Energy & specialized markets		131		139		(6	)
Industrial		537		485		11
Automotive		190		180		6
Intermodal [a]		757		796		(5	)
Premium		947		976		(3	)
Total		2,006		1,927		4	%

*Average Revenue per Car*
for the Three Months Ended March 31,	*2022*		2021		*Change*		%
Grain & grain products	$	4,269	$	3,782		13	%
Fertilizer		4,016		3,852		4
Food & refrigerated		5,637		5,234		8
Coal & renewables		2,262		1,958		16
Bulk		3,508		3,246		8
Industrial chemicals & plastics		3,247		3,113		4
Metals & minerals		2,660		2,563		4
Forest products		5,672		5,244		8
Energy & specialized markets		4,219		3,828		10
Industrial		3,574		3,417		5
Automotive		2,640		2,485		6
Intermodal [a]		1,566		1,299		21
Premium		1,782		1,517		17
Average	$	2,711	$	2,413		12	%

[a]

For intermodal shipments each container or trailer equals one carload.

Table of Contents

Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated goods, and coal and renewables. Freight revenues from bulk shipments increased in the first quarter of 2022 compared to 2021 due to 12% higher volume, higher fuel surcharge revenue, and core pricing gains, partially offset by a negative mix of traffic (increased coal shipments). Coal and renewable carloads were up 29% in the first quarter of 2022 compared to 2021 because of higher natural gas prices and contract wins.

Industrial – Industrial includes shipments of industrial chemicals and plastics, metals and minerals, forest products, and energy and specialized markets. Freight revenues from industrial shipments increased in the first quarter of 2022 compared to the same period in 2021 due to 11% higher volume, higher fuel surcharge revenue, and core pricing gains, partially offset by negative mix of traffic (increased short haul rock shipments). In the first quarter of 2021, many of our customers in the Gulf Coast experienced Winter Storm Uri interruptions for an extended period causing a significant impact on the industrial chemicals and plastics and metals and minerals industries. Last year’s weather event coupled with strong demand drove the year-over-year increase for the impacted commodities. Petroleum shipments declined due to unfavorable regional crude oil pricing spreads and regulatory challenges in Mexico markets.

Premium – Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international. Premium freight revenues increased in the first quarter of 2022 compared to 2021 due to higher fuel surcharge, core pricing gains, positive mix of traffic (lower international intermodal shipments), partially offset by a 3% decline in volume. Intermodal shipments declined 5% driven primarily by ongoing international supply chain disruptions, partially offset by domestic contract wins, tight truck capacity, and strength in e-commerce parcel shipments. Automotive shipments increased 6% compared to first quarter 2021 driven by an increase in automotive parts shipments as the automotive industry slowly recovers from the shortage of semiconductors and last year’s weather disruptions.

Mexico Business – Each of our commodity groups includes revenues from shipments to and from Mexico. Revenues from Mexico business increased 16% to $654 million in the first quarter of 2022 compared to 2021 driven by higher fuel surcharge revenues, positive business mix (lower intermodal shipments), a 1% volume increase, and core pricing gains. The volume increase was driven by shipments of automotive parts, steel, and coal, partially offset by intermodal and petroleum.

Operating Expenses

Millions, for the Three Months Ended March 31,	*2022*		2021		Change		%
Compensation and benefits	$	1,101	$	1,026		7	%
Fuel		714		411		74
Purchased services and materials		561		490		14
Depreciation		555		549		1
Equipment and other rents		215		212		1
Other		337		320		5
Total	$	3,483	$	3,008		16	%

Operating expenses increased $475 million in the first quarter of 2022 compared to 2021 driven by higher fuel prices, inflation, and volume-related costs. Partially offsetting these increases were lower weather-related expenses compared to 2021.

Compensation and Benefits – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, and incentive costs. For the first quarter, expenses increased 7% compared to 2021 due to wage inflation, excess network costs, and an increase in carload volumes resulting in a 1% increase in employee levels, partially offset by last year’s weather-related expenses.

Fuel – Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment. Fuel expense increased in the first quarter of 2022 compared to the same period in 2021 driven by a 59% increase in locomotive diesel fuel prices, which averaged $2.95 and $1.85 per gallon (including taxes and transportation costs) in the first quarter of 2022 and 2021, respectively. A 9% increase in gross ton-miles also contributed to the higher expense. Fuel consumption rate, computed as gallons of fuel consumed divided by gross ton-mile in thousands, improved slightly.

Table of Contents

Purchased Services and Materials – Expense for purchased services and materials includes the costs of services purchased from outside contractors and other service providers (including equipment maintenance and contract expenses incurred by our subsidiaries for external transportation services); materials used to maintain the Railroad’s lines, structures, and equipment; costs of operating facilities jointly used by UPRR and other railroads; transportation and lodging for train crew employees; trucking and contracting costs for intermodal containers; leased automobile maintenance expenses; and tools and supplies. Purchased services and materials increased 14% in the first quarter of 2022 compared to 2021 primarily due to inflation, increased drayage costs incurred by one of our subsidiaries, and higher locomotive and freight car maintenance expenses due to a larger active fleet, partially offset by last year’s weather-related expenses.

Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was up 1% for the first quarter of 2022 compared to 2021.

Equipment and Other Rents – Equipment and other rents expense primarily includes rental expense that the Railroad pays for freight cars owned by other railroads or private companies; freight car, intermodal, and locomotive leases; and office and other rentals. Equipment and other rents expense increased 1% in the first quarter of 2022 compared to 2021 driven by lower equity income from our investment in TTX Company.

Other – Other expenses include state and local taxes; freight, equipment, and property damage; utilities; insurance; personal injury; environmental remediation; employee travel; telephone and cellular; computer software; bad debt; and other general expenses. Other costs increased 5% in the first quarter of 2022 driven by higher state and local taxes; casualty expenses, including environmental remediation, damaged freight, and destroyed equipment; and increased business travel, partially offset by lower bad debt expense, higher equity income from our investment in Grupo Ferroviaro Mexicano, and lower personal injury expense.

Non-Operating Items

Millions, for the Three Months Ended March 31,	*2022*			2021			Change		%
Other income, net	$	47		$	51			(8	)%
Interest expense		(307	)		(290	)		6
Income taxes		(487	)		(413	)		18

Other Income, net – Other income decreased in the first quarter of 2022 compared to 2021 driven by higher environmental remediation expense at non-operating sites.

Interest Expense – Interest expense increased in the first quarter of 2022 compared to 2021 due to an increased weighted-average debt level of $31.1 billion in 2022 compared to $26.7 billion in 2021, partially offset by a lower effective interest rate of 4.0% in 2022 compared to 4.2% in 2021.

Income Taxes – Income taxes increased in the first quarter of 2022 compared to 2021 due to higher pre-tax income. Our effective tax rates for the first quarter of 2022 and 2021 were 23.0% and 23.5%, respectively.

Table of Contents

OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS

We report a number of key performance measures weekly to the Surface Transportation Board (STB). We provide this data on our website at www.up.com/investor/aar-stb_reports/index.htm.

Operating/Performance Statistics

Management continuously measures these key operating metrics to evaluate our operational efficiency and asset utilization in striving to provide a consistent, reliable service product to our customers.

Railroad performance measures are included in the table below:

For the Three Months Ended March 31,	2022	2021	Change	%
Gross ton-miles (GTMs) (billions)	209.7	193.1	9	%
Revenue ton-miles (billions)	107.2	97.4	10
Freight car velocity (daily miles per car)	198	209	(5	)
Average train speed (miles per hour) [a]	24.1	25.2	(4	)
Average terminal dwell time (hours) [a]	24.0	23.5	2
Locomotive productivity (GTMs per horsepower day)	130	138	(6	)
Train length (feet)	9,205	9,247	-
Intermodal car trip plan compliance (%)	71	77	(6)	pts
Manifest/Automotive car trip plan compliance (%)	62	68	(6)	pts
Workforce productivity (car miles per employee)	1,056	1,002	5
Total employees (average)	30,189	29,755	1
Operating ratio	59.4	60.1	(0.7)	pts

[a]

As reported to the STB.

Gross and Revenue Ton-Miles – Gross ton-miles are calculated by multiplying the weight of loaded and empty freight cars by the number of miles hauled. Revenue ton-miles are calculated by multiplying the weight of freight by the number of tariff miles. Gross ton-miles and revenue ton-miles increased 9% and 10%, respectively, during the first quarter of 2022 compared to 2021, driven by a 4% increase in carloadings. Changes in commodity mix drove the variance in year-over-year increases between gross ton-miles, revenue ton-miles, and carloads.

Freight Car Velocity – Freight car velocity measures the average daily miles per car on our network. The two key drivers of this metric are the speed of the train between terminals (average train speed) and the time a rail car spends at the terminals (average terminal dwell time). As freight car velocity, average train speed, and average terminal dwell deteriorated, operating car inventory levels increased and further congested the network compared to the same period in 2021.

Locomotive Productivity – Locomotive productivity is gross ton-miles per average daily locomotive horsepower available. Locomotive productivity decreased in the first quarter of 2022 compared to the same period in 2021 driven by an increase in our average active fleet size as resources were deployed to handle increased volume and help alleviate network congestion.

Train Length – Train length is the average maximum train length on a route measured in feet. Our train length was flat in the first quarter of 2022 compared to same period in 2021 primarily driven by train length improvement initiatives offset by lower international intermodal shipments.

Car Trip Plan Compliance – Car trip plan compliance is the percentage of cars delivered on time in accordance with our original trip plan. Our network trip plan compliance is broken into the intermodal and manifest/automotive products. Both intermodal trip plan compliance and manifest/automotive car trip compliance deteriorated 6 points in the first quarter of 2022 compared to 2021, as a result of network congestion.

Workforce Productivity – Workforce productivity is average daily car miles per employee. Workforce productivity improved 5% in the first quarter of 2022, as average daily car miles increased 7% while employees increased 1% compared to 2021. Higher volume drove the increase in average daily car miles. The 1% increase in employee levels was driven by an increase in train, engine, and yard employees to handle the additional volume.

Table of Contents

Operating Ratio – Operating ratio is our operating expenses reflected as a percentage of operating revenue. Our operating ratio of 59.4% improved 0.7 points compared to 2021 mainly due to positive mix of traffic, core pricing gains, and lower weather-related expenses, partially offset by higher fuel prices, inflation, and other cost increases.

Adjusted Debt / Adjusted EBITDA

Millions, Except Ratios	*Mar. 31,*			Dec. 31,
for the Trailing Twelve Months Ended [a]		*2022*			2021
Net income		$	6,812		$	6,523
Add:
Income tax expense/(benefit)			2,029			1,955
Depreciation			2,214			2,208
Interest expense			1,174			1,157
EBITDA		$	12,229		$	11,843
Adjustments:
Other income, net			(293	)		(297	)
Interest on operating lease liabilities [b]			51			56
Adjusted EBITDA		$	11,987		$	11,602
Debt		$	32,239		$	29,729
Operating lease liabilities			1,596			1,759
Unfunded/(funded) pension and other postretirement benefits,			(92	)		(72	)
net of tax cost/(benefit) of ($28) and ($21)
Adjusted debt		$	33,743		$	31,416
Adjusted debt / Adjusted EBITDA			2.8			2.7

[a]	The trailing twelve months income statement information ended March 31, 2022, is recalculated by taking the twelve months ended December 31, 2021, subtracting the three months ended March 31, 2021, and adding the three months ended March 31, 2022.
[b]	Represents the hypothetical interest expense we would incur (using the incremental borrowing rate) if the property under our operating leases were owned or accounted for as finance leases.

Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and adjustments for other income and interest on present value of operating leases) is considered a non-GAAP financial measure by SEC Regulation G and Item 10 of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe this measure is important to management and investors in evaluating the Company’s ability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by rating agencies when reviewing the Company’s credit rating. Adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At both March 31, 2022, and December 31, 2021, the incremental borrowing rate on operating leases was 3.2%.

LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

*Cash Flows*
Millions, for the Three Months Ended March 31,	*2022*			2021
Cash provided by operating activities	$	2,236		$	1,958
Cash used in investing activities		(836	)		(505	)
Cash used in financing activities		(1,453	)		(2,073	)
Net change in cash, cash equivalents and restricted cash	$	(53	)	$	(620	)

Table of Contents

Operating Activities

Cash provided by operating activities increased in the first three months of 2022 compared to the same period of 2021 due to higher net income.

Investing Activities

Cash used in investing activities increased in the first three months of 2022 compared to the same period of 2021 driven by increased capital investment in all asset categories.

The table below details cash capital investments:

Millions, for the Three Months Ended March 31,	*2022*		2021
Rail and other track material	$	113	$	101
Ties		111		92
Ballast		44		43
Other [a]		113		93
Total road infrastructure replacements [b]		381		329
Line expansion and other capacity projects		70		48
Commercial facilities		28		11
Total capacity and commercial facilities		98		59
Locomotives and freight cars [c]		239		75
Technology and other		130		73
Total cash capital investments	$	848	$	536

[a]	Other includes bridges and tunnels, signals, other road assets, and road work equipment.
[b]	Weather-related damages for the three months ended March 31, 2022 and 2021 are immaterial.
[c]	Locomotives and freight cars include lease buyouts of $46 million in 2022 and $23 million in 2021.

Capital Plan

In 2022, we expect our capital expenditures to be approximately $3.3 billion, up 10% from 2021, as we make investments to support our growth strategy. We will continue to harden our infrastructure, replace older assets, and improve the safety and resilience of the network. In addition, the plan includes targeted freight car acquisitions, investments in growth-related projects to drive more carloads to the network, certain ramps to efficiently handle volumes from new and existing intermodal customers, continued modernization of our locomotive fleet, and projects intended to improve operational efficiency. The capital plan may be revised if business conditions warrant or if new laws or regulations affect our ability to generate sufficient returns on these investments.

Financing Activities

Cash used in financing activities decreased in the first three months of 2022 compared to the same period of 2021 driven by an increase in debt issued, partially offset by higher share repurchases and debt repaid.

See Note 13 of the Condensed Consolidated Financial Statements for a description of all our outstanding financing arrangements and significant new borrowings and Note 15 of the Condensed Consolidated Financial Statements for a description of our share repurchase programs.

Free Cash Flow – Free cash flow is defined as cash provided by operating activities less cash used in investing activities and dividends paid. Cash flow conversion rate is cash provided by operating activities less cash used for capital investments as a ratio of net income.

Free cash flow and cash flow conversion rate are not considered financial measures under GAAP by SEC Regulation G and Item 10 of SEC Regulation S-K and may not be defined and calculated by other companies in the same manner. We believe free cash flow and cash flow conversion rate are important to management and investors in evaluating our financial performance and measures our ability to generate cash without additional external financing. Free cash flow and cash flow conversion rate should be considered in addition to, rather than as a substitute for, cash provided by operating activities.

Table of Contents

The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure):

Millions, for the Three Months Ended March 31,	*2022*			2021
Cash provided by operating activities	$	2,236		$	1,958
Cash used in investing activities		(836	)		(505	)
Dividends paid		(743	)		(650	)
Free cash flow	$	657		$	803

The following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure):

Millions, for the Three Months Ended March 31,	*2022*			2021
Cash provided by operating activities	$	2,236		$	1,958
Cash used in capital investments		(848	)		(536	)
Total (a)	$	1,388		$	1,422
Net income (b)	$	1,630		$	1,341
Cash flow conversion rate (a/b)		85	%		106	%

Current Liquidity Status

We are continually evaluating our financial condition and liquidity. We analyze a wide range of economic scenarios and the impact on our ability to generate cash. These analyses inform our liquidity plans and activities outlined below and indicate we have sufficient borrowing capacity to sustain an extended period of lower volumes.

During the first quarter, we generated $2.2 billion of cash provided by operating activities, paid our quarterly dividend, and repurchased $2.7 billion under our share repurchase program, including entering into accelerated share repurchase programs for $2.2 billion ($1.8 billion assigned to the initial delivery of shares). On March 31, 2022, we had $909 million of cash and cash equivalents, $2.0 billion of credit available under our revolving credit facility, and up to $800 million undrawn on the Receivables Facility. In the first quarter, we repaid the $300 million outstanding on the Receivables Facility. In April 2022, we drew $600 million on the Receivables Facility and redeemed all $750 million of outstanding 4.163% notes due July 15, 2022. We have been, and we expect to continue to be, in compliance with our debt covenants.

As described in the notes to the Condensed Consolidated Financial Statements and as referenced in the table below, we have contractual obligations that may affect our financial condition. However, based on our assessment of the underlying provisions and circumstances of our contractual obligations, including material sources of off-balance sheet and structured finance arrangements, there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur that would have a material adverse effect on our consolidated results of operations, financial condition, or liquidity. In addition, our commercial obligations, financings, and commitments are customary transactions that are like those of other comparable corporations, particularly within the transportation industry.

Table of Contents

The following table identifies material obligations as of March 31, 2022:

						Payments Due by Dec. 31,
*Contractual Obligations*			Apr. 1 through											After
Millions	Total		Dec. 31, 2022			2023		2024		2025		2026		2026
Debt [a]	$	59,173		$	1,954	$	2,452	$	2,471	$	2,451	$	1,990	$	47,855
Purchase obligations [b]		2,420			629		394		389		347		269		392
Operating leases [c]		1,790			151		295		282		286		218		558
Other post retirement benefits [d]		389			34		44		40		39		39		193
Finance lease obligations [e]		304			45		76		63		44		35		41
Total contractual obligations	$	64,076		$	2,813	$	3,261	$	3,245	$	3,167	$	2,551	$	49,039

[a]	Excludes finance lease obligations of $272 million as well as unamortized discount and deferred issuance costs of ($1,787) million. Includes an interest component of $25,419 million.
[b]	Purchase obligations include locomotive maintenance contracts; purchase commitments for fuel purchases, ties, ballast, and rail; and agreements to purchase other goods and services.
[c]	Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $194 million.
[d]	Includes estimated other post retirement, medical, and life insurance payments and payments made under the unfunded pension plans for the next ten years.
[e]	Represents total obligations, including interest component of $32 million.

OTHER MATTERS

Accounting Pronouncements – See Note 2 to the Condensed Consolidated Financial Statements.

Asserted and Unasserted Claims – See Note 14 to the Condensed Consolidated Financial Statements.

Indemnities – See Note 14 to the Condensed Consolidated Financial Statements.

CAUTIONARY INFORMATION

Statements in this Form 10-Q/filing, including forward-looking statements, speak only as of and are based on information we have learned as of April 21, 2022. We assume no obligation to update any such information to reflect subsequent developments, changes in assumptions, or changes in other factors affecting forward-looking information. If we do update one or more of these statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other statements.

Certain statements in this report, and statements in other reports or information filed or to be filed with the SEC (as well as information included in oral statements or other written statements made or to be made by us), are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements and information also include any other statements or information in this report regarding: potential impacts of the COVID-19 pandemic and the Russia-Ukraine conflict on our business operations, financial results, liquidity, and financial position, and on the world economy (including our customers and supply chains), including as a result of decreased volume and carloadings; closing of customer manufacturing, distribution or production facilities; expectations as to operational or service improvements; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications (including those in response to increased traffic); expectations as to cost savings, revenue growth, and earnings; the time by which goals, targets, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as to our business, financial, and operational results, future economic performance, and general economic conditions; proposed new products and services; estimates of costs relating to environmental remediation and restoration; estimates and expectations regarding tax matters, expectations that claims, litigation, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse effect on our consolidated results of operations, financial condition, or liquidity and any other similar expressions concerning matters that are not historical facts.

Table of Contents

Forward-looking statements and information reflect the good faith consideration by management of currently available information, and may be based on underlying assumptions believed to be reasonable under the circumstances. However, such information and assumptions (and, therefore, such forward-looking statements and information) are or may be subject to risks and uncertainties over which management has little or no influence or control. The Risk Factors in Item 1A of our 2021 Annual Report on Form 10-K, filed February 4, 2022, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements, and this report, including this Item 2, should be read in conjunction with these Risk Factors. 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 that, or by which, such performance or results will be achieved. Forward-looking information is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.

AVAILABLE INFORMATION

Our Internet website is www.up.com. We make available free of charge on our website (under the “Investors” caption link) our Annual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our current reports on Form 8-K; our proxy statements; Forms 3, 4, and 5, filed on behalf of directors and executive officers; and amendments to any such reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available on our website previously filed SEC reports and exhibits via a link to EDGAR on the SEC’s Internet site at www.sec.gov. We provide these previously filed reports as a convenience and their contents reflect only information that was true and correct as of the date of the report. We assume no obligation to update this historical information. Additionally, our corporate governance materials, including By-Laws, Board Committee charters, governance guidelines and policies, and codes of conduct and ethics for directors, officers, and employees are available on our website. From time to time, the corporate governance materials on our website may be updated as necessary to comply with rules issued by the SEC and the New York Stock Exchange or as desirable to promote the effective and efficient governance of our company. Any security holder wishing to receive, without charge, a copy of any of our SEC filings or corporate governance materials should send a written request to: Corporate Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179.

References to our website address in this report, including references in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 2, are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not be considered part of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the Quantitative and Qualitative Disclosures About Market Risk previously disclosed in our 2021 Annual Report on Form 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer (CEO) and Executive Vice President and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based upon that evaluation, the CEO and the CFO concluded that, as of the end of the period covered by this report, the Corporation’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Additionally, the CEO and CFO determined that there were no changes to the Corporation’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection with our business. We routinely assess our liabilities and contingencies in connection with these matters based upon the latest available information and, when necessary, we seek input from our third-party advisors when making these assessments. Consistent with SEC rules and requirements, we describe below material pending legal proceedings (other than ordinary routine litigation incidental to our business), material proceedings known to be contemplated by governmental authorities, other proceedings arising under federal, state, or local environmental laws and regulations (including governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of $1,000,000), and such other pending matters that we may determine to be appropriate.

Environmental Matters

We receive notices from the EPA and state environmental agencies alleging that we are or may be liable under federal or state environmental laws for remediation costs at various sites throughout the U.S., including sites on the Superfund National Priorities List or state superfund lists. We cannot predict the ultimate impact of these proceedings and suits because of the number of potentially responsible parties involved, the degree of contamination by various wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs.

Information concerning environmental claims and contingencies and estimated remediation costs is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Environmental, Item 7, and Note 17 of the Consolidated Financial Statements of our 2021 Annual Report on Form 10-K.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the risk factors disclosed in our Form 10-K for the year ended December 31, 2021. These risks could materially and adversely affect our business, financial condition, results of operations (including revenues and profitability), and/or stock price. Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities – The following table presents common stock repurchases during each month for the first quarter of 2022:

Period	Total Number of Shares Purchased [a]		Average Price Paid Per Share [b]		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program [c]		Maximum Number of Shares That May Be Purchased Under Current Authority [d]
Jan. 1 through Jan. 31		2,099,971	$	246.59		2,088,776		75,596,574
Feb. 1 through Feb. 28		8,684,085		250.03		8,488,172		67,108,402
Mar. 1 through Mar. 31		484,078		264.08		437,253		66,671,149
Total		11,268,134	$	249.99		11,014,201		N/A

[a]	Total number of shares purchased during the quarter includes 253,933 shares delivered or attested to UPC by employees to pay stock option exercise prices, satisfy excess tax withholding obligations for stock option exercises or vesting of retention units, and pay withholding obligations for vesting of retention shares.
[b]	The average price of the initial settlement of the 2022 accelerated share repurchase programs was $250.99.
[c]	Total number of shares purchased as part of a publicly announced plan or program includes 7,012,232 shares repurchased in February under ASRs. See Note 15 to the Condensed Consolidated Financial Statements for additional information.
[d]	Effective April 1, 2022, our Board of Directors authorized the repurchase of up to 100 million shares of our common stock by March 31, 2025. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and amount of these transactions.

Table of Contents

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description

Filed with this Statement

31(a)	Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Lance M. Fritz.

31(b)	Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Jennifer L. Hamann

32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Lance M. Fritz and Jennifer L. Hamann

101	The following financial and related information from Union Pacific Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2022 (filed with the SEC on April 21, 2022), formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) Condensed Consolidated Statements of Income for the periods ended March 31, 2022 and 2021, (ii) Condensed Consolidated Statements of Comprehensive Income for the periods ended March 31, 2022 and 2021, (iii) Condensed Consolidated Statements of Financial Position at March 31, 2022, and December 31, 2021, (iv) Condensed Consolidated Statements of Cash Flows for the periods ended March 31, 2022 and 2021, (v) Condensed Consolidated Statements of Changes in Common Shareholders’ Equity for the periods ended March 31, 2022 and 2021, and (vi) the Notes to the Condensed Consolidated Financial Statements.

104	Cover Page Interactive Data File, formatted in Inline XBRL (contained in Exhibit 101).

Incorporated by Reference

3(a)	Restated Articles of Incorporation of UPC, as amended and restated through June 27, 2011, and as further amended May 15, 2014, are incorporated herein by reference to Exhibit 3(a) to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

3(b)	By-Laws of UPC, as amended, effective November 19, 2015, are incorporated herein by reference to Exhibit 3.2 to the Corporation’s Current Report on Form 8-K dated November 19, 2015.

4(a)	Form of 2.800% Note due 2032 is incorporated by reference to Exhibit 4.1 to the Corporation’s Current Report on Form 8-K dated February 14, 2022.

4(b)	Form of 3.375% Note due 2042 is incorporated by reference to Exhibit 4.2 to the Corporation’s Current Report on Form 8-K dated February 14, 2022.

4(c)	Form of 3.500% Note due 2053 is incorporated by reference to Exhibit 4.3 to the Corporation’s Current Report on Form 8-K dated February 14, 2022.

4(d)	Form of 3.850% Note due 2072 is incorporated by reference to Exhibit 4.4 to the Corporation’s Current Report on Form 8-K dated February 14, 2022.

Table of Contents

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: April 21, 2022

		UNION PACIFIC CORPORATION (Registrant)

By	/s/ Jennifer L. Hamann
	Jennifer L. Hamann
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

By	/s/ Todd M. Rynaski
	Todd M. Rynaski
	Vice President and Controller
	(Principal Accounting Officer)