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Table of Contents

a

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x

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

For the quarterly period ended September 30, 2019

OR

¨

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

For the transition period from __________ to ____________

Commission File Number 1-6075

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.

x 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).

x 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

Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

x

¨

¨

¨

¨

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     x No

As of October 11, 2019, there were 694,199,885 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 September 30, 2019 and 2018

3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Three Months Ended September 30, 2019 and 2018

3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

For the Nine Months Ended September 30, 2019 and 2018

4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the Nine Months Ended September 30, 2019 and 2018

4

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

At September 30, 2019 and December 31, 2018

5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended September 30, 2019 and 2018

6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS’ EQUITY (Unaudited)

For the Three and Nine Months Ended September 30, 2019 and 2018

7

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

Signatures

40

Certifications

 

2


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 September 30,

2019

2018

Operating revenues:

Freight revenues

$

5,146 

$

5,558 

Other revenues

370 

370 

Total operating revenues

5,516 

5,928 

Operating expenses:

Compensation and benefits

1,134 

1,262 

Purchased services and materials

574 

632 

Depreciation

557 

547 

Fuel

504 

659 

Equipment and other rents

236 

272 

Other

277 

287 

Total operating expenses

3,282 

3,659 

Operating income

2,234 

2,269 

Other income (Note 6)

53 

48 

Interest expense

(266)

(241)

Income before income taxes

2,021 

2,076 

Income taxes

(466)

(483)

Net income

$

1,555 

$

1,593 

Share and Per Share (Note 8):

Earnings per share - basic

$

2.22 

$

2.16 

Earnings per share - diluted

$

2.22 

$

2.15 

Weighted average number of shares - basic

699.3 

737.4 

Weighted average number of shares - diluted

701.9 

740.9 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions,

for the Three Months Ended September 30,

2019

2018

Net income

$

1,555 

$

1,593 

Other comprehensive income/(loss):

Defined benefit plans

11 

19 

Foreign currency translation

(18)

17 

Total other comprehensive income/(loss) [a]

(7)

36 

Comprehensive income

$

1,548 

$

1,629 

[a]Net of deferred taxes of $(4) million and $(7) million during the three months ended September 30, 2019, and 2018, respectively.

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


3


Table of Contents

Condensed Consolidated Statements of Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, Except Per Share Amounts,

for the Nine Months Ended September 30,

2019

2018

Operating revenues:

Freight revenues

$

15,392 

$

15,997 

Other revenues

1,104 

1,078 

Total operating revenues

16,496 

17,075 

Operating expenses:

Compensation and benefits

3,484 

3,776 

Purchased services and materials

1,723 

1,861 

Depreciation

1,657 

1,636 

Fuel

1,595 

1,891 

Equipment and other rents

754 

803 

Other

829 

801 

Total operating expenses

10,042 

10,768 

Operating income

6,454 

6,307 

Other income (Note 6)

187 

48 

Interest expense

(772)

(630)

Income before income taxes

5,869 

5,725 

Income taxes

(1,353)

(1,313)

Net income

$

4,516 

$

4,412 

Share and Per Share (Note 8):

Earnings per share - basic

$

6.39 

$

5.82 

Earnings per share - diluted

$

6.36 

$

5.79 

Weighted average number of shares - basic

707.2 

758.1 

Weighted average number of shares - diluted

709.8 

761.4 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions,

for the Nine Months Ended September 30,

2019

2018

Net income

$

4,516 

$

4,412 

Other comprehensive income/(loss):

Defined benefit plans

103 

56 

Foreign currency translation

7 

(7)

Total other comprehensive income/(loss) [a]

110 

49 

Comprehensive income

$

4,626 

$

4,461 

[a]Net of deferred taxes of $(35) million and $(20) million during the nine months ended September 30, 2019, and 2018, respectively.

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

 

4


Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

Union Pacific Corporation and Subsidiary Companies

September 30,

December 31,

Millions, Except Share and Per Share Amounts

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

1,250 

$

1,273 

Short-term investments (Note 13)

60 

60 

Accounts receivable, net (Note 10)

1,650 

1,755 

Materials and supplies

771 

742 

Other current assets

342 

333 

Total current assets

4,073 

4,163 

Investments

2,003 

1,912 

Net properties (Note 11)

53,488 

52,679 

Operating lease assets (Note 16)

1,931 

-

Other assets

483 

393 

Total assets

$

61,978 

$

59,147 

Liabilities and Common Shareholders' Equity

Current liabilities:

Accounts payable and other current liabilities (Note 12)

$

3,166 

$

3,160 

Debt due within one year (Note 14)

1,421 

1,466 

Total current liabilities

4,587 

4,626 

Debt due after one year (Note 14)

24,314 

20,925 

Operating lease liabilities (Note 16)

1,542 

-

Deferred income taxes

11,744 

11,302 

Other long-term liabilities

1,775 

1,871 

Commitments and contingencies (Note 17)

 

 

Total liabilities

43,962 

38,724 

Common shareholders' equity:

Common shares, $2.50 par value, 1,400,000,000 authorized;

1,112,026,912 and 1,111,739,781 issued; 695,495,657 and 725,056,690

outstanding, respectively

2,780 

2,779 

Paid-in-surplus

4,505 

4,449 

Retained earnings

47,875 

45,284 

Treasury stock

(35,839)

(30,674)

Accumulated other comprehensive loss (Note 9)

(1,305)

(1,415)

Total common shareholders' equity

18,016 

20,423 

Total liabilities and common shareholders' equity

$

61,978 

$

59,147 

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

 

5


Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions,

for the Nine Months Ended September 30,

2019

2018

Operating Activities

Net income

$

4,516 

$

4,412 

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation

1,657 

1,636 

Deferred and other income taxes

297 

312 

Other operating activities, net

102 

368 

Changes in current assets and liabilities:

Accounts receivable, net

105 

(299)

Materials and supplies

(29)

(40)

Other current assets

(12)

(65)

Accounts payable and other current liabilities

(257)

(175)

Income and other taxes

(115)

225 

Cash provided by operating activities

6,264 

6,374 

Investing Activities

Capital investments

(2,495)

(2,428)

Maturities of short-term investments (Note 13)

120 

90 

Purchases of short-term investments (Note 13)

(110)

(90)

Proceeds from asset sales

63 

39 

Other investing activities, net

(85)

(45)

Cash used in investing activities

(2,507)

(2,434)

Financing Activities

Common share repurchases (Note 18)

(5,162)

(6,304)

Debt issued (Note 14)

3,986 

6,992 

Dividends paid

(1,925)

(1,716)

Debt repaid

(642)

(1,807)

Net issuance/(repayment) of commercial paper (Note 14)

(5)

195 

Accelerated share repurchase programs pending final settlement

-

(720)

Other financing activities, net

(34)

(45)

Cash used in financing activities

(3,782)

(3,405)

Net change in cash, cash equivalents and restricted cash

(25)

535 

Cash, cash equivalents, and restricted cash at beginning of year

1,328 

1,275 

Cash, cash equivalents, and restricted cash at end of period

$

1,303 

$

1,810 

Supplemental Cash Flow Information

Non-cash investing and financing activities:

Capital investments accrued but not yet paid

$

151 

$

159 

Capital lease financings

-

12 

Common shares repurchased but not yet paid

42 

10 

Cash (paid for)/received from:

Income taxes, net of refunds

$

(1,104)

$

(845)

Interest, net of amounts capitalized

(855)

(577)

Reconciliation of cash, cash equivalents, and restricted cash

to the Condensed Consolidated Statement of Financial Position:

Cash and cash equivalents

$

1,250 

$

1,810 

Restricted cash equivalents in other current assets

41 

-

Restricted cash equivalents in other assets

12 

-

Total cash, cash equivalents and restricted cash equivalents per above

$

1,303 

$

1,810 

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

 

6


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 July 1, 2018

1,111.8 

(372.3)

$   2,779 

$   3,778 

$   43,311 

$   (28,531)

$   (1,428)

$    19,909 

Net income

-

-

1,593 

-

-

1,593 

Other comprehensive income

-

-

-

-

36 

36 

Conversion, stock option
exercises, forfeitures, and other

-

0.2 

-

25 

-

14 

-

39 

Share repurchase programs
   (Note 18)

-

(2.2)

-

-

-

(341)

-

(341)

Cash dividends declared
($0.80 per share)

-

-

-

-

(591)

-

-

(591)

Balance at September 30, 2018

1,111.8 

(374.3)

$   2,779 

$   3,803 

$   44,313 

$   (28,858)

$   (1,392)

$    20,645 

Balance at July 1, 2019

1,112.0 

(407.1)

$   2,780 

$   3,954 

$   46,997 

$   (34,262)

$   (1,298)

$    18,171 

Net income

-

-

1,555 

-

-

1,555 

Other comprehensive loss

-

-

-

-

(7)

(7)

Conversion, stock option
exercises, forfeitures, and other

-

0.1 

-

23 

-

7 

-

30 

Share repurchase programs
   (Note 18)

-

(9.5)

-

528 

-

(1,584)

-

(1,056)

Cash dividends declared
($0.97 per share)

-

-

-

-

(677)

-

-

(677)

Balance at September 30, 2019

1,112.0 

(416.5)

$   2,780 

$   4,505 

$   47,875