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 – In 2019, our Board of Directors reauthorized the issuance of up to $6 billion of debt securities. 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, 2020, we issued the following unsecured, fixed-rate debt securities under our current shelf registration:
|
|
|
|
|
|
|
Date
|
Description of Securities
|
|
January 31, 2020
|
$500 million of 2.150% Notes due February 5, 2027
|
|
|
$750 million of 2.400% Notes due February 5, 2030
|
|
|
$1.0 billion of 3.250% Notes due February 5, 2050
|
|
|
$750 million of 3.750% Notes due February 5, 2070
|
We used the net proceeds from this offering 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, 2020, we had remaining authority from the Board of Directors to issue up to $3.0 billion of debt securities under our shelf registration.
Receivables Securitization Facility – As of both March 31, 2020, and December 31, 2019, we recorded $400 million of borrowings under our Receivables Facility as secured debt. (See further discussion of our receivables securitization facility in Note 10).
Subsequent Event – On April 7, 2020, we issued the following unsecured, fixed-rate debt security under our current shelf registration:
fc
|
|
|
|
|
|
|
Date
|
Description of Securities
|
|
April 7, 2020
|
$750 million of 3.250% Notes due February 5, 2050
|
|
|
|
Proceeds from this offering are for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. The debt security includes a change-of-control provision. After this issuance, we had remaining authority from the Board of Directors to issue up to $2.25 billion of debt securities under our shelf registration.
15. Variable Interest Entities
We have entered into various lease transactions in which the structure of the leases contain variable interest entities (VIEs). These VIEs were created solely for the purpose of doing lease transactions (principally involving railroad equipment and facilities) and have no other activities, assets or liabilities outside of the lease transactions. Within these lease arrangements, we have the right to purchase some or all of the assets at fixed prices. Depending on market conditions, fixed-price purchase options available in the leases could potentially provide benefits to us; however, these benefits are not expected to be significant.
We maintain and operate the assets based on contractual obligations within the lease arrangements, which set specific guidelines consistent within the railroad industry. As such, we have no control over activities that could materially impact the fair value of the leased assets. We do not hold the power to direct the activities of the VIEs and, therefore, do not control the ongoing activities that have a significant impact on the economic performance of the VIEs. Additionally, we do not have the obligation to absorb losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to the VIEs.
We are not considered to be the primary beneficiary and do not consolidate these VIEs because our actions and decisions do not have the most significant effect on the VIE’s performance and our fixed-price purchase options are not considered to be potentially significant to the VIEs. The future minimum lease payments associated with the VIE leases totaled $1.3 billion as of March 31, 2020 and are recorded as operating lease liabilities at present value in our Consolidated Statements of Financial Position.
since commencement of our repurchase programs in 2007. The table below represents shares repurchased under repurchase programs during 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Purchased
|
Average Price Paid
|
|
|
2020
|
2019
|
2020
|
2019
|
|
First quarter [a]
|
14,305,793
|
18,149,450
|
$
|
178.66
|
$
|
165.79
|
|
Remaining number of shares that may be repurchased under current authority
|
|
118,849,288
|
[a]Includes 8,786,380 and 11,795,930 shares repurchased in February 2020 and 2019, respectively, 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.
On February 19, 2020, the Company received 8,786,380 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. When the shares were received, the exchange was accounted for as an equity transaction with $1.6 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 2020. The final settlement is expected to be completed prior to the end of the third quarter of 2020.
On February 26, 2019, the Company received 11,795,930 shares of its common stock repurchased under ASRs for an aggregate of $2.5 billion. Upon settlement of these ASRs in the third quarter of 2019, we received 3,172,900 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.
19. 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 railcar pooling company that owns railcars and intermodal wells to serve North America’s railroads. TTX assists railroads in meeting the needs of their customers by providing railcars in an efficient, pooled environment. All railroads have the ability to utilize TTX railcars through car hire by renting railcars at stated rates.
UPRR had $1.4 billion recognized as investments related to TTX in our Condensed Consolidated Statements of Financial Position as of both March 31, 2020, and December 31, 2019. TTX car hire expenses of $96 million and $105 million for the three months ended March 31, 2020, and 2019, respectively, are included in equipment and other rents in our Condensed Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $65 million and $62 million as of March 31, 2020, and December 31, 2019, respectively.
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, 2020, Compared to
Three Months Ended March 31, 2019
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 revenue by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network.
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 23, 2020. 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 Securities Act of 1933 and the Section 21E of the Exchange Act. These forward-looking statements and information include, without limitation, the statements and information set forth under the caption “Effects from COVID-19” in Item 2 regarding the impact of the COVID-19 pandemic on our business and operations, “Liquidity and Capital Resources” in Item 2 regarding our capital plan, statements under the caption “Share Repurchase Programs”, statements under the caption “Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments”, and statements under the caption “Other Matters.” Forward-looking statements and information also include any other statements or information in this report regarding: potential impacts of the COVID-19 pandemic on our business operations, financial results 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; 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.
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, and many of these risks and uncertainties are currently
amplified by and may continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic. The Risk Factors in Item 1A of our 2019 Annual Report on Form 10-K, filed February 7, 2020 and in Part II, Item 1A of this report, 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. To the extent circumstances require or we deem it otherwise necessary, we will update or amend these risk factors in a Form 10-Q or Form 8-K. 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.
Critical Accounting Policies and 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 policies are available in Item 7 of our 2019 Annual Report on Form 10-K. There have not been any significant changes with respect to these policies during the first three months of 2020.
RESULTS OF OPERATIONS
Quarterly Summary
The Company reported earnings of $2.15 per diluted share on net income of $1.5 billion and an all-time record operating ratio of 59.0% in the first quarter of 2020 compared to earnings of $1.93 per diluted share on net income of $1.4 billion for the first quarter of 2019. Freight revenues decreased 3% in the quarter compared to the same period in 2019 driven by a 7% volume decline. Average revenue per car (ARC) was up 5% due to positive mix of traffic and core pricing gains partially offset by lower fuel surcharge revenue. Growth in shipments of petroleum products, construction, metals, liquid petroleum gas (LPG), industrial chemicals, and plastics were more than offset by declines in intermodal, coal and frac sand shipments.
Productivity initiatives, volume declines, lower fuel prices and elimination of additional costs from weather events in 2019 drove operating expenses down 10% from 2019. These factors, coupled with price increases, more than offset the impact of the revenue decline as operating income increased 9% in the first quarter compared to the same period in 2019.
Effects from COVID-19
As COVID-19 spread throughout the world, our first quarter revenue was negatively impacted by the disruptions to China’s supply chain starting in mid-February and the closure of the U.S. automotive plants at the end of March. With the continuation of the pandemic into the second quarter and its further spread, we have seen material volume declines from March in autos, intermodal, chemicals, petroleum, coal and metals offset by increases in grain, construction and pulp and paper products. Demand driven resources will be adjusted to match the volumes and other cost savings initiatives will be implemented in the second quarter. In addition, we have to date incurred and expect to continue to incur additional expenses associated with keeping our employees, customers and communities safe. While we do not currently expect these expenses to have a material negative impact on our second quarter results overall, they may impact trends on certain expense lines.
Although the pandemic is causing economic disruptions, our rail network remains fluid and we have continued to serve our customers with minimal impact. Safety is our first priority and we are taking precautions to protect the health and wellbeing of our employees, as they play the most critical role in keeping our operations running. Our employees responsible for operating freight trains as well as maintaining rail infrastructure and equipment were deemed essential critical infrastructure workers by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Agency (CISA). In addition, the border restrictions on non-essential travel between the U.S., Canada and Mexico do not apply to freight
shipments related to international trade. While our operations are currently not materially negatively affected, it is not possible to predict whether or how they may be negatively affected if the pandemic persists for an extended period. While we respond to this evolving situation, we intend to continue to execute on our strategic Unified Plan 2020.
We believe the steps we have taken to enhance our capital structure and liquidity have strengthened our ability to operate through current conditions. During the first quarter, we generated $2.2 billion of cash from operations. On March 31, 2020, we had $1.1 billion of cash and cash equivalents and $2 billion of credit available under our revolving credit facility and up to $400 million undrawn on the Receivables Facility. On April 7, 2020, we issued $750 million of long-term debt. We have $949 million of debt maturing before the end of the year. Based on our current cash position and outlook, we do not expect any issue funding our debt maturities in 2020. We have been, and we expect to continue to be, in compliance with our debt covenants. We will utilize some of the tax payment deferral opportunities provided by the IRS and Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Our bad debt provision may increase in 2020 if the creditworthiness of our customers deteriorates. We plan to maintain our dividend but have currently suspended our share repurchase activity with the exception of the final settlement on our $2 billion accelerated share repurchase program initiated on February 18, 2020.
This situation is fluid and highly uncertain, and, while the industrial sector may begin to rebound in the second quarter, consumer and industrial demand for these goods may have a longer recovery period. Even though the timing is unknown, we have adequate resources that can be put into service quickly when volume returns. Select locomotives, although not currently in use, are stored and maintained so they can be returned to service immediately. We also maintain a program for our train service employees to work a reduced schedule that allows them to stay qualified and return to full time status without additional training (alternate work status). We continue to maintain existing processes and procedures, including but not limited to processes and procedures around protection of our technology systems and proprietary data, even though a significant number of our employees are working from home. During this time of uncertainty, the health and wellbeing of our employees is top of mind as we continue our operating transformation and now navigate the challenges presented by the pandemic. Despite all of the steps taken to mitigate the risk presented by the pandemic, the impact on our 2020 financial and operating results could be material.
Operating Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions,
|
|
|
|
|
|
%
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
Change
|
|
Freight revenues
|
$
|
4,880
|
$
|
5,010
|
(3)
|
%
|
|
Other subsidiary revenues
|
|
214
|
|
223
|
(4)
|
|
|
Accessorial revenues
|
|
117
|
|
133
|
(12)
|
|
|
Other
|
|
18
|
|
18
|
-
|
|
|
Total
|
$
|
5,229
|
$
|
5,384
|
(3)
|
%
|
We generate freight revenues by transporting freight or other materials from our three commodity groups. Prior to 2020, we reported on four commodity groups, thus 2020 commodity, ARC, and carloadings have been realigned to the new reporting format. 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 revenue between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred.
Other revenues consist primarily of revenues earned by our other subsidiaries (primarily logistics and commuter rail operations) and accessorial revenues. Other subsidiary revenues are generally recognized over time as shipments move from origin to destination. The allocation of revenue 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 revenue decreased 3% during the first quarter of 2020 compared to 2019, resulting from a 7% volume decline and lower fuel surcharge, partially offset by positive mix of traffic and core pricing gains. Fewer shipments of intermodal, coal and frac sand partially offset by increases in petroleum products, construction, metals, LPG, industrial chemicals, and plastics shipments drove the volume declines.
Each of our commodity groups includes revenue from fuel surcharges. Freight revenues from fuel surcharge programs were $351 million in the first quarter of 2020 compared to $398 million in the same period of 2019. The decline was driven by reduced volume and lower fuel prices.
Other revenue decreased in the first quarter compared to 2019 due to volume declines in intermodal. Lower revenue at our subsidiaries, primarily those that broker intermodal, transload, and refrigerated warehousing logistics services also contributed to the first quarter decrease compared to 2019.
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,
|
2020
|
2019
|
Change
|
|
Grain & grain products
|
$
|
689
|
$
|
665
|
4
|
%
|
|
Fertilizer
|
|
174
|
|
159
|
9
|
|
|
Food & refrigerated
|
|
250
|
|
242
|
3
|
|
|
Coal & renewables
|
|
421
|
|
554
|
(24)
|
|
|
Bulk
|
|
1,534
|
|
1,620
|
(5)
|
|
|
Industrial chemicals & plastics
|
|
495
|
|
452
|
10
|
|
|
Metals & minerals
|
|
469
|
|
536
|
(13)
|
|
|
Forest products
|
|
303
|
|
285
|
6
|
|
|
Energy & specialized markets
|
|
627
|
|
566
|
11
|
|
|
Industrial
|
|
1,894
|
|
1,839
|
3
|
|
|
Automotive
|
|
524
|
|
520
|
1
|
|
|
Intermodal
|
|
928
|
|
1,031
|
(10)
|
|
|
Premium
|
|
1,452
|
|
1,551
|
(6)
|
|
|
Total
|
$
|
4,880
|
$
|
5,010
|
(3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Carloads
|
|
|
|
|
Thousands,
|
|
|
%
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
Change
|
|
Grain & grain products
|
175
|
169
|
4
|
%
|
|
Fertilizer
|
46
|
43
|
7
|
|
|
Food & refrigerated
|
48
|
47
|
2
|
|
|
Coal & renewables
|
208
|
256
|
(19)
|
|
|
Bulk
|
477
|
515
|
(7)
|
|
|
Industrial chemicals & plastics
|
154
|
148
|
4
|
|
|
Metals & minerals
|
174
|
180
|
(3)
|
|
|
Forest products
|
56
|
56
|
-
|
|
|
Energy & specialized markets
|
162
|
147
|
10
|
|
|
Industrial
|
546
|
531
|
3
|
|
|
Automotive
|
208
|
210
|
(1)
|
|
|
Intermodal [a]
|
709
|
831
|
(15)
|
|
|
Premium
|
917
|
1,041
|
(12)
|
|
|
Total
|
1,940
|
2,087
|
(7)
|
%
|
[a] For intermodal shipments each container or trailer equals one carload.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Revenue per Car
|
|
%
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
Change
|
|
Grain & grain products
|
$
|
3,940
|
$
|
3,924
|
-
|
%
|
|
Fertilizer
|
|
3,768
|
|
3,718
|
1
|
|
|
Food & refrigerated
|
|
5,277
|
|
5,219
|
1
|
|
|
Coal & renewables
|
|
2,022
|
|
2,162
|
(6)
|
|
|
Bulk
|
|
3,219
|
|
3,146
|
2
|
|
|
Industrial chemicals & plastics
|
|
3,205
|
|
3,047
|
5
|
|
|
Metals & minerals
|
|
2,697
|
|
2,968
|
(9)
|
|
|
Forest products
|
|
5,457
|
|
5,145
|
6
|
|
|
Energy & specialized markets
|
|
3,866
|
|
3,865
|
-
|
|
|
Industrial
|
|
3,469
|
|
3,465
|
-
|
|
|
Automotive
|
|
2,525
|
|
2,472
|
2
|
|
|
Intermodal [a]
|
|
1,307
|
|
1,241
|
5
|
|
|
Premium
|
|
1,583
|
|
1,489
|
6
|
|
|
Average
|
$
|
2,516
|
$
|
2,401
|
5
|
%
|
[a] For intermodal shipments each container or trailer equals one carload.
Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated goods, and coal and renewables. Freight revenue from bulk shipments decreased in the first quarter of 2020 compared to 2019 due to a 7% volume decline and lower fuel surcharge revenue, partially offset by positive business mix and core pricing gains. Volume declines were driven by a reduction in coal shipments partially offset by growth in ethanol and fertilizer shipments. Continued softness in market conditions due to historically low natural gas prices, a mild winter and weak export demand drove the 20% decline in coal shipments in the first quarter 2020 compared to the same period in 2019, which was negatively impacted by last year’s weather events.
Industrial – Industrial includes shipments of industrial chemicals and plastics, metals and minerals, forest products, and energy and specialized markets. Freight revenue from industrial shipments increased 3% in the first quarter compared to 2019 due to a 3% increase in volume and core pricing gains, partially offset by a negative mix of traffic and lower fuel surcharge revenue. Growth in petroleum products, construction, metals, LPG, industrial chemicals and plastics more than offset the declines in frac sand. In the first part of the quarter, favorable Canadian spreads facilitated strength in Canadian crude business to the U.S. Gulf. Mexican market strength drove increased LPG shipments. In addition, volume increases were driven by strong market demand in construction, industrial chemicals and plastics. Strong metals shipments were due to inventory replenishments. Sand shipments decreased due to the use of local sand and drilling declines compared to first quarter 2019.
Premium – Premium includes shipments of finished automobiles, automotive parts, and various merchandise in intermodal containers, both domestic and international. Premium revenue declined 6% compared to 2019 as a 12% decline in premium volume more than offset a 6% improvement in ARC, driven by positive mix of traffic and core pricing gains. The decrease in premium volume was concentrated in international intermodal shipments, which faced a difficult year-over-year comparison due to trade uncertainty and expected tariffs in early 2019. The 2020 impacts of the COVID-19 pandemic, including the extended Lunar New Year holiday, materially disrupted supply chains in China and the surrounding regions. Domestic shipments were also impacted negatively due to the disrupted supply chain driving weak imports and fewer shipments off the west coast. The surplus in truck capacity also contributed to the weakness in domestic shipments. Automotive shipments were strong for most of the first quarter until the pandemic closed dealerships and manufacturing plants in North America the last few weeks in March and into the second quarter, resulting in a 1% decline in volume compared to first quarter 2019.
Mexico Business – Each of our commodity groups includes revenue from shipments to and from Mexico. Revenue from Mexico business increased 1% as positive mix of traffic and pricing gains more than offset the 2% decline in shipments. Growth in beer, LPG and industrial chemical shipments were more than offset by declines in coal and intermodal shipments.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions,
|
|
|
%
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
Change
|
|
Compensation and benefits
|
$
|
1,059
|
$
|
1,205
|
(12)
|
%
|
|
Depreciation
|
|
547
|
|
549
|
-
|
|
|
Purchased services and materials
|
|
521
|
|
576
|
(10)
|
|
|
Fuel
|
|
434
|
|
531
|
(18)
|
|
|
Equipment and other rents
|
|
227
|
|
258
|
(12)
|
|
|
Other
|
|
298
|
|
305
|
(2)
|
|
|
Total
|
$
|
3,086
|
$
|
3,424
|
(10)
|
%
|
Operating expenses decreased $338 million in the first quarter compared to 2019 driven by productivity initiatives, volume declines, lower fuel prices and lower year-over-year weather-related costs. Partially offsetting these decreases compared to 2019 are an employment tax refund recognized in 2019, inflation and increased bad debt expense.
Compensation and Benefits – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, other postretirement benefits, and incentive costs. For the first quarter, expenses decreased 12% compared to 2019 due to a 15% reduction in employee levels driven by a 7% decline in carload volumes and productivity initiatives. Comparisons with the first quarter of 2019 were favorably impacted by fewer workforce reduction expenses and decreased weather-related costs, offset by an employment tax refund recognized in 2019.
Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was essentially flat compared to the first quarter of 2019.
Purchased Services and Materials – Expense for purchased services and materials includes the costs of services purchased (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 decreased 10% primarily due to lower locomotive maintenance expenses due to a smaller active fleet, volume-related costs for intermodal and transload services, costs associated with derailments, professional services costs and lower year-over-year weather-related costs.
Fuel – Fuel includes locomotive fuel and fuel for highway and non-highway vehicles and heavy equipment. A 10% decline in locomotive diesel fuel prices, which averaged $1.87 per gallon (including taxes and transportation costs) in the first quarter of 2020 compared to $2.07 per gallon in the same period in 2019, a 5% improvement in the fuel consumption rate, computed as gallons of fuel consumed divided by gross ton-mile in thousands, and a 4% decline in gross ton-miles drove the decrease in the first quarter compared to the same period in 2019.
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 decreased 12% in the first quarter compared to 2019, driven by lower locomotive and freight car lease expenses, decreased car rent expense due to volume declines, and improved cycle time partially offset 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, employee travel, telephone and cellular, computer software, bad debt and other general expenses. Other costs decreased 2% in the first quarter compared to 2019 driven primarily by lower costs associated with destroyed equipment and freight loss and damage costs. Conversely, additional bad debt expense associated with the pandemic-induced uncertainty related to certain customer receivables partially offset these decreases versus 2019.
Non-Operating Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions,
|
|
|
%
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
Change
|
|
Other income
|
$
|
53
|
$
|
77
|
(31)
|
%
|
|
Interest expense
|
|
(278)
|
|
(247)
|
13
|
|
|
Income taxes
|
|
(444)
|
|
(399)
|
11
|
|
Other Income – Other income decreased in the first quarter of 2020 compared to 2019 as a result of $27 million in interest income associated with an employment tax refund in 2019.
Interest Expense – Interest expense increased in the first quarter of 2020 compared to 2019 due to an increase in the weighted-average debt level of $27.3 billion in 2020 compared to $23.6 billion in 2019, partially offset by a lower effective interest rate of 4.1% in 2020 compared to 4.3% in 2019.
Income Taxes – Income taxes increased in the first quarter of 2020 compared to 2019 due to higher pre-tax income. Our effective tax rates for the first quarter of 2020 and 2019 were 23.1% and 22.3%, respectively.
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
In an effort to operate a safe, reliable and efficient railroad, management uses these key operating metrics to evaluate the health of our network. The metrics are continuously measured to determine our productivity, asset utilization, and network efficiency 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,
|
2020
|
2019
|
Change
|
|
Gross ton-miles (GTMs) (billions)
|
201.3
|
210.3
|
(4)
|
%
|
|
Revenue ton-miles (billions)
|
99.7
|
106.7
|
(7)
|
|
|
Freight car velocity (daily miles per car) [a]
|
209
|
194
|
8
|
|
|
Average train speed (miles per hour) [a] [b]
|
25.4
|
24.6
|
3
|
|
|
Average terminal dwell time (hours) [a] [b]
|
23.8
|
26.8
|
(11)
|
|
|
Locomotive productivity (GTMs per horsepower day)
|
131
|
111
|
18
|
|
|
Train length (feet)
|
8,396
|
7,292
|
15
|
|
|
Intermodal car trip plan compliance (%)
|
85
|
66
|
19
|
pts
|
|
Manifest/Automotive car trip plan compliance (%)
|
64
|
63
|
1
|
pts
|
|
Workforce productivity (car miles per employee)
|
894
|
812
|
10
|
|
|
Total employees (average)
|
33,872
|
40,053
|
(15)
|
|
|
Operating ratio
|
59.0
|
63.6
|
(4.6)
|
pts
|
[a] Prior years have been recast to conform to the current year presentation which reflects minor refinements.
[b] 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 decreased 4% and 7%, respectively, in 2020 compared to 2019, driven by a 7% decline in carloadings. Changes in commodity mix drove the variance in year-over-year decreases between gross ton-miles and 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). Continued implementation of Unified Plan 2020 was the primary driver of the 8% improvement from 2019 as both average terminal dwell and average train speed improved in the first quarter of 2020 compared to the same period in 2019. Average terminal dwell time in 2020 decreased 11% compared to 2019 largely due to improved terminal processes, transportation plan changes to eliminate switches, and a decrease in freight car inventory levels. Average train speed in the first quarter of 2020 improved 3% compared to the first quarter of 2019 as weather-related challenges slowed trains in 2019.
Locomotive Productivity – Locomotive productivity is gross ton-miles per average daily locomotive horsepower. Locomotive productivity increased 18% in the first quarter compared to 2019 driven by a 23% reduction in our average active fleet size due to transportation plan changes and lower locomotive dwell times.
Train Length – Train length is the average maximum train length on a route measured in feet. Our average train length increased 15%, to 8,396 feet, in the first quarter 2020 compared to same period in 2019 as a result of blending service products and transportation plan changes.
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 intermodal containers / trailers and manifest / automotive railcars. Intermodal car trip plan compliance improved 19 points, to 85%, in the first quarter of 2020 compared to same period in 2019 as a result of improved train speed and reduced dwell at our origin and destination ramps. Manifest / automotive car trip plan compliance of 64% was 1 point better in the first quarter compared to 2019 due to improved car dwell in our yards and more reliable first mile last mile service. Both metrics improvement was partially due to milder weather relative to the series of significant weather events in the first quarter of 2019.
Workforce Productivity – Workforce productivity is average daily car miles per employee. Workforce productivity improved 10% as average daily car miles decreased 7% while employees decreased 15% compared to 2019. Lower car volumes drove the decline in average daily car miles. The 15% decline in employee levels was driven by a 7% decline in carload volumes, productivity initiatives and a smaller capital workforce. At the end of the first quarter, approximately 3,800 employees across all crafts were either furloughed or in alternate work status.
Operating Ratio – Operating ratio is our operating expenses reflected as a percentage of operating revenue. Our operating ratio of 59.0% was an all-time record and improved 4.6 points compared to 2019 mainly driven by productivity initiatives, lower fuel prices, and elimination of additional costs associated with weather-related challenges in 2019, which were partially offset by inflation and other cost increases.
Adjusted Debt / Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions, Except Ratios
|
Mar. 31,
|
Dec. 31,
|
|
for the Trailing Twelve Months Ended [a]
|
2020
|
2019
|
|
Net income
|
$
|
6,002
|
$
|
5,919
|
|
Add:
|
|
|
|
|
|
Income tax expense
|
|
1,873
|
|
1,828
|
|
Depreciation
|
|
2,214
|
|
2,216
|
|
Interest expense
|
|
1,081
|
|
1,050
|
|
EBITDA
|
$
|
11,170
|
$
|
11,013
|
|
Adjustments:
|
|
|
|
|
Other income
|
|
(219)
|
|
(243)
|
|
Interest on operating lease liabilities [b]
|
|
62
|
|
68
|
|
Adjusted EBITDA
|
$
|
11,013
|
$
|
10,838
|
|
Debt
|
$
|
27,876
|
$
|
25,200
|
|
Operating lease liabilities
|
|
1,665
|
|
1,833
|
|
Unfunded pension and OPEB, net of taxes of $116 and $124
|
|
387
|
|
400
|
|
Adjusted debt
|
$
|
29,928
|
$
|
27,433
|
|
Adjusted debt / Adjusted EBITDA
|
|
2.7
|
|
2.5
|
[a]The trailing twelve month income statement information ended March 31, 2020 is recalculated by taking the twelve months ended December 31, 2019, subtracting the three months ended March 31, 2019, and adding the three months ended March 31, 2020.
[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, other income and interest on operating lease liabilities) 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, 2020 and December 31, 2019, the incremental borrowing rate on operating lease liabilities was 3.7%.
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
|
|
|
|
|
|
Millions,
|
|
|
|
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
|
Cash provided by operating activities
|
$
|
2,155
|
$
|
1,959
|
|
Cash used in investing activities
|
|
(807)
|
|
(784)
|
|
Cash used in financing activities
|
|
(997)
|
|
(1,405)
|
|
Net change in cash, cash equivalents and restricted cash
|
$
|
351
|
$
|
(230)
|
Operating Activities
Cash provided by operating activities increased in the first three months of 2020 compared to the same period of 2019 due primarily to higher net income.
Investing Activities
Increased capital investments on road infrastructure replacements drove higher cash used in investing activities in the first three months of 2020 compared to the same period in 2019.
The table below details cash capital investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions,
|
|
|
for the Three Months Ended March 31,
|
2020
|
2019
|
|
Rail and other track material
|
$
|
141
|
$
|
142
|
|
Ties
|
|
135
|
|
112
|
|
Ballast
|
|
61
|
|
48
|
|
Other [a]
|
|
143
|
|
103
|
|
Total road infrastructure replacements
|
|
480
|
|
405
|
|
Line expansion and other capacity projects
|
|
81
|
|
100
|
|
Commercial facilities
|
|
28
|
|
26
|
|
Total capacity and commercial facilities
|
|
109
|
|
126
|
|
Locomotives and freight cars [b]
|
|
103
|
|
94
|
|
Positive train control
|
|
18
|
|
17
|
|
Technology and other
|
|
97
|
|
110
|
|
Total cash capital investments
|
$
|
807
|
$
|
752
|
[a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.
[b]Locomotives and freight cars include lease buyouts of $14 million in 2020 and $30 million in 2019.
Capital Plan
We estimate our 2020 capital expenditures to be approximately $2.9 billion, a reduction of $150 to $200 million from our previously announced capital plan as a result of economic uncertainties associated with the COVID-19 pandemic and the impact to our business. Further revisions may occur if business conditions or the regulatory environment affect our ability to generate sufficient returns on these investments.
Financing Activities
Cash used in financing activities decreased $408 million in the first three months of 2020 compared to the same period of 2019, driven by decreased share repurchases.
See Note 14 of the Condensed Consolidated Financial Statements for a description of all our outstanding financing arrangements and significant new borrowings and Note 18 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 from operations 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.
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,
|
2020
|
2019
|
|
|
Cash provided by operating activities
|
$
|
2,155
|
$
|
1,959
|
|
|
Cash used in investing activities
|
|
(807)
|
|
(784)
|
|
|
Dividends paid
|
|
(660)
|
|
(626)
|
|
|
Free cash flow
|
$
|
688
|
$
|
549
|
|
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,
|
2020
|
2019
|
|
|
Cash provided by operating activities
|
$
|
2,155
|
$
|
1,959
|
|
|
Cash used in capital investments
|
|
(807)
|
|
(752)
|
|
|
Total (a)
|
|
1,348
|
|
1,207
|
|
|
Net income (b)
|
|
1,474
|
|
1,391
|
|
|
Cash flow conversion rate (a/b)
|
|
91
|
%
|
87
|
%
|
Current Liquidity Status
We are continually evaluating the impact of COVID-19 on our financial condition and liquidity. Although the situation is fluid and highly uncertain, we have analyzed 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 capacity to sustain an extended period of lower volumes.
During the first quarter, we generated $2.2 billion of cash from operations. At March 31, 2020, we had over $1 billion of cash and cash equivalents. We have access to commercial paper and bank markets. We also have access to $2 billion of credit available under our revolving credit facility and up to $400 million undrawn on the Receivables Facility. On April 7, 2020, we issued $750 million of long-term debt demonstrating our current ability to access the corporate bond market. We have $949 million of debt maturing before the end of the year. Based on our current cash position and outlook, we do not expect any issue funding our debt maturities in 2020. We plan to maintain our dividend, while we have currently suspended our share repurchase activity with the exception of the final settlement on our $2 billion accelerated share repurchase program initiated on February 18, 2020.
We are also utilizing the provisions of IRS Notice 2020-23 to shift our federal estimated income tax payments from the second quarter to the third quarter and the CARES Act to defer our employment tax deposits to December 2021 and December 2022.
Share Repurchase Programs
Effective April 1, 2019, our Board of Directors authorized the repurchase of up to 150 million shares of our common stock by March 31, 2022. 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. As of March 31, 2020, we repurchased a total of $39.7 billion of our common stock since commencement of our repurchase programs in 2007. The table below represents shares repurchased under repurchase programs during 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Purchased
|
Average Price Paid
|
|
|
2020
|
2019
|
2020
|
2019
|
|
First quarter [a]
|
14,305,793
|
18,149,450
|
$
|
178.66
|
$
|
165.79
|
|
Remaining number of shares that may be repurchased under current authority
|
|
118,849,288
|
[a]Includes 8,786,380 and 11,795,930 shares repurchased in February 2020 and 2019, respectively, 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.
On February 19, 2020, the Company received 8,786,380 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. When the shares were received, the exchange was accounted for as an equity transaction with $1.6 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 2020. The final settlement is expected to be completed prior to the end of the third quarter of 2020.
On February 26, 2019, the Company received 11,795,930 shares of its common stock repurchased under ASRs for an aggregate of $2.5 billion. Upon settlement of these ASRs in the third quarter of 2019, we received 3,172,900 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.
Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments
As described in the notes to the Condensed Consolidated Financial Statements and as referenced in the tables below, we have contractual obligations and commercial commitments that may affect our financial condition. However, based on our assessment of the underlying provisions and circumstances of our contractual obligations and commercial commitments, 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 similar to those of other comparable corporations, particularly within the transportation industry.
The following tables identify material obligations and commitments as of March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr. 1
|
Payments Due by Dec. 31,
|
|
|
|
|
through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
|
Dec. 31,
|
|
|
|
|
|
|
|
|
|
After
|
|
|
|
Millions
|
Total
|
2020
|
2021
|
2022
|
2023
|
2024
|
2024
|
Other
|
|
Debt [a]
|
$
|
48,918
|
$
|
1,548
|
$
|
2,148
|
$
|
2,670
|
$
|
2,236
|
$
|
2,255
|
$
|
38,061
|
$
|
-
|
|
Operating leases [b]
|
|
1,935
|
|
147
|
|
302
|
|
267
|
|
226
|
|
216
|
|
777
|
|
-
|
|
Finance lease obligations [c]
|
|
640
|
|
84
|
|
142
|
|
127
|
|
88
|
|
75
|
|
124
|
|
-
|
|
Purchase obligations [d]
|
|
2,664
|
|
1,060
|
|
458
|
|
219
|
|
169
|
|
153
|
|
602
|
|
3
|
|
Other postretirement benefits [e]
|
313
|
|
37
|
|
36
|
|
33
|
|
33
|
|
29
|
|
145
|
|
-
|
|
Income tax contingencies [f]
|
|
67
|
|
2
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
65
|
|
Total contractual obligations
|
$
|
54,537
|
$
|
2,878
|
$
|
3,086
|
$
|
3,316
|
$
|
2,752
|
$
|
2,728
|
$
|
39,709
|
$
|
68
|
[a]Excludes finance lease obligations of $552 million, as well as unamortized discount and deferred issuance costs of $(1,212) million. Includes an interest component of $20,382 million.
[b] Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $270 million.
[c]Represents total obligations, including interest component of $88 million.
[d]Purchase obligations include locomotive maintenance contracts; purchase commitments for fuel purchases, locomotives, ties, ballast, and rail; and agreements to purchase other goods and services. For amounts where we cannot reasonably estimate the year of settlement, they are included in the Other column.
[e]Includes estimated other postretirement, medical, and life insurance payments and payments made under the unfunded pension plan for the next ten years.
[f]Future cash flows for income tax contingencies reflect the recorded liabilities and assets for unrecognized tax benefits, including any interest or penalties, as of March 31, 2020. For amounts where the year of settlement is uncertain, they are included in the Other column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apr. 1
|
Amount of Commitment Expiration by Dec. 31,
|
|
|
|
|
through
|
|
|
|
|
|
|
|
|
|
|
|
Other Commercial Commitments
|
|
Dec. 31,
|
|
|
|
|
|
|
|
|
|
After
|
|
Millions
|
Total
|
2020
|
2021
|
2022
|
2023
|
2024
|
2024
|
|
Credit facilities [a]
|
$
|
2,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2,000
|
$
|
-
|
$
|
-
|
|
Receivables securitization facility [b]
|
800
|
|
-
|
|
-
|
|
800
|
|
-
|
|
-
|
|
-
|
|
Guarantees [c]
|
|
15
|
|
5
|
|
5
|
|
5
|
|
-
|
|
-
|
|
-
|
|
Standby letters of credit [d]
|
|
18
|
|
7
|
|
11
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Total commercial commitments
|
$
|
2,833
|
$
|
12
|
$
|
16
|
$
|
805
|
$
|
2,000
|
$
|
-
|
$
|
-
|
[a] None of the credit facility was used as of March 31, 2020.
[b] $400 million of the receivables securitization facility was utilized as of March 31, 2020, which is accounted for as debt. The full program matures in July 2022.
[c]Includes guaranteed obligations related to our affiliated operations.
[d]None of the letters of credit were drawn upon as of March 31, 2020.
OTHER MATTERS
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.
Indemnities – We are contingently obligated under a variety of indemnification arrangements, although in some cases the extent of our potential liability is limited, 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.
Accounting Pronouncements – See Note 2 to the Condensed Consolidated Financial 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 Securities and Exchange Commission (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 2019 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.