filings.toolsCover and table of contents
18K characters. Original on sec.gov ·
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
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 incorporation or organization) | (I.R.S. Employer Identification No.) |
| 1400 Douglas Street, Omaha, Nebraska | 68179 |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (402) 544-5000
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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. |
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☑Yes ☐ No
| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |
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☐Yes ☑ No
| 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. |
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☑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). |
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☑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. |
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☐
| Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. |
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| If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. |
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| Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). |
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☐
| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). |
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☐Yes ☑ No
| As of June 30, 2022, the aggregate market value of the registrant’s Common Stock held by non-affiliates (using the New York Stock Exchange closing price) was $131.5 billion. |
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The number of shares outstanding of the registrant’s Common Stock as of February 3, 2023, was 611,872,981.
Documents Incorporated by Reference – Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 18, 2023, are incorporated by reference into Part III of this report. The registrant’s Proxy Statement will be filed with the Securities and Exchange Commission (SEC) within 120 days after the end of the fiscal year that this report relates pursuant to Regulation 14A.
TABLE OF CONTENTS
Fellow Shareholders:
| 2022 was a foundational year for Union Pacific, building and executing on our long-term growth strategy. From numerous customer wins, to preparing for and onboarding a large intermodal customer, to strategic investments in our intermodal network and transload business, we took action to create long-term value. Those successes, however, were met with some significant short-term barriers – continued global supply chain disruptions, an elevated inflationary environment, record fuel prices, challenging labor markets, and an extended labor negotiation. All of those factors had a real impact on our ability to deliver a consistent and reliable service product to our customers in 2022. They also contributed to uneven financial results for the year. In 2022, we reported record earnings per share of $11.21, a 13% increase versus 2021. Total volumes increased 2% versus 2021, driven by strength in industrial and bulk markets offsetting continued supply chain challenges in our premium markets. Our operating ratio was a 60.1%, a 290-basis point deterioration versus 2021 driven by inflation, operational inefficiency, and higher fuel prices. For the full year, our average fuel price per gallon increased 64%. Also notable, was a $92 million one-time charge recorded in the third quarter for new labor agreements. |  |
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Success at Union Pacific begins with safety. In 2022, we made progress on our personal injury safety metrics, improving 18% to a five-year low and lead the industry in employee safety. We will build upon this improvement by enhancing training programs and solidifying our safety culture through ownership and personal accountability on the path to achieving our goal of world-class safety performance. We need to expand our progress from personal injuries to derailments, where we have opportunity for improvement. The ultimate goal remains returning each employee home safely at the end of the day.
In 2021, we rolled out a strategic plan we call, “Serve, Grow, Win – Together.” And over the past two years, we have been executing on that long-term strategy. While our 2022 progress was mixed, we advanced our position towards long-term sustainable growth through targeted capital investments, emissions reduction programs, and by leveraging technology to improve our customer's experience.
Everything we do starts with Serve and delivering customer-centered operational excellence. In 2022, our service product did not meet expectations. Constrained crew bases in critical locations, elevated freight car inventory levels, and continued supply chain disruptions all played a role and impacted our ability to support customers and their needs. In 2022, freight car velocity deteriorated 6% versus 2021, lowering trip plan compliance for intermodal 6 points and manifest/automotive 4 points. Similarly, our efficiency measures were impacted as locomotive productivity declined 6% and workforce productivity and train length were flat. To address constrained crew bases, we hired and trained over 1,300 new transportation employees in 2022 and have almost 600 more in the training pipeline as we enter 2023. We also amplified our customer communications to provide clear expectations and leveraged continuous improvement efforts to address discrete service issues.
A key long-term initiative for Union Pacific is to reduce our carbon footprint for the benefit of all stakeholders. For the fourth consecutive year, we achieved a best-ever fuel consumption rate, improving 1% versus 2021. In addition, we increased our biodiesel blend to over 4.5%, on track toward our 2030 target of 20%. These efforts helped our customers eliminate over 23 million metric tons of greenhouse gas emissions by choosing Union Pacific versus truck.
We continue to make significant investments in our infrastructure to support our service product. In 2022, our capital program of approximately $3.4 billion included completing 24 siding projects, finishing the Twin Cities, MN, intermodal terminal, further expanding the West Colton, CA, intermodal terminal, modernizing over 130 locomotives, and hardening our infrastructure.
These investments support the next tenet of our strategy – Grow. We have the best rail franchise in North America. Our growth is powered by providing products and services that meet our customers’ needs. This includes providing new services for our customers and expanding our reach through new transload facilities and intermodal terminals, which our team translated into new business wins in 2022. And those business development wins will provide a tailwind in 2023 as we navigate an uncertain economy.
Growth is also dependent on a customer experience that constantly improves and evolves. Technology plays a key role. We’re integrating deeper in our customers’ systems and supply chains by being the industry leader in providing application programming interfaces (API), with over 70 services available being called on over 600,000 times a day.
Successful execution of our plans to “Serve” and “Grow” leads to Win. For our shareholders, winning means generating strong cash returns. In 2022, we paid dividends of $3.2 billion, which included a 10% dividend increase in the second quarter. In addition, we repurchased 27 million Union Pacific shares, decreasing our full-year average share count 5%. Combining dividends and share repurchases, Union Pacific returned $9.4 billion to our shareholders in 2022.
“Winning” extends to all UP’s stakeholders, and the value we create for each of them, which is the final piece of our strategy – Together. We continue to evolve our comprehensive approach to Environmental, Social, and Governance issues as laid out in “Building a Sustainable Future 2030”. Ultimately, we demonstrate our commitment to this through actions. In 2022, we announced our plans to purchase battery electric locomotives for use in yard operations, executed a three-year deal to modernize 600 additional locomotives starting in 2023, issued $600 million in green bonds, and became the first U.S. railroad to formally support the Task Force on Climate-related Financial Disclosures (TCFD). Late in the year we were added to the Dow Jones Sustainability Index and included in the JUST Capital 100. Our momentum on sustainability is real and demonstrates our position as the rail leader in the space.
The entire Union Pacific team recognizes that we fell short of expectations in 2022. But, thanks to the hard work of our exceptional workforce, we are entering 2023 positioned for success. While the year ahead has some real challenges – an uncertain economy, higher cost structure, and stakeholder trust to rebuild – the Union Pacific team is again ready to rise to the occasion. Our fundamentals for long-term success have not changed. Powered by our best-in-industry employees and franchise, a strategy built for profitable growth, and a more efficient and reliable service product, Union Pacific is poised to do great things in 2023. We can’t wait to prove it to you.
Chairman, President, and Chief Executive Officer
DIRECTORS AND SENIOR MANAGEMENT
| BOARD OF DIRECTORS | ||||
| William J. DeLaney Former Chief Executive Officer – Sysco Corporation Board Committees: Audit; Compensation and Benefits (Chair) David B. Dillon Former Chairman and CEO – The Kroger Company Board Committees: Audit (Chair); Compensation and Benefits Sheri H. Edison Former Executive Vice President and General Counsel – Amcor plc Board Committees: Compensation and Benefits; Corporate Governance, Nominating, and Sustainability | Teresa M. Finley Former Chief Marketing and Business Services Officer – United Parcel Service, Inc. Board Committees: Compensation and Benefits; Finance Lance M. Fritz Chairman, President, and Chief Executive Officer – Union Pacific Corporation and Union Pacific Railroad Company Deborah C. Hopkins Former Chief Executive Officer – Citi Ventures and Former Chief Innovation Officer – Citi Board Committees: Audit; Finance (Chair) Jane H. Lute Strategic Advisor – SICPA, North America Board Committees: Audit; Corporate Governance, Nominating, and Sustainability | Michael R. McCarthy Chairman – McCarthy Group, LLC; Co-Chairman – Bridges Trust Company Lead Independent Director Board Committees: Corporate Governance, Nominating, and Sustainability (Chair); Finance Jose H. Villarreal Retired Advisor – Akin, Gump, Strauss, Hauer, & Feld, LLP Board Committees: Compensation and Benefits; Corporate Governance, Nominating, and Sustainability Christopher J. Williams Chairman – Siebert Williams Shank & Co. Board Committees: Audit; Finance |
SENIOR MANAGEMENT*
| Lance M. Fritz Chairman, President, and Chief Executive Officer Prentiss W. Bolin, Jr. Vice President – External Relations Bryan L. Clark Vice President – Tax Eric J. Gehringer Executive Vice President – Operations Jennifer L. Hamann Executive Vice President and Chief Financial Officer | Rahul Jalali Senior Vice President – Information Technologies and Chief Information Officer Michael V. Miller Vice President and Treasurer Scott D. Moore Senior Vice President – Corporate Relations and Chief Administrative Officer Clark J. Ponthier Senior Vice President – Supply Chain and Continuous Improvement | Craig V. Richardson Executive Vice President, Chief Legal Officer, and Corporate Secretary Kenny G. Rocker Executive Vice President – Marketing and Sales Todd M. Rynaski Senior Vice President and Chief Accounting, Risk, and Compliance Officer Elizabeth F. Whited Executive Vice President – Sustainability and Strategy |
| *Senior management are elected officers of both Union Pacific Corporation and Union Pacific Railroad Company, except Messrs. Gehringer, Ponthier, and Rocker are elected officers for Union Pacific Railroad Company. |
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