Union Pacific (UNP) 10-K risk factor changes: FY2022 vs FY2021

For the fiscal year ended December 31, [removed: 2021][added: 2022]

| (State or other jurisdiction of [added: incorporation or organization)] | | (I.R.S. Employer [added: Identification No.)] |

[added: |] 1400 Douglas Street, Omaha, Nebraska [added: | 68179 |]

[added: |] (Address of principal executive offices) [added: | (Zip Code) |]

[removed: (Registrant’s] [added: Registrant’s] telephone number, including area [removed: code)][added: code: (402) 544-5000]

| [removed: Title] [added: Title] of each [removed: Class] [added: Class] | [removed: Trading Symbol] [added: Trading Symbol] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: ■ |] Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. |

| [removed: ■ |] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |

| [removed: ■ |] 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. |

| [removed: ■ |] 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). |

| [removed: ■ |] 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. | [added: | | | | | | |]

| [removed: ■ |] 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. |

| [removed: ■ |] 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 [added: public] accounting firm that prepared or issued its audit report. |

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

| [removed: ■ |] As of June 30, [removed: 2021,] [added: 2022,] the aggregate market value of the registrant’s Common Stock held by non-affiliates (using the New York Stock Exchange closing price) was [removed: $142.0] [added: $131.5] billion. |

The number of shares outstanding of the registrant’s Common Stock as of [removed: January 28, 2022,] [added: February 3, 2023,] was [removed: 636,898,957.][added: 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 [removed: 12, 2022,] [added: 18, 2023,] are incorporated by reference into Part III of this report.

| | [Directors and Senior Management](#sr_mgmt) | [removed: [4](#sr_mgmt)] [added: [5](#sr_mgmt)] |

| Item 1. | [Business](#i1) | [removed: [5](#i1)] [added: [6](#i1)] |

| Item 1A. | [Risk Factors](#i1A) | [removed: [9](#i1A)] [added: [12](#i1A)] |

| Item 1B. | [Unresolved Staff Comments](#i1B) | [removed: [12](#i1B)] [added: [18](#i1B)] |

| Item 2. | [Properties](#i2) | [removed: [13](#i2)] [added: [18](#i2)] |

| Item 3. | [Legal Proceedings](#i3) | [removed: [15](#i3)] [added: [21](#i3)] |

| Item 4. | [Mine Safety Disclosures](#i4) | [removed: [16](#i4)] [added: [22](#i4)] |

| | [Executive Officers of the Registrant and Principal Executive Officers of Subsidiaries](#exec_officers) | [removed: [17](#exec_officers)] [added: [22](#exec_officers)] |

| Item 5. | [Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](#i5) | [removed: [18](#i5)] [added: [23](#i5)] |

| Item 6. | [\[Reserved\]](#i6) | [removed: [19](#i6)] [added: [24](#i6)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#i7) | [removed: [19](#i7)] [added: [24](#i7)] |

| | [Critical Accounting [removed: Estimates](#acc_policies)] [added: Estimates](#CRITICAL_ACCOUNTING_ESTIMATES)] | [removed: [19](#acc_policies)] [added: [24](#acc_policies)] |

| | [Cautionary Information](#cautionary_info) | [removed: [32](#cautionary_info)] [added: [40](#cautionary_info)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#i7A) | [removed: [32](#i7A)] [added: [40](#i7A)] |

| Item 8. | [Financial Statements and Supplementary Data](#i8) | [removed: [33](#i8)] [added: [41](#i8)] |

| | [Report of Independent Registered Public Accounting Firm](#ind_report) | [removed: [34](#ind_report)] [added: [42](#ind_report)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#i9) | [removed: [61](#i9)] [added: [73](#i9)] |

| Item 9A. | [Controls and Procedures](#i9A) | [removed: [61](#i9A)] [added: [73](#i9A)] |

| | [Management’s Annual Report on Internal Control Over Financial Reporting](#mgmt_report) | [removed: [61](#mgmt_report)] [added: [73](#mgmt_report)] |

| | [Report of Independent Registered Public Accounting Firm](#ind_report_9A) | [removed: [62](#ind_report_9A)] [added: [74](#ind_report_9A)] |

| Item 9B. | [Other Information](#i9B) | [removed: [63](#i9B)] [added: [75](#i9B)] |

| Item 9C. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i9c) | [removed: [63](#i9c)] [added: [75](#i9c)] |

| Item 10. | [Directors, Executive Officers, and Corporate Governance](#i10) | [removed: [63](#i10)] [added: [75](#i10)] |

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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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| 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. |  |

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.

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.

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.

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.

| incorporation or organization) | | Identification No.) |

68179

(Zip Code)

(402) 544-5000

| --- | --- |

Union Pacific demonstrated again in 2021 that our team is “best in class” as we navigated challenges from the pandemic and numerous operational disruptions.

The pandemic continued to impact our daily lives and disrupt supply chains in significant ways.

Despite these wide-ranging impacts, the Union Pacific team achieved record financial results.

In 2021, we are reporting earnings per share of $9.95, which is a 26% increase versus 2020.

Total volumes increased 4% versus 2020, as our economy continued to recover from the pandemic impacts.

Operating ratio was a record 57.2%, 270 basis points better than 2020’s 59.9% demonstrating continued focus on efficient operations.

2020 results were negatively impacted by a one-time $278 million non-cash impairment charge that reduced earnings per share by $0.31 and increased operating ratio by 140 basis points.

In 2022, we are continuing to engage external experts to help us get back on track to world class industrial safety performance.

We are implementing more effective ways to coach, train, and root-cause analyze, all while building a stronger, deeper safety culture.

Nothing is more important than making sure every employee returns home safely.

| During 2021, we rolled out a new strategic plan we call, “Serve, Grow, Win, Together.” The essence of our strategy is unchanged; however, as our culture evolves, it’s imperative that we have a strategic plan that clearly defines our path to long-term sustainable growth. Everything we do starts with Serve and the transportation products we provide our customers. Precision Scheduled Railroading (PSR) is the foundation for delivering customer-centered operational excellence and creating a more resilient and agile service product. In 2021, weather, wildfires, supply chain disruptions, and pandemic impacts to crew availability all impeded our ability to further improve our service product. Freight car velocity was down 8% versus 2020, lowering Trip Plan Compliance for both Intermodal and Manifest/Autos 8 points. Beyond reliable service, our customers want “greener” transportation options. Every carload of freight we take off the highway saves fuel, lowers emissions, and reduces highway congestion. We took steps toward our long-term emission reduction goals by achieving a best-ever fuel consumption rate, improving 1% versus 2020, helping our customers eliminate roughly 23 million metric tons of greenhouse gas emissions by choosing rail versus truck. To support our service product, we continue to make significant investments in our infrastructure. In 2021, we invested approximately $3.0 billion, completing 15 siding extensions, opening pop-up intermodal terminals in the Twin Cities, MN, and West Colton, CA, modernizing 100 locomotives, and hardening our infrastructure. We also invested in energy management systems to reduce fuel consumption and the resulting carbon emissions. |  |

By providing a quality service product, along with the lowest cost structure in the industry, we are well positioned to handle more business for new and existing customers.

We see many opportunities to grow, whether by providing more services for our customers or by expanding our reach through new transload facilities or pop-up intermodal terminals.

And our team is winning in the marketplace!

We welcomed new customers in 2021, are onboarding more in 2022, and already setting the stage for a great 2023 with a significant domestic intermodal win.

In 2021, we took major steps on our ESG journey, beginning with the July release of our 2018, 2019, and 2020 EEO-1 reports, providing increased transparency to our workforce demographics.

And we continue to report quarterly progress towards our long-term diversity representation goals.

Further, in December, we released our initial Climate Action Plan, laying out our plan to achieve our 2030 carbon emission reduction goals, approved in February by the Science Based Targets initiative (SBTi), and our commitment to Net Zero by 2050, the only U.S. rail to do so.

Every year can bring real challenges to our “outdoor factory”, although the last two years were unique.

In response, the resiliency of the Union Pacific team has been on full display, and our employees have positioned our Company for even greater success in 2022.

As we prepare to celebrate our 160th anniversary in 2022, we are focused on customer-centered operational excellence, growing with our customers, and winning together with all our stakeholders.

The future is very bright for Union Pacific.

| | | | | |

| Andrew H. Card, Jr. | | Lance M. Fritz | | Thomas F. McLarty III |

| Chief of Staff | | Chief Executive Officer | | McLarty Associates |

| _Board Committees: Compensation_ _and Benefits, Corporate Governance_ | | Union Pacific Corporation and Union Pacific Railroad Company | | _Board Committees: Finance (Chair),_ _Corporate Governance and_ |

| _and Nominating_ | | | | _Nominating_ |

| William J. DeLaney | | Former Chief Executive Officer | | Jose H. Villarreal |

| Former Chief Executive Officer | | Citi Ventures and Former | | Retired Advisor |

| Sysco Corporation | | Chief Innovation Officer Citi | | Akin, Gump, Strauss, Hauer, & |

| _Board Committees: Audit,_ | | _Board Committees: Audit, Finance_ | | Feld, LLP |

| _Compensation and Benefits (Chair)_ | | | | _Board Committees: Compensation_ |

| | | Jane H. Lute | | _and Benefits, Corporate Governance_ |

| David B. Dillon | | Strategic Advisor | | _and Nominating_ |

| Former Chairman and CEO | | SICPA, North America | | |