Union Pacific (UNP) 10-K risk factor changes: FY2023 vs FY2022

For the fiscal year ended December 31, [removed: 2022][added: 2023]

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

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

| As of June 30, [removed: 2022,] [added: 2023,] the aggregate market value of the registrant’s Common Stock held by non-affiliates (using the New York Stock Exchange closing price) was [removed: $131.5] [added: $123.0] billion. |

The number of shares outstanding of the registrant’s Common Stock as of February [removed: 3, 2023,] [added: 2, 2024,] was [removed: 611,872,981.][added: 609,777,914.]

Documents Incorporated by Reference – Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May [removed: 18, 2023,] [added: 9, 2024,] are incorporated by reference into Part III of this report.

| | [removed: [Chairman’s] [added: [CEO’s] Letter](#chairman_letter) | [3](#chairman_letter) |

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

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

| Item 1A. | [Risk Factors](#i1A) | [removed: [12](#i1A)] [added: [10](#i1A)] |

| Item 1B. | [Unresolved Staff Comments](#i1B) | [removed: [18](#i1B)] [added: [16](#i1B)] |

| Item 3. | [Legal Proceedings](#i3) | [removed: [21](#i3)] [added: [20](#i3)] |

| Item 4. | [Mine Safety Disclosures](#i4) | [removed: [22](#i4)] [added: [21](#i4)] |

| | [Cautionary Information](#cautionary_info) | [removed: [40](#cautionary_info)] [added: [38](#cautionary_info)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#i7A) | [removed: [40](#i7A)] [added: [39](#i7A)] |

| Item 8. | [Financial Statements and Supplementary Data](#i8) | [removed: [41](#i8)] [added: [40](#i8)] |

| | [Report of Independent Registered Public Accounting Firm](#ind_report) | [removed: [42](#ind_report)] [added: [41](#ind_report)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#i9) | [removed: [73](#i9)] [added: [72](#i9)] |

| Item 9A. | [Controls and Procedures](#i9A) | [removed: [73](#i9A)] [added: [72](#i9A)] |

| | [Management’s Annual Report on Internal Control Over Financial Reporting](#mgmt_report) | [removed: [73](#mgmt_report)] [added: [72](#mgmt_report)] |

| | [Report of Independent Registered Public Accounting Firm](#ind_report_9A) | [removed: [74](#ind_report_9A)] [added: [73](#ind_report_9A)] |

| Item 9B. | [Other Information](#i9B) | [removed: [75](#i9B)] [added: [74](#i9B)] |

| Item 9C. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i9c) | [removed: [75](#i9c)] [added: [74](#i9c)] |

| Item 10. | [Directors, Executive Officers, and Corporate Governance](#i10) | [removed: [75](#i10)] [added: [74](#i10)] |

| Item 11. | [Executive Compensation](#i11) | [removed: [75](#i11)] [added: [74](#i11)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director Independence](#i13) | [removed: [76](#i13)] [added: [75](#i13)] |

| Item 14. | [Principal Accountant Fees and Services](#i14) | [removed: [76](#i14)] [added: [75](#i14)] |

| Item 15. | [Exhibit and Financial Statement Schedules](#i15) | [removed: [76](#i15)] [added: [75](#i15)] |

| Item 16. | [Form 10-K Summary](#i16) | [removed: [80](#i16)] [added: [79](#i16)] |

| | [Signatures](#sigs) | [removed: [81](#sigs)] [added: [80](#sigs)] |

| | Certifications | [removed: 82] [added: 81] |

[](# "chairman_letter")February [removed: 10, 2023][added: 9, 2024]

[removed: ][added: |  | |]

[removed: Chairman, President, and] Chief Executive Officer

| William J. DeLaney Former Chief Executive Officer [removed: –] [added: -] Sysco Corporation _Board Committees: [removed: Audit;] Compensation and Benefits [removed: (Chair)_] [added: (Chair); Safety and Service Quality_] David B. Dillon Former Chairman and CEO [removed: –] [added: -] The Kroger Company _Board Committees: Audit (Chair); [removed: Compensation] [added: Corporate Governance, Nominating,] and [removed: Benefits_] [added: Sustainability_] Sheri H. Edison Former Executive Vice President and General Counsel [removed: –] [added: -] Amcor plc _Board Committees: Compensation and Benefits; Corporate Governance, Nominating, and [removed: Sustainability_ | |] [added: Sustainability (Chair)_] Teresa M. Finley Former Chief Marketing and Business Services Officer [removed: –] [added: -] United Parcel Service, Inc. _Board Committees: [removed: Compensation and Benefits;] [added: Audit;] Finance_ [removed: Lance M. Fritz Chairman, President, and Chief Executive Officer – Union Pacific Corporation and Union Pacific Railroad Company] [added: | |] Deborah C. Hopkins Former Chief Executive Officer [removed: –] [added: -] Citi Ventures and Former Chief Innovation Officer [removed: –] [added: -] Citi _Board Committees: [removed: Audit;] [added: Compensation and Benefits;] Finance (Chair)_ Jane H. Lute Strategic Advisor [removed: –] [added: -] SICPA, North America _Board Committees: Audit; [removed: Corporate Governance, Nominating,] [added: Safety] and [removed: Sustainability_ | |] [added: Service Quality (Chair)_] Michael R. McCarthy Chairman [removed: –] [added: - Union Pacific Corporation and Union Pacific Railroad Company; Chairman -] McCarthy Group, LLC; [added: and] Co-Chairman [removed: –] [added: -] Bridges Trust Company [removed: _Lead Independent Director_] _Board Committees: Corporate Governance, Nominating, and [removed: Sustainability (Chair);] [added: Sustainability;] Finance_ [removed: Jose H. Villarreal Retired Advisor – Akin, Gump, Strauss, Hauer, & Feld, LLP] [added: Doyle R. Simons Former President and CEO - Weyerhaeuser Company] _Board Committees: Compensation and Benefits; [removed: Corporate Governance, Nominating,] [added: Safety] and [removed: Sustainability_] [added: Service Quality_ | | John K. Tien, Jr. Former Deputy Secretary - U.S. Department of Homeland Security _Board Committees: Pending Assignment_ V. James Vena Chief Executive Officer - Union Pacific Corporation and Union Pacific Railroad Company John P. Wiehoff Former Chairman, President, and CEO - C.H. Robinson Worldwide, Inc. _Board Committees: Audit; Safety and Service Quality_] Christopher J. Williams Chairman [removed: –] [added: -] Siebert Williams Shank & Co. _Board Committees: Audit; Finance_ |

[added: |] SENIOR [removed: MANAGEMENT*][added: MANAGEMENT | | | | |]

| [removed: Lance M. Fritz Chairman, President, and] [added: V. James Vena] Chief Executive Officer Prentiss W. Bolin, Jr. Vice President [removed: –] [added: -] External Relations Bryan L. Clark Vice President [removed: –] [added: -] Tax Eric J. [removed: Gehringer] [added: Gehringer*] Executive Vice President [removed: –] [added: -] Operations [added: Rebecca B. Gregory* Vice President and Chief of Staff | |] Jennifer L. Hamann Executive Vice President and Chief Financial Officer [removed: | |] Rahul Jalali [removed: Senior] [added: Executive] Vice President [removed: – Information Technologies] and Chief Information Officer Michael V. Miller Vice President and Treasurer [removed: 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 [added: | |] Kenny G. [removed: Rocker] [added: Rocker*] Executive Vice President [removed: –] [added: -] Marketing and Sales Todd M. Rynaski Senior Vice President and Chief Accounting, Risk, and Compliance Officer Elizabeth F. Whited [removed: Executive Vice] President [removed: – Sustainability and Strategy] |

[removed: Win:  Driving] [added: The result will be] strong financial performance [removed: resulting in] [added: driving] significant shareholder returns.

Execution of our [removed: plans] [added: strategy] to [added: be the industry leader in] both [removed: serve] [added: safety] and [removed: grow,] [added: service] leads to [removed: higher revenues] [added: revenue growth] with improved margins and greater cash generation, creating long term enterprise value.

Our passion for performance will help us win; our high ethical standards [removed: will lead us to] [added: ensure we] win in a way that supports all of our stakeholders; and our teamwork [removed: will make sure] [added: ensures] we win together.

| Item 1C. | [Cybersecurity](#Cybersecurity) | [16](#Cybersecurity) |

As Union Pacific shareholders, we own a piece of history.

Over the course of 161 years, our Company is built to handle inevitable changes and challenges of business cycles while seeking ways to innovate and grow.

2023 was no different.

This year, I assumed the role of Chief Executive Officer, and Lance Fritz retired after a distinguished career.

At that time, we also split the roles of Chairman and CEO and Mike McCarthy, was named Chairman of the Board of Directors.

The transition was seamless, a credit to the Board, Lance, and the management team.

Since becoming CEO, I have focused the team on a multi-year strategy of “Safety + Service & Operational Excellence = Growth.” Safety must always be our first area of focus, returning everyone home safely each day.

Service is all about delivering what we sold our customers, committing to what we can do and doing it with excellence.

Operational Excellence is about operating efficiently and productively while maintaining a buffer to handle ups and downs of railroading.

In the second half of 2023, we achieved great momentum as the team united to deliver a shared strategy.

Our fourth quarter operating metrics were the best of the year.

We exited the year with a stronger service product and fluid network.

Our Fourth Quarter financial results also demonstrated momentum as we achieved sequential quarterly margin improvement.

For 2023, we reported earnings per diluted share of $10.45, a 7% decrease versus 2022, reflecting 1% lower volumes and an operating ratio increase of 220 basis points.

To support our service product and growth, we invested $3.7 billion back into our network.

Soft consumer markets, continued inflationary pressures, and new labor agreements all impacted financial results.

As we turn the page to 2024, we are looking at the opportunities ahead.

The entire Union Pacific team is focused on being the industry’s best in safety, service, and operational excellence.

That strategy leads to long-term growth and provides you with industry-leading returns on your investment.

It’s how we win.

We understand that we hold the keys to an iconic company that helped Build America.

We are propelled by that history and recognize we have an important responsibility to deliver for our stakeholders.

We are grateful for this opportunity and thank you for your ownership of Union Pacific

| *For Union Pacific Railroad Company only. | | | | |

Safety, Service, and Operational Excellence supports the Company's long term initiative to Grow its freight volumes (Safety + Service & Operational Excellence = Growth).

Together as a team, the Company will focus on achieving the best safety record in the industry, being known for superior service, grounded in operational excellence which, in turn, drives growth.

Safety is paramount and, as our first area of focus, sets the foundation for achieving the Company's objectives.

The mindset and culture are built around a personal commitment by all employees to prioritize safety so everyone goes home safely.

Service is all about delivering what we sold our customers.

We work with our customers to understand the service they need to win in their markets and then drive how we win together.

We commit to these service levels and do it with excellence.

Operational Excellence is about operating efficiently and productively.

We will drive value with our available resources, but also maintain a buffer so our service is resilient, managing the inevitable ups and downs that come with weather, fluctuating volumes, and securing growth.

As we work to transform our railroad, our core values continue to guide us.

Proud & Engaged Workforce – Our employees are central to our Safety + Service & Operational Excellence = Growth strategy, and investing in our workforce is key to our success.

We believe that a diverse and supportive culture increases employee engagement, improves morale, and allows qualified employees to succeed and contribute to Union Pacific's success.

All of this supports our safety strategy and improves the quality of decision-making, problem-solving, and strategic thinking.

We are focused on effectively managing workforce levels to the demands of the business and improving quality of life for our employees.

Therefore, we continue to hire to backfill attrition and handle growth as needed.

| --- | --- |

| | | |

| 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.

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).