Union Pacific : UPC 10-Q Filed 07/18/2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

For the transition period from __________ to ____________

Commission File Number 1-6075

UNION PACIFIC CORPORATION

(Exact name of registrant as specified in its charter)

Utah	13-2626465
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1400 Douglas Street, Omaha, Nebraska

(Address of principal executive offices)

68179

(Zip Code)

[phone]

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each Class	Trading Symbol	Name of each exchange on which registered
Common Stock (Par Value $2.50 per share)	UNP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 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).

 Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	Accelerated Filer	Accelerated Filer	Smaller Reporting Company	Emerging Growth Company
				

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



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

 Yes  No

As of July 12, 2019, there were 704,529,750 shares of the Registrant's Common Stock outstanding.

TABLE OF CONTENTS

UNION PACIFIC CORPORATION

AND SUBSIDIARY COMPANIES

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements:
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)	3
	For the Three Months Ended June 30, 2019 and 2018
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	(Unaudited)
	For the Three Months Ended June 30, 2019 and 2018	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)	4
	For the Six Months Ended June 30, 2019 and 2018
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	(Unaudited)
	For the Six Months Ended June 30, 2019 and 2018	4
	CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
	(Unaudited)
	At June 30, 2019 and December 31, 2018	5
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	6
	For the Six Months Ended June 30, 2019 and 2018
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON
	SHAREHOLDERS' EQUITY (Unaudited)
	For the Three and Six Months Ended June 30, 2019 and 2018	7
	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
	(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40
Certifications
	2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Statements of Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, Except Per Share Amounts,		2019
for the Three Months Ended June 30,			2018
Operating revenues:
Freight revenues	$	5,236	$	5,317
Other revenues		360		355
Total operating revenues		5,596		5,672
Operating expenses:
Compensation and benefits		1,145		1,241
Purchased services and materials		573		630
Depreciation		551		546
Fuel		560		643
Equipment and other rents		260		265
Other		247		248
Total operating expenses		3,336		3,573
Operating income		2,260		2,099
Other income (Note 6)		57		42
Interest expense		(259)		(203)
Income before income taxes		2,058		1,938
Income taxes		(488)		(429)
Net income	$	1,570	$	1,509
Share and Per Share (Note 8):
Earnings per share - basic	$	2.23	$	1.98
Earnings per share - diluted	$	2.22	$	1.98
Weighted average number of shares - basic		705.5		760.5
Weighted average number of shares - diluted		708.0		763.7

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions,		2019
for the Three Months Ended June 30,			2018
Net income	$	1,570	$	1,509
Other comprehensive income/(loss):
Defined benefit plans		82		18
Foreign currency translation		(2)		(24)
Total other comprehensive income/(loss) [a]		80		(6)
Comprehensive income	$	1,650	$	1,503

1. Net of deferred taxes of $(27) million and $(7) million during the three months ended June 30, 2019, and 2018, respectively. The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

3

Condensed Consolidated Statements of Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions, Except Per Share Amounts,		2019
for the Six Months Ended June 30,			2018
Operating revenues:
Freight revenues	$	10,246	$	10,439
Other revenues		734		708
Total operating revenues		10,980		11,147
Operating expenses:
Compensation and benefits		2,350		2,514
Purchased services and materials		1,149		1,229
Depreciation		1,100		1,089
Fuel		1,091		1,232
Equipment and other rents		518		531
Other		552		514
Total operating expenses		6,760		7,109
Operating income		4,220		4,038
Other income (Note 6)		134		-
Interest expense		(506)		(389)
Income before income taxes		3,848		3,649
Income taxes		(887)		(830)
Net income	$	2,961	$	2,819
Share and Per Share (Note 8):
Earnings per share - basic	$	4.16	$	3.67
Earnings per share - diluted	$	4.15	$	3.65
Weighted average number of shares - basic		711.2		768.4
Weighted average number of shares - diluted		713.8		771.6

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

Millions,		2019
for the Six Months Ended June 30,			2018
Net income	$	2,961	$	2,819
Other comprehensive income/(loss):
Defined benefit plans		92		37
Foreign currency translation		25		(24)
Total other comprehensive income/(loss) [a]		117		13
Comprehensive income	$	3,078	$	2,832

1. Net of deferred taxes of $(31) million and $(13) million during the six months ended June 30, 2019, and 2018, respectively. The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4

Condensed Consolidated Statements of Financial Position (Unaudited)

Union Pacific Corporation and Subsidiary Companies

		June 30,	December 31,
Millions, Except Share and Per Share Amounts		2019		2018
Assets
Current assets:
Cash and cash equivalents	$	1,049	$	1,273
Short-term investments (Note 13)		60		60
Accounts receivable, net (Note 10)		1,809		1,755
Materials and supplies		775		742
Other current assets		393		333
Total current assets		4,086		4,163
Investments		1,989		1,912
Net properties (Note 11)		53,115		52,679
Operating lease assets (Note 16)		2,076		-
Other assets		442		393
Total assets	$	61,708	$	59,147
Liabilities and Common Shareholders' Equity
Current liabilities:
Accounts payable and other current liabilities (Note 12)	$	3,368	$	3,160
Debt due within one year (Note 14)		2,297		1,466
Total current liabilities		5,665		4,626
Debt due after one year (Note 14)		22,955		20,925
Operating lease liabilities (Note 16)		1,612		-
Deferred income taxes		11,574		11,302
Other long-term liabilities		1,731		1,871
Commitments and contingencies (Note 17)
Total liabilities		43,537		38,724
Common shareholders' equity:
Common shares, $2.50 par value, 1,400,000,000 authorized;
1,112,046,154 and 1,111,739,781 issued; 704,942,478 and 725,056,690
outstanding, respectively		2,780		2,779
Paid-in-surplus		3,954		4,449
Retained earnings		46,997		45,284
Treasury stock		(34,262)		(30,674)
Accumulated other comprehensive loss (Note 9)		(1,298)		(1,415)
Total common shareholders' equity		18,171		20,423
Total liabilities and common shareholders' equity	$	61,708	$	59,147

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

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