UNION PACIFIC CORPORATION UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2021 , Compared to
Three and Nine Months Ended September 30, 2020 For purposes of this report, unless the context otherwise requires, all
references herein to "UPC", "Corporation", "Company", "we", "us", and "our"
shall mean
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 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 filing on Form 10-Q, including forward-looking statements,
speak only as of and are based on information we have learned as of
Certain statements in this report, and statements in other reports or
information filed or to be filed with the
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. The Risk Factors in Item 1A of
our 2020 Annual Report on Form 10-K, filed
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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.
Effects from COVID-19
COVID-19 vaccine mandates may affect workforce availability ranging from absences to get vaccinated and cope with any side-effects, resignations from unwillingness to comply with the mandate, and/or organized work stoppages from any of our unions. Significant workforce availability challenges could have a material effect on our business operations, financial results, liquidity, and financial position.
On
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 2020 Annual Report on Form 10-K. There have not been any significant changes with respect to these policies during the first nine months of 2021.
RESULTS OF OPERATIONS Quarterly Summary
The Company reported earnings of
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Operating Revenues
Three Months Ended Nine Months Ended
September 30, September 30,
Millions 2021 2020 Change 2021 2020 Change
Freight revenues $ 5,166 $ 4,596 12 % $ 14,947 $ 13,448 11 %
Other subsidiary revenues 182 193 (6) 539 557 (3)
Accessorial revenues 198 114 74 535 334 60
Other 20 16 25 50 53 (6)
Total $ 5,566 $ 4,919 13 % $ 16,071 $ 14,392 12 %
We generate freight revenues by transporting freight or other materials from our three commodity groups. 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 increased 12% during the third quarter of 2021 compared to 2020, resulting from a 12% increase in ARC driven by higher fuel surcharge revenue, core pricing gains, and positive mix of traffic. Volume was flat compared to the third quarter 2020 as strength in the industrial sector and coal were offset by lower shipments of intermodal, as global supply chain challenges persist, and automotive shipments, due to semiconductor chip shortages.
Each of our commodity groups includes revenue from fuel surcharges. Freight
revenues from fuel surcharge programs were
Accessorial revenue increased in the third quarter and the year-to-date period compared to 2020 driven by increased intermodal accessorial charges as a result of the global supply chain disruptions. Other subsidiary revenues decreased in the third quarter and the year-to-date period compared to 2020 driven by the semiconductor shortage negatively impacting 2021 automotive production which outweighed the recovery from COVID-19 declines in 2020.
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The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:
Three Months Ended Nine Months Ended
Freight Revenues September 30, September 30,
Millions 2021 2020 Change 2021 2020 Change
Grain & grain products $ 731 $ 695 5 % $ 2,292 $ 2,028 13 %
Fertilizer 172 157 10 521 499 4
Food & refrigerated 253 239 6 739 694 6
Coal & renewables 531 387 37 1,295 1,177 10
Bulk 1,687 1,478 14 4,847 4,398 10
Industrial chemicals & plastics 503 454 11 1,436 1,384 4
Metals & minerals 488 365 34 1,330 1,202 11
Forest products 342 284 20 1,006 853 18
Energy & specialized markets 578 464 25 1,654 1,522 9
Industrial 1,911 1,567 22 5,426 4,961 9
Automotive 417 481 (13) 1,292 1,194 8
Intermodal 1,151 1,070 8 3,382 2,895 17
Premium 1,568 1,551 1 4,674 4,089 14
Total $ 5,166 $ 4,596 12 % $ 14,947 $ 13,448 11 %
Three Months Ended Nine Months Ended
Revenue Carloads September 30, September 30,
Thousands 2021 2020 Change 2021 2020 Change
Grain & grain products 185 187 (1) % 592 529 12 %
Fertilizer 55 50 10 153 149 3
Food & refrigerated 48 48 - 141 137 3
Coal & renewables 232 213 9 604 607 -
Bulk 520 498 4 1,490 1,422 5
Industrial chemicals & plastics 153 144 6 449 439 2
Metals & minerals 188 156 21 516 492 5
Forest products 63 55 15 187 161 16
Energy & specialized markets 145 125 16 422 402 5
Industrial 549 480 14 1,574 1,494 5
Automotive 166 203 (18) 519 490 6
Intermodal [a] 809 863 (6) 2,483 2,296 8
Premium 975 1,066 (9) 3,002 2,786 8
Total 2,044 2,044 - % 6,066 5,702 6 %
Three Months Ended Nine Months Ended
September 30, September 30,
Average Revenue per Car 2021 2020 Change 2021 2020 Change
Grain & grain products $ 3,937 $ 3,705 6 % $ 3,869 $ 3,832 1 %
Fertilizer 3,125 3,172 (1) 3,398 3,361 1
Food & refrigerated 5,246 4,891 7 5,235 5,053 4
Coal & renewables 2,298 1,820 26 2,146 1,938 11
Bulk 3,244 2,964 9 3,252 3,092 5
Industrial chemicals & plastics 3,277 3,154 4 3,195 3,150 1
Metals & minerals 2,596 2,337 11 2,577 2,444 5
Forest products 5,457 5,181 5 5,390 5,300 2
Energy & specialized markets 3,996 3,742 7 3,924 3,791 4
Industrial 3,482 3,271 6 3,448 3,321 4
Automotive 2,500 2,368 6 2,488 2,438 2
Intermodal [a] 1,424 1,238 15 1,362 1,261 8
Premium 1,608 1,454 11 1,557 1,468 6
Average $ 2,528 $ 2,248 12 % $ 2,464 $ 2,359 4 %
[a] For intermodal shipments each container or trailer equals one carload.
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Bulk - Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated goods, and coal and renewables. Freight revenue from bulk shipments increased in the third quarter of 2021 compared to 2020 due to core pricing gains, higher fuel surcharge revenue, and a 4% increase in carloadings. Coal and renewables shipments increased 9% compared to the third quarter of 2020 due to increased market demand as some electricity generation shifted to coal due to higher natural gas prices. Strength in the export potash market drove fertilizer shipments up 10% in the third quarter. Year-to-date, freight revenue from bulk shipments increased compared to the same period in 2020 driven by 5% higher volume, core pricing gains, higher fuel surcharge revenue, and positive mix of traffic. Despite weather disruptions in the first quarter of 2021, strong demand for export grain drove a 12% increase in shipments of grain and grain products year-to-date.
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 in the third quarter
compared to the same period in 2020 due to higher volume, higher fuel surcharge
revenue, core pricing gains, and positive mix of traffic. Volume increases in
the third quarter of 2021 were primarily driven by continued recovery from the
pandemic slowdown that impacted production across a wide array of industries in
2020. Volumes also were positively impacted by new business secured in the year.
Year-to-date, freight revenue from industrial shipments increased compared to
the same period in 2020 driven by 5% volume increase, core pricing gains,
positive mix of traffic, and higher fuel surcharge revenue. Year-over-year
strength from the pandemic recovery in the second and third quarters overcame
the first quarter 2021 losses caused by weather disruptions in the
Premium - Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international. Premium freight revenue increased in the third quarter 2021 compared to the third quarter 2020 driven by higher fuel surcharge revenue and core pricing gains, partially offset by a 9% decline in volume and negative mix of traffic. The semiconductor shortage continues to impact the automotive industry as shipments are down 18% in the third quarter compared to 2020. Intermodal volume declined 6% due to global supply chain disruptions in the same period. These disruptions include port congestion due to both high demand for consumer goods and labor availability challenges, railroad equipment and chassis availability, truck driver supply, and warehouse receiving capacity. Year-to-date, premium freight revenue increased compared to the same period in 2020, despite weather disruptions in the first quarter of 2021, driven by an 8% increase in volume, higher fuel surcharge revenue, and core pricing gains. Automotive shipments of 173 thousand carloads in the second quarter of 2021 were more than double the 79 thousand carloads in the same period last year as North American manufacturing plants suspended production due to the pandemic in 2020. This recovery is masking the impact to automotive shipments in the year-to-date period of 2021 due to the on-going shortage of semiconductors. Despite the global supply chain disruptions, intermodal shipments increased 8% in the nine-month period of 2021 due to improving economic conditions, inventory restocking, contract wins, and continued strength of e-commerce and parcel shipments.
Mexico Business - Each of our commodity groups includes revenue from shipments
to and from
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Operating Expenses
Three Months Ended Nine Months Ended
September 30, September 30,
Millions 2021 2020 Change 2021 2020 Change
Compensation and benefits $ 1,040 $ 1,008 3 % $ 3,088 $ 2,972 4 %
Depreciation 553 555 - 1,652 1,653 -
Purchased services and materials 510 508 - 1,478 1,470 1
Fuel 544 301 81 1,452 982 48
Equipment and other rents 217 217 - 629 655 (4)
Other 270 299 (10) 874 832 5
Total $ 3,134 $ 2,888 9 % $ 9,173 $ 8,564 7 %
Operating expenses increased
Compensation and Benefits - Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, other postretirement benefits, and incentive costs. For the third quarter and year-to-date periods, expenses increased 3% and 4%, respectively, compared to 2020 due to wage inflation, 2020 management actions responding to the sharp decline in volume (temporary unpaid leave, salary reductions, and shop closures), and higher costs due to weather-related events. Partially offsetting these increases are productivity initiatives resulting in employee levels that were down 1% and 5% in the third quarter and year-to-date periods, respectively, compared to 2020 despite flat and 6% volume increases, and lower severance costs. In addition, the year-to-date period comparison was impacted by increased incentive compensation.
Depreciation - The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was essentially flat for the third quarter and nine-month periods of 2021 compared to 2020.
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 were essentially flat in the third quarter compared to 2020 driven by higher locomotive and freight car maintenance expense due to a larger active fleet, offset by lower contractor expense for derailment clean up. Year-to-date, expenses increased 1% due to higher volume-related costs associated with our intermodal business and higher cost due to weather-related events, partially offset by lower locomotive and freight car maintenance expenses due to a smaller active fleet in the first quarter.
Fuel - Fuel includes locomotive fuel and fuel for highway and non-highway
vehicles and heavy equipment. Fuel expense increased in the third quarter of
2021 compared to the same period in 2020 driven by a 74% increase in locomotive
diesel fuel prices, which averaged
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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 were flat in the third
quarter compared to 2020 consistent with our volume. Year-to-date, expense
decreased by 4% driven by lower rent on stored equipment and higher equity
income from our investment in
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 10% in the third quarter compared to 2020 driven by lower in-progress write-offs of certain capital projects, 2020 lease impairments, and lower costs associated with destroyed equipment, partially offset by higher personal injury expense and higher state and local taxes. Year-to-date expenses increased 5% driven by casualty expenses including personal injury, environmental, and damaged freight; an insurance reimbursement recognized in 2020; and higher state and local taxes, partially offset by lower in-progress write-offs of certain in-progress capital projects and 2020 lease impairments.
Non-Operating Items
Three Months Ended Nine Months Ended
September 30, September 30,
Millions 2021 2020 Change 2021 2020 Change
Other income, net $ 38 $ 37 3 % $ 214 $ 221 (3) %
Interest expense (290) (295) (2) (862) (862) -
Income taxes (507) (410) 24 (1,438) (1,218) 18
Other Income, net - Other income slightly increased in the third quarter of 2021
compared to the same period in 2020. Year-to-date, other income decreased driven
by lower real estate sale gains. Real estate sales in the second quarter of 2021
included a
Interest Expense - Interest expense decreased in the third quarter of 2021
compared to 2020 due to a lower effective interest rate of 4.0% in 2021 compared
to 4.1% in 2020, partially offset by an increase in the weighted-average debt
level of
Income Taxes - Income taxes increased in the third quarter and nine-month
periods of 2021 compared to 2020 due to higher pre-tax income. Our effective tax
rates year-to-date 2021 and 2020 were 23.0% and 23.5%, respectively. In the
second quarter of 2021,
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OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS
We report a number of key performance measures weekly to the
Operating/Performance Statistics
Management continuously monitors these key operating metrics to evaluate 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:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 ChangeGross ton-miles (GTMs) (billions) 207.1 197.0 5 % 607.9 568.9 7 % Revenue ton-miles (billions)
104.3 97.9 7 306.4 283.5 8
Freight car velocity (daily miles 195 223 (13) 205 220 (7)
per car) [a]
Average train speed (miles per hour) 24.2 25.3 (4) 24.8 25.8 (4)
[b]
Average terminal dwell time (hours) 24.0 22.8 5 23.5 22.8 3
[b]
Locomotive productivity (GTMs per 127 138 (8) 135 135 - horsepower day) Train length (feet) 9,359 8,984 4 9,340 8,676 8 Intermodal car trip plan compliance 66 77 (11) pts 72 81 (9) pts (%) Manifest/Automotive car trip plan 60 72 (12) pts 65 70 (5) pts compliance (%) Workforce productivity (car miles 1,044 998 5 1,036 920 13 per employee) Total employees (average) 29,810 30,155 (1) 29,877 31,362 (5) Operating ratio 56.3 58.7 (2.4) pts 57.1 59.5 (2.4) 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 increased 5% and 7%, respectively, during the third quarter of 2021 compared to 2020, despite overall flat volume, due to commodity mix (decreases in our intermodal and automotive shipments, which are generally lower weight, coupled with increases in coal and industrial shipments, which are generally higher weight). Year-to-date, gross ton-miles and revenue ton-miles increased 7% and 8%, respectively, driven by a 6% increase in carloadings.
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). Train speed slowed and terminal
dwell increased in the third quarter and nine-month periods of 2021 compared to
the same periods in 2020 as the network was impacted by bridge outages caused by
the
Locomotive Productivity - Locomotive productivity is gross ton-miles per average
daily locomotive horsepower. Locomotive productivity decreased in the third
quarter compared to the third quarter in 2020 as we increased the active fleet
size to combat the slowdown in the network caused by the
Train Length - Train length is the average maximum train length on a route measured in feet. Our train length increased in the third quarter and nine-month periods compared to same periods in 2020 as a result of blending service products and transportation plan changes designed to improve overall operational
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efficiency. However, sequentially, train length declined slightly from the
second quarter of 2021 as we rerouted trains due to the
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 the intermodal and manifest/automotive products.
Intermodal trip plan compliance deteriorated in the third quarter and
year-to-date periods of 2021 compared to 2020 because of global supply chain
issues. Manifest trip plan compliance deteriorated in the third quarter and
year-to-date periods of 2021 compared to 2020 as the network slowed because of
the
Workforce Productivity - Workforce productivity is average daily car miles per employee. Workforce productivity improved 5%, as employee counts were down 1% compared to 2020, while average daily car miles increased 3%. Productivity initiatives and a smaller capital workforce offset higher train and engine employee counts due to weather-related challenges and the network disruptions, keeping total employee levels down 1% versus the third quarter of 2020. Year-to-date, workforce productivity improved 13% as average daily car miles increased 7%, while employees decreased 5% compared to 2020.
Operating
Adjusted Debt / Adjusted EBITDA
Millions, Except Ratios Sep. 30, Dec. 31, for the Trailing Twelve Months Ended [a] 2021 2020 Net income$ 6,192 $ 5,349 Add: Income tax expense 1,851 1,631 Depreciation 2,209 2,210 Interest expense 1,141 1,141 EBITDA$ 11,393 $ 10,331 Adjustments: Other income, net (280) (287) Interest on operating lease liabilities [b] 53 59 Adjusted EBITDA$ 11,166 $ 10,103 Debt$ 29,395 $ 26,729 Operating lease liabilities 1,568 1,604
Unfunded pension and OPEB, net of taxes of
$ 31,548 $ 28,970 Adjusted debt / Adjusted EBITDA 2.8 2.9
[a]The trailing twelve month income statement information ended
[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, and adjustments for other income, net 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
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to, rather than as a substitute for, net income. The table above provides
reconciliations from net income to adjusted debt to adjusted EBITDA. At
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
Cash Flows Millions, for the Nine Months Ended September 30, 2021 2020 Cash provided by operating activities$ 6,503 $ 5,993 Cash used in investing activities (1,792) (2,081) Cash used in financing activities (5,291) (2,150)
Net change in cash, cash equivalents and restricted cash
Operating Activities
Cash provided by operating activities increased in the first nine months of 2021 compared to the same period of 2020 driven by higher net income, partially offset by higher receivables and material inventory.
Investing Activities
Cash used in investing activities decreased in the first nine months of 2021 compared to the same period of 2020 primarily driven by reduced capital investment in all asset categories.
The table below details cash capital investments:
Millions,
for the Nine Months Ended
$ 367 $ 393 Ties 334 415 Ballast 156 188 Other [a] 435 456
Total road infrastructure replacements 1,292 1,452 Line expansion and other capacity projects 173 234 Commercial facilities
104 125
Total capacity and commercial facilities 277 359 Locomotives and freight cars [b]
192 210
Positive train control 50 52
Technology and other 134 221
Total cash capital investments $ 1,945 $ 2,294 [a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.
[b]Locomotives and freight cars include lease buyouts of
Capital Plan
In 2021, we expect our capital expenditures to be approximately
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Financing Activities
Cash used in financing activities increased in the first nine months of 2021 compared to the same period of 2020 driven by an increase in shares repurchased.
See Note 14 of the Condensed Consolidated Financial Statements for a description of all our outstanding financing arrangements and significant new borrowings and Note 16 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 operating activities 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 Nine Months Ended
(2,045) (1,974)
Free cash flow $ 2,666 $ 1,938 The following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure):
Millions,
for the Nine Months Ended
$ 4,558 $ 3,699 Net income (b)$ 4,812 $ 3,969 Cash flow conversion rate (a/b) 95 % 93 %
Current Liquidity Status
We are continually evaluating our financial condition and liquidity. We analyze 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 third quarter, we generated
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repurchase program, including the final settlement of the accelerated share
repurchase program entered into on
As described in the notes to the Condensed Consolidated Financial Statements and as referenced in the table below, we have contractual obligations that may affect our financial condition. However, based on our assessment of the underlying provisions and circumstances of our contractual obligations, 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 table identifies material obligations as of
Oct. 1 Payments Due by Dec. 31,
through
Contractual Obligations Dec. 31, After
Millions Total 2021 2022 2023 2024 2025 2025 Other
Debt [a] $ 53,764 $ 523 $ 2,472 $ 2,337 $ 2,356 $ 2,336 $ 43,740 $ -
Purchase obligations 2,303 254 576 305 290 266 612 -
[b]
Operating leases [c] 1,770 41 306 263 247 247 666 -
Finance lease 419 40 108 81 68 45 77 -
obligations [d]
Other postretirement 374 13 45 44 39 39 194 -
benefits [e]
Income tax 36 1 - - - - - 35
contingencies [f]
Total contractual $ 58,666 $ 872 $ 3,507 $ 3,030 $ 3,000 $ 2,933 $ 45,289 $ 35
obligations
[a]Excludes finance lease obligations of
[b] 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.
[c]Includes leases for locomotives, freight cars, other equipment, and real
estate. Includes an interest component of
[d]Represents total obligations, including interest component of
[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
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.
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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
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.
© Edgar Online, source
