Retention awards are granted at no cost to the employee or non-employee director and vest over periods lasting up to ~~four~~4 years. At March 31, ~~2019,~~2020, there was ~~$135~~$131 million of total unrecognized compensation expense related to nonvested retention awards, which is expected to be recognized over a weighted-average period of ~~2.1~~2.2 years.

Performance Retention Awards – In February ~~2019,~~2020, our Board of Directors approved performance stock unit grants. The basic terms of these performance stock units are identical to those granted in February ~~2018,~~2019, except for different annual return on invested capital (ROIC) performance targets. The plan also includes relative operating income growth (OIG) as a modifier compared to the companies included in the S&P 500 Industrials Index. We define ROIC as net operating profit adjusted for interest expense (including interest on ~~the present value of~~average operating ~~leases)~~lease liabilities) and taxes on interest divided by average invested capital adjusted for ~~the present value of~~average operating ~~leases.~~lease liabilities. The modifier can be up to +/- 25% of the award earned based on the ROIC ~~achieved, but not to exceed the maximum number of shares granted.~~achieved.

On June 30, 2019, the OPEB plan was remeasured to reflect an announced plan amendment effective January 1, 2020 that reduced and eliminated certain medical benefits for Medicare-eligible retirees. This negative plan amendment resulted in a reduction in the accumulated postretirement benefit obligation of approximately $92 million with a corresponding adjustment of $69 million in other comprehensive income, net of $23 million in deferred taxes. This amount is being amortized as a reduction of future net periodic OPEB cost over approximately 8 years, which represents the future remaining service period of eligible employees.

For the three months ended March 31, ~~2019, we did not make any~~2020, cash contributions totaled $0 to the qualified pension plan. Any contributions made during ~~2019~~2020 will be based on cash generated from operations and financial market considerations. Our policy with respect to funding the qualified plans is to fund at least the minimum required by law and not more than the maximum amount deductible for tax purposes. At March 31, ~~2019,~~2020, we do not have minimum cash funding requirements for ~~2019.~~2020.

~~[a]2018 includes a debt extinguishment charge for the early redemption of certain bonds and debentures in the first quarter~~

~~[b]2019 includes $27 million in interest income associated with the employment tax refund (Note 17).~~

~~The~~UPC is not currently under examination by the Internal Revenue Service (IRS) ~~is performing limited scope audits of UPC’s 2016 and 2017 tax returns.~~. The statute of limitations has run for all years prior to ~~2015.~~ 2016. Several state tax authorities are examining our state tax returns for years 2015 through ~~2017.~~2018. At March 31, ~~2019,~~2020, we had a net liability for unrecognized tax benefits of ~~$176~~$67 million.

[a]The accumulated other comprehensive income/(loss) reclassification components are 1) prior service cost/(credit) and 2) net actuarial loss which are both included in the computation of net periodic pension cost. See Note 5 Retirement Plans for additional details.

~~[b]~~ASU 2018-02 is the Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows entities the option to reclassify from accumulated other comprehensive income to retained earnings the income tax effects that remain stranded in AOCI resulting from the application of the Tax Cuts and Jobs Act.

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~~balances, and,~~ unless we change the terms of our commercial paper program, our aggregate issuance of commercial paper will not exceed the amount of borrowings available under the Facility.

Shelf Registration Statement and Significant New Borrowings – In ~~2018, the~~2019, our Board of Directors reauthorized the issuance of up to $6 billion of debt securities. Under our ~~Shelf~~shelf registration, we may issue, from time to time any combination of debt securities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings.

During the three months ended March 31, ~~2019,~~2020, we issued the following unsecured, fixed-rate debt securities under our current shelf registration:



Date	Description of Securities
~~February 19, 2019~~January 31, 2020	$500 million of ~~2.950%~~2.150% Notes due ~~March 1, 2022~~February 5, 2027
	$~~500~~750 million of ~~3.150%~~2.400% Notes due ~~March 1, 2024~~February 5, 2030
	$1.0 billion of ~~3.700%~~3.250% Notes due ~~March 1, 2029~~February 5, 2050
	$~~1.0 billion~~750 million of ~~4.300%~~3.750% Notes due ~~March 1, 2049~~February 5, 2070

We used the net proceeds from this offering for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. These debt securities include change-of-control provisions. At March 31, ~~2019,~~2020, we had remaining authority from the Board of Directors to issue up to $3.0 billion of debt securities under our ~~Shelf~~shelf registration.

Receivables Securitization Facility – As of both March 31, ~~2019,~~2020, and December 31, ~~2018,~~2019, we recorded $400 million of borrowings under our Receivables Facility as secured debt. (See further discussion of our receivables securitization facility in Note 10).

~~Debt Redemption~~Subsequent Event – ~~Effective as~~On April 7, 2020, we issued the following unsecured, fixed-rate debt security under our current shelf registration:



Date	Description of Securities
April 7, 2020	$750 million of 3.250% Notes due February 5, 2050

Proceeds from this offering are for general corporate purposes, including the repurchase of ~~March 15, 2018,~~common stock pursuant to our share repurchase programs. The debt security includes a change-of-control provision. After this issuance, we ~~redeemed, in entirety,~~had remaining authority from the Missouri Pacific 5% Income Debentures due 2045, the Chicago and Eastern Illinois 5% Income Debentures due 2054, and the Missouri Pacific 4.75% General Mortgage Income Bonds Series A due 2020 and Series B due 2030. The debentures had principal outstandingBoard of ~~$96 million and $2 million, respectively, and the bonds had principal outstanding~~Directors to issue up to $2.25 billion of $30 million and $27 million, respectively. The bonds and debentures were assumed by the Railroad in the 1982 acquisition of the Missouri Pacific Railroad Company, with a weighted average interest rate of 4.9%. The carrying value of all four bonds and debentures at the time of redemption was $70 million, due to fair value purchase accounting adjustments related to the acquisition. The redemption resulted in an early extinguishment charge of $85 million in the first quarter of 2018.debt securities under our shelf registration.

15. Variable Interest Entities

We have entered into various lease transactions in which the structure of the leases contain variable interest entities (VIEs). These VIEs were created solely for the purpose of doing lease transactions (principally involving railroad equipment and facilities) and have no other activities, assets or liabilities outside of the lease transactions. Within these lease arrangements, we have the right to purchase some or all of the assets at fixed prices. Depending on market conditions, fixed-price purchase options available in the leases could potentially provide benefits to us; however, these benefits are not expected to be significant.

We maintain and operate the assets based on contractual obligations within the lease arrangements, which set specific guidelines consistent within the railroad industry. As such, we have no control over activities that could materially impact the fair value of the leased assets. We do not hold the power to direct the activities of the VIEs and, therefore, do not control the ongoing activities that have a significant impact on the economic performance of the VIEs. Additionally, we do not have the obligation to absorb losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to the VIEs.

We are not considered to be the primary beneficiary and do not consolidate these VIEs because our actions and decisions do not have the most significant effect on the VIE’s performance and our fixed-price purchase options are not considered to be potentially significant to the VIEs. The future minimum lease payments associated with the VIE leases totaled ~~$1.6~~$1.3 billion as of March 31, ~~2019.~~2020 and are recorded as operating lease liabilities at present value in our Consolidated Statements of Financial Position.

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16. Leases

Our significant accounting policies are detailed in Note 2 of our Annual Report on Form 10-K for the year ended December 31, 2018. Changes to our accounting policies as a result of adopting ASU 2016-02 are discussed below.

We lease certain locomotives, freight cars, and other property for use in our rail operations. We determine if an arrangement is or contains a lease at inception. We have lease agreements with lease and non-lease components and we have elected to not separate lease and non-lease components for all classes of underlying assets. Leases with an initial term of 12 months or less are not recorded on our Consolidated Statements of Financial Position; we recognize lease expense for these leases on a straight-line basis over the lease term. Leases with initial terms in excess of 12 months are recorded as operating or financing leases in our Consolidated Statement of Financial Position. Operating leases are included in operating lease assets, accounts payable and other current liabilities, and operating lease liabilities on our Consolidated Statements of Financial Position. Finance leases are included in net properties, debt due within one year, and debt due after one year on our Consolidated Statements of Financial Position.

Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use a collateralized incremental borrowing rate for all operating leases based on the information available at commencement date, including lease term, in determining the present value of future payments. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Operating lease expense is recognized on a straight-line basis over the lease term and reported in ~~Equipment~~equipment and other rents and financing lease expense is recorded as ~~Depreciation~~depreciation and ~~Interest~~interest expense in our Consolidated Statements of Income.

The following are additional details related to our lease portfolio:


~~The following are additional details related to our lease portfolio:~~



		Mar. 31,		Dec. 31,
Millions	Classification	2020		2019
Assets
Operating leases	Operating lease assets	$	1,773	$	1,812
Finance leases	Net properties [a]		444		468
Total leased assets		$	2,217	$	2,280
Liabilities
Current
Operating	Accounts payable and other current liabilities	$	326	$	362
Finance	Debt due within one year		119		114
Noncurrent
Operating	Operating lease liabilities		1,339		1,471
Finance	Debt due after one year		433		491
Total lease liabilities		$	2,217	$	2,438



		~~Mar. 31,~~
~~Millions~~	~~Classification~~	~~2019~~
~~Assets~~
~~Operating leases~~	~~Operating lease assets~~	$	~~2,146~~
~~Finance leases~~	~~Net properties [a]~~		~~516~~
~~Total leased assets~~		$	~~2,662~~
~~Liabilities~~
~~Current~~
~~Operating~~	~~Accounts payable and other current liabilities~~	$	~~417~~
~~Finance~~	~~Debt due within one year~~		99
~~Noncurrent~~
~~Operating~~	~~Operating lease liabilities~~		~~1,663~~
~~Finance~~	~~Debt due after one year~~		~~560~~
~~Total lease liabilities~~		$	~~2,739~~

~~[a]~~[a] Finance lease assets are recorded net of accumulated amortization of ~~$717~~$766 million and $797 million as of March 31, 2020 and December 31, 2019.

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The lease cost components are classified as follows:



~~Millions,~~
~~for the Three Months Ended March 31,~~	~~Classification~~	~~2019~~
~~Operating lease cost [a]~~	~~Equipment and other rents~~	$	93
~~Finance lease cost~~
~~Amortization of leased assets~~	~~Depreciation~~		18
~~Interest on lease liabilities~~	~~Interest expense~~		9
~~Net lease cost~~		$	~~120~~



Millions,
for the Three Months Ended March 31,	Classification		2020		2019
Operating lease cost [a]	Equipment and other rents	$	69	$	93
Finance lease cost
Amortization of leased assets	Depreciation		17		18
Interest on lease liabilities	Interest expense		7		9
Net lease cost		$	93	$	120

[a] Includes short-term lease costs of $0.0 million and $0.2 million for the three months ended March 31, 2020, and 2019, respectively, and variable lease costs of $1.8million and $1.9 ~~million.~~million for the three months ended March 31, 2020, and 2019, respectively.

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The following table presents aggregate lease maturities as of March 31, ~~2019:~~2020:



Millions		Operating Leases		Finance Leases		Total		Operating Leases		Finance Leases		Total
2019	$	196	$	72	$	268
2020		384		143		527	$	147	$	84	$	231
2021		308		147		455		302		142		444
2022		273		130		403		267		127		394
2023		235		88		323		226		88		314
After 2023		1,040		199		1,239
2024								216		75		291
After 2024								777		124		901
Total lease payments	$	2,436	$	779	$	3,215	$	1,935	$	640	$	2,575
Less: Interest [a]		356		120		476
Less: Interest								270		88		358
Present value of lease liabilities	$	2,080	$	659	$	2,739	$	1,665	$	552	$	2,217

The Consolidated Statement of Financial Position as of December 31, 2018 included $1,454, net of $912 million of accumulated depreciation for properties held under capital leases. The following table presents aggregate lease maturities as of December 31, 2018:

Millions
Operating
Leases
Capital
Leases
2019
$
419
$
148
2020

378

155
2021

303

159
2022

272

142
2023

234

94
Later years

1,040

200
Total minimum lease payments
$
2,646
$
898
Amount representing interest

N/A

(144)
Present value of minimum lease payments

N/A
$
754

The following table presents the weighted average remaining lease term and discount rate:



			Mar. 31,
	2020		~~2019~~
Weighted-average remaining lease term (years)
Operating leases			~~9.0~~
~~Finance leases~~				~~6.6~~
~~Weighted-average discount rate~~				8.3
~~Operating~~Finance leases		5.8	~~3.7~~
~~Finance leases~~Weighted-average discount rate
Operating leases	~~5.3~~	3.7
Finance leases		5.2

The following table presents other information related to our operating and finance leases:



~~Millions,~~
~~for the Three Months Ended March 31,~~	~~2019~~
~~Cash paid for amounts included in the measurement of lease liabilities~~
~~Operating cash flows from operating leases~~	$	~~215~~
~~Operating cash flows from finance leases~~		17
~~Financing cash flows from finance leases~~		58
~~Leased assets obtained in exchange for new finance lease liabilities~~		-
~~Leased assets obtained in exchange for new operating lease liabilities~~		9



Millions,
for the Three Months Ended March 31,	2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	210		215
Operating cash flows from finance leases		13		17
Financing cash flows from finance leases		41		58
Leased assets obtained in exchange for finance lease liabilities		-		-
Leased assets obtained in exchange for operating lease liabilities		45		9

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17. Commitments and Contingencies

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.

Personal Injury – The cost of personal injuries to employees and others related to our activities is charged to expense based on estimates of the ultimate cost and number of incidents each year. We use an actuarial analysis to measure the expense and liability, including unasserted claims. The Federal Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages are assessed based on a finding of fault through litigation or out-of-court settlements. We offer a comprehensive variety of services and rehabilitation programs for employees who are injured at work.

Our personal injury liability is not discounted to present value due to the uncertainty surrounding the timing of future payments. Approximately 94% of the recorded liability is related to asserted claims and approximately 6% is related to unasserted claims at March 31, ~~2019.~~2020. Because of the uncertainty surrounding the ultimate outcome of personal injury claims, it is reasonably possible that future costs to settle these claims may range from approximately ~~$266~~$270 million to ~~$292~~$295 million. We record an accrual at the low end of the range as no amount of loss within the range is more probable than any other. Estimates can vary over time due to evolving trends in litigation.

Our personal injury liability activity was as follows:



Millions,
for the Three Months Ended March 31,	2019		2018		2020		2019
Beginning balance	$	271	$	285	$	265	$	271
Current year accruals		18		19		18		18
Changes in estimates for prior years		(2)		(11)		2		(2)
Payments		(21)		(21)		(15)		(21)
Ending balance at March 31	$	266	$	272	$	270	$	266
Current portion, ending balance at March 31	$	67	$	70	$	62	$	67

We reassess our estimated insurance recoveries annually and have recognized an asset for estimated insurance recoveries at both March 31, 2020, and December 31, ~~2018, and 2017.~~2019. Any changes to recorded insurance recoveries are included in the above table in the Changes in estimates for prior years category.

Environmental Costs – We are subject to federal, state, and local environmental laws and regulations. We have identified ~~337~~359 sites at which we are or may be liable for remediation costs associated with alleged contamination or for violations of environmental requirements. This includes 3231 sites that are the subject of actions taken by the U.S. government, 2120 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes joint and several liability for the remediation of identified sites; consequently, our ultimate environmental liability may include costs relating to activities of other parties, in addition to costs relating to our own activities at each site.

When we identify an environmental issue with respect to property owned, leased, or otherwise used in our business, we perform, with assistance of our consultants, environmental assessments on the property. We expense the cost of the assessments as incurred. We accrue the cost of remediation where our obligation is probable and such costs can be reasonably estimated. Our environmental liability is not discounted to present value due to the uncertainty surrounding the timing of future payments.

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Our environmental liability activity was as follows:



Millions,
for the Three Months Ended March 31,	2019		2018		2020		2019
Beginning balance	$	223	$	196	$	227	$	223
Accruals		10		16		15		10
Payments		(17)		(14)		(16)		(17)
Ending balance at March 31	$	216	$	198	$	226	$	216
Current portion, ending balance at March 31	$	63	$	57	$	64	$	63

The environmental liability includes future costs for remediation and restoration of sites, as well as ongoing monitoring costs, but excludes any anticipated recoveries from third parties. Cost estimates are based on information available for each site, financial viability of other potentially responsible parties, and existing technology, laws, and regulations. The ultimate liability for remediation is difficult to determine because of the number of potentially responsible parties, site-specific cost sharing arrangements with other potentially responsible parties, the degree of contamination by various wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs. Estimates of liability may vary over time due to changes in federal, state, and local laws governing environmental remediation. Current obligations are not expected to have a material adverse effect on our consolidated results of operations, financial condition, or liquidity.

Insurance – The Company has a consolidated, wholly-owned captive insurance subsidiary (the captive), that provides insurance coverage for certain risks including FELA claims and property coverage which are subject to reinsurance. The captive entered into annual reinsurance treaty agreements that insure workers compensation, general liability, auto liability and FELA risk. The captive cedes a portion of its FELA exposure through the treaty and assumes a proportionate share of the entire risk. The captive receives direct premiums, which are netted against the Company’s premium costs in other expenses in the Condensed Consolidated Statements of Income. The treaty agreements provide for certain protections against the risk of treaty participants’ non-performance, and we do not believe our exposure to treaty participants’ non-performance is material at this time. We record both liabilities and reinsurance receivables using an actuarial analysis based on historical experience in our Condensed Consolidated Statements of Financial Position. Effective January 2019, the captive insurance subsidiary no longer participates in the reinsurance treaty agreement. The Company established a trust in the fourth quarter of 2018 for the purpose of providing collateral as required under the reinsurance treaty agreement for prior years’ participation.

Guarantees – At both March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we were contingently liable for ~~$22~~$15 million in guarantees. The fair value of these obligations as of both March 31, ~~2019,~~2020, and December 31, ~~2018~~2019 was $0. We entered into these contingent guarantees in the normal course of business, and they include guaranteed obligations related to our affiliated operations. The final guarantee expires in 2022. We are not aware of any existing event of default that would require us to satisfy these guarantees. We do not expect that these guarantees will have a material adverse effect on our consolidated financial condition, results of operations, or liquidity.

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.

~~Gain Contingency~~ – UPRR filed multiple claims with the IRS for refunds of Railroad Retirement Taxes paid on (i) certain stock awards to its employees and (ii) certain bonus payments it made to labor agreement employees during the years 1991-2017. The IRS denied UPRR’s claims for 1991 – 2007 (employment tax refund). UPRR filed suit in the U.S. District Court for the District of Nebraska (the District Court) for the employment tax refund and in 2016 the District Court denied the refund claim. UPRR appealed this denial to the U.S. Court of Appeals for the 8th ~~Circuit (8~~th ~~Circuit) and the 8~~th ~~Circuit ruled in favor of UPRR and remanded the case to the District Court. The IRS appealed the 8~~th ~~Circuit ruling to the U.S. Supreme Court.~~

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~~In June 2018, a similar case for another railroad was decided by the U.S. Supreme Court against the IRS and in favor of that railroad (Wisconsin Central LTD., Et. Al. v. U.S.). As a result, the U.S. Supreme Court denied the IRS request to appeal the 8~~th ~~Circuit ruling~~. On November 28, 2018 the District Court issued an order granting summary judgment to UPRR pursuant to the mandate of the 8th Circuit. UPRR, the Department of Justice (DOJ), and the IRS subsequently agreed upon the tax refund amounts owed UPRR and its employees for all claims. On February 12, 2019, UPRR received a partial final judgment from the District Court for the employment tax refund. As a result, in the first quarter of 2019 UPRR recognized an employer refund of $42 million as a reduction of compensation and benefit expenses and approximately $27 million of interest in other income.

~~UPRR’s refund claims for 2008 – 2017 are pending with the IRS, and we expect IRS approval of these claims in 2019. These claims are considered gain contingencies and no refund amounts have been recognized in~~ the Consolidated Financial Statements as of March 31, 2019. These claims will be recognized when UPRR receives final approval from the IRS allowing the refunds. When recognized, UPRR will reduce compensation and benefit expenses by $36 million and record approximately $3 million of interest in other income.

18. Share Repurchase Programs

~~On February 7,~~Effective April 1, 2019, ~~the~~our Board of Directors ~~approved a new share~~authorized the repurchase ~~authorization, enabling the Company to buy~~of up to 150 million shares of ~~its~~our common ~~shares~~stock by March 31, 2022. ~~The new authorization is effective April 1, 2019,~~These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and ~~replaces the previous authorization~~amount of ~~up to 120 million shares, which expired on March 31, 2019.~~these transactions. As of March 31, ~~2019,~~2020, we repurchased a total of ~~$34.4~~$39.7 billion of our common stock

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since commencement of our repurchase programs in 2007. The ~~following~~ table below represents shares repurchased under repurchase programs during 2020 and 2019:



	Number of Shares Purchased		Average Price Paid
	2020	2019	2020		2019
First quarter [a]	14,305,793	18,149,450	$	178.66	$	165.79
Remaining number of shares that may be repurchased under current authority				118,849,288

[a]Includes 8,786,380 and 11,795,930 shares repurchased in ~~the first quarter of~~February 2020 and 2019, ~~and 2018:~~respectively, under accelerated share repurchase programs.

Number of Shares Purchased
Average Price Paid

2019 2018 2019 2018
First quarter [a]
18,149,450 9,259,004
$
165.79
$
132.84

~~[a]~~

~~Includes 11,795,930 shares repurchased in February 2019 under accelerated share repurchase programs.~~

Management's assessments of market conditions and other pertinent factors guide the timing and volume of all repurchases. We expect to fund any share repurchases under this program through cash generated from operations, the sale or lease of various operating and non-operating properties, debt issuances, and cash on hand. Open market repurchases are recorded in treasury stock at cost, which includes any applicable commissions and fees.

Accelerated Share Repurchase Programs –~~On February 25, 2019, the~~The Company has established accelerated share repurchase programs (ASRs) with ~~two~~ financial institutions to repurchase shares of our common stock. ~~On February 26, 2019,~~These ASRs have been structured so that at the ~~Company received 11,795,930 shares~~time of its common stock repurchased under the ASRs for an aggregate of $2.5 billion. When the shares were received, the exchange was accounted for as an equity transaction with $2.0 billion of the aggregate amount allocated to treasury stock and the remaining $0.5 billion allocated to paid-in-surplus. The Company reflected the shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.

~~Under these ASRs,~~commencement, we ~~paid~~pay a specified amount to the financial institutions and ~~received~~receive an initial delivery of shares. ~~This delivery~~Additional shares may be received at the time of ~~shares represents the initial and likely minimum number of shares that we may receive under the ASRs.~~settlement. The final number of shares to be ~~repurchased under the ASRs will be~~received is based on the volume weighted average price of the Company’s common stock during the ASR term, less a discount and subject to potential adjustments pursuant to the terms of such ASR.

On February 19, 2020, the Company received 8,786,380 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. When the shares were received, the exchange was accounted for as an equity transaction with $1.6 billion of the aggregate amount allocated to treasury stock and the remaining $0.4 billion allocated to paid-in-surplus. This delivery of shares represents the initial and likely minimum number of shares that we may receive under the ASRs initiated in 2020. The final settlement is expected to be completed prior to the end of the third quarter of 2020.

On February 26, 2019, ~~but~~ the Company received 11,795,930 shares of its common stock repurchased under ASRs ~~may be terminated early~~for an aggregate of $2.5 billion. Upon settlement of these ASRs in ~~certain circumstances.~~the third quarter of 2019, we received 3,172,900 additional shares.

ASRs are accounted for as equity transactions, and at the time of receipt, shares are included in treasury stock at fair market value as of the corresponding initiation or settlement date. The Company reflects shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.

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19. Related Parties

UPRR and other North American railroad companies jointly own TTX Company (TTX). UPRR has a 36.79% economic and voting interest in TTX while the other North American railroads own the remaining interest. In accordance with ASC 323 Investments - Equity Method and Joint Venture, UPRR applies the equity method of accounting to our investment in TTX.

TTX is a railcar pooling company that owns railcars and intermodal wells to serve North America’s railroads. TTX assists railroads in meeting the needs of their customers by providing railcars in an efficient, pooled environment. All railroads have the ability to utilize TTX railcars through car hire by renting railcars at stated rates.

UPRR had ~~$1.3~~$1.4 billion recognized as investments related to TTX in our Condensed Consolidated Statements of Financial Position as of both March 31, ~~2019,~~2020, and December 31, ~~2018.~~2019. TTX car hire expenses of $96 million and $105 million for ~~both~~ the three months ended March 31, 2020, and 2019, ~~and 2018,~~respectively, are included in equipment and other rents in our Condensed Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of ~~$69~~$65 million and ~~$66~~$62 million as of March 31, ~~2019,~~2020, and December 31, ~~2018,~~2019, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

RESULTS OF OPERATIONS

Three Months Ended March 31, 2020, Compared to

Three Months Ended March 31, 2019 ~~Compared to~~

~~Three Months Ended March 31, 2018~~

For purposes of this report, unless the context otherwise requires, all references herein to “UPC”, “Corporation”, “Company”, “we”, “us”, and “our” shall mean Union Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which we separately refer to as “UPRR” or the “Railroad”.

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 United States of America (GAAP).

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.

~~Available~~Cautionary Information

Statements in this Form 10-Q/filing, including forward-looking statements, speak only as of and are based on information we have learned as of April 23, 2020. We assume no obligation to update any such information to reflect subsequent developments, changes in assumptions or changes in other factors affecting forward-looking information. If we do update one or more of these statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other statements.

Certain statements in this report, and statements in other reports or information filed or to be filed with the SEC (as well as information included in oral statements or other written statements made or to be made by us), are forward-looking statements within the meaning of Section 27A Securities Act of 1933 and the Section 21E of the Exchange Act. These forward-looking statements and information include, without limitation, the statements and information set forth under the caption “Effects from COVID-19” in Item 2 regarding the impact of the COVID-19 pandemic on our business and operations, “Liquidity and Capital Resources” in Item 2 regarding our capital plan, statements under the caption “Share Repurchase Programs”, statements under the caption “Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments”, and statements under the caption “Other Matters.” Forward-looking statements and information also include any other statements or information in this report regarding: potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the world economy (including our customers and supply chains), including as a result of decreased volume and carloadings; closing of customer manufacturing; distribution or production facilities; expectations as to operational or service improvements; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications; expectations as to cost savings, revenue growth, and earnings; the time by which goals, targets, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, future economic performance, and general economic conditions; proposed new products and services; estimates of costs relating to environmental remediation and restoration; estimates and expectations regarding tax matters, expectations that claims, litigation, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse effect on our consolidated results of operations, financial condition, or liquidity and any other similar expressions concerning matters that are not historical facts.

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amplified by and may continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic. The Risk Factors in Item 1A of our 2019 Annual Report on Form 10-K, filed February 7, 2020 and in Part II, Item 1A of this report, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements, and this report, including this Item 2, should be read in conjunction with these Risk Factors. To the extent circumstances require or we deem it otherwise necessary, we will update or amend these risk factors in a Form 10-Q or Form 8-K. Forward-looking 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.

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 2019 Annual Report on Form 10-K. There have not been any significant changes with respect to these policies during the first three months of 2020.

RESULTS OF OPERATIONS

Quarterly Summary

The Company reported earnings of $2.15 per diluted share on net income of $1.5 billion and an all-time record operating ratio of 59.0% in the first quarter of 2020 compared to earnings of $1.93 per diluted share on net income of $1.4 billion for the first quarter of 2019. Freight revenues decreased 3% in the quarter compared to the same period in 2019 driven by a 7% volume decline. Average revenue per car (ARC) was up 5% due to positive mix of traffic and core pricing gains partially offset by lower fuel surcharge revenue. Growth in shipments of petroleum products, construction, metals, liquid petroleum gas (LPG), industrial chemicals, and plastics were more than offset by declines in intermodal, coal and frac sand shipments.

Productivity initiatives, volume declines, lower fuel prices and elimination of additional costs from weather events in 2019 drove operating expenses down 10% from 2019. These factors, coupled with price increases, more than offset the impact of the revenue decline as operating income increased 9% in the first quarter compared to the same period in 2019.

Effects from COVID-19

As COVID-19 spread throughout the world, our first quarter revenue was negatively impacted by the disruptions to China’s supply chain starting in mid-February and the closure of the U.S. automotive plants at the end of March. With the continuation of the pandemic into the second quarter and its further spread, we have seen material volume declines from March in autos, intermodal, chemicals, petroleum, coal and metals offset by increases in grain, construction and pulp and paper products. Demand driven resources will be adjusted to match the volumes and other cost savings initiatives will be implemented in the second quarter. In addition, we have to date incurred and expect to continue to incur additional expenses associated with keeping our employees, customers and communities safe. While we do not currently expect these expenses to have a material negative impact on our second quarter results overall, they may impact trends on certain expense lines.

Although the pandemic is causing economic disruptions, our rail network remains fluid and we have continued to serve our customers with minimal impact. Safety is our first priority and we are taking precautions to protect the health and wellbeing of our employees, as they play the most critical role in keeping our operations running. Our employees responsible for operating freight trains as well as maintaining rail infrastructure and equipment were deemed essential critical infrastructure workers by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Agency (CISA). In addition, the border restrictions on non-essential travel between the U.S., Canada and Mexico do not apply to freight

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shipments related to international trade. While our operations are currently not materially negatively affected, it is not possible to predict whether or how they may be negatively affected if the pandemic persists for an extended period. While we respond to this evolving situation, we intend to continue to execute on our strategic Unified Plan 2020.

We believe the steps we have taken to enhance our capital structure and liquidity have strengthened our ability to operate through current conditions. During the first quarter, we generated $2.2 billion of cash from operations. On March 31, 2020, we had $1.1 billion of cash and cash equivalents and $2 billion of credit available under our revolving credit facility and up to $400 million undrawn on the Receivables Facility. On April 7, 2020, we issued $750 million of long-term debt. We have $949 million of debt maturing before the end of the year. Based on our current cash position and outlook, we do not expect any issue funding our debt maturities in 2020. We have been, and we expect to continue to be, in compliance with our debt covenants. We will utilize some of the tax payment deferral opportunities provided by the IRS and Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Our bad debt provision may increase in 2020 if the creditworthiness of our customers deteriorates. We plan to maintain our dividend but have currently suspended our share repurchase activity with the exception of the final settlement on our $2 billion accelerated share repurchase program initiated on February 18, 2020.

This situation is fluid and highly uncertain, and, while the industrial sector may begin to rebound in the second quarter, consumer and industrial demand for these goods may have a longer recovery period. Even though the timing is unknown, we have adequate resources that can be put into service quickly when volume returns. Select locomotives, although not currently in use, are stored and maintained so they can be returned to service immediately. We also maintain a program for our train service employees to work a reduced schedule that allows them to stay qualified and return to full time status without additional training (alternate work status). We continue to maintain existing processes and procedures, including but not limited to processes and procedures around protection of our technology systems and proprietary data, even though a significant number of our employees are working from home. During this time of uncertainty, the health and wellbeing of our employees is top of mind as we continue our operating transformation and now navigate the challenges presented by the pandemic. Despite all of the steps taken to mitigate the risk presented by the pandemic, the impact on our 2020 financial and operating results could be material.

Operating Revenues



Millions,						%
for the Three Months Ended March 31,	2020		2019		Change
Freight revenues	$	4,880	$	5,010	(3)	%
Other subsidiary revenues		214		223	(4)
Accessorial revenues		117		133	(12)
Other		18		18	-
Total	$	5,229	$	5,384	(3)	%

We generate freight revenues by transporting freight or other materials from our three commodity groups. Prior to 2020, we reported on four commodity groups, thus 2020 commodity, ARC, and carloadings have been realigned to the new reporting format. 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.

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Freight revenue decreased 3% during the first quarter of 2020 compared to 2019, resulting from a 7% volume decline and lower fuel surcharge, partially offset by positive mix of traffic and core pricing gains. Fewer shipments of intermodal, coal and frac sand partially offset by increases in petroleum products, construction, metals, LPG, industrial chemicals, and plastics shipments drove the volume declines.

Each of our commodity groups includes revenue from fuel surcharges. Freight revenues from fuel surcharge programs were $351 million in the first quarter of 2020 compared to $398 million in the same period of 2019. The decline was driven by reduced volume and lower fuel prices.

Other revenue decreased in the first quarter compared to 2019 due to volume declines in intermodal. Lower revenue at our subsidiaries, primarily those that broker intermodal, transload, and refrigerated warehousing logistics services also contributed to the first quarter decrease compared to 2019.

The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:



Freight Revenues
Millions,					%
for the Three Months Ended March 31,	2020		2019		Change
Grain & grain products	$	689	$	665	4	%
Fertilizer		174		159	9
Food & refrigerated		250		242	3
Coal & renewables		421		554	(24)
Bulk		1,534		1,620	(5)
Industrial chemicals & plastics		495		452	10
Metals & minerals		469		536	(13)
Forest products		303		285	6
Energy & specialized markets		627		566	11
Industrial		1,894		1,839	3
Automotive		524		520	1
Intermodal		928		1,031	(10)
Premium		1,452		1,551	(6)
Total	$	4,880	$	5,010	(3)	%



Revenue Carloads
Thousands,			%
for the Three Months Ended March 31,	2020	2019	Change
Grain & grain products	175	169	4	%
Fertilizer	46	43	7
Food & refrigerated	48	47	2
Coal & renewables	208	256	(19)
Bulk	477	515	(7)
Industrial chemicals & plastics	154	148	4
Metals & minerals	174	180	(3)
Forest products	56	56	-
Energy & specialized markets	162	147	10
Industrial	546	531	3
Automotive	208	210	(1)
Intermodal [a]	709	831	(15)
Premium	917	1,041	(12)
Total	1,940	2,087	(7)	%

[a] For intermodal shipments each container or trailer equals one carload.

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Average Revenue per Car					%
for the Three Months Ended March 31,	2020		2019		Change
Grain & grain products	$	3,940	$	3,924	-	%
Fertilizer		3,768		3,718	1
Food & refrigerated		5,277		5,219	1
Coal & renewables		2,022		2,162	(6)
Bulk		3,219		3,146	2
Industrial chemicals & plastics		3,205		3,047	5
Metals & minerals		2,697		2,968	(9)
Forest products		5,457		5,145	6
Energy & specialized markets		3,866		3,865	-
Industrial		3,469		3,465	-
Automotive		2,525		2,472	2
Intermodal [a]		1,307		1,241	5
Premium		1,583		1,489	6
Average	$	2,516	$	2,401	5	%

[a] For intermodal shipments each container or trailer equals one carload.

Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated goods, and coal and renewables. Freight revenue from bulk shipments decreased in the first quarter of 2020 compared to 2019 due to a 7% volume decline and lower fuel surcharge revenue, partially offset by positive business mix and core pricing gains. Volume declines were driven by a reduction in coal shipments partially offset by growth in ethanol and fertilizer shipments. Continued softness in market conditions due to historically low natural gas prices, a mild winter and weak export demand drove the 20% decline in coal shipments in the first quarter 2020 compared to the same period in 2019, which was negatively impacted by last year’s weather events.

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 3% in the first quarter compared to 2019 due to a 3% increase in volume and core pricing gains, partially offset by a negative mix of traffic and lower fuel surcharge revenue. Growth in petroleum products, construction, metals, LPG, industrial chemicals and plastics more than offset the declines in frac sand. In the first part of the quarter, favorable Canadian spreads facilitated strength in Canadian crude business to the U.S. Gulf. Mexican market strength drove increased LPG shipments. In addition, volume increases were driven by strong market demand in construction, industrial chemicals and plastics. Strong metals shipments were due to inventory replenishments. Sand shipments decreased due to the use of local sand and drilling declines compared to first quarter 2019.

Premium – Premium includes shipments of finished automobiles, automotive parts, and various merchandise in intermodal containers, both domestic and international. Premium revenue declined 6% compared to 2019 as a 12% decline in premium volume more than offset a 6% improvement in ARC, driven by positive mix of traffic and core pricing gains. The decrease in premium volume was concentrated in international intermodal shipments, which faced a difficult year-over-year comparison due to trade uncertainty and expected tariffs in early 2019. The 2020 impacts of the COVID-19 pandemic, including the extended Lunar New Year holiday, materially disrupted supply chains in China and the surrounding regions. Domestic shipments were also impacted negatively due to the disrupted supply chain driving weak imports and fewer shipments off the west coast. The surplus in truck capacity also contributed to the weakness in domestic shipments. Automotive shipments were strong for most of the first quarter until the pandemic closed dealerships and manufacturing plants in North America the last few weeks in March and into the second quarter, resulting in a 1% decline in volume compared to first quarter 2019.

Mexico Business – Each of our commodity groups includes revenue from shipments to and from Mexico. Revenue from Mexico business increased 1% as positive mix of traffic and pricing gains more than offset the 2% decline in shipments. Growth in beer, LPG and industrial chemical shipments were more than offset by declines in coal and intermodal shipments.

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Operating Expenses



Millions,					%
for the Three Months Ended March 31,	2020		2019		Change
Compensation and benefits	$	1,059	$	1,205	(12)	%
Depreciation		547		549	-
Purchased services and materials		521		576	(10)
Fuel		434		531	(18)
Equipment and other rents		227		258	(12)
Other		298		305	(2)
Total	$	3,086	$	3,424	(10)	%

Operating expenses decreased $338 million in the first quarter compared to 2019 driven by productivity initiatives, volume declines, lower fuel prices and lower year-over-year weather-related costs. Partially offsetting these decreases compared to 2019 are an employment tax refund recognized in 2019, inflation and increased bad debt expense.

Compensation and Benefits –Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, other postretirement benefits, and incentive costs. For the first quarter, expenses decreased 12% compared to 2019 due to a 15% reduction in employee levels driven by a 7% decline in carload volumes and productivity initiatives. Comparisons with the first quarter of 2019 were favorably impacted by fewer workforce reduction expenses and decreased weather-related costs, offset by an employment tax refund recognized in 2019.

Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was essentially flat compared to the first quarter of 2019.

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 decreased 10% primarily due to lower locomotive maintenance expenses due to a smaller active fleet, volume-related costs for intermodal and transload services, costs associated with derailments, professional services costs and lower year-over-year weather-related costs.

Fuel –Fuel includes locomotive fuel and fuel for highway and non-highway vehicles and heavy equipment. A 10% decline in locomotive diesel fuel prices, which averaged $1.87 per gallon (including taxes and transportation costs) in the first quarter of 2020 compared to $2.07 per gallon in the same period in 2019, a 5% improvement in the fuel consumption rate, computed as gallons of fuel consumed divided by gross ton-mile in thousands, and a 4% decline in gross ton-miles drove the decrease in the first quarter compared to the same period in 2019.

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 decreased 12% in the first quarter compared to 2019, driven by lower locomotive and freight car lease expenses, decreased car rent expense due to volume declines, and improved cycle time partially offset by lower equity income from our investment in TTX Company.

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 2% in the first quarter compared to 2019 driven primarily by lower costs associated with destroyed equipment and freight loss and damage costs. Conversely, additional bad debt expense associated with the pandemic-induced uncertainty related to certain customer receivables partially offset these decreases versus 2019.

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Non-Operating Items



Millions,					%
for the Three Months Ended March 31,	2020		2019		Change
Other income	$	53	$	77	(31)	%
Interest expense		(278)		(247)	13
Income taxes		(444)		(399)	11

Other Income – Other income decreased in the first quarter of 2020 compared to 2019 as a result of $27 million in interest income associated with an employment tax refund in 2019.

Interest Expense – Interest expense increased in the first quarter of 2020 compared to 2019 due to an increase in the weighted-average debt level of $27.3 billion in 2020 compared to $23.6 billion in 2019, partially offset by a lower effective interest rate of 4.1% in 2020 compared to 4.3% in 2019.

Income Taxes – Income taxes increased in the first quarter of 2020 compared to 2019 due to higher pre-tax income. Our effective tax rates for the first quarter of 2020 and 2019 were 23.1% and 22.3%, respectively.

OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS

We report a number of key performance measures weekly to the Surface Transportation Board (STB). We provide this data on our website at www.up.com/investor/aar-stb_reports/index.htm.

Operating/Performance Statistics

In an effort to operate a safe, reliable and efficient railroad, management uses these key operating metrics to evaluate the health of our network. The metrics are continuously measured to determine 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:



			%
For the Three Months Ended March 31,	2020	2019	Change
Gross ton-miles (GTMs) (billions)	201.3	210.3	(4)	%
Revenue ton-miles (billions)	99.7	106.7	(7)
Freight car velocity (daily miles per car) [a]	209	194	8
Average train speed (miles per hour) [a] [b]	25.4	24.6	3
Average terminal dwell time (hours) [a] [b]	23.8	26.8	(11)
Locomotive productivity (GTMs per horsepower day)	131	111	18
Train length (feet)	8,396	7,292	15
Intermodal car trip plan compliance (%)	85	66	19	pts
Manifest/Automotive car trip plan compliance (%)	64	63	1	pts
Workforce productivity (car miles per employee)	894	812	10
Total employees (average)	33,872	40,053	(15)
Operating ratio	59.0	63.6	(4.6)	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 decreased 4% and 7%, respectively, in 2020 compared to 2019, driven by a 7% decline in carloadings. Changes in commodity mix drove the variance in year-over-year decreases between gross ton-miles and revenue ton-miles and carloads.

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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). Continued implementation of Unified Plan 2020 was the primary driver of the 8% improvement from 2019 as both average terminal dwell and average train speed improved in the first quarter of 2020 compared to the same period in 2019. Average terminal dwell time in 2020 decreased 11% compared to 2019 largely due to improved terminal processes, transportation plan changes to eliminate switches, and a decrease in freight car inventory levels. Average train speed in the first quarter of 2020 improved 3% compared to the first quarter of 2019 as weather-related challenges slowed trains in 2019.

Locomotive Productivity – Locomotive productivity is gross ton-miles per average daily locomotive horsepower. Locomotive productivity increased 18% in the first quarter compared to 2019 driven by a 23% reduction in our average active fleet size due to transportation plan changes and lower locomotive dwell times.

Train Length – Train length is the average maximum train length on a route measured in feet. Our average train length increased 15%, to 8,396 feet, in the first quarter 2020 compared to same period in 2019 as a result of blending service products and transportation plan changes.

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 intermodal containers / trailers and manifest / automotive railcars. Intermodal car trip plan compliance improved 19 points, to 85%, in the first quarter of 2020 compared to same period in 2019 as a result of improved train speed and reduced dwell at our origin and destination ramps. Manifest / automotive car trip plan compliance of 64% was 1 point better in the first quarter compared to 2019 due to improved car dwell in our yards and more reliable first mile last mile service. Both metrics improvement was partially due to milder weather relative to the series of significant weather events in the first quarter of 2019.

Workforce Productivity – Workforce productivity is average daily car miles per employee. Workforce productivity improved 10% as average daily car miles decreased 7% while employees decreased 15% compared to 2019. Lower car volumes drove the decline in average daily car miles. The 15% decline in employee levels was driven by a 7% decline in carload volumes, productivity initiatives and a smaller capital workforce. At the end of the first quarter, approximately 3,800 employees across all crafts were either furloughed or in alternate work status.

Operating Ratio – Operating ratio is our operating expenses reflected as a percentage of operating revenue. Our operating ratio of 59.0% was an all-time record and improved 4.6 points compared to 2019 mainly driven by productivity initiatives, lower fuel prices, and elimination of additional costs associated with weather-related challenges in 2019, which were partially offset by inflation and other cost increases.

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Adjusted Debt / Adjusted EBITDA



Millions, Except Ratios	Mar. 31,		Dec. 31,
for the Trailing Twelve Months Ended [a]	2020		2019
Net income	$	6,002	$	5,919
Add:
Income tax expense		1,873		1,828
Depreciation		2,214		2,216
Interest expense		1,081		1,050
EBITDA	$	11,170	$	11,013
Adjustments:
Other income		(219)		(243)
Interest on operating lease liabilities [b]		62		68
Adjusted EBITDA	$	11,013	$	10,838
Debt	$	27,876	$	25,200
Operating lease liabilities		1,665		1,833
Unfunded pension and OPEB, net of taxes of $116 and $124		387		400
Adjusted debt	$	29,928	$	27,433
Adjusted debt / Adjusted EBITDA		2.7		2.5

[a]The trailing twelve month income statement information ended March 31, 2020 is recalculated by taking the twelve months ended December 31, 2019, subtracting the three months ended March 31, 2019, and adding the three months ended March 31, 2020.

[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, other income 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 to, rather than as a substitute for, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At both March 31, 2020 and December 31, 2019, the incremental borrowing rate on operating lease liabilities was 3.7%.

LIQUIDITY AND CAPITAL RESOURCES

Financial Condition



Cash Flows
Millions,
for the Three Months Ended March 31,	2020		2019
Cash provided by operating activities	$	2,155	$	1,959
Cash used in investing activities		(807)		(784)
Cash used in financing activities		(997)		(1,405)
Net change in cash, cash equivalents and restricted cash	$	351	$	(230)

Operating Activities

Cash provided by operating activities increased in the first three months of 2020 compared to the same period of 2019 due primarily to higher net income.

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Investing Activities

Increased capital investments on road infrastructure replacements drove higher cash used in investing activities in the first three months of 2020 compared to the same period in 2019.

The table below details cash capital investments:



Millions,
for the Three Months Ended March 31,	2020		2019
Rail and other track material	$	141	$	142
Ties		135		112
Ballast		61		48
Other [a]		143		103
Total road infrastructure replacements		480		405
Line expansion and other capacity projects		81		100
Commercial facilities		28		26
Total capacity and commercial facilities		109		126
Locomotives and freight cars [b]		103		94
Positive train control		18		17
Technology and other		97		110
Total cash capital investments	$	807	$	752

[a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.

[b]Locomotives and freight cars include lease buyouts of $14 million in 2020 and $30 million in 2019.

Capital Plan

We estimate our 2020 capital expenditures to be approximately $2.9 billion, a reduction of $150 to $200 million from our previously announced capital plan as a result of economic uncertainties associated with the COVID-19 pandemic and the impact to our business. Further revisions may occur if business conditions or the regulatory environment affect our ability to generate sufficient returns on these investments.

Financing Activities

Cash used in financing activities decreased $408 million in the first three months of 2020 compared to the same period of 2019, driven by decreased share repurchases.

See Note 14 of the Condensed Consolidated Financial Statements for a description of all our outstanding financing arrangements and significant new borrowings and Note 18 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 operations 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.

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The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure):



Millions,
for the Three Months Ended March 31,	2020		2019
Cash provided by operating activities	$	2,155	$	1,959
Cash used in investing activities		(807)		(784)
Dividends paid		(660)		(626)
Free cash flow	$	688	$	549

The following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure):



Millions,
for the Three Months Ended March 31,	2020		2019
Cash provided by operating activities	$	2,155	$	1,959
Cash used in capital investments		(807)		(752)
Total (a)		1,348		1,207
Net income (b)		1,474		1,391
Cash flow conversion rate (a/b)		91	%	87	%

Current Liquidity Status

We are continually evaluating the impact of COVID-19 on our financial condition and liquidity. Although the situation is fluid and highly uncertain, we have analyzed 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 first quarter, we generated $2.2 billion of cash from operations. At March 31, 2020, we had over $1 billion of cash and cash equivalents. We have access to commercial paper and bank markets. We also have access to $2 billion of credit available under our revolving credit facility and up to $400 million undrawn on the Receivables Facility. On April 7, 2020, we issued $750 million of long-term debt demonstrating our current ability to access the corporate bond market. We have $949 million of debt maturing before the end of the year. Based on our current cash position and outlook, we do not expect any issue funding our debt maturities in 2020. We plan to maintain our dividend, while we have currently suspended our share repurchase activity with the exception of the final settlement on our $2 billion accelerated share repurchase program initiated on February 18, 2020.

We are also utilizing the provisions of IRS Notice 2020-23 to shift our federal estimated income tax payments from the second quarter to the third quarter and the CARES Act to defer our employment tax deposits to December 2021 and December 2022.

Share Repurchase Programs

Effective April 1, 2019, our Board of Directors authorized the repurchase of up to 150 million shares of our common stock by March 31, 2022. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and amount of these transactions. As of March 31, 2020, we repurchased a total of $39.7 billion of our common stock since commencement of our repurchase programs in 2007. The table below represents shares repurchased under repurchase programs during 2020 and 2019:



	Number of Shares Purchased		Average Price Paid
	2020	2019	2020		2019
First quarter [a]	14,305,793	18,149,450	$	178.66	$	165.79
Remaining number of shares that may be repurchased under current authority				118,849,288

[a]Includes 8,786,380 and 11,795,930 shares repurchased in February 2020 and 2019, respectively, under accelerated share repurchase programs.

Table of Contents

Accelerated Share Repurchase Programs –The Company has established accelerated share repurchase programs (ASRs) with financial institutions to repurchase shares of our common stock. These ASRs have been structured so that at the time of commencement, we pay a specified amount to the financial institutions and receive an initial delivery of shares. Additional shares may be received at the time of settlement. The final number of shares to be received is based on the volume weighted average price of the Company’s common stock during the ASR term, less a discount and subject to potential adjustments pursuant to the terms of such ASR.

On February 26, 2019, the Company received 11,795,930 shares of its common stock repurchased under ASRs for an aggregate of $2.5 billion. Upon settlement of these ASRs in the third quarter of 2019, we received 3,172,900 additional shares.

Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments

As described in the notes to the Condensed Consolidated Financial Statements and as referenced in the tables below, we have contractual obligations and commercial commitments that may affect our financial condition. However, based on our assessment of the underlying provisions and circumstances of our contractual obligations and commercial commitments, 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.

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The following tables identify material obligations and commitments as of March 31, 2020:



			Apr. 1		Payments Due by Dec. 31,
			through
Contractual Obligations			Dec. 31,											After
Millions	Total		2020		2021		2022		2023		2024		2024		Other
Debt [a]	$	48,918	$	1,548	$	2,148	$	2,670	$	2,236	$	2,255	$	38,061	$	-
Operating leases [b]		1,935		147		302		267		226		216		777		-
Finance lease obligations [c]		640		84		142		127		88		75		124		-
Purchase obligations [d]		2,664		1,060		458		219		169		153		602		3
Other postretirement benefits [e]		313		37		36		33		33		29		145		-
Income tax contingencies [f]		67		2		-		-		-		-		-		65
Total contractual obligations	$	54,537	$	2,878	$	3,086	$	3,316	$	2,752	$	2,728	$	39,709	$	68

[a]Excludes finance lease obligations of $552 million, as well as unamortized discount and deferred issuance costs of $(1,212) million. Includes an interest component of $20,382 million.

[b] Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $270 million.

[c]Represents total obligations, including interest component of $88 million.

[d]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.

[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 March 31, 2020. For amounts where the year of settlement is uncertain, they are included in the Other column.



			Apr. 1		Amount of Commitment Expiration by Dec. 31,
			through
Other Commercial Commitments			Dec. 31,											After
Millions	Total		2020		2021		2022		2023		2024		2024
Credit facilities [a]	$	2,000	$	-	$	-	$	-	$	2,000	$	-	$	-
Receivables securitization facility [b]		800		-		-		800		-		-		-
Guarantees [c]		15		5		5		5		-		-		-
Standby letters of credit [d]		18		7		11		-		-		-		-
Total commercial commitments	$	2,833	$	12	$	16	$	805	$	2,000	$	-	$	-

[a] None of the credit facility was used as of March 31, 2020.

[b] $400 million of the receivables securitization facility was utilized as of March 31, 2020, which is accounted for as debt. The full program matures in July 2022.

[c]Includes guaranteed obligations related to our affiliated operations.

[d]None of the letters of credit were drawn upon as of March 31, 2020.

OTHER MATTERS

‎

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Accounting Pronouncements – See Note 2 to the Condensed Consolidated Financial Statements.

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; ~~eXtensible Business Reporting Language (XBRL) documents;~~ 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 Securities and Exchange Commission (SEC). We also make available on our website previously filed SEC reports and exhibits via a link to EDGAR on the SEC’s Internet site at www.sec.gov. We provide these previously filed reports as a convenience and their contents reflect only information that was true and correct as of the date of the report. We assume no obligation to update this historical information. Additionally, our corporate governance materials, including By-Laws, Board Committee charters, governance guidelines and policies, and codes of conduct and ethics for directors, officers, and employees are available on our website. From time to time, the corporate governance materials on our website may be updated as necessary to comply with rules issued by the SEC and the New York Stock Exchange or as desirable to promote the effective and efficient governance of our company. Any security holder wishing to receive, without charge, a copy of any of our SEC filings or corporate governance materials should send a written request to: Corporate Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179.

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.

~~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 2018 Annual Report on Form 10-K. ~~Changes to our accounting policies as a result of adopting ASU 2016-02 are discussed within Note 16~~ ~~of the Condensed Consolidated Financial Statements~~.

~~Table of Contents~~

~~RESULTS OF OPERATIONS~~

~~Quarterly Summary~~

We reported earnings of $1.93 per diluted share on net income of $1.4 billion in the first quarter of 2019 compared to earnings of $1.68 per diluted share on net income of $1.3 billion for the first quarter of 2018.

Freight revenues decreased 2% in the first quarter compared to the same period in 2018 driven by a 2% volume decline. Average revenue per car (ARC) was essentially flat as core pricing gains and higher fuel surcharge revenue were offset by negative mix of traffic. Growth in shipments of intermodal, rock, petroleum products, plastics, and steel were more than offset by declines in coal, frac sand, domestic intermodal, grain, grain products, and auto parts shipments.

~~Service disruptions were caused by a series of significant weather events throughout the quarter.~~ ~~Heavy snowfall and harsh winter conditions in the Midwest and Pacific Northwest were followed by widespread flooding across the central portion of our network~~. These weather events negatively impacted carload volumes across various lines of business and drove additional operating expenses in the quarter, adversely affecting earnings by approximately $0.15 per diluted share. Despite the disruptions, we remained focused on productivity initiatives and implementation of Unified Plan 2020, the Company’s plan for operating a safe, reliable and efficient railroad by increasing reliability of our service product, reducing variability in network operations, and improving resource utilization costs. As part of this implementation, network operations improved significantly throughout the fourth quarter and into 2019. Year-over-year we saw a 6% improvement in locomotive productivity and a 7% improvement in freight car velocity.

Although we incurred additional costs from the weather events, including higher labor, equipment rental, locomotive maintenance, and fuel consumption costs, they were more than offset by lower fuel prices, productivity savings and a $42 million reduction of compensation expense due to refund claims for railroad retirement taxes on certain stock awards and bonus payments (employment tax refund). The reduction in expenses more than offset lower top line results, generating operating income growth of 1% and 1.0 point improvement in the operating ratio.

~~Operating Revenues~~

Millions,

%
for the Three Months Ended March 31,
2019 2018
Change
Freight revenues
$
5,010
$
5,122 (2)
%
Other subsidiary revenues

223

217 3

Accessorial revenues

133

121 10

Other

18

15 20

Total
$
5,384
$
5,475 (2)
%

We generate freight revenues by transporting freight or other materials from our four commodity groups. Freight revenues vary with volume (carloads) and ARC. Changes in price, traffic mix and fuel surcharges drive ARC. We provide some of our customers with contractual incentives for meeting or exceeding specified cumulative volumes or shipping to and from specific locations, which we record as reductions to freight revenues based on the actual or projected future shipments. 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 revenues decreased 2% during the first quarter of 2019 compared to 2018,~~ resulting from a 2% volume decline and negative mix of traffic partially offset by core pricing gains and higher fuel surcharge revenue. Weather-related disruptions negatively impacted coal, domestic intermodal, grain products and lumber volumes year-over-year. Fewer shipments of frac sand, grain and auto parts partially offset by growth in international intermodal, rock, petroleum products and plastics drove additional volume declines.

~~Table of Contents~~

Each of our commodity groups includes revenue from fuel surcharges. Freight revenues from fuel surcharge programs were $398 million in the first quarter of 2019 compared to $353 million in the same period of 2018. Higher fuel surcharge revenue resulted from lag in fuel surcharge recovery due to the sequential decrease in fuel price from the fourth quarter of 2018 (it can generally take up to two months for changing fuel prices to affect fuel surcharge recoveries) partially offset by volume declines.

~~Other revenues increased in the first quarter compared to 2018 due to higher~~ ~~accessorial~~ charges focused on incentivizing customers’ efficient use of Company assets. Higher revenues at our subsidiaries, primarily those that broker intermodal, transload, and refrigerated warehousing logistics services also contributed to the first quarter increase compared to 2018.

~~The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type:~~

Freight Revenues

Millions,

%
for the Three Months Ended March 31,
2019 2018
Change
Agricultural Products
$
1,067
$
1,098 (3)
%
Energy

982

1,173 (16)

Industrial

1,410

1,340 5

Premium

1,551

1,511 3

Total
$
5,010
$
5,122 (2)
%

Revenue Carloads

Thousands,

%
for the Three Months Ended March 31,
2019 2018
Change
Agricultural Products
259 279 (7)
%
Energy
358 419 (15)

Industrial
429 411 4

Premium [a]
1,041 1,016 2

Total
2,087 2,125 (2)
%

Average Revenue per Car

%
for the Three Months Ended March 31,
2019 2018
Change
Agricultural Products
$
4,123
$
3,942 5
%
Energy

2,740

2,799 (2)

Industrial

3,292

3,262 1

Premium

1,489

1,487
-

Average
$
2,401
$
2,411
-
%

~~[a] For intermodal shipments each container or trailer equals one carload.~~

~~Agricultural Products~~ – Freight revenue from agricultural products shipments decreased in the first quarter of 2019 compared to 2018 due to 7% decline in volume partially offset by core pricing gains and higher fuel surcharge revenue. In the first quarter, volume declines were driven by lower exports of grain to China, and lower shipments of several products due to weather-related challenges compared to 2018.

~~Energy –~~ ~~Freight~~ revenue from energy shipments decreased 16% in the first quarter compared to 2018 due to a 15% decline in volume and negative mix of traffic, partially offset by core pricing gains and higher fuel surcharge revenue. Frac sand shipments, which represents 11% of energy shipments in 2019, declined 45% in the first quarter compared to last year as regional sand supplies in the Permian displaced select shipments originating from the upper Midwest. In addition, coal and coke shipments, which represents 70% of energy shipments in 2019, declined 14% due to weather-related operational challenges, a commercial contract loss, and certain UPRR-served facility retirements. Growth in petroleum shipments (both crude and refined) due to strong drilling activity partially offset the sand and coal volume declines.

~~Table of Contents~~

~~Industrial~~ – Freight revenue from industrial shipments increased in the first quarter of 2019 compared to 2018 due to volume growth, core pricing gains, and higher fuel surcharge revenue, partially offset by negative mix of traffic. Volume grew 4% in the first quarter compared to 2018 driven by strong market demand in construction products, plastics and metals, while lumber shipments decreased due to weather-related challenges compared to 2018.

~~Premium~~ – Freight revenue from premium shipments increased in the first quarter compared to 2018 due to core pricing gains, volume growth, and higher fuel surcharge revenue, partially offset by negative mix of traffic. Volume grew 2% in the first quarter compared to 2018 driven by growth in international intermodal shipments due to surge in shipments and newly secured business. These volume increases were partially offset by declines in domestic intermodal shipments, including containerized automotive parts, as shipments moved via truck due to weather-related challenges, in addition to increased truck capacity.

~~Mexico Business –~~ Each of our commodity groups includes revenue from shipments to and from Mexico. Revenue from Mexico business decreased 1% to $576 million in the first quarter of 2019 compared to 2018 driven by 7% decline in volume, partially offset by higher fuel surcharge revenue, and core pricing gains. The decrease in volume was driven by shipments of automotive parts, international intermodal, finished vehicles, and beverage shipments, partially offset by growth in petroleum products.

~~Operating Expenses~~

Millions,

%
for the Three Months Ended March 31,
2019 2018
Change
Compensation and benefits
$
1,205
$
1,273 (5)
%
Purchased services and materials

576

599 (4)

Depreciation

549

543 1

Fuel

531

589 (10)

Equipment and other rents

258

266 (3)

Other

305

266 15

Total
$
3,424
$
3,536 (3)
%

~~Operating expenses decreased $112 million in the first quarter compared to 2018 driven by productivity savings, lower fuel price, lower~~ ~~compensation expense due to the employment tax refund (see Note 17 of the Condensed Consolidated Financial Statements),~~ and lower management and administrative wage and benefit costs. Additional costs due to weather-related challenges, expense associated with a workforce reduction, higher destroyed equipment and freight damage costs, depreciation and inflation partially offset these decreases compared to 2018.

~~Compensation and Benefits~~ – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, other postretirement benefits, and incentive costs. For the first quarter, expenses decreased 5% compared to 2018 due to the employment tax refund ~~and lower~~ management and administrative wage and benefit costs. Expenses associated with a workforce reduction, increased costs due to weather-related challenges and wage inflation partially offset the decreases.

~~Purchased Services and Materials~~–Expense for purchased services and materials includes the costs of services purchased from outside contractors and other service providers (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 decreased 4% in the first quarter compared to 2018. Lower locomotive repair expense due to a smaller active fleet in service and lower costs for services purchased from outside contractors primarily drove the decrease in the first quarter. Conversely, higher costs associated with weather-related challenges, derailments and volume-related intermodal contracting costs partially offset these decreases versus 2018.

~~Table of Contents~~

~~Depreciation~~ – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. A higher depreciable asset base, reflecting recent years’ higher capital spending, increased depreciation expense in the first quarter of 2019 compared to 2018.

~~Fuel~~ ~~– Fuel includes locomotive fuel and fuel for highway and non-highway vehicles and heavy equipment. A 7% decline in gross ton-miles and lower locomotive diesel fuel prices, which averaged~~ $2.07 per gallon (including taxes and transportation costs) in the first quarter of 2019, compared to $2.13 per gallon in the same period in 2018, drove the decrease in the first quarter compared to the same period in 2018. While the fuel consumption rate, computed as gallons of fuel consumed divided by gross ton-miles in thousands, increased 1% compared to the first quarter of 2018, driven by weather-related challenges.

~~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 decreased 3% in the first quarter compared to 2018, driven by lower locomotive and freight car lease expenses, decreased car rent expense due to volume declines, and improved cycle time partially offset by additional cost associated with weather-related challenges.

~~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 increased 15% in the first quarter compared to 2018 driven primarily by higher destroyed equipment and freight loss and damage costs.

~~Non-Operating Items~~

Millions,

%
for the Three Months Ended March 31,
2019 2018
Change
Other income/(expense)
$
77
$
(42)
F
%
Interest expense

(247)

(186) 33

Income taxes

(399)

(401)
-

~~Other Income/(Expense)~~ – Other income/(expense) increased in the first quarter of 2019 as a result of $27 million in interest income associated with the employment tax refund in 2019 and a decrease of $85 million in expense associated with early-extinguishment of outstanding debentures and mortgage bonds recognized in the first quarter of 2018.

~~Interest Expense~~ – Interest expense increased in the first quarter of 2019 compared to 2018 due to an increase in the weighted-average debt level of $23.6 billion in 2019 compared to $17.1 billion in 2018, partially offset by a lower effective interest rate of 4.3% in 2019 compared 4.4% in 2018.

~~Income Taxes –~~ Income taxes were lower in the first quarter of 2019 compared to 2018, driven by higher excess tax benefits from the exercise of stock options, partially offset by higher income. Our effective tax rates for the first quarter of 2019 and 2018 were 22.3% and 23.4%, respectively.

~~Table of Contents~~

~~OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS~~

~~We report a number of key performance measures weekly to the Association of American Railroads (AAR). We provide this data on our website at www.up.com/investor/aar-stb_reports/index.htm.~~

~~Operating/Performance Statistics~~

~~Railroad performance measures are included in the table below:~~

%
For the Three Months Ended March 31,
2019 2018
Change
Gross ton-miles (GTMs) (billions)
210.3 226.9 (7)
%
Revenue ton-miles (billions)
106.7 117.4 (9)

Freight car velocity (daily miles per car)
185 173 7

Average train speed (miles per hour) [a]
23.3 24.8 (6)

Average terminal dwell time (hours) [a]
26.6 33.0 (19)

Locomotive productivity (GTMs per horsepower day)
111 105 6

Workforce productivity (car miles per employee)
812 826 (2)

Employees (average)
40,053 41,735 (4)

Operating ratio
63.6 64.6 (1.0)
pts

~~[a] As reported to the AAR.~~

~~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 decreased 7% and 9%, respectively, during the first quarter of 2019 compared to 2018, driven by a 2% decline in carloadings. Changes in commodity mix drove the variance in year-over-year decreases between gross ton-miles, revenue ton-miles and carloads.

~~Freight Car Velocity~~ – Freight car velocity is average daily car miles per car. 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). Implementation of Unified Plan 2020 drove the 7% improvement. Average terminal dwell time in the first quarter of 2018 decreased 19%, compared to the same period in 2018 largely due to a decrease in our freight car inventory levels, improved processes in the terminals and transportation plan changes to eliminate switches. Conversely, weather-related disruptions did impact our average train speed, as it declined 6% year-over-year.

~~Locomotive Productivity~~ – Locomotive productivity is gross ton-miles per average daily locomotive horsepower. Locomotive productivity increased 6% year-over-year and was flat with fourth quarter of 2018 as we reduced our active locomotive fleet by over 15% since the first quarter of 2018.

~~Workforce Productivity~~ – Workforce productivity is average daily car miles per employee. Workforce productivity declined 2% as average daily car miles decreased 6% while employees decreased 4% compared to the first quarter of 2018. Lower carload volumes and the major weather events drove the decline in average daily car miles. The 4% decline in employee levels was driven by a 2% decline in carload volumes and initiatives to further right-size the workforce. At the end of the first quarter, approximately 1,100 employees across all crafts were either furloughed or in alternate work status due primarily to a smaller active locomotive fleet. Weather-related operational challenges required a temporary increase in train crew resources, partially offsetting some of the year-over-year reductions.

~~Operating Ratio~~ – Operating ratio is our operating expenses reflected as a percentage of operating revenue. Our first quarter operating ratio of 63.6% improved 1.0 point compared to 2018 mainly driven by core pricing gains, productivity, lower fuel prices, and the employment tax refund~~which were offset by costs associated with the major weather events, other cost hurdles, and inflation.~~

~~Table of Contents~~

~~Adjusted Debt / Adjusted EBITDA~~

Millions, Except Ratios
Mar. 31,
Dec. 31,
for the Trailing Twelve Months Ended [a]
2019 2018
Net income
$
6,047
$
5,966
Less:

Other income

213

94
Add:

Income tax expense

1,773

1,775
Depreciation

2,197

2,191
Interest expense

931

870
EBITDA
$
10,735
$
10,708
Interest on operating lease liabilities [b]

77

84
Adjusted EBITDA (a)
$
10,812
$
10,792
Debt
$
25,112
$
22,391
Operating lease liabilities [c]

2,080

2,271
Unfunded pension and OPEB, net of taxes of $128 and $135

446

456
Adjusted debt (b)
$
27,638
$
25,118
Adjusted debt / Adjusted EBITDA (b/a)

2.6

2.3

~~[a]~~

The trailing twelve month income statement information ended March 31, 2019 is recalculated by taking the twelve months ended December 31, 2018, subtracting the three months ended March 31, 2018, and adding the three months ended March 31, 2019.

~~[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.~~

~~[c]~~

Effective January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases. ASU 2016-02 requires companies to recognize lease assets and lease liabilities on the balance sheet. Prior to adoption, the present value of operating leases was used in this calculation.

Adjusted debt to Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization 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 to, rather than as a substitute for, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At both March 31, 2019 and December 31, 2018, the incremental borrowing rate on operating lease liabilities was 3.7%.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Financial Condition~~

Cash Flows

Millions,

for the Three Months Ended March 31,
2019 2018
Cash provided by operating activities
$
1,959
$
1,901
Cash used in investing activities

(784)

(919)
Cash used in financing activities

(1,405)

(1,209)
Net change in cash, cash equivalents and restricted cash
$
(230)
$
(227)

~~Operating Activities~~

~~Cash provided by operating activities increased in the first three months of 2019 compared to the same period of 2018 due to higher net income.~~

~~Table of Contents~~

~~Investing Activities~~

~~Reduced capital investments on equipment purchases and Positive Train Control drove lower cash used in investing activities in the first three months of 2019 compared to the same period in 2018.~~

~~The table below details cash capital investments:~~

Millions,

for the Three Months Ended March 31,
2019 2018
Rail and other track material
$
142
$
128
Ties

112

114
Ballast

48

45
Other [a]

103

86
Total road infrastructure replacements

405

373
Line expansion and other capacity projects

100

42
Commercial facilities

26

36
Total capacity and commercial facilities

126

78
Locomotives and freight cars [b]

94

300
Positive train control

17

41
Technology and other

110

118
Total cash capital investments
$
752
$
910

~~[a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.~~

~~[b]Locomotives and freight cars include lease buyouts of $30 million in 2019 and $210 million in 2018.~~

~~Capital Plan~~

We expect our 2019 capital expenditures to be approximately $3.2 billion. Revisions may occur as we continue to evaluate the impact of Unified Plan 2020, or if business conditions or the regulatory environment affect our ability to generate sufficient returns on these investments.

~~Financing Activities~~

Cash used in financing activities increased $196 million in the first three months of 2019 compared to the same period of 2018, driven by a $2.3 billion increase in our share repurchase programs and a $58 million increase in dividends paid, partially offset by a $2.2 billion net increase in additional debt and commercial paper.

~~Free Cash Flow~~ – ~~Free cash flow is defined as cash provided by operating activities less cash used in investing activities and dividends paid.~~

Free cash flow is not considered a financial measure 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 is important to management and investors in evaluating our financial performance and measures our ability to generate cash without additional external financing. Free cash flow should be considered in addition to, rather than as a substitute for, cash provided by operating activities.

~~Table of Contents~~

~~The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure):~~

Millions,

for the Three Months Ended March 31,
2019 2018
Cash provided by operating activities
$
1,959
$
1,901
Cash used in investing activities

(784)

(919)
Dividends paid

(626)

(568)
Free cash flow
$
549
$
414

~~Share Repurchase Programs~~

On February 7, 2019, the Board of Directors approved a new share repurchase authorization, enabling the Company to buy up to 150 million of its common shares by March 31, 2022. The new authorization is effective April 1, 2019, and replaces the previous authorization of up to 120 million shares, which expired on March 31, 2019. As of March 31, 2019, we repurchased a total of $34.4 billion of our common stock since commencement of our repurchase programs in 2007. The table below represents shares repurchased in the first quarter of 2019 and 2018.

Number of Shares Purchased
Average Price Paid

2019 2018 2019 2018
First quarter [a]
18,149,450 9,259,004
$
165.79
$
132.84

~~[a]~~

~~Includes 11,795,930 shares repurchased in February 2019 under accelerated share repurchase programs.~~

~~Accelerated Share Repurchase Programs~~ – On February 25, 2019, the Company established accelerated share repurchase programs (ASRs) with two financial institutions to repurchase shares of our common stock. On February 26, 2019, the Company received 11,795,930 shares of its common stock repurchased under the ASRs for an aggregate of $2.5 billion. When the shares were received, the exchange was accounted for as an equity transaction with $2.0 billion of the aggregate amount allocated to treasury stock and the remaining $0.5 billion allocated to paid-in-surplus. The Company reflected the shares received as a repurchase of common stock in the weighted average common shares outstanding calculation for basic and diluted earnings per share.

Under these ASRs, we paid a specified amount to the financial institutions and received an initial delivery of shares. This delivery of shares represents the initial and likely minimum number of shares that we may receive under the ASRs. The final number of shares to be repurchased under the ASRs will be based on the volume weighted average price of the Company’s common stock during the ASR term, less a discount and subject to potential adjustments pursuant to the terms of such ASR. The final settlement is expected to be completed prior to the end of the third quarter of 2019, but the ASRs may be terminated early in certain circumstances.

~~Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments~~

~~Table of Contents~~

~~The following tables identify material obligations and commitments as of March 31, 2019:~~

Apr. 1
Payments Due by Dec. 31,

through

Contractual Obligations

Dec. 31,

After

Millions
Total
2019 2020 2021 2022 2023 2023
Other
Debt [a]
$
42,538
$
1,814
$
1,790
$
2,036
$
2,159
$
2,124
$
32,615
$
-
Operating leases [b]

2,436

196

384

308

273

235

1,040

-
Capital lease obligations [c]

779

72

143

147

130

88

199

-
Purchase obligations [d]

3,270

1,754

1,058

275

57

38

52

36
Other postretirement benefits [e]
358

37

37

37

36

36

175

-
Income tax contingencies [f]

176

99

-

-

-

-

-

77
Total contractual obligations
$
49,557
$
3,972
$
3,412
$
2,803
$
2,655
$
2,521
$
34,081
$
113

~~[a]Excludes capital lease obligations of $659 million, as well as unamortized discount and deferred issuance costs of $(836) million. Includes an interest component of $17,249 million.~~

~~[b]~~ ~~Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $356 million.~~

~~[c]Represents total obligations, including interest component of $120 million.~~

~~[d]~~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.

~~[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 March 31, 2019. For amounts where the year of settlement is uncertain, they are included in the Other column.

Apr. 1
Amount of Commitment Expiration by Dec. 31,

through

Other Commercial Commitments

Dec. 31,

After
Millions
Total
2019 2020 2021 2022 2023 2023
Credit facilities [a]
$
2,000
$
-
$
-
$
-
$
-
$
2,000
$
-
Receivables securitization facility [b]
650

650

-

-

-

-

-
Guarantees [c]

22

7

5

5

5

-

-
Standby letters of credit [d]

19

12

7

-

-

-

-
Total commercial commitments
$
2,691
$
669
$
12
$
5
$
5
$
2,000
$
-

~~[a]~~ ~~None of the credit facility was used as of March 31, 2019.~~

~~[b]~~ ~~$400 million of the receivables securitization facility was utilized as of March 31, 2019, which is accounted for as debt. The full program matures in July 2019.~~

~~[c]Includes guaranteed obligations related to our affiliated operations.~~

~~[d]None of the letters of credit were drawn upon as of March 31, 2019.~~

~~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

~~Table of Contents~~

~~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~~.

~~CAUTIONARY INFORMATION~~

Certain statements in this report, and statements in other reports or information filed or to be filed with the SEC (as well as information included in oral statements or other written statements made or to be made by us), are, or will be, forward-looking statements as defined by the Securities Act of 1933 and the Exchange Act. These forward-looking statements and information include, without limitation, the statements and information set forth under the caption “Liquidity and Capital Resources” in Item 2 regarding our capital plan, statements under the caption “Share Repurchase Programs”, statements under the caption “Off-Balance Sheet Arrangements, Contractual Obligations, and Commercial Commitments”, and statements under the caption “Other Matters.” Forward-looking statements and information also include any other statements or information in this report regarding: expectations as to operational or service improvements; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications; expectations as to cost savings, revenue growth, and earnings; the time by which goals, targets, or objectives will be achieved; projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, future economic performance, and general economic conditions; proposed new products and services; estimates of costs relating to environmental remediation and restoration; estimates and expectations regarding tax matters, expectations that claims, litigation, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse effect on our consolidated results of operations, financial condition, or liquidity and any other similar expressions concerning matters that are not historical facts.

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 variables or unknown or unforeseeable events or circumstances over which management has little or no influence or control. The Risk Factors in Item 1A of our 2018 Annual Report on Form 10-K, filed February 8, 2019, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements, and this report, including this Item 2, should be read in conjunction with these Risk Factors. To the extent circumstances require or we deem it otherwise necessary, we will update or amend these risk factors in a Form 10-Q or Form 8-K. Information regarding new risk factors or material changes to our risk factors, if any, is set forth in Item 1A of Part II of this report. Forward-looking 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.

Forward-looking statements speak only as of the date the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the Quantitative and Qualitative Disclosures About Market Risk previously disclosed in our ~~2018~~2019 Annual Report on Form 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer (CEO) and Executive Vice President and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant

~~Table of Contents~~

to Exchange Act Rules 13a-15 and 15d-15. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based upon that evaluation, the CEO and the CFO concluded that, as of the end of the period covered by this report, the Corporation’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

~~During the first quarter of 2019, we implemented new internal controls to support adoption of the new lease accounting standard~~ ~~ASU No. 2016-02,~~ ~~Leases (Topic 842)~~.

Additionally, the CEO and CFO determined that there were no ~~other~~ changes to the Corporation’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection with our business. We routinely assess our liabilities and contingencies in connection with these matters based upon the latest available information and, when necessary, we seek input from our third-party advisors when making these assessments. Consistent with SEC rules and requirements, we describe below material pending legal proceedings (other than ordinary routine litigation incidental to our business), material proceedings known to be contemplated by governmental authorities, other proceedings arising under federal, state, or local environmental laws and regulations (including governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of $100,000), and such other pending matters that we may determine to be appropriate.

Environmental Matters

As previously reported, the United States Department of Justice has asserted claims against Union Pacific in connection with a September 12, 2014 release of diesel from a locomotive fuel tank arising out of a derailment that occurred in Salem, OR. Some portion of that fuel entered Pringle Creek, which the United States asserts to be a Water of the United States within the meaning of the federal Clean Water Act. On March 26, 2019 the United States District Court for the District of Oregon entered the Stipulation of Settlement and Judgment in this matter, pursuant to which the Company will pay $47,500 to the United States and $47,500 to the State of Oregon.

We receive notices from the EPA and state environmental agencies alleging that we are or may be liable under federal or state environmental laws for remediation costs at various sites throughout the U.S., including sites on the Superfund National Priorities List or state superfund lists. We cannot predict the ultimate impact of these proceedings and suits because of the number of potentially responsible parties involved, the degree of contamination by various wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs.

Information concerning environmental claims and contingencies and estimated remediation costs is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Environmental, Item 7 of our ~~2018~~2019 Annual Report on Form 10-K.

Other Matters

~~Antitrust Litigation~~ - As we reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, 20 rail shippers (many of whom are represented by the same law firms) filed virtually identical antitrust lawsuits in various federal district courts against us and four other Class I railroads in the U.S. Currently, UPRR and three other Class I railroads are the named defendants in the lawsuit. An appellate hearing related to the U.S. District Court for the District of Columbia’s denial of class certification for the rail shippers was held on September 28, 2018. We are awaiting a decision regarding that hearing. For additional information on this lawsuit, please refer to Item 3. Legal Proceedings, under Other Matters, Antitrust Litigation in our most recently filed Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~

~~Table of Contents~~

~~As we reported~~2019, in our Current Report on Form 8-K, filed on June 10, 2011, the Railroad received a complaint filed in the U.S. District Court for the District of Columbia on June 7, 2011, by Oxbow Carbon & Minerals LLC and related entities (Oxbow). For additional information on Oxbow, please refer to Item 3. Legal Proceedings, under Other Matters, Antitrust Litigation in our most recently filed Annual Report on Form 10-K for the year ended December 31, 2018.

We continue to deny the allegations that our fuel surcharge programs violate the antitrust laws or any other laws. We believe that these lawsuits are without merit, and we will vigorously defend our actions. Therefore, we currently believe that these matters will not have a material adverse effect on any of our results of operations, financial condition, and liquidity.

In 2016, a lawsuit was filed in U.S. District Court for the Western District of Washington (the District Court-Washington) alleging violations of the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act relating to Fitness for Duty requirements for safety sensitive positions.

On August 8, 2016, the ~~U.S.~~ District ~~Court for the Western District of Washington~~Court-Washington granted plaintiffs' motion to transfer their claim to the U.S. District Court of ~~Nebraska.~~Nebraska (the District Court-Nebraska). On February 5, 2019, the ~~U.S.~~ District ~~Court of Nebraska~~Court-Nebraska granted plaintiffs’ motion to certify the ADA allegations as a class action. We ~~filed a petition for permission~~were granted the right to appeal this class certification to the U.S. ~~District Court’s decision to~~Court of Appeals for the Eighth Circuit ~~Court of Appeals. On~~(the Eighth Circuit) on March 13, 2019 and the matter was argued before the Eighth Circuit ~~granted Union Pacific’s Petition. We have also subsequently filed~~in November 2019. On March 24, 2020, a ~~Motion to Stay the U.S. District Court proceedings pending~~panel of Eighth Circuit judges issued a decision byoverturning the District Court-Nebraska and decertified the class action. Plaintiff’s counsel has indicated that they will not pursue an appeal of the Eighth ~~Circuit.~~ Circuit’s decision and will instead pursue former class members’ individual potential ADA claims.

We ~~continue to deny~~believe that these ~~allegations, believe this lawsuit is~~lawsuits are without merit, and we will vigorously defend our actions. We currently believe ~~this lawsuit~~that these matters will not have a material adverse effect on ~~any of~~ our results of operations, financial condition, and liquidity.

Item 1A. Risk Factors

~~There were no material changes from~~For a discussion of our potential risks and uncertainties, see the risk ~~factors previously disclosed in~~factor below and the information under Item 1A of our ~~2018~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019.

Our business, financial condition and results of operations have been adversely affected and in the future could be materially adversely affected by the coronavirus (COVID-19) pandemic.

Our business, financial condition and results of operations have been adversely affected by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity (including the decrease in demand for a broad variety of goods), disruptions in global supply chains and significant volatility and disruption of financial markets and that also has adversely affected workforces, customers, and regional and local economies.

Table of Contents

Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the impact on our business and financial condition remains uncertain and difficult to predict. The ultimate impact of the COVID-19 pandemic on our results of operations and financial condition remains uncertain and depends on numerous evolving factors, many of which are not within our control, and which we may not be able to effectively respond to, including, but not limited to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport, workforce pressures and social distancing and shelter-in-place orders); the effect of the pandemic on economic activity and actions taken in response; the effect on our customers and their demand for our services; the effect of the pandemic on the credit-worthiness of our customers; national or global supply chain challenges or disruption; facility closures; commodity cost volatility; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides, as well as response to a potential reoccurrence.

Further, the COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the pandemic, could also precipitate or aggravate the other risk factors that we identify in our 2019 Annual Report on Form 10-K, which could materially adversely affect our business, financial condition, results of operations (including revenues and profitability) and/or stock price. Additionally, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.
‎

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities – The following table presents common stock repurchases during each month for the first quarter of ~~2019:~~2020:



Period	Total Number of Shares Purchased [a]	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program [b]	Maximum Number of Shares That May Be Purchased Under Current Authority [c]	Total Number of ‎Shares ‎Purchased [a]	Average ‎Price Paid ‎Per Share		Total Number of Shares ‎Purchased as Part of a ‎Publicly Announced Plan ‎or Program	Maximum Number of ‎Shares That May Be ‎Purchased Under Current ‎Authority [b]
Jan. 1 through Jan. 31	3,046,226	$	150.78	2,766,800	23,661,319	2,293,974	$	181.31	2,141,202	131,013,879
Feb. 1 through Feb. 28	14,184,118		168.90	13,897,650	9,763,669
Feb. 1 through Feb. 29						11,314,456		181.97	10,969,260	120,044,619
Mar. 1 through Mar. 31	1,491,879		164.61	1,485,000	8,278,669	1,198,268		144.48	1,195,331	118,849,288
Total	18,722,223	$	165.61	18,149,450	N/A	14,806,698	$	178.83	14,305,793	N/A

~~[a]~~

Total number of shares purchased during the quarter includes 572,773 shares delivered or attested to UPC by employees to pay stock option exercise prices, satisfy excess tax withholding obligations for stock option exercises or vesting of retention units, and pay withholding obligations for vesting of retention shares.

~~[b]~~

Total number of shares purchased as part of a publicly announced plan or program includes 11,795,930 shares repurchased in February under ASRs. See Note 18 to the Condensed Consolidated Financial Statements for additional information.

~~[c]~~

[a]Total number of shares purchased during the quarter includes 500,905 shares delivered or attested to UPC by employees to pay stock option exercise prices, satisfy excess tax withholding obligations for stock option exercises or vesting of retention units, and pay withholding obligations for vesting of retention shares.

[b]Effective April 1, 2019, our Board of Directors authorized the repurchase of up to 150 million shares of our common stock by March 31, 2022. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and amount of these transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

‎

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Item 6. Exhibits



Exhibit No.	Description

Filed with this Statement
31(a)	Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Lance M. Fritz.
31(b)	Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ~~- Robert M. Knight, Jr.~~– Jennifer L. Hamann
32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Lance M. Fritz and ~~Robert M. Knight, Jr.~~Jennifer L. Hamann
101	eXtensible Business Reporting Language (XBRL) documents submitted electronically: 101.INS (XBRL Instance Document), 101.SCH (XBRL Taxonomy Extension Schema Document), 101.CAL (XBRL Calculation Linkbase Document), 101.LAB (XBRL Taxonomy Label Linkbase Document), 101.DEF (XBRL Taxonomy Definition Linkbase Document) and 101.PRE (XBRL Taxonomy Presentation Linkbase Document). The following financial and related information from Union Pacific Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2019~~2020 (filed with the SEC on April ~~18, 2019)~~23, 2020), is formatted in ~~XBRL and submitted electronically herewith:~~Inline Extensible Business Reporting Language (iXBRL) includes (i) Condensed Consolidated Statements of Income for the periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, (ii) Condensed Consolidated Statements of Comprehensive Income for the periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iii) Condensed Consolidated Statements of Financial Position at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, (iv) Condensed Consolidated Statements of Cash Flows for the periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, (v) Condensed Consolidated Statements of Changes in Common Shareholders’ Equity for the periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, and (vi) the Notes to the Condensed Consolidated Financial Statements.
~~Incorporated by Reference~~104	Cover Page Interactive Data File, formatted in Inline XBRL (contained in Exhibit 101).
Incorporated by Reference
3(a)	Restated Articles of Incorporation of UPC, as amended and restated through June 27, 2011, and as further amended May 15, 2014, are incorporated herein by reference to Exhibit 3(a) to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
3(b)	By-Laws of UPC, as amended, effective November 19, 2015, are incorporated herein by reference to Exhibit 3.2 to the Corporation’s Current Report on Form 8-K dated November 19, 2015.
4(a)	Form of ~~2.950%~~2.150% Note due ~~2022~~2027 is incorporated by reference to Exhibit 4.1 to the Corporation’s Current Report on Form 8-K dated ~~February 19, 2019.~~January 31, 2020.
4(b)	Form of ~~3.150%~~2.400% Note due ~~2024~~2030 is incorporated by reference to Exhibit 4.2 to the Corporation’s Current Report on Form 8-K dated ~~February 19, 2019.~~January 31, 2020.
4(c)	Form of ~~3.700%~~3.250% Note due ~~2029~~2050 is incorporated by reference to Exhibit 4.3 to the Corporation’s Current Report on Form 8-K dated ~~February 19, 2019.~~January 31, 2020.
4(d)	Form of ~~4.300%~~3.750% Note due ~~2049~~2070 is incorporated by reference to Exhibit 4.4 to the Corporation’s Current Report on Form 8-K dated ~~February 19, 2019.~~January 31, 2020.
4(e)	Form of 3.250% Note due 2050 is incorporated by reference to Exhibit 4.1 to the Corporation’s Current Report on Form 8-K dated April 7, 2020.

3639

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SI~~GNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: April ~~18, 2019~~23, 2020

UNION PACIFIC CORPORATION (Registrant)


By	/s/ ~~Robert M. Knight, Jr.~~Jennifer L. Hamann
	~~Robert M. Knight, Jr.~~Jennifer L. Hamann
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial Officer)

By	/s/ Todd M. Rynaski
	Todd M. Rynaski
	Vice President and Controller
	(Principal Accounting Officer)

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

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


~~Large accelerated filer~~	Large Accelerated ~~filer~~Filer	~~Non-accelerated filer~~þ	~~Smaller reporting company~~	~~Emerging growth company~~Accelerated Filer	¨	Non-Accelerated Filer	¨
☒	☐Smaller Reporting Company	☐¨	☐	☐
Emerging Growth Company				¨


Item 1.	Condensed Consolidated Financial Statements:
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	For the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	3
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	For the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	3
	CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
	At March 31, ~~2019~~2020 and December 31, ~~2018~~2019	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	For the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	5
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS’ EQUITY (Unaudited)
	For the Three and Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6
	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3335
Item 4.	Controls and Procedures	3335



	March 31,		December 31,		March 31,		December 31,
Millions, Except Share and Per Share Amounts	2019		2018		2020		2019
Assets
Current assets:
Cash and cash equivalents	$	1,059	$	1,273	$	1,130	$	831
Short-term investments (Note 13)		60		60		60		60
Accounts receivable, net (Note 10)		1,672		1,755		1,669		1,595
Materials and supplies		780		742		692		751
Other current assets		382		333		253		222
Total current assets		3,953		4,163		3,804		3,459
Investments		1,951		1,912		2,078		2,050
Net properties (Note 11)		52,856		52,679		54,121		53,916
Operating lease assets (Note 16)		2,146		-		1,773		1,812
Other assets		413		393		440		436
Total assets	$	61,319	$	59,147	$	62,216	$	61,673
Liabilities and Common Shareholders' Equity
Current liabilities:
Accounts payable and other current liabilities (Note 12)	$	3,559	$	3,160	$	3,130	$	3,094
Debt due within one year (Note 14)		1,703		1,466		1,511		1,257
Total current liabilities		5,262		4,626		4,641		4,351
Debt due after one year (Note 14)		23,409		20,925		26,365		23,943
Operating lease liabilities (Note 16)		1,663		-		1,339		1,471
Deferred income taxes		11,408		11,302		12,088		11,992
Other long-term liabilities		1,835		1,871		1,792		1,788
Commitments and contingencies (Note 17)
Total liabilities		43,577		38,724		46,225		43,545
Common shareholders' equity:
Common shares, $2.50 par value, 1,400,000,000 authorized;
1,112,062,832 and 1,111,739,781 issued; 708,456,092 and 725,056,690
1,112,277,525 and 1,112,014,480 issued; 678,558,571 and 692,100,651
outstanding, respectively		2,780		2,779		2,781		2,780
Paid-in-surplus		3,929		4,449		4,112		4,523
Retained earnings		46,049		45,284		49,419		48,605
Treasury stock		(33,638)		(30,674)		(38,992)		(36,424)
Accumulated other comprehensive loss (Note 9)		(1,378)		(1,415)		(1,329)		(1,356)
Total common shareholders' equity		17,742		20,423		15,991		18,128
Total liabilities and common shareholders' equity	$	61,319	$	59,147	$	62,216	$	61,673


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



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



Item 1.	Legal Proceedings	3436
Item 1A.	Risk Factors	3536
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3538
Item 3.	Defaults Upon Senior Securities	3538
Item 4.	Mine Safety Disclosures	3538
Item 5.	Other Information	3538
Item 6.	Exhibits	3639
Signatures		3740
Certifications		41



Millions, Except Per Share Amounts,
Millions, Except Per Share Amounts, ‎
for the Three Months Ended March 31,	2019		2018		2020		2019
Operating revenues:
Freight revenues	$	5,010	$	5,122	$	4,880	$	5,010
Other revenues		374		353		349		374
Total operating revenues		5,384		5,475		5,229		5,384
Operating expenses:
Compensation and benefits		1,205		1,273		1,059		1,205
Depreciation						547		549
Purchased services and materials		576		599		521		576
Depreciation		549		543
Fuel		531		589		434		531
Equipment and other rents		258		266		227		258
Other		305		266		298		305
Total operating expenses		3,424		3,536		3,086		3,424
Operating income		1,960		1,939		2,143		1,960
Other income/(expense) (Note 6)		77		(42)
Other income (Note 6)						53		77
Interest expense		(247)		(186)		(278)		(247)
Income before income taxes		1,790		1,711		1,918		1,790
Income taxes		(399)		(401)		(444)		(399)
Net income	$	1,391	$	1,310	$	1,474	$	1,391
Share and Per Share (Note 8):
Earnings per share - basic	$	1.94	$	1.69	$	2.15	$	1.94
Earnings per share - diluted	$	1.93	$	1.68	$	2.15	$	1.93
Weighted average number of shares - basic		716.8		776.4		684.3		716.8
Weighted average number of shares - diluted		719.5		779.6		686.2		719.5



Millions	Common Shares	Treasury Shares	Common Shares		Paid-in-Surplus		Retained Earnings		Treasury Stock		AOCI [a]		Total
Balance at January 1, 2018	1,111.4	(330.5)		$ 2,778		$ 4,476		$ 41,317		$ (22,574)		$ (1,141)		$ 24,856
Net income				-		-		1,310		-		-		1,310
Other comprehensive income				-		-		-		-		19		19
Conversion, stock option exercises, forfeitures, and other	0.4	0.5		1		(3)		-		4		-		2
Share repurchase programs (Note 18)	-	(9.3)		-		-		-		(1,230)		-		(1,230)
Cash dividends declared ($0.73 per share)	-	-		-		-		(568)		-		-		(568)
Reclassification due to ASU 2018-02 adoption	-	-		-		-		300		-		(300)		-
Balance at March 31, 2018	1,111.8	(339.3)		$ 2,779		$ 4,473		$ 42,359		$ (23,800)		$ (1,422)		$ 24,389

Balance at January 1, 2019	1,111.7	(386.6)		$ 2,779		$ 4,449		$ 45,284		$ (30,674)		$ (1,415)		$ 20,423
Net income				-		-		1,391		-		-		1,391
Other comprehensive income				-		-		-		-		37		37
Conversion, stock option exercises, forfeitures, and other	0.3	1.1		1		(20)		-		45		-		26
Share repurchase programs (Note 18)	-	(18.1)		-		(500)		-		(3,009)		-		(3,509)
Cash dividends declared ($0.88 per share)	-	-		-		-		(626)		-		-		(626)
Balance at March 31, 2019	1,112.0	(403.6)		$ 2,780		$ 3,929		$ 46,049		$ (33,638)		$ (1,378)		$ 17,742



‎Millions	Common ‎Shares	Treasury ‎Shares	Common Shares		Paid-in-Surplus		Retained Earnings		Treasury Stock		AOCI ‎[a]		Total
Balance at January 1, 2019	1,111.7	(386.6)		$ 2,779		$ 4,449		$ 45,284		$ (30,674)		$ (1,415)		$ 20,423
Net income				-		-		1,391		-		-		1,391
Other comprehensive income				-		-		-		-		37		37
Conversion, stock option ‎ exercises, forfeitures, and other	0.3	1.1		1		(20)		-		45		-		26
Share repurchase programs ‎ (Note 18)	-	(18.1)		-		(500)		-		(3,009)		-		(3,509)
Cash dividends declared ‎ ($0.88 per share)	-	-		-		-		(626)		-		-		(626)
Balance at March 31, 2019	1,112.0	(403.6)		$ 2,780		$ 3,929		$ 46,049		$ (33,638)		$ (1,378)		$ 17,742

Balance at January 1, 2020	1,112.0	(419.9)		$ 2,780		$ 4,523		$ 48,605		$ (36,424)		$ (1,356)		$ 18,128
Net income				-		-		1,474		-		-		1,474
Other comprehensive income				-		-		-		-		27		27
Conversion, stock option ‎ exercises, forfeitures, and other	0.3	0.5		1		(11)		-		(12)		-		(22)
Share repurchase programs ‎ (Note 18)	-	(14.3)		-		(400)		-		(2,556)		-		(2,956)
Cash dividends declared ‎ ($0.97 per share)	-	-		-		-		(660)		-		-		(660)
Balance at March 31, 2020	1,112.3	(433.7)		$ 2,781		$ 4,112		$ 49,419		$ (38,992)		$ (1,329)		$ 15,991



Weighted-Average Assumptions	2019		2018		2020		2019
Risk-free interest rate		2.5%		2.6%		1.5%		2.5%
Dividend yield		2.2%		2.3%		2.1%		2.2%
Expected life (years)		5.2		5.3		4.9		5.2
Volatility		22.7%		21.1%		23.4%		22.7%
Weighted-average grant-date fair value of options granted	$	30.37	$	21.70	$	32.20	$	30.37



	Options (thous.)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2019	5,170	$	92.06	5.4	yrs.	$	239
Granted	573		160.84		N/A		N/A
Exercised	(1,505)		68.66		N/A		N/A
Forfeited or expired	(36)		119.14		N/A		N/A
Outstanding at March 31, 2019	4,202	$	109.59	6.6	yrs.	$	242
Vested or expected to vest at March 31, 2019	4,161	$	109.31	6.6	yrs.	$	241
Options exercisable at March 31, 2019	2,856	$	97.12	5.6	yrs.	$	200



	Options (thous.)	Weighted-Average ‎Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value (millions)
Outstanding at January 1, 2020	3,502	$	113.38	6.1	yrs.	$	236
Granted	558		176.63		N/A		N/A
Exercised	(602)		101.15		N/A		N/A
Forfeited or expired	(6)		142.54		N/A		N/A
Outstanding at March 31, 2020	3,452	$	125.69	6.6	yrs.	$	85
Vested or expected to vest at March 31, 2020	3,418	$	125.31	6.6	yrs.	$	85
Options exercisable at March 31, 2020	2,306	$	108.27	5.5	yrs.	$	79



	Shares (thous.)	Weighted-Average Grant-Date Fair Value		Shares ‎(thous.)	Weighted-Average ‎Grant-Date Fair Value
Nonvested at January 1, 2019	2,070	$	104.55
Nonvested at January 1, 2020				1,898	$	112.12
Granted	374		161.56	304		185.97
Vested	(419)		120.91	(608)		75.89
Forfeited	(40)		109.51	(22)		134.81
Nonvested at March 31, 2019	1,985	$	111.74
Nonvested at March 31, 2020				1,572	$	140.10



Millions, Except Estimated Useful Life			Accumulated		Net Book		Estimated			Accumulated		Net Book		Estimated
As of March 31, 2019	Cost		Depreciation		Value		Useful Life
As of March 31, 2020								Cost		Depreciation		Value		Useful Life
Land	$	5,266	$	N/A	$	5,266	N/A	$	5,275	$	N/A	$	5,275	N/A
Road:
Rail and other track material		16,872		6,213		10,659	42		17,288		6,440		10,848	42
Ties		10,496		3,075		7,421	34		10,793		3,230		7,563	34
Ballast		5,594		1,619		3,975	34		5,798		1,687		4,111	34
Other roadway [a]		19,703		3,844		15,859	48		20,486		4,124		16,362	48
Total road		52,665		14,751		37,914	N/A		54,365		15,481		38,884	N/A
Equipment:
Locomotives		9,638		3,739		5,899	18		9,456		3,453		6,003	18
Freight cars		2,198		906		1,292	24		2,089		783		1,306	24
Work equipment and other		1,056		311		745	19		1,094		330		764	18
Total equipment		12,892		4,956		7,936	N/A		12,639		4,566		8,073	N/A
Technology and other		1,121		496		625	12		1,193		490		703	12
Construction in progress		1,115		-		1,115	N/A		1,186		-		1,186	N/A
Total	$	73,059	$	20,203	$	52,856	N/A	$	74,658	$	20,537	$	54,121	N/A



Millions, Except Estimated Useful Life			Accumulated		Net Book		Estimated			Accumulated		Net Book		Estimated
As of December 31, 2018	Cost		Depreciation		Value		Useful Life
As of December 31, 2019								Cost		Depreciation		Value		Useful Life
Land	$	5,264	$	N/A	$	5,264	N/A	$	5,276	$	N/A	$	5,276	N/A
Road:
Rail and other track material		16,785		6,156		10,629	43		17,178		6,381		10,797	42
Ties		10,409		3,025		7,384	34		10,693		3,186		7,507	34
Ballast		5,561		1,595		3,966	34		5,752		1,669		4,083	34
Other roadway [a]		19,584		3,766		15,818	48		20,331		4,056		16,275	48
Total road		52,339		14,542		37,797	N/A		53,954		15,292		38,662	N/A
Equipment:
Locomotives		9,792		3,861		5,931	19		9,467		3,434		6,033	18
Freight cars		2,229		929		1,300	24		2,083		779		1,304	25
Work equipment and other		1,040		301		739	19		1,081		322		759	18
Total equipment		13,061		5,091		7,970	N/A		12,631		4,535		8,096	N/A
Technology and other		1,117		493		624	12		1,136		503		633	12
Construction in progress		1,024		-		1,024	N/A		1,249		-		1,249	N/A
Total	$	72,805	$	20,126	$	52,679	N/A	$	74,246	$	20,330	$	53,916	N/A



	~~2019~~ 2020
Dividend per share per quarter	$	~~0.88~~ 0.97
Risk-free interest rate at date of grant		~~2.5%~~ 1.4%



Millions,	Pension				OPEB				Pension				OPEB
for the Three Months Ended March 31,	2019		2018		2019		2018		2020		2019		2020		2019
Service cost	$	22	$	27	$	-	$	-	$	27	$	22	$	-	$	-
Interest cost		40		36		3		3		34		40		1		3
Expected return on plan assets		(68)		(68)		-		-		(70)		(68)		-		-
Amortization of actuarial loss		16		23		1		2
Amortization of:
Prior service cost										-		-		(3)		-
Actuarial loss										28		16		2		1
Net periodic benefit cost	$	10	$	18	$	4	$	5	$	19	$	10	$	-	$	4



Millions	Defined benefit plans		Foreign currency translation		Total		Defined ‎benefit ‎plans		Foreign ‎currency ‎translation		Total
Balance at January 1, 2020							$	(1,150)	$	(206)	$	(1,356)
Other comprehensive income/(loss) before reclassifications								2		5		7
Amounts reclassified from accumulated other comprehensive income/(loss) [a]								20		-		20
Net year-to-date other comprehensive income/(loss), ‎net of taxes of ($7) million								22		5		27
Balance at March 31, 2020							$	(1,128)	$	(201)	$	(1,329)

Balance at January 1, 2019	$	(1,192)	$	(223)	$	(1,415)	$	(1,192)	$	(223)	$	(1,415)
Other comprehensive income/(loss) before reclassifications		(3)		27		24		(3)		27		24
Amounts reclassified from accumulated other comprehensive income/(loss) [a]		13		-		13		13		-		13
Net year-to-date other comprehensive income/(loss), net of taxes of $(4) million		10		27		37
Net year-to-date other comprehensive income/(loss), ‎net of taxes of ($4) million								10		27		37
Balance at March 31, 2019	$	(1,182)	$	(196)	$	(1,378)	$	(1,182)	$	(196)	$	(1,378)

Balance at January 1, 2018	$	(1,029)	$	(112)	$	(1,141)
Other comprehensive income/(loss) before reclassifications		-		-		-
Amounts reclassified from accumulated other comprehensive income/(loss) [a]		19		-		19
Net year-to-date other comprehensive income/(loss), net of taxes of $(6) million		19		-		19
Reclassification due to ASU 2018-02 adoption [b]		(225)		(75)		(300)
Balance at March 31, 2018	$	(1,235)	$	(187)	$	(1,422)



Millions	Operating Leases		Capital Leases
2019	$	419	$	148
2020		378		155
2021		303		159
2022		272		142
2023		234		94
Later years		1,040		200
Total minimum lease payments	$	2,646	$	898
Amount representing interest		N/A		(144)
Present value of minimum lease payments		N/A	$	754