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What changed in Union Pacific Corporation's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Union Pacific Corporation's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+225 added−252 removedSource: 10-K (2024-02-09) vs 10-K (2023-02-10)

Top changes in Union Pacific Corporation's 2023 10-K

225 paragraphs added · 252 removed · 179 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWhile we work to further reduce our environmental footprint, it is important to note that railroads already are one of the most fuel-efficient means of transportation. According to the AAR, moving freight by rail instead of truck reduces greenhouse gas (GHG) emissions by up to 75%.
Biggest changeSustainable Future – Union Pacific believes it is important that we act as environmental stewards, reducing greenhouse gas (GHG) emissions and supporting the transition to a more sustainable future. While we work to further reduce our environmental footprint, it is important to note that railroads already are one of the most fuel-efficient means of transportation.
We access most major grain markets, connecting the Midwest and Western U.S. producing areas to export terminals in the Pacific Northwest and Gulf Coast ports as well as Mexico. We also serve significant domestic markets, including grain processors, animal feeders, and ethanol producers in the Midwest and West.
We access most major grain markets, connecting the Midwest and Western U.S. producing areas to export terminals in the Pacific Northwest and Gulf Coast ports as well as Mexico. We also serve significant domestic markets, including grain processors, animal feeders, ethanol, and renewable biofuel producers in the Midwest and West.
To achieve this, our employees identify risks, initiate action to mitigate those risks, and have the courage to care to keep each other safe. 8 Table of Contents Our success is measured by our personal injury rate (the number of reportable injuries for every 200,000 employee-hours worked), and our derailment incident rate (the number of reportable derailment incidents per million train miles).
To achieve this, our employees identify risks, initiate action to mitigate those risks, and have the courage to care to keep each other safe. Our success is measured by our personal injury rate (the number of reportable injuries for every 200,000 employee-hours worked) and our derailment incident rate (the number of reportable derailment incidents per million train miles).
Union Pacific’s commitment, today and for the future, is to further improve and strengthen performance through an inclusive workforce that reflects the diverse markets and communities we serve, where everyone is treated fairly, and differences are valued.
Union Pacific’s commitment, today and for the future, is to further improve and strengthen performance through an inclusive workforce that reflects the diverse markets and communities we serve, where everyone is treated fairly, differences are valued, and talent is recognized and rewarded.
To date, we have not experienced any material disruption of our operations due to a cyber threat or attack directed at us. 10 Table of Contents Cooperation with Federal, State, and Local Government Agencies – We work closely on physical and cybersecurity initiatives with government agencies, including the U.S.
To date, we have not experienced any material disruption of our operations due to a cyber threat or incident directed at us. 8 Table of Contents Cooperation with Federal, State, and Local Government Agencies – We work closely on physical and cybersecurity initiatives with government agencies, including the U.S.
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: Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179. 11 Table of Contents References to our website address, the "We Are One" report, and the Climate Action Plan, in this report, including references in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7, 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.
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: Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179. 9 Table of Contents References to our website address, in this report, including references in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7, 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.
Our Culture: We incorporate our commitment to safety, high ethical standards, passion for performance, and teamwork into our day-to-day operations as we service our customers. Safety is central to everything we do at Union Pacific. Together, we are committed to cultivating a safety-focused culture, so our employees return home safely every day.
Our Culture: We incorporate our commitment to safety, diversity and inclusion, high ethical standards, passion for performance, and teamwork into our day-to-day operations as we serve our customers. Safety is central to everything we do at Union Pacific. Together, we are committed to cultivating a safety-focused culture, so our employees return home safely every day.
Transportation of these products accounted for 35% of our freight revenues in 2022. Commercial, residential, and governmental infrastructure investments drive shipments of steel, aggregates, cement, and wood products. Industrial and light manufacturing plants receive steel, nonferrous materials, minerals, and other raw materials.
Transportation of these products accounted for 36% of our freight revenues in 2023. Commercial, residential, and governmental infrastructure investments drive shipments of steel, aggregates, cement, and wood products. Industrial and light manufacturing plants receive steel, nonferrous materials, minerals, and other raw materials.
Although we provide revenues by commodity group, we analyze the net financial results of the Railroad as one segment due to the integrated nature of our rail network.
Although we provide and analyze revenues by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network.
Our Board of Directors evaluates our non-union compensation plans and reviews recommendations from the Compensation and Benefits Committee, while collective bargaining agreements govern compensation for our union employees. The median annual compensation for all employees employed as of December 31, 2022, was $86,778 (excluding the CEO).
Our Board of Directors evaluates our non-union compensation plans and reviews recommendations from the Compensation and Benefits Committee, while collective bargaining agreements govern compensation for our union employees. The median annual compensation for all employees employed as of December 31, 2023, was $108,244 (excluding the CEO).
In 2022 , we generated freight revenues totaling $23.2 billion from the following three commodity groups: 2022 Freight Revenues Bulk – The Company's Bulk shipments consist of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. In 2022, this group genera ted 33% of our freight revenues.
In 2023 , we generated freight revenues totaling $22.6 billion from the following three commodity groups: 2023 Freight Revenues Bulk – The Company's Bulk shipments consist of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. In 2023, this group genera ted 33% of our freight revenues.
Made up of management and craft professionals, we are focused on attracting, retaining, and developing talent across our entire system. As of December 31, 2022, the Company employed 33,179 employees. Our workforce includes five generations from Traditionalists (born before 1946) to Generation Z (born after 1998). The average age is 46.5 with average tenure of 15.8 years.
Made up of management and craft professionals, we are focused on attracting, retaining, and developing talent across our entire system. As of December 31, 2023, the Company employed 32,973 employees. Our workforce includes five generations from Traditionalists (born before 1946) to Generation Z (born after 1998). The average age is 46.6 with average tenure of 15.9 years.
Our passion for performance will help us win; our high ethical standards will lead us to win in a way that supports all of our stakeholders; and our teamwork will make sure we win together. 6 Table of Contents OPERATIONS The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment.
Our passion for performance will help us win; our high ethical standards ensure we win in a way that supports all of our stakeholders; and our teamwork ensures we win together. OPERATIONS The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment.
Reportable derailment incidents are defined as any occurrence where a wheel of a locomotive or rail car falls off the track that causes damage to track, equipment, or structures above the Federal Railroad Administration (FRA) reporting threshold, regardless of ownership ($11,300 for 2022 and $11,500 for 2023).
Reportable derailment incidents are defined as any occurrence where a wheel of a locomotive or rail car falls off the track and causes damage to track, equipment, or structures above the Federal Railroad Administration (FRA) reporting threshold, regardless of ownership ($11,500 for 2023 and $12,000 for 2024) per million train miles.
Department of Transportation (DOT); the Department of Homeland Security (DHS), along with its Cybersecurity & Infrastructure Security Agency (CISA) and TSA; as well as local police departments, fire departments, and other first responders. In connection with new guidance from the TSA, effective January 1, 2022, we were required to report cyber incidents to CISA.
Department of Transportation (DOT); the Federal Bureau of Investigation (FBI); the Department of Homeland Security (DHS), along with its Cybersecurity and Infrastructure Security Agency (CISA) and the TSA; as well as local police departments, fire departments, and other first responders. Based on guidance from the TSA, starting from January 1, 2022, we were obligated to report cyber incidents to CISA.
Railroads are governed by the Railway Labor Act (RLA), a federal statute enacted in 1926 to bring the railroads and unions to agreement without disruptions to rail transportation. The RLA includes numerous safeguards to help overcome bargaining stalemates. The recent round of labor negotiations related to years 2020-2024 concluded in December 2022.
Railroads are governed by the Railway Labor Act (RLA), a federal statute enacted in 1926 to bring the railroads and unions to agreement without disruptions to rail transportation. The RLA includes numerous safeguards to help overcome bargaining stalemates. The next round of negotiations begins on January 1, 2025, related to years 2025-2029.
The final stage of the employee journey is a fulfilling retirement, which is enabled during their UP career through our compensation and benefit programs, particularly contributions to 401(k) plans and the employee stock purchase plan (ESPP).
Benefits vary based on the applicable collective bargaining agreement or an employee’s management status. The final stage of the employee journey is a fulfilling retirement, which is enabled during their UP career through our compensation and benefit programs, particularly contributions to 401(k) plans and the employee stock purchase plan (ESPP).
Railroad Security – Our security efforts consist of a wide variety of measures, including employee training, engagement with our customers, training of emergency responders, and partnerships with numerous federal, state, and local government agencies.
Therefore, we continue to hire to backfill attrition and handle growth as needed. Railroad Security – Our security efforts consist of a wide variety of measures, including employee training, engagement with our customers, training of emergency responders, and partnerships with numerous federal, state, and local government agencies.
Seasonality – Some of the commodities we carry have peak shipping seasons, reflecting either or both the nature of the commodity (such as certain agricultural and food products that have specific growing and harvesting seasons) and the demand cycle for the commodity (such as intermodal traffic that generally peaks during the third quarter to meet back-to-school and holiday-related demand for consumer goods during the fourth quarter).
In addition to transporting finished vehicles, the Company provides expedited handling of automotive parts in both boxcars and intermodal containers destined for Mexico, the U.S., and Canada. 6 Table of Contents Seasonality – Some of the commodities we carry have peak shipping seasons, reflecting either or both the nature of the commodity (such as certain agricultural and food products that have specific growing and harvesting seasons) and the demand cycle for the commodity (such as intermodal traffic that generally peaks during the third quarter to meet back-to-school and holiday-related demand for consumer goods during the fourth quarter).
Additional information regarding our business and operations, including revenues, financial information and data, and other information regarding environmental matters, is presented in Risk Factors, Item 1A; Legal Proceedings, Item 3; Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7; and the Financial Statements and Supplementary Data, Item 8 (which include information regarding revenues, statements of income, and total assets).
Additional information regarding our business and operations, including revenues, financial information and data, and other information regarding environmental matters, is presented in Risk Factors, Item 1A; Legal Proceedings, Item 3; Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7; and the Financial Statements and Supplementary Data, Item 8. 5 Table of Contents Operations – UPRR is a Class I railroad operating in the U.S.
Union Pacific works with 13 major rail unions, representing approximately 83% of our workforce. Most craft professionals and more than 45 railroads participate in negotiations on a national multi-employer basis. The National Carriers Conference Committee of the National Railway Labor Conference, consisting of the top labor officers in most Class I railroads, is the bargaining committee for the industry.
Union Pacific works with 13 major rail unions, representing approximately 85% of our workforce. The National Carriers Conference Committee of the National Railway Labor Conference, consisting of the top labor officers in most Class I railroads, is the bargaining committee for the industry.
Operations – UPRR is a Class I railroad operating in the U.S. We have 32,534 route miles, connecting Pacific Coast and Gulf Coast ports with the Midwest and Eastern U.S. gateways and providing several corridors to key Mexican gateways.
We have 32,693 route miles, connecting Pacific Coast and Gulf Coast ports with the Midwest and Eastern U.S. gateways and providing several corridors to key Mexican and Canadian gateways.
The personal injuries and derailment incidents that meet reportable criteria are reported to the FRA. Our 2022 personal injury rate of 0.80 improved 18% while our derailment incident rate of 2.88 increased 8% versus 2021.
Personal injuries and derailment incidents that meet reportable criteria are reported to the FRA. Our 2023 personal injury rate of 1.17 deteriorated 4%, while our derailment incident rate of 2.72 improved 6% versus 2022.
The Company’s petroleum and LPG shipments are primarily impacted by refinery utilization rates, regional crude pricing differentials, pipeline capacity, and the use of asphalt for road programs.
The Company’s petroleum and LPG shipments are primarily impacted by refinery utilization rates, regional crude pricing differentials, pipeline capacity, and the use of asphalt for road programs. Soda ash originates in southwestern Wyoming and California, destined for chemical and glass producing markets in North America and abroad.
In cooperation with the FRA and other interested groups, we are also working to develop additional improvements to tank car design that will further limit the risk of releases of hazardous materials. Sustainable Future – Union Pacific believes it is important that we act as environmental stewards, reducing emissions and supporting the transition to a more sustainable future.
In cooperation with the FRA and other interested groups, we are also working to develop additional improvements to tank car design that will further limit the risk of releases of hazardous materials.
The STB also continues to explore changes to the methodology for determining railroad revenue adequacy and the possible uses of revenue adequacy in regulating railroad rates. The STB posts quarterly reports on rate reasonableness cases, maintains a database on service complaints, and has the authority to initiate investigations, among other things.
The STB posts quarterly reports on rate reasonableness cases, maintains a database on service complaints, and has the authority to initiate investigations, among other things.
The Railroad’s extensive franchise accesses six vehicle assembly plants and connects to West Coast ports, all six major Mexico gateways, and the Port of Houston to accommodate both import and export shipments. In addition to transporting finished vehicles, the Company provides expedited handling of automotive parts in both boxcars and intermodal containers destined for Mexico, the U.S., and Canada.
The Railroad’s extensive franchise accesses six vehicle assembly plants and connects to West Coast ports, all six major Mexico gateways, and the Port of Houston to accommodate both import and export shipments.
Proud & Engaged Workforce – Our employees are central to our Serve, Grow, Win – Together strategy, and Investing in our Workforce is one of the five areas of concentration in our "Building a Sustainable Future 2030" strategy. Our People: Our award-winning, multigenerational workforce includes talented people from all walks of life, in many stages of life.
Proud & Engaged Workforce – Our employees are central to our Safety + Service & Operational Excellence = Growth strategy, and investing in our workforce is key to our success. Our People: Our award-winning, multigenerational workforce includes talented people from all walks of life, in many stages of life.
The statutes and regulations are administered and monitored by the Environmental Protection Agency (EPA) and by various state environmental agencies.
The statutes and regulations are administered and monitored by the Environmental Protection Agency (EPA) and by various state environmental agencies, such as the California Air Resources Board (CARB) and the Texas Commission on Environmental Quality (TCEQ), among others.
Soda ash originates in southwestern Wyoming and California, destined for chemical and glass producing markets in North America and abroad. 7 Table of Contents Premium – In 2022, Premium shipments generated 32% of Union Pacific’s total freight revenues. Premium includes finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international.
Premium – In 2023, Premium shipments generated 31% of Union Pacific’s total freight revenues. Premium includes finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international.
Providing competitive compensation and meaningful benefits is key to attracting and retaining talented employees. Union Pacific is committed to continuously reviewing its compensation programs and comprehensive benefits programs to promote programs that are fair and competitive.
Union Pacific is committed to continuously reviewing its compensation programs and comprehensive benefits programs to promote programs that are fair and competitive. Both are key to enhancing the value of working for Union Pacific and demonstrating the Company’s commitment to the health and wealth of employees during their career.
Talent is critical – our ability to recruit and retain employees is directly tied to our railroad’s fluidity. Without team members to dispatch or operate trains, our network struggles to provide customers efficient, reliable service. We accelerated recruitment efforts in 2022, requiring us to evolve our hiring practices and incorporate innovative strategies.
Talent is critical - our ability to recruit and retain employees is directly tied to our railroad’s fluidity. Without team members to dispatch, operate trains, and maintain our infrastructure, our network struggles to provide customers efficient, reliable service. We are focused on effectively managing workforce levels to the demands of the business and improving quality of life for our employees.
The process begins with recruitment, where we strive to attract the most talented and diverse employees to join our team. Then, we focus on training and development, which includes programs designed to recognize potential and to help our employees grow into new roles so that we can retain our workforce over time.
Then, we focus on training and development, which includes courses and programs designed to help our employees grow into new roles and/or learn a new skill in their current role so that we can retain our workforce over time. Providing competitive compensation and meaningful benefits is key to attracting and retaining talented employees.
The Employee Journey: From recruitment to retirement and milestones in between, we are relentlessly focused on supporting and engaging employees throughout their Union Pacific journey. We view it as imperative to invest in our employees with meaningful benefit offerings, developmental experiences, and career opportunities.
We view it as imperative to invest in our employees with meaningful benefit offerings, developmental experiences, and career opportunities. The process begins with recruitment, where we strive to attract the most talented and diverse employees to join our team.
To that end, Union Pacific established a goal to reach 40% people of color and double our female representation to 11% in our workforce by 2030. As of December 31, 2022, workforce representation of people of color and females was approximately 32.8% and 5.5%, respectively.
To that end, Union Pacific intends to maintain its standards of hiring and promoting based on merit, while aspiring to reach 40% people of color and double our female representation to 11% in our workforce by 2030.
Building on rail’s relative emissions benefits over other modes of transportation, we are taking additional actions to reduce our emissions. These actions are described in our Climate Action Plan on our website. Competition – see “ We Face Competition from Other Railroads and Other Transportation Providers ” in the Risk Factors in Item 1A of this report.
Therefore, converting freight transportation from truck to rail typically results in an immediate reduction in our customers' scope 3 GHG emissions. Competition – see “ We Face Competition from Other Railroads and Other Transportation Providers ” in the Risk Factors in Item 1A of this report.
Win: Driving strong financial performance resulting in significant shareholder returns. Execution of our plans to both serve and grow, leads to higher revenues with improved margins and greater cash generation, creating long term enterprise value. Together: Engaging our four stakeholder groups – Communities, Customers, Employees, and Shareholders.
Execution of our strategy to be the industry leader in both safety and service leads to revenue growth with improved margins and greater cash generation, creating long term enterprise value. The result will be strong financial performance driving significant shareholder returns. As we work to transform our railroad, our core values continue to guide us.
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STRATEGY The Company’s growth strategy focuses on growing customer value through innovative supply chain solutions and aspiring to Serve, Grow, Win – Together. Serve: Driving operational excellence to create a safer, more reliable, and efficient service product. Precision scheduled railroading (PSR) is the foundation for delivering customer-centered operational excellence by: 1.
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STRATEGY Safety, Service, and Operational Excellence supports the Company's long term initiative to Grow its freight volumes (Safety + Service & Operational Excellence = Growth). Together as a team, the Company will focus on achieving the best safety record in the industry, being known for superior service, grounded in operational excellence which, in turn, drives growth.
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Shifting the focus of operations from moving trains to moving cars. 2. Minimizing car dwell, car classification events, and locomotive power requirements. 3. Utilizing general-purpose trains by blending existing train service. 4. Balancing train movements to improve the utilization of resources.
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Safety is paramount and, as our first area of focus, sets the foundation for achieving the Company's objectives. The mindset and culture are built around a personal commitment by all employees to prioritize safety so everyone goes home safely. Service is all about delivering what we sold our customers.
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We aim to move cars faster and reduce the number of times each car is touched, resulting in terminal consolidation opportunities, improved asset utilization, and fewer car classifications, which in turn leads to products getting to the market quicker and more reliably. The result is a better customer experience, which enables us to grow our market share.
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We work with our customers to understand the service they need to win in their markets and then drive how we win together. We commit to these service levels and do it with excellence. Operational Excellence is about operating efficiently and productively.
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Grow: By harnessing the potential of the best rail franchise in the industry, we expect to generate growth in three ways – increasing profitable carloads that fit our network and transportation plan, providing more products and services to create value for our customers, and increasing the geographic reach of our franchise through innovative supply chain solutions.
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We will drive value with our available resources, but also maintain a buffer so our service is resilient, managing the inevitable ups and downs that come with weather, fluctuating volumes, and securing growth.
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Our comprehensive approach to Environmental, Social, and Governance issues, “Building a Sustainable Future 2030,” is designed to address the evolving interests of our stakeholders and is built on five areas of concentration – Building Responsible Foundations, Investing in our Workforce, Driving Sustainable Solutions, Championing Environmental Stewardship, and Strengthening our Communities.
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We believe that a diverse and supportive culture increases employee engagement, improves morale, and allows qualified employees to succeed and contribute to Union Pacific's success. All of this supports our safety strategy and improves the quality of decision-making, problem-solving, and strategic thinking.
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We believe that operational excellence and an engaged workforce with deep market knowledge and strong customer relationships supports best-in-class safety, a customer experience that drives growth, and shareholder returns. As we work to transform our railroad into the safest, most reliable, and most efficient in North America, our values continue guiding us.
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As of December 31, 2023, workforce representation of people of color and females was approximately 33.8% and 5.5%, respectively. 7 Table of Contents The Employee Journey: From recruitment to retirement and milestones in between, we are relentlessly focused on supporting and engaging employees throughout their Union Pacific journey.
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See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Matters – Labor Agreements, Item 7, of this report for information about the conclusion of the 2020-2024 negotiations. The next round of negotiations begins on January 1, 2025, related to years 2025-2029.
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Additionally, we appointed cybersecurity coordinators, conducted a self-assessment of our cyber vulnerabilities, and put in place a plan to respond to cyber incidents.
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From an employee’s perspective, a diverse culture increases engagement, improves morale, and supports safety. From a business perspective, diversity improves the Company’s decision-making, problem-solving, and strategic thinking, which translates into a competitive advantage with bottom-line results.
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We are currently awaiting approval of our security plan before progressing with the establishment of a cybersecurity assessment plan, which will describe how the Company proactively and regularly evaluates the effectiveness of our cybersecurity measures as well as identify and address any weaknesses in our devices, networks, and systems.
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Both are key to enhancing the value of working for Union Pacific and demonstrating the Company’s commitment to the health and wealth of employees during their career. Benefits vary based on the applicable collective bargaining agreement or an employee’s management status.
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Freight rail leads other forms of surface transportation when it comes to minimizing GHG emissions, and we expect rail will continue to play a critical role in mitigating and abating the impacts of climate change. According to the AAR, moving freight by rail instead of truck reduces GHG emissions by up to 75%.
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From virtual career fairs to pre-recorded video interviews, we implemented robust recruiting tools to meet candidates where they are and provide an efficient, user-friendly experience through every phase of the recruitment process. 9 Table of Contents We've also been aggressive in how we compete to attract talent in the marketplace. In particularly hard-to-fill jobs and locations, we offered hiring incentives.
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The STB also continues to explore changes to the methodology for determining railroad revenue adequacy, the possible uses of revenue adequacy in regulating railroad rates, and ways to regulate service, including by use of emergency service orders.
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These incentives are a mix of travel allowances and relocation bonuses, as well as local hiring bonuses to attract applicants already residing in the communities we serve. We continue driving inclusivity into our hiring process.
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We’re removing bias by using software tools to confirm gender-neutral language in job postings, as well as providing video demonstrations and visual cues during physical abilities tests. Pre-recorded video interviews allow applicants to participate at a time that works best for their schedule, accommodating those who may have nontraditional schedules.
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And finally, tapping into those who know us best – employee referrals played an important part in building our team. The “Great People Know Great People” employee referral program offers an incentive for each referral hired. In 2022, we hired more than 1,250 referred employees. Further discussion can be found in our “We Are One” report available on our website.
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Additionally, during 2022, as required by the TSA guidance, we performed a cyber vulnerability self-assessment, submitted the results to the TSA, assembled and adopted a cyber incident response plan, and appointed cybersecurity coordinators. During 2023, we are required to comply with the second directive from the TSA, effective October 18, 2022.
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By February 21, 2023, we are required to develop and implement a cybersecurity implementation plan. Afterwards we need to establish a cybersecurity assessment plan that describes how the Company will proactively and regularly assess the effectiveness of cybersecurity measures as well as identify and resolve device, network, and system vulnerabilities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis may also limit our access to external sources of capital and significantly increase the costs of short and long-term debt financing. 17 Table of Contents General Risk Factors We Are Affected by General Economic Conditions – Prolonged, severe adverse domestic and global macroeconomic conditions or disruptions of financial and credit markets, including, for example, the recessionary fears and high inflation we are seeing in the current economic environment, may affect the producers and consumers of the commodities we carry and may have a material adverse effect on our access to liquidity, results of operations, and financial condition.
Biggest changeGeneral Risk Factors We Are Affected by General Economic Conditions – Prolonged, severe adverse domestic and global macroeconomic conditions or disruptions of financial and credit markets, including, for example, the recessionary fears, inflationary pressures, and elevated interest rates we are seeing in the current economic environment, may affect the producers and consumers of the commodities we carry and may have a material adverse effect on our access to liquidity, results of operations, and financial condition. 15 Table of Contents We May Be Affected by Acts of Terrorism, War, or Risk of War – Our rail lines, facilities, and equipment, including rail cars carrying hazardous materials, could be direct targets or indirect casualties of terrorist attacks.
This level of demand may also compound the impact of weather and weather-related events on our operations and velocity.
This level of demand also may compound the impact of weather and weather-related events on our operations and velocity.
Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, reputation, financial condition, results of operations, cash flows, and prospects. 12 Table of Contents Strategic and Operational Risks We Must Manage Fluctuating Demand for Our Services and Network Capacity – Significant reductions in demand for rail services with respect to one or more commodities or changes in consumer preferences that affect the businesses of our customers can lead to increased costs associated with resizing our operations, including higher unit operating costs and costs for the storage of locomotives, rail cars, and other equipment; workforce adjustments; and other related activities, which could have a material adverse effect on our results of operations, financial condition, and liquidity.
Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, reputation, financial condition, results of operations, cash flows, and prospects. 10 Table of Contents Strategic and Operational Risks We Must Manage Fluctuating Demand for Our Services and Network Capacity – Significant reductions in demand for rail services with respect to one or more commodities or changes in consumer preferences that affect the businesses of our customers can lead to increased costs associated with resizing our operations, including higher unit operating costs and costs for the storage of locomotives, rail cars, and other equipment; workforce adjustments; and other related activities, which could have a material adverse effect on our results of operations, financial condition, and liquidity.
There can be no assurance that the systems we have designed to identify, prevent, or limit the effects of cyber incidents or attacks will be sufficient to prevent or detect such incidents or attacks, or to avoid a material adverse impact on our systems after such incidents or attacks do occur.
There can be no assurance that the systems we have designed to identify, prevent, or limit the effects of cyber incidents will be sufficient to prevent or detect such incidents, or to avoid a material adverse impact on our systems after such incidents do occur.
As fuel prices fluctuate, our fuel surcharge programs trail such fluctuations in fuel price by approximately two months, and may be a significant source of quarter-over-quarter and year-over-year volatility, particularly in periods of rapidly changing prices.
As fuel prices fluctuate, our fuel surcharge programs trail such fluctuations in fuel prices by approximately two months, and may be a significant source of quarter-over-quarter and year-over-year volatility, particularly in periods of rapidly changing prices.
Additionally, we may be exposed to increased cybersecurity risk because we are a component of the critical U.S. infrastructure. 13 Table of Contents Severe Weather Could Result in Significant Business Interruptions and Expenditures – As a railroad with a vast network, we are exposed to severe weather conditions and other natural phenomena, including earthquakes, hurricanes, fires, floods, mudslides or landslides, extreme temperatures, avalanches, and significant precipitation, and climate change may cause or contribute to the severity or frequency of such weather conditions.
Additionally, we may be exposed to increased cybersecurity risk because we are a component of the critical U.S. infrastructure. 11 Table of Contents Severe Weather Could Result in Significant Business Interruptions and Expenditures – As a railroad with a vast network, we are exposed to severe weather conditions and other natural phenomena, including earthquakes, hurricanes, fires, floods, mudslides or landslides, extreme temperatures, avalanches, and significant precipitation, and climate change may cause or contribute to the severity or frequency of such weather conditions.
We could incur significant costs as a result of any of the foregoing, and we may be required to incur significant expenses to investigate and remediate known, unknown, or future environmental contamination, which could have a material adverse effect on our results of operations, financial condition, and liquidity. 15 Table of Contents Macroeconomic and Industry Risks We Face Competition from Other Railroads and Other Transportation Providers – We face competition from other railroads, motor carriers, ships, barges, and pipelines.
We could incur significant costs as a result of any of the foregoing, and we may be required to incur significant expenses to investigate and remediate known, unknown, or future environmental contamination, which could have a material adverse effect on our results of operations, financial condition, and liquidity. 13 Table of Contents Macroeconomic and Industry Risks We Face Competition from Other Railroads and Other Transportation Providers – We face competition from other railroads, motor carriers, ships, barges, and pipelines.
Labor disputes, work stoppages, slowdowns, or lockouts by employees of our customers or our suppliers could compromise our service reliability and have a material adverse impact on our results of operations, financial condition, and liquidity. 14 Table of Contents The Availability of Qualified Personnel Could Adversely Affect Our Operations – Changes in demographics, training requirements, and pandemic illnesses or restrictions could negatively affect the availability of qualified personnel for us, our customers, and throughout the supply chain.
Labor disputes, work stoppages, slowdowns, or lockouts by employees of our customers or our suppliers could compromise our service reliability and have a material adverse impact on our results of operations, financial condition, and liquidity. 12 Table of Contents The Availability of Qualified Personnel Could Adversely Affect Our Operations – Changes in demographics, training requirements, and pandemic illnesses or restrictions could negatively affect the availability of qualified personnel for us, our customers, and throughout the supply chain.
Any one or more of the following could cause a significant and sustained interruption of trade with Mexico, Canada, or countries in Southeast Asia: (a) a deterioration of security for international trade and businesses; (b) the adverse impact of new laws, rules, and regulations or the interpretation of laws, rules, and regulations by government entities, courts, or regulatory bodies, including the United States-Mexico-Canada Agreement (USMCA) and a “Phase One” trade agreement with China; (c) actions of taxing authorities that affect our customers doing business in foreign countries; (d) any significant adverse economic developments, such as extended periods of high inflation, material disruptions in the banking sector or in the capital markets of these foreign countries, and significant changes in the valuation of the currencies of these foreign countries that could materially affect the cost or value of imports or exports; (e) shifts in patterns of international trade that adversely affect import and export markets; (f) a material reduction in foreign direct investment in these countries; and (g) public health crises, including the outbreak of pandemic or contagious disease, such as the coronavirus and its variant strains (COVID).
Any one or more of the following could cause a significant and sustained interruption of trade with Mexico, Canada, or countries in Southeast Asia: (a) a deterioration of security for international trade and businesses; (b) the adverse impact of new laws, rules, and regulations or the interpretation of laws, rules, and regulations by government entities, courts, or regulatory bodies, including the United States-Mexico-Canada Agreement (USMCA) or other international trade agreements; (c) actions of taxing authorities that affect our customers doing business in foreign countries; (d) any significant adverse economic developments, such as extended periods of high inflation, material disruptions in the banking sector or in the capital markets of these foreign countries, and significant changes in the valuation of the currencies of these foreign countries that could materially affect the cost or value of imports or exports; (e) shifts in patterns of international trade that adversely affect import and export markets; (f) a material reduction in foreign direct investment in these countries; and (g) public health crises, including the outbreak of pandemic or contagious disease, such as the coronavirus and its variant strains (COVID).
Significant instability or disruptions of the capital markets, including, among other things, current rising interest rates in the credit markets, or deterioration of our financial condition due to internal or external factors could restrict or prohibit our access to, and significantly increase the cost of, commercial paper and other financing sources, including bank credit facilities and the issuance of long-term debt, including corporate bonds.
Significant instability or disruptions of the capital markets, including, among other things, elevated interest rates in the credit markets and/or changes in interest rates, or deterioration of our financial condition due to internal or external factors could restrict or prohibit our access to, and significantly increase the cost of, commercial paper and other financing sources, including bank credit facilities and the issuance of long-term debt, including corporate bonds.
Furthermore, due to the rising numbers and increasing sophistication of cyber-attacks, an increasingly complex information technology supply chain, and the nature of zero-day exploits, we may be unable to anticipate or implement adequate preventative measures to prevent a security breach, including by ransomware, human error, or other cyber-attack methods, from materially disrupting our systems or the systems of third-parties upon which we rely.
Furthermore, due to the rising numbers and increasing sophistication of cyber-attacks, an increasingly complex information technology supply chain, and the nature of zero-day exploits, we may be unable to anticipate or implement adequate measures to prevent a security breach, including by ransomware or as a result of human error or other cyber-attack methods, from materially affecting our systems or the systems of third-parties upon which we rely.
A successful cyber-attack that results in significant service interruption; safety failure; other operational difficulties; unauthorized access to (or the loss of access to) competitively sensitive, confidential, or other critical data or systems; loss of customers; financial losses; regulatory fines; and misuse or corruption of critical data and proprietary information, could have a material adverse impact on our results of operations, financial condition, and liquidity.
A cyber incident that results in significant service interruption; safety failure; other operational difficulties; unauthorized access to (or the loss of access to) competitively sensitive, confidential, or other critical data or systems; loss of customers; financial losses; regulatory fines; reputational harm; or misuse or corruption of critical data and proprietary information, could have a material adverse impact on our results of operations, financial condition, and liquidity.
Terrorist attacks, or other similar events, any government response thereto, and war or risk of war may adversely affect our results of operations, financial condition, and liquidity. In addition, insurance premiums for some or all of our current coverages could increase dramatically, or certain coverages may not be available to us in the future. Item 1B. Unresolved Staff Comments None.
Terrorist attacks, or other similar events, any government response thereto, and war or risk of war may adversely affect our results of operations, financial condition, and liquidity. In addition, insurance premiums for some or all of our current coverages could increase dramatically, or certain coverages may not be available to us in the future.
Significant and sustained interruptions of trade with Mexico, Canada, or countries in Southeast Asia, including China, could adversely affect customers and other entities that, directly or indirectly, purchase or rely on rail transportation services in the U.S. as part of their operations, and any such interruptions could have a material adverse effect on our results of operations, financial condition, and liquidity.
Significant and sustained interruptions of trade with Mexico, Canada, or countries in Southeast Asia, including China, could adversely affect customers and other entities that, directly or indirectly, purchase or rely on rail transportation services in the U.S. as part of their operations, and any such interruptions, including international armed conflicts such as the Russia-Ukraine and Israel-Hamas wars, could have a material adverse effect on our results of operations, financial condition, and liquidity.
Department of Interior and the impacts of ethanol incentives on farming and ethanol producers. We could face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change.
Department of Interior and the impacts of ethanol incentives on farming and ethanol producers. We could face increased costs related to defending and resolving legal claims and other litigation or complying with laws or regulations related to climate change and the alleged impact of our operations on climate change.
Although we continue to work to improve our transportation plan, add capacity, improve operations at our yards and other facilities, and improve our ability to address surges in demand for any reason with adequate resources, we cannot be sure that these measures will fully or adequately address any service shortcomings resulting from demand exceeding our planned capacity.
Although we continue to work to improve our transportation plan, add capacity, improve operations at our yards and other facilities, and improve our ability to address surges in demand for any reason by carrying a resource buffer, we cannot be sure that these measures will fully or adequately address any service shortcomings resulting from demand exceeding our planned capacity.
We may experience security breaches that could remain undetected for an extended period and, therefore, have a greater impact on the services we offer.
We may experience security breaches that could remain undetected for an extended period and, therefore, have a greater impact on us.
Violent weather caused by climate change, including hurricanes, fires, floods, extreme temperatures, avalanches, and significant precipitation could cause line outages and other interruptions to our infrastructure.
Violent weather caused by climate change, including hurricanes, fires, floods, extreme temperatures, avalanches, and significant precipitation has in the past and could in the future cause line outages and other interruptions to our infrastructure.
These impacts caused by severe weather could have a material adverse effect on our results of operations, financial condition, and liquidity.
Our revenues can also be adversely affected by severe weather that causes damage and disruptions to our customers. These impacts caused by severe weather could have a material adverse effect on our results of operations, financial condition, and liquidity.
Line outages and other interruptions caused by these conditions can adversely affect our entire rail network, potentially negatively affecting revenues, costs, and liabilities, despite efforts we undertake to plan for these events. Our revenues can also be adversely affected by severe weather that causes damage and disruptions to our customers.
Line outages and other interruptions caused by these conditions has in the past and can in the future adversely affect parts or all of our entire rail network, potentially negatively affecting revenues, costs, and liabilities, despite efforts we undertake to plan for these events.
International, political, and economic factors, events and conditions, including the start of the Russian-Ukraine conflict in late February 2022, affect the volatility of fuel prices and supplies. Weather can also affect fuel supplies and limit domestic refining capacity.
International, political, and economic factors, events and conditions, including international armed conflicts such as the Russia-Ukraine and Israel-Hamas wars, affect the volatility of fuel prices and supplies. Weather can also affect fuel supplies and limit domestic refining capacity.
A significant deterioration of our financial condition could result in a reduction of our credit rating to below investment grade, which could restrict us from utilizing our current receivables securitization facility (Receivables Facility).
A significant deterioration of our financial condition could result in a reduction of our credit rating to below investment grade, which could restrict us from utilizing our current receivables securitization facility (Receivables Facility). This may also limit our access to external sources of capital and significantly increase the costs of short and long-term debt financing.
While we work to implement our Climate Action Plan, our efforts to achieve emission reduction targets could significantly increase our operational costs and capital expenditures. 16 Table of Contents Our Business, Financial Condition, and Results of Operations have been Adversely Affected, and in the Future, Could be Materially Adversely Affected by Pandemics or Other Public Health Crises – Pandemics, epidemics, and other outbreaks of disease can have significant and widespread impacts.
In addition, stakeholder expectations regarding some of these matters may be evolving and there may be differing views among stakeholders, which could harm our reputation or increase our costs. 14 Table of Contents Our Business, Financial Condition, and Results of Operations have been Adversely Affected, and in the Future, Could be Materially Adversely Affected by Pandemics or Other Public Health Crises – Pandemics, epidemics, and other outbreaks of disease can have significant and widespread impacts.
Removed
We May Be Affected by Acts of Terrorism, War, or Risk of War – Our rail lines, facilities, and equipment, including rail cars carrying hazardous materials, could be direct targets or indirect casualties of terrorist attacks.
Added
In addition, some of these matters could impact the cost of obtaining, or availability in general, of insurance coverage meant to cover these types of risks.
Added
Our efforts to achieve emission reduction targets could significantly increase our operational costs and capital expenditures.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2022, we owned or leased the following units of equipment: Average Locomotives Owned Leased Total Age (yrs.) Multiple purpose 6,083 1,038 7,121 23.4 Switching 149 - 149 42.7 Other 15 53 68 42.5 Total locomotives 6,247 1,091 7,338 N/A 19 Table of Contents Average Freight cars Owned Leased Total Age (yrs.) Covered hoppers 13,360 9,714 23,074 22.1 Open hoppers 4,926 779 5,705 35.8 Gondolas 6,188 4,060 10,248 24.2 Boxcars 2,598 6,877 9,475 38.2 Refrigerated cars 2,496 1,371 3,867 22.4 Flat cars 2,248 1,450 3,698 32.4 Other - 312 312 31.4 Total freight cars 31,816 24,563 56,379 N/A Average Highway revenue equipment Owned Leased Total Age (yrs.) Containers 48,180 1,356 49,536 11.4 Chassis 29,703 19,616 49,319 12.0 Total highway revenue equipment 77,883 20,972 98,855 N/A We continuously assess our need for equipment to run an efficient and reliable network.
Biggest changeAs of December 31, 2023, we owned or leased the following units of equipment: Average Locomotives Owned Leased Total Age (yrs.) Multiple purpose 5,971 1,037 7,008 24.3 Switching 132 - 132 43.5 Other 14 - 14 51.2 Total locomotives 6,117 1,037 7,154 N/A Average Freight cars Owned Leased Total Age (yrs.) Covered hoppers 13,761 9,474 23,235 21.3 Open hoppers 4,846 775 5,621 36.4 Gondolas 6,396 4,492 10,888 23.1 Boxcars 3,389 7,572 10,961 32.7 Refrigerated cars 2,444 1,199 3,643 21.8 Flat cars 2,216 2,254 4,470 32.6 Other - 371 371 35.2 Total freight cars 33,052 26,137 59,189 N/A Average Highway revenue equipment Owned Leased Total Age (yrs.) Containers 47,439 545 47,984 12.2 Chassis 30,635 17,705 48,340 13.2 Total highway revenue equipment 78,074 18,250 96,324 N/A 19 Table of Contents We continuously assess our need for equipment to run an efficient and reliable network.
The facility has 1.2 million square feet of space that can accommodate approximately 4,000 employees. HARRIMAN DISPATCHING CENTER The Harriman Dispatching Center (HDC), located in Omaha, Nebraska, is our primary dispatching facility. It is linked to regional dispatching and locomotive management facilities at various locations along our network.
The facility has 1.2 million square feet of space that can accommodate approximately 4,000 employees. 18 Table of Contents HARRIMAN DISPATCHING CENTER The Harriman Dispatching Center (HDC), located in Omaha, Nebraska, is our primary dispatching facility. It is linked to regional dispatching and locomotive management facilities at various locations along our network.
Many factors cause us to adjust the size of our active fleets, including changes in carload volume, weather events, seasonality, customer preferences, and operational efficiency initiatives. As some of these factors are difficult to assess or can change rapidly, we maintain a surge fleet to remain agile.
Many factors cause us to adjust the size of our active fleets, including changes in carload volume, weather events, seasonality, customer preferences, and operational efficiency initiatives. As some of these factors are difficult to assess or can change rapidly, we maintain a buffer to remain agile.
(See discussion within this report of environmental issues in Business – Governmental and Environmental Regulation, Item 1; Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Environmental, Item 7; and Note 17 to the Financial Statements and Supplementary Data, Item 8.) 20 Table of Contents
(See discussion within this report of environmental issues in Business - Governmental and Environmental Regulation, Item 1; Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Environmental, Item 7; and Note 17 to the Financial Statements and Supplementary Data, Item 8.)
The following table includes the major yards and terminals on our system: Major Classification Yards Major Intermodal Terminals North Platte, Nebraska Joliet (Global 4), Illinois Englewood (Houston), Texas Global II (Chicago), Illinois North Little Rock, Arkansas East Los Angeles, California Livonia, Louisiana Mesquite, Texas West Colton, California Lathrop, California Fort Worth, Texas LATC (Los Angeles), California Houston, Texas ICTF (Los Angeles), California Roseville, California Marion, Arkansas RAIL EQUIPMENT Our equipment includes owned and leased locomotives and rail cars; heavy maintenance equipment and machinery; other equipment and tools in our shops, offices, and facilities; and vehicles for maintenance, transportation of crews, and other activities.
The following table includes the major yards and terminals on our system: Major Classification Yards Major Intermodal Terminals North Platte, Nebraska Joliet (Global 4), Illinois Englewood (Houston), Texas Global II (Chicago), Illinois North Little Rock, Arkansas East Los Angeles, California Livonia, Louisiana ICTF (Long Beach), California Fort Worth, Texas Mesquite, Texas Roseville, California Lathrop, California Houston, Texas City of Industry, California West Colton, California Salt Lake City, Utah RAIL EQUIPMENT Our equipment includes owned and leased locomotives and rail cars; heavy maintenance equipment and machinery; other equipment and tools in our shops, offices, and facilities; and vehicles for maintenance, transportation of crews, and other activities.
These fleets serve as the most reliable and efficient equipment to facilitate growth without additional acquisitions. Locomotive and freight car in service utilization percentages for the year ended December 31, 2022, were 70% and 78%, respectively. CAPITAL EXPENDITURES Our rail network requires significant annual capital investments for replacement, improvement, and expansion.
These fleets serve as the most reliable and efficient equipment to facilitate growth without additional acquisitions. Locomotive and freight car in service utilization percentages for the year ended December 31, 2023, were 69% and 74%, respectively. CAPITAL EXPENDITURES Our rail network requires significant annual capital investments for replacement, improvement, and expansion.
Item 2. Properties We employ a variety of assets in the management and operation of our rail business. Our rail network covers 23 states in the western two-thirds of the U.S. 18 Table of Contents TRACK Our rail network includes 32,534 route miles. We own 26,121 miles and operate on the remainder pursuant to trackage rights or leases.
Item 2. Properties We employ a variety of assets in the management and operation of our rail business. Our rail network covers 23 states in the western two-thirds of the U.S. TRACK Our rail network includes 32,693 route miles. We own 26,110 miles and operate on the remainder pursuant to trackage rights or leases.
(See the cash capital investments table in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, Item 7, of this report.) 2023 Capital Plan – In 2023, we expect our capital plan to be approximately $3.6 billion, up 6% from 2022.
(See the cash capital investments table in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, Item 7, of this report.) 2024 Capital Plan – In 2024, we expect our capital plan to be approximately $3 .4 billion, down 8 % from 2023.
These investments enhance safety, support the transportation needs of our customers, improve our operational efficiency, and support emission reduction initiatives outlined in our Climate Action Plan. Additionally, we add new equipment to our fleet to replace older equipment and to support growth and customer demand. 2022 Capital Program – During 2022, our capital program totaled approximately $3.4 billion.
These investments enhance safety, support the transportation needs of our customers, improve our operational efficiency, and support emission reduction initiatives. Additionally, we add new equipment to our fleet to replace older equipment and to support growth and customer demand. 2023 Capital Program – During 2023, our capital program totaled approximately $3.7 billion.
The following table describes track miles: As of December 31, 2022 2021 Route 32,534 32,452 Other main line 7,113 7,093 Passing lines and turnouts 3,454 3,412 Switching and classification yard lines 8,853 8,887 Total miles 51,954 51,844 HEADQUARTERS BUILDING We own our headquarters building in Omaha, Nebraska.
The following table describes track miles: As of December 31, 2023 2022 Route 32,693 32,534 Other main line 7,117 7,113 Passing lines and turnouts 3,466 3,454 Switching and classification yard lines 8,852 8,853 Total miles 52,128 51,954 HEADQUARTERS BUILDING We own our headquarters building in Omaha, Nebraska.
(See further discussion of our 2023 capital plan in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, Item 7, of this report.) OTHER Equipment Encumbrances – Equipment with a carrying value of approximately $903 million and $1.2 billion at December 31, 2022 and 2021, respectively, served as collateral for finance leases and other types of equipment obligations in accordance with the secured financing arrangements utilized to acquire or refinance such railroad equipment.
(See further discussion of our 2024 capital plan in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, Item 7, of this report.) OTHER Equipment Encumbrances – See Note 14 and 16 to the Financial Statements and Supplementary Data, Item 8.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOTHER 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 were 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.
Biggest changeInformation concerning environmental claims and contingencies and estimated remediation costs is set forth in this report in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Environmental, Item 7, and Note 17 to the Financial Statements and Supplementary Data, Item 8. 20 Table of Contents 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 were 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.
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. 21 Table of Contents
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.
They are proceeding on a consolidated basis in the U.S. District Court before the Honorable Paul L. Friedman (MDL I). Since the Certification Denial, approximately 111 lawsuits have been filed in federal court based on claims identical to those alleged in the class certification case. The Judicial Panel on Multidistrict Litigation consolidated these suits for pretrial proceedings in the U.S.
They are proceeding on a consolidated basis in the U.S. District Court before the Honorable Paul L. Friedman (MDL I). Since the Certification Denial, approximately 106 lawsuits are pending in federal court based on claims identical to those alleged in the class certification case. The Judicial Panel on Multidistrict Litigation consolidated these suits for pretrial proceedings in the U.S.
A hearing has not been scheduled on the motion. As we reported 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).
District Court before the Honorable Beryl A. Howell (MDL II). As we reported 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).
Just as it did in the MDL proceedings, Union Pacific filed a motion for summary judgment on May 14, 2021, and no hearing has been scheduled. 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.
In 2019, Oxbow dismissed certain claims and the claims that remain are the same as the Plaintiffs’ claims in MDL I. 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.
Removed
Information concerning environmental claims and contingencies and estimated remediation costs is set forth in this report in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Environmental, Item 7, and Note 17 to the Financial Statements and Supplementary Data, Item 8.
Removed
District Court before the Honorable Beryl A. Howell (MDL II). On February 19, 2021, the court denied our motion to exclude plaintiffs' alleged evidence of conspiracy under a federal statute designed to incent and protect railroad communications made to further interline service (i.e., where two railroads are in the route).
Removed
On May 17, 2022, the DC Circuit reversed the trial court and largely adopted the railroads’ interpretation of the statute, although no individual evidentiary rulings were made. We also filed a motion for summary judgment on May 14, 2021, in the MDL I proceedings, and the briefing was completed in September 2021.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeHamann was elected Executive Vice President and Chief Financial Officer of UPC and the Railroad effective January 1, 2020. She previously served as Senior Vice President – Finance (April 2019 – December 2019) and Vice President – Planning & Analysis (October 2017 – March 2019) . [2] Mr.
Biggest changeShe previously served as Senior Vice President - Finance (April 2019 - December 2019) and Vice President - Planning & Analysis (October 2017 - March 2019). [4] Mr. Gehringer was elected Executive Vice President - Operations of the Railroad effective January 1, 2021. Mr.
Item 4. Mine Safety Disclosures Not applicable. Information About Our Executive Officers and Principal Executive Officers of Our Subsidiaries The Board of Directors typically elects and designates our executive officers on an annual basis at the board meeting held in conjunction with the Annual Meeting of Shareholders, and they hold office until their successors are elected.
Item 4. Mine Safety Disclosures Not applicable. 21 Table of Contents Information About Our Executive Officers and Principal Executive Officers of Our Subsidiaries The Board of Directors typically elects and designates our executive officers on an annual basis at the board meeting held in conjunction with the Annual Meeting of Shareholders, and they hold office until their successors are elected.
The following table sets forth certain information current as of February 10, 2023, relating to the executive officers. Business Experience During Name Position Age Past Five Years Lance M. Fritz Chairman, President, and Chief Executive Officer of UPC and the Railroad 60 Current Position Jennifer L.
The following table sets forth certain information current as of February 9, 2024 , relating to the executive officers. Business Experience During Name Position Age Past Five Years V. James Vena Chief Executive Officer of UPC and the Railroad 65 [1] Elizabeth F. Whited President of UPC and the Railroad 58 [2] Jennifer L.
Whited was elected Executive Vice President – Sustainability and Strategy of UPC and the Railroad effective February 3, 2022. She previously served as Executive Vice President and Chief Human Resources Officer (August 2018 – February 2022) and Executive Vice President and Chief Marketing Officer (December 2016 – August 2018) . 22 Table of Contents PART II
Whited most recently served as Executive Vice President - Sustainability and Strategy of UPC and the Railroad (February 2022 - August 2023). She previously served as Executive Vice President and Chief Human Resources Officer (August 2018 - February 2022). [3] Ms. Hamann was elected Executive Vice President and Chief Financial Officer of UPC and the Railroad effective January 1, 2020.
Richardson was elected Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad effective December 8, 2020. He most recently served as Vice President – Commercial and Regulatory Law since 2015. [3] Mr. Rocker was elected Executive Vice President – Marketing and Sales of the Railroad effective August 15, 2018. Mr.
He most recently served as Interim Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad (September 2020 - November 2020) and Vice President - Commercial and Regulatory Law (July 2018 - August 2020). [7] Mr.
Rocker previously served at the Railroad as Vice President – Marketing and Sales – Industrial team (October 2016 – August 2018). [4] Mr. Rynaski was elected Senior Vice President and Chief Accounting, Risk, and Compliance Officer of UPC and the Railroad effective July 1, 2022. Mr.
Rynaski was elected Senior Vice President and Chief Accounting, Risk, and Compliance Officer of UPC and the Railroad effective July 1, 2022. Mr. Rynaski previously served as Vice President and Controller (September 2015 - June 2022). 22 Table of Contents PART II
Hamann Executive Vice President and Chief Financial Officer of UPC and the Railroad 55 [1] Craig V. Richardson Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad 61 [2] Kenny G. Rocker Executive Vice President – Marketing and Sales of the Railroad 51 [3] Todd M.
Richardson Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad 62 [6] Kenny G. Rocker Executive Vice President - Marketing and Sales of the Railroad 52 Current Position Todd M. Rynaski Senior Vice President and Chief Accounting, Risk, and Compliance Officer of UPC and the Railroad 53 [7] [1] Mr.
Rynaski previously served as Vice President and Controller (September 2015 – June 2022). [5] Mr. Gehringer was elected Executive Vice President – Operations of the Railroad effective January 1, 2021. Mr.
Gehringer previously served as Senior Vice President - Transportation (July 2020 - December 2020), Vice President - Mechanical and Engineering (January 2020 - July 2020), and Vice President - Engineering (March 2018 - January 2020). [5] Mr. Jalali was elected Executive Vice President and Chief Information Officer of UPC and the Railroad effective June 1, 2023. Mr.
Rynaski Senior Vice President and Chief Accounting, Risk, and Compliance Officer of UPC and the Railroad 52 [4] Eric J. Gehringer Executive Vice President – Operations of the Railroad 43 [5] Elizabeth F. Whited Executive Vice President – Sustainability and Strategy of UPC and the Railroad 57 [6] [1] Ms.
Hamann Executive Vice President and Chief Financial Officer of UPC and the Railroad 56 [3] Eric J. Gehringer Executive Vice President - Operations of the Railroad 44 [4] Rahul Jalali Executive Vice President and Chief Information Officer of UPC and the Railroad 50 [5] Craig V.
Removed
Gehringer previously served as Senior Vice President – Transportation (July 2020 – December 2020), Vice President – Mechanical and Engineering (January 2020 – July 2020), Vice President – Engineering (March 2018 – January 2020), and Assistant Vice President – Engineering (September 2016 – March 2018) . [6] Ms.
Added
Vena was elected Chief Executive Officer of UPC and the Railroad effective August 14, 2023. He previously served as a Senior Advisor to the Chairman of UPC (January 2021 - June 2021) and Chief Operating Officer (January 2019 - December 2020). [2] Ms. Whited was elected President of UPC and the Railroad effective August 14, 2023. Ms.
Added
Jalali most recently served as Senior Vice President and Chief Information Officer (November 2020 - May 2023). [6] Mr. Richardson was elected Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad effective December 8, 2020.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod UNP Peer Group DJ Trans S&P 500 1 Year (2022) (15.9 )% (16.1 )% (17.6 )% (18.1 )% 3 Year (2020 - 2022) 22.0 33.6 27.9 24.7 Five-Year Performance Comparison – The following graph provides an indicator of cumulative total shareholder returns for the Corporation as compared to the peer group index (described above), the DJ Trans, and the S&P 500.
Biggest changePeriod UNP Peer Group DJ Trans S&P 500 1 Year (2023) 21.5 % 6.9 % 20.4 % 26.3 % 3 Year (2021 - 2023) 26.0 % 12.9 % 32.1 % 33.0 % Five-Year Performance Comparison – The following graph provides an indicator of cumulative total shareholder returns for the Corporation as compared to the peer group index (described above), the DJ Trans, and the S&P 500.
The graph assumes that $100 was invested in the common stock of Union Pacific Corporation and each index on December 31, 2017, and that all dividends were reinvested.
The graph assumes that $100 was invested in the common stock of Union Pacific Corporation and each index on December 31, 2018, and that all dividends were reinvested.
On that date, the closing price of the common stock on the NYSE was $210.29. We paid dividends to our common shareholders during each of the past 123 years.
On that date, the closing price of the common stock on the NYSE was $248.33. We paid dividends to our common shareholders during each of the past 124 years.
The information below is historical in nature and is not necessarily indicative of future performance. 23 Table of Contents Purchases of Equity Securities – During 2022, we repurchased 27,374,826 shares of our common stock at an average price of $231.51.
The information below is historical in nature and is not necessarily indicative of future performance. 23 Table of Contents Purchases of Equity Securities – During 2023, we repurchased 3,657,484 shares of our common stock at an average price of $202.67.
Item 5. Market for the Registrant ’ s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “UNP”. At February 3, 2023, there were 611,872,981 shares of common stock outstanding and 28,959 common shareholders of record.
Item 5. Market for the Registrant ’ s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock is traded on the NYSE under the symbol “UNP”. At February 2, 2024, there were 609,777,914 shares of common stock outstanding and 27,949 common shareholders of record.
The following table presents common stock repurchases during each month for the fourth quarter of 2022: 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 Maximum Number of Shares Remaining Under the Plan or Program [b] Oct. 1 through Oct. 31 1,985,868 $ 196.40 1,985,704 85,423,274 Nov. 1 through Nov. 30 1,235,296 206.48 1,234,889 84,188,385 Dec. 1 through Dec. 31 281,092 213.45 281,074 83,907,311 Total 3,502,256 $ 201.32 3,501,667 N/A [a] Total number of shares purchased during the quarter includes approximately 589 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, 2022, our Board of Directors authorized the repurchase of up to 100 million shares of our common stock by March 31, 2025, replacing our previous repurchase program.
The following table presents common stock repurchases during each month for the fourth quarter of 2023: 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 Maximum Number of Shares Remaining Under the Plan or Program [b] Oct. 1 through Oct. 31 166 $ 222.76 - 80,392,027 Nov. 1 through Nov. 30 3,069 219.57 - 80,392,027 Dec. 1 through Dec. 31 3,573 235.05 - 80,392,027 Total 6,808 $ 227.77 - N/A [a] Total number of shares purchased during the quarter includes approximately 6,808 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, 2022, our Board of Directors authorized the repurchase of up to 100 million shares of our common stock by March 31, 2025, replacing our previous repurchase program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Critical Accounting Estimates 24 Cautionary Information 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 40 Item 8. Financial Statements and Supplementary Data 41 Report of Independent Registered Public Accounting Firm 42
Biggest changeItem 6. [Reserved] 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Critical Accounting Estimates 24 Cautionary Information 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 39 Item 8. Financial Statements and Supplementary Data 40 Report of Independent Registered Public Accounting Firm 41

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables detail cash capital investments and track statistics for the years ended December 31: Millions 2022 2021 2020 Ties $ 544 $ 443 $ 507 Rail and other track material 437 507 471 Ballast 216 215 225 Other [a] 693 760 629 Total road infrastructure replacements 1,890 1,925 1,832 Line expansion and other capacity projects 276 284 332 Commercial facilities 308 243 171 Total capacity and commercial facilities 584 527 503 Locomotives and freight cars [b] 800 322 269 Technology and other 346 162 323 Total cash capital investments $ 3,620 $ 2,936 $ 2,927 [a] Other includes bridges and tunnels, signals, other road assets, and road work equipment. [b] Locomotives and freight cars include early lease buyouts of $70 million, $34 million, and $38 million in 2022, 2021, and 2020, respectively. 2022 2021 2020 Track miles of rail replaced 542 502 468 Track miles of rail capacity expansion 44 70 83 New ties installed (thousands) 3,712 4,058 4,671 Miles of track surfaced 9,502 10,441 10,414 Capital Plan – In 2023, we expect our capital plan to be approximately $3.6 billion, up 6% from 2022 as we make investments to support our growth strategy.
Biggest changeThe following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure): Millions, For the Year Ended December 31, 2023 2022 2021 Cash provided by operating activities $ 8,379 $ 9,362 $ 9,032 Cash used in capital investments (3,606 ) (3,620 ) (2,936 ) Total (a) 4,773 5,742 6,096 Net income (b) $ 6,379 $ 6,998 $ 6,523 Cash flow conversion rate (a/b) 75 % 82 % 93 % Investing Activities Cash used in investing activities in 2023 increased compared to 2022 primarily driven by lower proceeds from asset sales within other investing activities net. 34 Table of Contents The following tables detail cash capital investments and track statistics for the years ended December 31: Millions 2023 2022 2021 Ties $ 565 $ 544 $ 443 Rail and other track material 454 437 507 Ballast 194 216 215 Other [a] 691 693 760 Total road infrastructure replacements 1,904 1,890 1,925 Line expansion and other capacity projects 239 276 284 Commercial facilities 425 308 243 Total capacity and commercial facilities 664 584 527 Locomotives and freight cars [b] 728 800 322 Technology and other 310 346 162 Total cash capital investments [c] $ 3,606 $ 3,620 $ 2,936 [a] Other includes bridges and tunnels, signals, other road assets, and road work equipment. [b] Locomotives and freight cars include early lease buyouts of $57 million, $70 million, and $34 million in 2023, 2022, and 2021, respectively. [c] Weather-related damages for 2023, 2022, and 2021 are immaterial.
Our environmental liability is subject to several factors such as type of remediation, nature and volume of contaminate, and number and financial viability of other potentially responsible parties, as well as uncertainty due to unknown alleged contamination, evolving trends in remediation techniques and final remedies, and changes in laws and regulations.
Our environmental liability is subject to several factors such as type of remediation, nature and volume of contaminate, number and financial viability of other potentially responsible parties, as well as uncertainty due to unknown alleged contamination, evolving trends in remediation techniques and final remedies, and changes in laws and regulations.
We will continue using a comprehensive safety management system approach utilizing technology, hazard identification and risk assessments, employee engagement, training, quality control, and targeted capital investments.
We will continue using a comprehensive safety management approach utilizing technology, hazard identification and risk assessments, employee engagement, training, quality control, and targeted capital investments.
See Note 14 to the Financial Statements and Supplementary Data, Item 8, for a description of all our outstanding financing arrangements and significant new borrowings, and Note 18 to the Financial Statements and Supplementary Data, Item 8, for a description of our share repurchase programs. 36 Table of Contents OTHER MATTERS Inflation – For capital-intensive companies, inflation significantly increases asset replacement costs for long-lived assets.
See Note 14 to the Financial Statements and Supplementary Data, Item 8, for a description of all our outstanding financing arrangements and significant new borrowings, and Note 18 to the Financial Statements and Supplementary Data, Item 8, for a description of our share repurchase programs. 35 Table of Contents OTHER MATTERS Inflation – For capital-intensive companies, inflation significantly increases asset replacement costs for long-lived assets.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Future tax legislation, such as a change in the federal corporate tax rate, could have a material impact on our financial condition, results of operations, or liquidity. For example, a future, permanent 1% increase in our federal income tax rate would increase our deferred tax liability by approximately $500 million.
Future tax legislation, such as a change in the federal corporate tax rate, could have a material impact on our financial condition, results of operations, or liquidity. For example, a future, permanent 1% increase in our federal income tax rate would increase our deferred tax liability by approximately $525 million.
Similarly, a future, permanent 1% decrease in our federal income tax rate would decrease our deferred tax liability by approximately $500 million. Accounting Pronouncements – See Note 3 to the Financial Statements and Supplementary Data, Item 8. Asserted and Unasserted Claims – See Note 17 to the Financial Statements and Supplementary Data, Item 8.
Similarly, a future, permanent 1% decrease in our federal income tax rate would decrease our deferred tax liability by approximately $525 million. Accounting Pronouncements – See Note 3 to the Financial Statements and Supplementary Data, Item 8. Asserted and Unasserted Claims – See Note 17 to the Financial Statements and Supplementary Data, Item 8.
Forward-looking statements and information also include any other statements or information in this report (including information incorporated herein by reference) regarding: potential impacts of public health crises, including the outbreak of pandemic or contagious disease, such as COVID; the Russian Ukraine conflict on our business operations, financial results, liquidity, and financial position, and on the world economy (including our customers, employees, and supply chains), including as a result of fluctuations in volume and carloadings; closing of customer manufacturing, distribution or production facilities; expectations as to operational or service improvements; expectations as to hiring challenges; availability of employees; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications (including those discussed in response to increased traffic); 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, cyber-attacks 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 also include any other statements or information in this report (including information incorporated herein by reference) regarding: potential impacts of public health crises, including pandemics, epidemics, and the outbreak of other contagious disease, such as COVID; the Russia-Ukraine and Israel-Hamas wars and any impacts on our business operations, financial results, liquidity, and financial position, and on the world economy (including customers, employees, and supply chains), including as a result of fluctuations in volume and carloadings; closing of customer manufacturing, distribution or production facilities; expectations as to operational or service improvements; expectations as to hiring challenges; availability of employees; expectations regarding the effectiveness of steps taken or to be taken to improve operations, service, infrastructure improvements, and transportation plan modifications (including those discussed in response to increased traffic); 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, cyber-attacks 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.
These forward-looking statements and information include, without limitation, statements in the Chairman’s letter preceding Part I; statements regarding planned capital expenditures under the caption “2023 Capital Plan” in Item 2 of Part I; and statements and information set forth under the captions “2023 Outlook”; “Liquidity and Capital Resources” in Item 7 of Part II regarding our capital plan, share repurchase programs, contractual obligations, "Pension Benefits", and "Other Matters" in this Item 7 of Part II.
These forward-looking statements and information include, without limitation, statements in the CEO’s letter preceding Part I; statements regarding planned capital expenditures under the caption “2024 Capital Plan” in Item 2 of Part I; and statements and information set forth under the captions “2024 Outlook”; “Liquidity and Capital Resources” in Item 7 of Part II regarding our capital plan, share repurchase programs, contractual obligations, "Pension Benefits", and "Other Matters" in this Item 7 of Part II.
We will continue our efforts to utilize data to identify and mitigate exposure to risk, detect rail defects, improve or close crossings, and educate the public and law enforcement agencies about crossing safety through a combination of our own programs (including risk assessment strategies), industry programs, and local community activities across the network.
We plan to utilize data to identify and mitigate exposure to risk, detect rail defects, improve or close crossings, and educate the public and law enforcement agencies about crossing safety through a combination of our own programs (including risk assessment strategies), industry programs, and local community activities across the network.
We estimated the fair values of our fixed-rate debt by considering the impact of the hypothetical interest rates on quoted market prices and current borrowing rates. Tax Rates – Our deferred tax assets and liabilities are measured based on current tax law.
We estimated the fair values of our fixed-rate debt by considering the impact of the hypotheti cal interest rates on quoted market prices and current borrowing rates. Tax Rates – Our deferred tax assets and liabilities are measured based on current tax law.
Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a hypothetical one percentage point decrease in interest rates as of December 31, 2022, and totals an increase of approximately $3.5 billion to the fair value of our debt at December 31, 2022.
Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a hypothetical one percentage point decrease in interest rates as of December 31, 2023 , and totals an increase of approximately $3.6 billion to the fair value of our debt at December 31, 2023 .
Includes an interest component of $26,797 million. [b] Purchase obligations include locomotive maintenance contracts; purchase commitments for fuel purchases, ties, ballast, and rail; and agreements to purchase other goods and services. [c] Includes leases for locomotives, freight cars, other equipment, and real estate.
Includes an interest component of $26,363 million. [b] Purchase obligations include locomotive maintenance contracts; purchase commitments for ties, ballast, and rail; and agreements to purchase other goods and services. [c] Includes leases for locomotives, freight cars, other equipment, and real estate.
Our effective tax rates for 2022 and 2021 were 22.9% and 23.1%, respectively. OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS We report a number of key performance measures weekly to the STB. We provide this data on our website at www.up.com/investor/aar-stb_reports/index.htm.
Our effective tax rates for 2023 and 2022 were 22.5% and 22.9%, respectively. OTHER OPERATING/PERFORMANCE AND FINANCIAL STATISTICS We report a number of key performance measures weekly to the STB. We provide this data on our website at www.up.com/investor/aar-stb_reports/index.htm.
Includes an interest component of $172 million. [d] Includes estimated other post retirement, medical, and life insurance payments, and payments made under the unfunded pension plan for the next ten years. [e] Represents total obligations, including interest component of $25 million.
Includes an interest component of $168 million. [d] Includes estimated other post retirement, medical, and life insurance payments, and payments made under the unfunded pension plan for the next ten years. [e] Represents total obligations, including interest component of $15 million.
Our personal injury liability balance and claims activity was as follows: 2022 2021 2020 Ending liability balance at December 31 (millions) $ 361 $ 325 $ 270 Open claims, beginning balance 2,027 1,897 1,985 New claims 2,747 2,719 2,577 Settled or dismissed claims (2,738 ) (2,589 ) (2,665 ) Open claims, ending balance at December 31 2,036 2,027 1,897 Environmental Costs – See Note 17 to the Financial Statements and Supplementary Data, Item 8; " We Are Subject to Significant Environmental Laws and Regulations" in the Risk Factors, Item 1A; and Environmental Matters in the Legal Proceedings, Item 3.
Our personal injury liability balance and claims activity was as follows: 2023 2022 2021 Ending liability balance at December 31 (millions) $ 383 $ 361 $ 325 Open claims, beginning balance 2,036 2,027 1,897 New claims 3,008 2,747 2,719 Settled or dismissed claims (3,173 ) (2,738 ) (2,589 ) Open claims, ending balance at December 31 1,871 2,036 2,027 Environmental Costs – See Note 17 to the Financial Statements and Supplementary Data, Item 8; " We Are Subject to Significant Environmental Laws and Regulations" in the Risk Factors, Item 1A; and Environmental Matters in the Legal Proceedings, Item 3.
The following section generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
The following section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Millions 2023 2022 2021 2020 Net periodic pension (benefit)/cost $ (6 ) $ 9 $ 85 $ 50 39 Table of Contents 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 Securities Exchange Act of 1934.
Millions 2024 2023 2022 2021 Net periodic pension (benefit)/cost $ (7 ) $ - $ 9 $ 85 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 Securities Exchange Act of 1934.
In addition, other factors, such as changes in domestic and foreign monetary policy (including rising interest rates), may affect economic activity and demand for rail transportation; natural gas prices, weather conditions, and demand for other energy sources may impact the coal market; crude oil prices and spreads may drive demand for petroleum products and drilling materials; available truck capacity could impact our intermodal business; and international trade agreements could promote or hinder trade. 26 Table of Contents ● Fuel Prices – Projections for crude oil and natural gas continue to fluctuate in the current economic environment.
In addition, other factors, such as changes in domestic and foreign monetary policy (including rising interest rates), may affect economic activity and demand for rail transportation; natural gas prices, weather conditions, and demand for other energy sources may impact the coal market; crude oil prices and spreads may drive demand for petroleum products and drilling materials; available truck capacity could impact our intermodal business; and international trade agreements could promote or hinder trade.
In addition, our Operating Practices Command Center will continue the implementation of predictive technology to reduce variability by seeking to identify causes of mainline service interruptions and develop solutions, in addition to assisting employees with understanding best practices for handling trains.
In addition, our Operating Practices Command Center will help position us to implement predictive technology to reduce variability by seeking to identify causes of mainline service interruptions and develop solutions in addition to assisting employees with understanding best practices for handling trains.
Our environmental liability balance and site activity was as follows: 2022 2021 2020 Ending liability balance at December 31 (millions) $ 253 $ 243 $ 233 Open sites, beginning balance 376 373 360 New sites 69 105 96 Closed sites (92 ) (102 ) (83 ) Open sites, ending balance at December 31 353 376 373 Property and Depreciation – See Note 11 to the Financial Statements and Supplementary Data, Item 8.
Our environmental liability balance and site activity was as follows: 2023 2022 2021 Ending liability balance at December 31 (millions) $ 245 $ 253 $ 243 Open sites, beginning balance 353 376 373 New sites 74 69 105 Closed sites (94 ) (92 ) (102 ) Open sites, ending balance at December 31 333 353 376 Property and Depreciation – See Note 11 to the Financial Statements and Supplementary Data, Item 8.
At December 31, 2022, 2021, and 2020, the incremental borrowing rate on operating leases was 3.3%, 3.2%, and 3.7%, respectively.
At December 31, 2023, 2022, and 2021, the incremental borrowing rate on operating leases was 3.6%, 3.3%, and 3.2%, respectively.
On December 31, 2022, we had $973 million of cash and cash equivalents, $2.0 billion of committed credit available under our revolving credit facility, and up to $700 million undrawn on the Receivables Facility.
On December 31, 2023, we had $1.1 billion of cash and cash equivalents, $2.0 billion of committed credit available under our revolving credit facility, and up to $800 million undrawn on the Receivables Facility.
The following tables present the key assumptions used to measure net periodic pension benefit/cost for 2023 and the estimated impact on 2023 net periodic pension benefit/cost relative to a change in those assumptions: Assumptions Discount rate for benefit obligations 5.21 % Discount rate for interest on benefit obligations 5.14 % Discount rate for service cost 5.18 % Discount rate for interest on service cost 5.21 % Expected return on plan assets 5.25 % Sensitivities Increase in Expense Millions Pension 0.25% decrease in discount rates $ 15 0.25% decrease in expected return on plan assets $ 12 The following table presents the net periodic pension benefit/cost for the years ended December 31: Est.
The following tables present the key assumptions used to measure net periodic pension benefit/cost for 2024 and the estimated impact on 2024 net periodic pension benefit/cost relative to a change in those assumptions: Assumptions Discount rate for benefit obligations 5.00 % Discount rate for interest on benefit obligations 4.90 % Discount rate for service cost 5.05 % Discount rate for interest on service cost 5.02 % Expected return on plan assets 5.25 % Sensitivities Increase in Expense Millions Pension 0.25% decrease in discount rates $ 1 0.25% decrease in expected return on plan assets $ 12 The following table presents the net periodic pension benefit/cost for the years ended December 31: Est.
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.
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 evaluate our critical assumptions at least annually, and selected assumptions are based on the following factors: ● We measure the service cost and interest cost components of our net periodic pension benefit/cost by using individual spot rates matched with separate cash flows for each future year.
The critical assumptions used to measure pension obligations and expenses are the discount rates and expected rate of return on pension assets. 37 Table of Contents We evaluate our critical assumptions at least annually, and selected assumptions are based on the following factors: ● We measure the service cost and interest cost components of our net periodic pension benefit/cost by using individual spot rates matched with separate cash flows for each future year.
Indemnities – See Note 17 to the Financial Statements and Supplementary Data, Item 8. Climate Change – Climate change could have an adverse impact on our operations and financial performance (see Risk Factors under Item 1A of this report), although we are currently unable to predict the manner or severity of such impact.
Indemnities – See Note 17 to the Financial Statements and Supplementary Data, Item 8. Climate Change – Climate change could have an adverse impact on our operations and financial performance (see Risk Factors under Item 1A of this report).
We will continue to harden our infrastructure, replace older assets, and improve the safety and resilience of the network. In addition, the plan includes investments in growth-related projects to drive more carloads to the network, certain ramps to efficiently handle volumes from new and existing intermodal customers, continuous modernization of our locomotive fleet, and projects intended to improve operational efficiency.
In addition, the plan includes investments in growth-related projects to drive more carloads to the network, certain ramps to efficiently handle volumes from new and existing intermodal customers, continued modernization of our locomotive fleet, and projects intended to improve operational efficiency.
Freight revenues from industrial shipments increased in 2022 versus 2021 due to higher fuel surcharge revenues, volume increases, and core pricing gains, partially offset by negative mix of traffic from increased short haul rock shipments and decreased petroleum. Volume increased 5% compared to 2021.
Freight revenues from industrial shipments increased slightly in 2023 versus 2022 due to core pricing gains and volume increases, offset by negative mix of traffic, driven by increased short haul rock shipments and decreased lumber shipments, and lower fuel surcharge revenues. Volume increased 1% compared to 2022.
The following critical accounting estimates are a subset of our significant accounting policies described in Note 2 to the Financial Statements and Supplementary Data, Item 8. These critical accounting estimates affect significant areas of our financial statements and involve judgment and estimates. If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material.
The following critical accounting estimates are a subset of our significant accounting policies described in Note 2 to the Financial Statements and Supplementary Data, Item 8. These critical accounting estimates affect significant areas of our financial statements and involve judgment and estimates.
Freight revenues from bulk shipments increased in 2022 compared to 2021 due to higher fuel surcharge revenues, core pricing gains, and volume increases, partially offset by negative mix from increased coal shipments and decreased grain shipments.
Freight revenues from bulk shipments decreased in 2023 compared to 2022 due to lower fuel surcharge revenues, lower volume, and negative mix from fewer food and refrigerated shipments, partially offset by core pricing gains.
Railroad performance measures are included in the table below: % Change % Change 2022 2021 2020 2022 v 2021 2021 v 2020 Gross ton-miles (GTMs) (billions) 843.4 817.9 771.8 3 % 6 % Revenue ton-miles (billions) 420.8 411.3 385.0 2 7 Freight car velocity (daily miles per car) [a] 191 203 221 (6 ) (8 ) Average train speed (miles per hour) [a] 23.8 24.6 25.9 (3 ) (5 ) Average terminal dwell time (hours) [a] 24.4 23.7 22.7 3 4 Locomotive productivity (GTMs per horsepower day) 125 133 137 (6 ) (3 ) Train length (feet) 9,329 9,334 8,798 - 6 Intermodal car trip plan compliance (%) [b] 67 73 81 (6 ) pts (8 ) pts Manifest/Automotive car trip plan compliance (%) [b] 59 63 71 (4 ) pts (8 ) pts Workforce productivity (car miles per employee) 1,036 1,038 947 - 10 Total employees (average) 30,717 29,905 30,960 3 (3 ) Operating ratio (%) 60.1 57.2 59.9 2.9 pts (2.7 ) pts [a] As reported to the STB. [b] Methodology used to report (described below) is not comparable with the reporting to the STB under docket number EP 770. 31 Table of Contents 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.
Operating/Performance Statistics Management continuously monitors these key operating metrics to evaluate our operational efficiency and help us deliver the service product we sold to our customers. 30 Table of Contents Railroad performance measures are included in the table below: % Change % Change 2023 2022 2021 2023 v 2022 2022 v 2021 Gross ton-miles (GTMs) (billions) 837.5 843.4 817.9 (1 ) 3 % Revenue ton-miles (billions) 413.3 420.8 411.3 (2 ) 2 Freight car velocity (daily miles per car) [a] 204 191 203 7 (6 ) Average train speed (miles per hour) [a] 24.2 23.8 24.6 2 (3 ) Average terminal dwell time (hours) [a] 23.4 24.4 23.7 (4 ) 3 Locomotive productivity (GTMs per horsepower day) 129 125 133 3 (6 ) Train length (feet) 9,356 9,329 9,334 - - Intermodal car trip plan compliance (%) [b] 78 67 73 11 pts (6 ) pts Manifest/Automotive car trip plan compliance (%) [b] 65 59 63 6 pts (4 ) pts Workforce productivity (car miles per employee) 1,000 1,036 1,038 (3 ) - Total employees (average) 31,490 30,717 29,905 3 3 Operating ratio (%) 62.3 60.1 57.2 2.2 pts 2.9 pts [a] As reported to the STB. [b] Methodology used to report (described below) is not comparable with the reporting to the STB under docket number EP 770.
Other revenues decreased year-over-year. 27 Table of Contents The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type: Freight Revenues % Change % Change Millions 2022 2021 2020 2022 v 2021 2021 v 2020 Grain & grain products $ 3,598 $ 3,181 $ 2,829 13 % 12 % Fertilizer 712 697 660 2 6 Food & refrigerated 1,093 998 937 10 7 Coal & renewables 2,134 1,780 1,534 20 16 Bulk 7,537 6,656 5,960 13 12 Industrial chemicals & plastics 2,158 1,943 1,845 11 5 Metals & minerals 2,196 1,811 1,580 21 15 Forest products 1,465 1,357 1,160 8 17 Energy & specialized markets 2,386 2,212 2,037 8 9 Industrial 8,205 7,323 6,622 12 11 Automotive 2,257 1,761 1,680 28 5 Intermodal 5,160 4,504 3,989 15 13 Premium 7,417 6,265 5,669 18 11 Total $ 23,159 $ 20,244 $ 18,251 14 % 11 % Revenue Carloads % Change % Change Thousands 2022 2021 2020 2022 v 2021 2021 v 2020 Grain & grain products 798 805 745 (1 )% 8 % Fertilizer 190 201 193 (5 ) 4 Food & refrigerated 187 189 185 (1 ) 2 Coal & renewables 885 819 797 8 3 Bulk 2,060 2,014 1,920 2 5 Industrial chemicals & plastics 637 606 587 5 3 Metals & minerals 785 697 646 13 8 Forest products 241 250 220 (4 ) 14 Energy & specialized markets 552 559 539 (1 ) 4 Industrial 2,215 2,112 1,992 5 6 Automotive 778 701 692 11 1 Intermodal [a] 3,116 3,211 3,149 (3 ) 2 Premium 3,894 3,912 3,841 - 2 Total 8,169 8,038 7,753 2 % 4 % % Change % Change Average Revenue per Car 2022 2021 2020 2022 v 2021 2021 v 2020 Grain & grain products $ 4,509 $ 3,953 $ 3,797 14 % 4 % Fertilizer 3,749 3,470 3,427 8 1 Food & refrigerated 5,844 5,279 5,047 11 5 Coal & renewables 2,410 2,173 1,926 11 13 Bulk 3,658 3,305 3,104 11 6 Industrial chemicals & plastics 3,388 3,207 3,144 6 2 Metals & minerals 2,797 2,598 2,445 8 6 Forest products 6,092 5,424 5,269 12 3 Energy & specialized markets 4,320 3,956 3,780 9 5 Industrial 3,704 3,467 3,324 7 4 Automotive 2,902 2,511 2,427 16 3 Intermodal [a] 1,656 1,403 1,267 18 11 Premium 1,905 1,601 1,476 19 8 Average $ 2,835 $ 2,519 $ 2,354 13 % 7 % [a] For intermodal shipments, each container or trailer equals one carload. 28 Table of Contents Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated, and coal and renewables.
Other revenues increased year-over-year. 26 Table of Contents The following tables summarize the year-over-year changes in freight revenues, revenue carloads, and ARC by commodity type: Freight Revenues % Change % Change Millions 2023 2022 2021 2023 v 2022 2022 v 2021 Grain & grain products $ 3,644 $ 3,598 $ 3,181 1 % 13 % Fertilizer 757 712 697 6 2 Food & refrigerated 1,041 1,093 998 (5 ) 10 Coal & renewables 1,916 2,134 1,780 (10 ) 20 Bulk 7,358 7,537 6,656 (2 ) 13 Industrial chemicals & plastics 2,176 2,158 1,943 1 11 Metals & minerals 2,194 2,196 1,811 - 21 Forest products 1,347 1,465 1,357 (8 ) 8 Energy & specialized markets 2,521 2,386 2,212 6 8 Industrial 8,238 8,205 7,323 - 12 Automotive 2,421 2,257 1,761 7 28 Intermodal 4,554 5,160 4,504 (12 ) 15 Premium 6,975 7,417 6,265 (6 ) 18 Total $ 22,571 $ 23,159 $ 20,244 (3 )% 14 % Revenue Carloads % Change % Change Thousands 2023 2022 2021 2023 v 2022 2022 v 2021 Grain & grain products 798 798 805 - % (1 )% Fertilizer 191 190 201 1 (5 ) Food & refrigerated 175 187 189 (6 ) (1 ) Coal & renewables 867 885 819 (2 ) 8 Bulk 2,031 2,060 2,014 (1 ) 2 Industrial chemicals & plastics 645 637 606 1 5 Metals & minerals 793 785 697 1 13 Forest products 213 241 250 (12 ) (4 ) Energy & specialized markets 582 552 559 5 (1 ) Industrial 2,233 2,215 2,112 1 5 Automotive 820 778 701 5 11 Intermodal [a] 3,028 3,116 3,211 (3 ) (3 ) Premium 3,848 3,894 3,912 (1 ) - Total 8,112 8,169 8,038 (1 )% 2 % % Change % Change Average Revenue per Car 2023 2022 2021 2023 v 2022 2022 v 2021 Grain & grain products $ 4,567 $ 4,509 $ 3,953 1 % 14 % Fertilizer 3,962 3,749 3,470 6 8 Food & refrigerated 5,929 5,844 5,279 1 11 Coal & renewables 2,211 2,410 2,173 (8 ) 11 Bulk 3,623 3,658 3,305 (1 ) 11 Industrial chemicals & plastics 3,374 3,388 3,207 - 6 Metals & minerals 2,765 2,797 2,598 (1 ) 8 Forest products 6,310 6,092 5,424 4 12 Energy & specialized markets 4,335 4,320 3,956 - 9 Industrial 3,689 3,704 3,467 - 7 Automotive 2,955 2,902 2,511 2 16 Intermodal [a] 1,504 1,656 1,403 (9 ) 18 Premium 1,813 1,905 1,601 (5 ) 19 Average $ 2,782 $ 2,835 $ 2,519 (2 )% 13 % [a] For intermodal shipments, each container or trailer equals one carload. 27 Table of Contents Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated, and coal and renewables.
Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was up 2% in 2022 compared to 2021.
Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material.
Our principal sources of liquidity include cash and cash equivalents, our Receivables Facility, our revolving credit facility, as well as the availability of commercial paper and other sources of financing through the capital markets.
We have been, and we expect to continue to be, in compliance with our debt covenants. Our principal sources of liquidity include cash and cash equivalents, our Receivables Facility, our revolving credit facility, as well as the availability of commercial paper and other sources of financing through the capital markets.
Real estate sales in 2022 included a $79 million gain from a land sale to the Illinois State Toll Highway Authority and a $35 million gain from a land sale to the Colorado Department of Transportation. Real estate sales in 2021 included a $50 million gain from a sale to the Colorado Department of Transportation.
Real estate sales in 2022 included a $79 million gain from a land sale to the Illinois State Toll Highway Authority and a $35 million gain from a land sale to the Colorado Department of Transportation. See Note 6 to the Financial Statements and Supplementary Data, Item 8, for additional detail.
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 rent expenses, offset by equity income from certain equity method investments.
Depreciation expense was up 3% in 2023 compared to 2022 due to a higher depreciable asset base. 29 Table of Contents 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 rent expenses, offset by equity income from certain equity method investments.
These hypothetical changes do not consider other factors that could impact actual results. Interest Rates – At December 31, 2022, we had variable-rate debt representing approximately 1.2% of our total debt.
These hypothetical changes do not consider other factors that could impact actual results. Interest Rates – At December 31, 2023, we did not have variable-rate debt.
On December 31, 2022, we had $973 million of cash and cash equivalents. Despite the challenging year, we generated $9.4 billion of cash provided by operating activities, yielding free cash flow of $2.7 billion after reductions of $3.5 billion for cash used in investing activities and $3.2 billion in dividends. We repurchased $6.3 billion of our shares.
Despite the challenging year, we generated $8.4 billion of cash provided by operating activities, yielded free cash flow of $1.5 billion after reductions of $3.7 billion for cash used in investing activities and $3.2 billion in dividends.
Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words, phrases, or expressions.
Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words, phrases, or expressions. 38 Table of Contents Forward-looking statements should not be read as a guarantee of future performance, results or outcomes, and will not necessarily be accurate indications of the times that, or by which, such performance, results or outcomes will be achieved.
The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although revenues are analyzed by commodity, we analyze the net financial results of the Railroad as one segment due to the integrated nature of the rail network. EXECUTIVE SUMMARY 2022 Results ● Safety – Union Pacific is dedicated to maintaining a safe and healthy workplace.
The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide and analyze revenues by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network.
The allocation of revenues 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 increased 14% year-over-year to $23.2 billion driven by higher fuel surcharge revenues, core pricing gains, and a 2% increase in volume.
The allocation of revenues 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.
Return on Average Common Shareholders ’ Equity Millions, Except Percentages 2022 2021 2020 Net income $ 6,998 $ 6,523 $ 5,349 Average equity $ 13,162 $ 15,560 $ 17,543 Return on average common shareholders' equity 53.2 % 41.9 % 30.5 % 32 Table of Contents Return on Invested Capital as Adjusted (ROIC) Millions, Except Percentages 2022 2021 2020 Net income $ 6,998 $ 6,523 $ 5,349 Interest expense 1,271 1,157 1,141 Interest on average operating lease liabilities 56 54 64 Taxes on interest (304 ) (280 ) (282 ) Net operating profit after taxes as adjusted $ 8,021 $ 7,454 $ 6,272 Average equity $ 13,162 $ 15,560 $ 17,543 Average debt 31,528 28,229 25,965 Average operating lease liabilities 1,695 1,682 1,719 Average invested capital as adjusted $ 46,385 $ 45,471 $ 45,227 Return on invested capital as adjusted 17.3 % 16.4 % 13.9 % ROIC 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.
Our operating ratio of 62.3% deteriorated 2.2 points compared to 2022 driven by inflation, excess network costs, the ratification charge for a crew staffing agreement reached in the second quarter of 2023, increased casualty costs, and other cost increases, partially offset by core pricing gains, the 2022 one-time charge for the labor agreements reached with our labor unions, and the year-over-year lag impact from lower fuel prices. 31 Table of Contents Return on Average Common Shareholders ’ Equity Millions, Except Percentages 2023 2022 2021 Net income $ 6,379 $ 6,998 $ 6,523 Average equity $ 13,476 $ 13,162 $ 15,560 Return on average common shareholders' equity 47.3 % 53.2 % 41.9 % Return on Invested Capital as Adjusted (ROIC) Millions, Except Percentages 2023 2022 2021 Net income $ 6,379 $ 6,998 $ 6,523 Interest expense 1,340 1,271 1,157 Interest on average operating lease liabilities 58 56 54 Taxes on interest (315 ) (304 ) (280 ) Net operating profit after taxes as adjusted $ 7,462 $ 8,021 $ 7,454 Average equity $ 13,476 $ 13,162 $ 15,560 Average debt 32,953 31,528 28,229 Average operating lease liabilities 1,616 1,695 1,682 Average invested capital as adjusted $ 48,045 $ 46,385 $ 45,471 Return on invested capital as adjusted 15.5 % 17.3 % 16.4 % ROIC 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.
Deterioration of our operating results or financial condition due to internal or external factors could negatively impact our ability to access capital markets as a source of liquidity. Access to liquidity through the capital markets is also dependent on our financial stability.
If our bond rating were to deteriorate, it could have an adverse impact on our liquidity. Access to commercial paper as well as other capital market financing is dependent on market conditions. Deterioration of our operating results or financial condition due to internal or external factors could negatively impact our ability to access capital markets as a source of liquidity.
Purchased services and materials increased 21% in 2022 compared to 2021 driven by higher locomotive maintenance expenses due to a larger active fleet to assist in recovering the network, inflation, increased drayage costs incurred by our Loup subsidiary, and volume-related costs. The year-over-year comparison was positively impacted by the 2021 weather-related expenses.
Purchased services and materials increased 7% in 2023 compared to 2022 driven by higher locomotive maintenance expenses due to inflation, increased locomotive overhauls, and a larger active fleet in the first half of 2023 to assist in recovering the network, partially offset by decreased volume-related drayage costs incurred at one of our subsidiaries.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure): Millions 2022 2021 2020 Cash provided by operating activities $ 9,362 $ 9,032 $ 8,540 Cash used in investing activities (3,471 ) (2,709 ) (2,676 ) Dividends paid (3,159 ) (2,800 ) (2,626 ) Free cash flow $ 2,732 $ 3,523 $ 3,238 2023 Outlook ● Safety – Operating a safe railroad benefits all our constituents: employees, customers, shareholders, and the communities we serve.
The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure): Millions 2023 2022 2021 Cash provided by operating activities $ 8,379 $ 9,362 $ 9,032 Cash used in investing activities (3,667 ) (3,471 ) (2,709 ) Dividends paid (3,173 ) (3,159 ) (2,800 ) Free cash flow $ 1,539 $ 2,732 $ 3,523 2024 Outlook ● Safety – Our goal is to be an industry leader in safety.
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). Freight car velocity, average train speed, and average terminal dwell deteriorated compared to 2021 as excess operating car inventory levels and hiring challenges decreased network fluidity.
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). Freight car velocity, average train speed, and average terminal dwell improved compared to 2022 as last year we experienced congestion across our system.
Personal Injury – See Note 17 to the Financial Statements and Supplementary Data, Item 8, and " We May Be Subject to Various Claims and Lawsuits That Could Result in Significant Expenditures" in the Risk Factors, Item 1A. Our personal injury liability is subject to uncertainty due to unasserted claims, timing and outcome of claims, and evolving trends in litigation.
If these estimates differ significantly from actual results, the impact on our Consolidated Financial Statements may be material. 36 Table of Contents Personal Injury – See Note 17 to the Financial Statements and Supplementary Data, Item 8, and " We May Be Subject to Various Claims and Lawsuits That Could Result in Significant Expenditures" in the Risk Factors, Item 1A.
Higher equity income partially offset some of these increases. 30 Table of Contents 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.
Equipment and other rents expense increased 5% compared to 2022 due to lower equity income and inflation, partially offset by greater network fluidity and lower volume. 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.
Changes in commodity mix drove the variance in year-over-year increases between gross ton-miles, revenue ton-miles, and carloads (higher increases in coal, which are generally heavier). Freight Car Velocity – Freight car velocity measures the average daily miles per car on our network.
In 2023, gross ton-miles and revenue ton-miles decreased 1% and 2%, respectively, compared to 2022, driven by a 1% decrease 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 measures the average daily miles per car on our network.
The capital plan may be revised if business conditions warrant or if new laws or regulations affect our ability to generate sufficient returns on these investments.
The capital plan may be revised if business conditions warrant or if new laws or regulations affect our ability to generate sufficient returns on these investments. Financing Activities Cash used in financing activities decreased in 2023 compared to 2022 driven by a decrease in share repurchases, partially offset by less debt issued.
(See further discussion in this Item 7 under Liquidity and Capital Resources – Capital Plan.) RESULTS OF OPERATIONS Operating Revenues % Change % Change Millions 2022 2021 2020 2022 v 2021 2021 v 2020 Freight revenues $ 23,159 $ 20,244 $ 18,251 14 % 11 % Other subsidiary revenues 884 741 743 19 - Accessorial revenues 779 752 473 4 59 Other 53 67 66 (21 ) 2 Total $ 24,875 $ 21,804 $ 19,533 14 % 12 % We generate freight revenues by transporting products from our three commodity groups.
RESULTS OF OPERATIONS Operating Revenues % Change % Change Millions 2023 2022 2021 2023 v 2022 2022 v 2021 Freight revenues $ 22,571 $ 23,159 $ 20,244 (3 )% 14 % Other subsidiary revenues 872 884 741 (1 ) 19 Accessorial revenues 584 779 752 (25 ) 4 Other 92 53 67 74 (21 ) Total $ 24,119 $ 24,875 $ 21,804 (3 )% 14 % We generate freight revenues by transporting products from our three commodity groups.
Locomotive diesel fuel prices, which averaged $3.65 per gallon (including taxes and transportation costs) in 2022, compared to $2.23 per gallon in 2021, increased expenses $1.3 billion (excluding any impact from increased volume year-over-year). Gross ton-miles increased 3% driving higher fuel expense.
Fuel expense decreased compared to 2022 due to a decrease in locomotive diesel fuel prices, which averaged $3.09 per gallon (including taxes and transportation costs) in 2023 compared to $3.65 per gallon in 2022, resulting in a $0.5 billion decrease in expense (excluding any impact from decreased volume year-over-year), and a 1% decrease in gross ton-miles, partially offset by a 1% deterioration to the fuel consumption rate in 2023 (computed as gallons of fuel consumed divided by gross ton-miles).
Interest Expense – Interest expense increased in 2022 compared to 2021 due to an increased weighted-average debt level of $32.1 billion in 2022 from $28.3 billion in 2021, partially offset by a lower effective interest rate of 4.0% in 2022 compared to 4.1% in 2021.
Interest Expense – Interest expense increased in 2023 compared to 2022 due to an increased weighted-average debt level of $33.2 billion in 2023 from $32.1 billion in 2022. The effective interest rate was 4.0% in both periods. Income Tax Expense – Income tax expense decreased in 2023 compared to 2022 due to lower pre-tax income and deferred tax expense reductions.
Adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, net income. The table above provides a reconciliation from net income to adjusted EBITDA and debt to adjusted debt.
Adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The most comparable GAAP measure is debt to net income ratio.
We are not aware of any specific factors that are reasonably likely to significantly change the estimated service lives of our assets.
We are not aware of any specific factors that are reasonably likely to significantly change the estimated service lives of our assets. Actual use and retirement of our assets may vary from our current estimates, which would impact the amount of depreciation expense recognized in future periods.
Actual use and retirement of our assets may vary from our current estimates, which would impact the amount of depreciation expense recognized in future periods. 38 Table of Contents Changes in estimated useful lives of our assets due to the results of our depreciation studies could significantly impact future periods’ depreciation expense and have a material impact on our Consolidated Financial Statements.
Changes in estimated useful lives of our assets due to the results of our depreciation studies could significantly impact future periods’ depreciation expense and have a material impact on our Consolidated Financial Statements. If the estimated useful lives of all depreciable assets were increased by one year, annual depreciation expense would decrease by approximately $71 million.
The growth was driven by metals and minerals due to strong demand for sand and rock as well as new business wins, expansions, and market demand for industrial chemicals and plastics.
The growth was driven by petroleum and LPG shipments and metals and minerals due to strong demand for rock.
Non-Operating Items % Change % Change Millions 2022 2021 2020 2022 v 2021 2021 v 2020 Other income, net $ 426 $ 297 $ 287 43 % 3 % Interest expense (1,271 ) (1,157 ) (1,141 ) 10 1 Income tax expense (2,074 ) (1,955 ) (1,631 ) 6 20 Other Income, net – Other income increased in 2022 compared to 2021 driven by higher real estate income and net periodic pension benefits, partially offset by a $36 million gain from the sale of an investment in a technology company in 2021 and higher environmental remediation expense at non-operating sites.
Non-Operating Items % Change % Change Millions 2023 2022 2021 2023 v 2022 2022 v 2021 Other income, net $ 491 $ 426 $ 297 15 % 43 % Interest expense (1,340 ) (1,271 ) (1,157 ) 5 10 Income tax expense $ (1,854 ) $ (2,074 ) $ (1,955 ) (11 )% 6 % Other Income, net – Other income increased in 2023 compared to 2022 driven by a one-time $107 million real estate transaction, partially offset by lower gains from real estate sales.
Cash Flows Millions 2022 2021 2020 Cash provided by operating activities $ 9,362 $ 9,032 $ 8,540 Cash used in investing activities (3,471 ) (2,709 ) (2,676 ) Cash used in financing activities (5,887 ) (7,158 ) (4,902 ) Net change in cash, cash equivalents, and restricted cash $ 4 $ (835 ) $ 962 Operating Activities Cash provided by operating activities increased in 2022 compared to 2021 due primarily to an increase in net income.
Cash Flows Millions 2023 2022 2021 Cash provided by operating activities $ 8,379 $ 9,362 $ 9,032 Cash used in investing activities (3,667 ) (3,471 ) (2,709 ) Cash used in financing activities (4,625 ) (5,887 ) (7,158 ) Net change in cash, cash equivalents, and restricted cash $ 87 $ 4 $ (835 ) Operating Activities Cash provided by operating activities decreased in 2023 compared to 2022 due primarily to a decrease in net income and $454 million of payments related to the 2022 one-time charge for agreements reached with our labor unions and the ratification charge for a crew staffing agreement reached in the second quarter of 2023.
For the remaining four unions that had not previously ratified, the agreements were imposed by legislation on December 2, 2022. 37 Table of Contents CRITICAL ACCOUNTING ESTIMATES Our Consolidated Financial Statements have been prepared in accordance with GAAP. The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities.
(See further discussion in "Sustainable Future" in the Operations section in Item 1 of this report.) CRITICAL ACCOUNTING ESTIMATES Our Consolidated Financial Statements have been prepared in accordance with GAAP. The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities.
In addition, our commercial obligations, financings, and commitments are customary transactions that are like those of other comparable corporations, particularly within the transportation industry. 34 Table of Contents The following table identifies material obligations as of December 31, 2022: Payments Due by December 31, Contractual Obligations After Millions Total 2023 2024 2025 2026 2027 2027 Debt [a] $ 61,664 $ 2,837 $ 2,562 $ 2,642 $ 2,081 2,323 $ 49,219 Purchase obligations [b] 3,241 920 818 822 275 180 226 Operating leases [c] 1,803 335 318 321 248 188 393 Other post retirement benefits [d] 396 45 40 40 40 39 192 Finance lease obligations [e] 259 76 63 44 35 30 11 Total contractual obligations $ 67,363 $ 4,213 $ 3,801 $ 3,869 $ 2,679 $ 2,760 $ 50,041 [a] Excludes finance lease obligations of $234 million as well as unamortized discount and deferred issuance costs of ($1,775) million.
In addition, our commercial obligations, financings, and commitments are customary transactions that are like those of other comparable corporations, particularly within the transportation industry. 33 Table of Contents The following table identifies material obligations as of December 31, 2023: Payments Due by December 31, Contractual Obligations After Millions Total 2024 2025 2026 2027 2028 2028 Debt [a] $ 60,516 $ 2,610 $ 2,591 $ 2,617 $ 2,348 2,294 $ 48,056 Purchase obligations [b] 2,985 1,150 744 600 222 158 111 Operating leases [c] 1,768 361 375 296 237 199 300 Other post retirement benefits [d] 393 44 40 40 39 39 191 Finance lease obligations [e] 173 55 42 35 30 11 - Total contractual obligations $ 65,835 $ 4,220 $ 3,792 $ 3,588 $ 2,876 $ 2,701 $ 48,658 [a] Excludes finance lease obligations of $158 million as well as unamortized discount and deferred issuance costs of ($1,732) million.
These analyses inform our liquidity plans and activities o utline d below and indicate we have sufficient borrowing capacity to sustain an extended period of lower volumes. At both December 31, 2022 and 2021, we had a working capital deficit due to upcoming debt maturities.
LIQUIDITY AND CAPITAL RESOURCES We are continually evaluating our financial condition and liquidity. We analyze a wide range of economic scenarios and the impact on our ability to generate cash. These analyses inform our liquidity plans and activities o utline d below and indicate we have sufficient borrowing capacity to sustain an extended period of lower volumes.
The year-over-year comparison was positively impacted by the 2021 weather-related expenses. Fuel – Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment.
Fuel – Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment.
If the estimated useful lives of all depreciable assets were increased by one year, annual depreciation expense would decrease by approximately $69 million. If the estimated useful lives of all depreciable assets were decreased by one year, annual depreciation expense would increase by approximately $73 million.
If the estimated useful lives of all depreciable assets were decreased by one year, annual depreciation expense would increase by approximately $76 million. We are projecting an increase in our depreciation expense of approximately 3% to 4% in 2024 versus 2023. This is driven by an increase in our projected depreciable asset base .
Other expenses increased 10% in 2022 compared to 2021 driven by casualty expenses, including higher personal injury expense and damaged freight; increased business travel costs; and higher state and local taxes, partially offset by higher equity income.
Other expenses increased 12% in 2023 compared to 2022 driven by casualty expenses, including higher personal injury expense, environmental remediation, and damaged freight, and one-time write-offs.
The volume decrease was driven by lower intermodal and petroleum shipments, partially offset by increases in automotive parts and steel shipments. 29 Table of Contents Operating Expenses % Change % Change Millions 2022 2021 2020 2022 v 2021 2021 v 2020 Compensation and benefits $ 4,645 $ 4,158 $ 3,993 12 % 4 % Fuel 3,439 2,049 1,314 68 56 Purchased services and materials 2,442 2,016 1,962 21 3 Depreciation 2,246 2,208 2,210 2 - Equipment and other rents 898 859 875 5 (2 ) Other 1,288 1,176 1,345 10 (13 ) Total $ 14,958 $ 12,466 $ 11,699 20 % 7 % Operating expenses increased $2.5 billion, or 20%, in 2022 compared to 2021 driven by higher fuel prices, operational inefficiencies, inflation, increased volume-related costs, and a one-time charge for the labor agreements reached with our labor unions (See Labor Agreements in Other Matters in this Item 7 of Part II).
The closure of the Eagle Pass and El Paso border crossings in the fourth quarter had a slightly negative impact on the overall results. 28 Table of Contents Operating Expenses % Change % Change Millions 2023 2022 2021 2023 v 2022 2022 v 2021 Compensation and benefits $ 4,818 $ 4,645 $ 4,158 4 % 12 % Fuel 2,891 3,439 2,049 (16 ) 68 Purchased services and materials 2,616 2,442 2,016 7 21 Depreciation 2,318 2,246 2,208 3 2 Equipment and other rents 947 898 859 5 5 Other 1,447 1,288 1,176 12 10 Total $ 15,037 $ 14,958 $ 12,466 1 % 20 % Operating expenses increased $79 million, or 1%, in 2023 compared to 2022 driven by inflation; operational challenges in the first half of the year, including additional costs related to weather; increased workforce levels, including the impact of increased sick leave benefits provided to our craft professionals; higher casualty costs; and the ratification charge for a crew staffing agreement reached in the second quarter of 2023, partially offset by lower fuel prices, a one-time charge in 2022 for agreements reached with our labor unions, and volume related costs. 2023 Operating Expenses Compensation and Benefits – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, and incentive costs.
Revenue ton-miles are calculated by multiplying the weight of freight by the number of tariff miles. In 2022, gross ton-miles and revenue ton-miles increased 3% and 2%, respectively, compared to 2021, driven by a 2% increase in carloadings.
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.
As of December 31, 2022, none of the revolving credit facility was drawn, and we did not draw on our revolving credit facility at any time during 2022. At December 31, 2022, we had $100 million of the Receivables Facility drawn, $200 million of commercial paper, and a $100 million term loan outstanding.
As of December 31, 2023, none of the revolving credit facility was drawn, and we did not draw on our revolving credit facility at any time during 2023. Our access to the Receivables Facility may be reduced or restricted if our bond ratings fall to certain levels below investment grade.
Income Tax Expense – Income tax expense increased in 2022 compared to 2021 due to higher pre-tax income, partially offset by reductions of $95 million in deferred tax expense from Nebraska, Iowa, Arkansas, and Idaho reducing their corporate income tax rates. 2021 income tax expense included reductions of $32 million in deferred tax expense from Nebraska, Oklahoma, Idaho, Louisiana, and Arkansas reducing their corporate income tax rates.
In 2023, the states of Nebraska, Iowa, Kansas, and Arkansas enacted legislation to reduce their corporate income tax rates for future years resulting in a $114 million reduction of our deferred tax expense. 2022 income tax expense included reductions of $95 million in deferred tax expense from Nebraska, Iowa, Arkansas, and Idaho reducing their corporate income tax rates.
There were no material changes to the assumptions used in the latest actuarial analysis.
Our personal injury liability is subject to uncertainty due to unasserted claims, timing and outcome of claims, and evolving trends in litigation. There were no material changes to the assumptions used in the latest actuarial analysis.
We could again see volatile fuel prices during 2023, as they are sensitive to global and U.S. domestic demand, refining capacity, geopolitical events, weather conditions, and other factors. As prices fluctuate, there will be a timing impact on earnings, as our fuel surcharge programs trail increases or decreases in fuel price by approximately two months.
Lower coal demand and some lost international intermodal business are expected to negatively impact volume. Fuel prices may continue to fluctuate in the current economic environment. As prices fluctuate, there will be a timing impact on earnings, as our fuel surcharge programs trail increases or decreases in fuel prices by approximately two months.
In 2022, other subsidiary revenues increased compared to 2021 primarily driven by higher fuel surcharge and an increase in automotive parts shipments due to market demand and contract wins at our Loup subsidiary. Accessorial revenues increased in 2022 compared to 2021 driven by increased intermodal accessorial charges tied to global supply chain disruptions.
In 2023, other subsidiary revenues decreased compared to 2022 primarily driven by weaker demand for intermodal shipments at our Loup subsidiary. Accessorial revenues decreased in 2023 compared to 2022 driven by decreased intermodal accessorial and container revenues due to lower volume and improvements in the global supply chain as reflected in better equipment cycle times.
Adjusted Debt / Adjusted EBITDA Millions, Except Ratios Dec. 31, Dec. 31, Dec. 31, for the Twelve Months Ended 2022 2021 2020 Net income $ 6,998 $ 6,523 $ 5,349 Add: Income tax expense 2,074 1,955 1,631 Depreciation 2,246 2,208 2,210 Interest expense 1,271 1,157 1,141 EBITDA $ 12,589 $ 11,843 $ 10,331 Adjustments: Other income, net (426 ) (297 ) (287 ) Interest on operating lease liabilities 54 56 59 Adjusted EBITDA $ 12,217 $ 11,602 $ 10,103 Debt $ 33,326 $ 29,729 $ 26,729 Operating lease liabilities 1,631 1,759 1,604 Unfunded pension and OPEB, net of tax cost of $0, $0, and $195 [a] - - 637 Adjusted debt $ 34,957 $ 31,488 $ 28,970 Adjusted debt / adjusted EBITDA 2.9 2.7 2.9 [a] Prior periods were recast to conform to the current year presentation, which removes the impact of pension and OPEB (other postretirement benefits) when the net amount represents a funded amount.
Debt / Net Income Millions, Except Ratios 2023 2022 2021 Debt $ 32,579 $ 33,326 $ 29,729 Net income $ 6,379 $ 6,998 $ 6,523 Debt / net income 5.1 4.8 4.6 Adjusted Debt / Adjusted EBITDA Millions, Except Ratios 2023 2022 2021 Net income $ 6,379 $ 6,998 $ 6,523 Add: Income tax expense 1,854 2,074 1,955 Depreciation 2,318 2,246 2,208 Interest expense 1,340 1,271 1,157 EBITDA $ 11,891 $ 12,589 $ 11,843 Adjustments: Other income, net (491 ) (426 ) (297 ) Interest on operating lease liabilities 58 54 56 Adjusted EBITDA $ 11,458 $ 12,217 $ 11,602 Debt $ 32,579 $ 33,326 $ 29,729 Operating lease liabilities 1,600 1,631 1,759 Adjusted debt $ 34,179 $ 34,957 $ 31,488 Adjusted debt / adjusted EBITDA 3.0 2.9 2.7 32 Table of Contents Adjusted debt (total debt plus operating lease liabilities plus after-tax unfunded pension and OPEB (other post retirement benefit) obligations) to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and adjustments for other income and interest on present value of operating leases) 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.
It is not unusual for us to have a working capital deficit, and we believe it is not an indication of a lack of liquidity. We also maintain adequate resources, including our credit facility and, when necessary, access the capital markets to meet foreseeable cash requirements.
At both December 31, 2023 and 2022, we had a working capital deficit due to upcoming debt maturities. It is not unusual for us to have a working capital deficit, and we believe it is not an indication of a lack of liquidity.
Workforce Productivity – Workforce productivity is average daily car miles per employee. Workforce productivity decreased slightly in 2022, as average daily car miles increased 3% and employees increased 3% compared to 2021. The 3% increase in employee levels was driven by an increase in train, engine, and yard employees to address volume increases and operational inefficiencies due to crew shortages.
Workforce productivity declined 3% in 2023 as average daily car miles decreased slightly and employees increased compared to 2022.
Partially offsetting some of the growth was a decline in petroleum shipments, within the energy and specialized markets commodity line, primarily due to regulatory challenges in Mexico markets. 2022 Industrial Carloads Premium – Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international.
Partially offsetting that growth were decreases in forest products due to the softening housing market and fewer shipments of brown paper as demand for non-durable goods declined. 2023 Industrial Carloads Premium – Premium includes shipments of finished automobiles, automotive parts, and merchandise in intermodal containers, both domestic and international.
Revenues from Mexico business were $2.7 billion in 2022, up 14% compared to 2021, driven by higher fuel surcharge revenues, core pricing gains, and positive mix of traffic, partially offset by a 1% decline in volume.
Revenues from Mexico shipments were $2.8 billion in 2023, up 2% compared to 2022, driven by a 4% volume increase, partially offset by a 2% decrease in average revenue per car due to lower fuel surcharge revenues. The volume increase was driven by higher intermodal and automotive shipments, partially offset by fewer beer shipments.
Car Trip Plan Compliance – Car trip plan compliance is the percentage of cars delivered on time in accordance with our original trip plan. Our network trip plan compliance is broken into the intermodal and manifest/automotive products. Intermodal car trip plan compliance and manifest/automotive car trip plan compliance deteriorated in 2022 compared to 2021 because of crew shortages.
Our train length increased slightly compared to 2022 as initiative to drive train length improvements in the second half of the year more than offset the declines in intermodal shipments, which generally move on longer trains. Car Trip Plan Compliance – Car trip plan compliance is the percentage of cars delivered on time in accordance with our original trip plan.
Safety procedures and policies are refined based on Centers for Disease Control and Prevention (CDC) guidelines. 24 Table of Contents We continued to refine our proprietary software to evaluate train and route characteristics to enable proactive intervention by our Operating Practices Command Center to prevent derailments.
We continued to refine our proprietary software called Precision Train Builder to evaluate train and route characteristics to enable proactive intervention by our Operating Practices Command Center to prevent derailments. In addition, the software allows the team to simulate in-train forces to avoid train handling that would generate forces greater than tolerance limits.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Information concerning market risk sensitive instruments is set forth under Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Matters, Item 7. **************************************** 40 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Information concerning market risk sensitive instruments is set forth under Management’s Discussion and Analysis of Financial Condition and Results of Operations - Other Matters, Item 7. **************************************** 39 Table of Contents

Other UNP 10-K year-over-year comparisons