Union Pacific(UNP) - 2024 Q1 - Quarterly Report

Part I. Financial Information Item 1. Condensed Consolidated Financial Statements Provides unaudited condensed consolidated financial statements for Q1 2024 and 2023, including income, financial position, cash flows, and related notes Condensed Consolidated Statements of Income Q1 2024 net income slightly increased to $1.641 billion, with flat revenues, decreased operating expenses, and improved EPS Q1 2024 vs Q1 2023 Income Statement Highlights (Millions, Except Per Share) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $6,031 | $6,056 | -0.4% | | Total operating expenses | $3,659 | $3,762 | -2.7% | | Operating income | $2,372 | $2,294 | +3.4% | | Net income | $1,641 | $1,630 | +0.7% | | Earnings per share - diluted | $2.69 | $2.67 | +0.7% | Condensed Consolidated Statements of Financial Position Total assets slightly increased to $67.27 billion, liabilities decreased to $51.60 billion, and shareholders' equity rose to $15.67 billion Financial Position Highlights (Millions) | Metric | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $4,194 | $4,148 | | Total assets | $67,266 | $67,132 | | Total current liabilities | $4,534 | $5,106 | | Total liabilities | $51,601 | $52,344 | | Total common shareholders' equity | $15,665 | $14,788 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $2.12 billion, investing cash flow remained stable, while financing cash flow increased to $1.45 billion Q1 2024 vs Q1 2023 Cash Flow Highlights (Millions) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $2,122 | $1,840 | | Cash used in investing activities | ($802) | ($805) | | Cash used in financing activities | ($1,451) | ($927) | | Net change in cash | ($131) | $108 | Notes to the Condensed Consolidated Financial Statements Details financial statement presentation, accounting policies, disaggregated freight revenues, credit facilities, and contingent liabilities Freight Revenue by Commodity (Millions) | Commodity Group | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Bulk | $1,817 | $1,897 | | Industrial | $2,104 | $2,017 | | Premium | $1,695 | $1,742 | | Total freight revenues | $5,616 | $5,656 | - Revenues from Mexico business increased to $790 million in Q1 2024 from $712 million in Q1 2023[26] - The company has a $2.0 billion revolving credit facility expiring in May 2027 and an $800 million receivables securitization facility maturing in July 2025. As of March 31, 2024, $400 million was drawn on the receivables facility[46][55][60] - The company estimates potential future costs for personal injury claims to range from $376 million to $487 million, with the low end of the range accrued[64] - No share repurchases were made in Q1 2024. In Q1 2023, 2.9 million shares were repurchased for $591 million. The current authorization allows for the repurchase of up to 80.4 million more shares by March 31, 2025[16][70] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 performance, highlighting improved operating ratio, network fluidity, and liquidity, despite slight revenue and volume declines Results of Operations Q1 2024 operating ratio improved to 60.7% due to decreased expenses and enhanced network fluidity, despite a slight revenue dip Q1 2024 Key Performance Summary | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income (billions) | $1.6 | $1.6 | 0% | | Diluted EPS | $2.69 | $2.67 | +0.7% | | Operating Ratio | 60.7% | 62.1% | -1.4 pts | | Freight Revenue (billions) | $5.6 | $5.7 | -1% | - Network fluidity improvements were supported by ample train crew and locomotive resources, leading to a 10% improvement in locomotive productivity and a reduction of approximately 500 active locomotives compared to 2023[81] - Workforce productivity improved 1% despite a 4% increase in train, engine, and yard employees, who were added to support new sick leave and work/rest agreements[81] Operating Revenues Analysis Total operating revenues remained flat at $6.0 billion, with freight revenues declining 1% due to volume and fuel surcharges, partially offset by pricing gains - Freight revenues from fuel surcharge programs decreased to $665 million in Q1 2024 from $883 million in Q1 2023 due to lower fuel prices[86] Q1 2024 vs Q1 2023 Freight Revenue by Commodity (Millions) | Commodity Group | Q1 2024 Revenue | Q1 2023 Revenue | % Change | | :--- | :--- | :--- | :--- | | Bulk | $1,817 | $1,897 | (4)% | | Industrial | $2,104 | $2,017 | 4% | | Premium | $1,695 | $1,742 | (3)% | | Total | $5,616 | $5,656 | (1)% | - Revenues from Mexico business grew 11% to $790 million, driven by a 7% increase in volume, particularly in grain and automotive shipments[93] Operating Expenses Analysis Operating expenses decreased 3% to $3.7 billion, primarily due to lower fuel costs and purchased services, partially offset by higher compensation and depreciation Q1 2024 vs Q1 2023 Operating Expenses (Millions) | Expense Category | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $1,223 | $1,179 | 4% | | Fuel | $658 | $766 | (14)% | | Purchased services and materials | $613 | $653 | (6)% | | Depreciation | $594 | $572 | 4% | | Equipment and other rents | $216 | $235 | (8)% | | Total | $3,659 | $3,762 | (3)% | - Locomotive diesel fuel prices averaged $2.81 per gallon in Q1 2024, down from $3.22 per gallon in Q1 2023[96] Operating and Performance Statistics Q1 2024 saw significant operational improvements, including increased locomotive productivity, freight car velocity, and enhanced service performance indices Q1 2024 vs Q1 2023 Key Operating Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Freight car velocity (daily miles per car) | 203 | 196 | 4% | | Average terminal dwell time (hours) | 23.5 | 24.0 | (2)% | | Locomotive productivity (GTMs/hp day) | 135 | 123 | 10% | | Train length (feet) | 9,287 | 9,159 | 1% | | Intermodal service performance index (%) | 95 | 81 | +14 pts | | Manifest/Automotive service index (%) | 87 | 80 | +7 pts | Liquidity and Capital Resources The company generated strong operating cash flow and free cash flow in Q1 2024, maintaining robust liquidity with a $3.4 billion capital plan - The 2024 capital plan is expected to be approximately $3.4 billion, down 8% from 2023[122] Free Cash Flow Reconciliation (Millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $2,122 | $1,840 | | Cash used in investing activities | ($802) | ($805) | | Dividends paid | ($795) | ($795) | | Free cash flow | $525 | $240 | - As of March 31, 2024, the company had total material contractual obligations of $64.1 billion, with the majority being long-term debt[131] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the quantitative and qualitative disclosures about market risk from the 2023 Form 10-K - There were no material changes to market risk disclosures from the 2023 Annual Report on Form 10-K[142] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Corporation's disclosure controls and procedures were effective as of the end of the reporting period[143] - No changes to the Corporation's internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[144] Part II. Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, including environmental matters with potential remediation liabilities at numerous sites - The company is involved in ongoing legal proceedings and claims, including environmental matters where it may be liable for remediation costs at various sites[146][147] Item 1A. Risk Factors Refers investors to the 2023 Annual Report on Form 10-K for a comprehensive discussion of potential risks and uncertainties - For a discussion of potential risks and uncertainties, the report refers to the risk factors disclosed in the Form 10-K for the year ended December 31, 2023[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the public program in Q1 2024, though shares were acquired for employee tax obligations and option exercises - No shares were repurchased as part of the publicly announced plan in Q1 2024. 117,178 shares were acquired from employees for tax withholding and option exercise purposes[150] - The current share repurchase program, authorized on April 1, 2022, allows for the repurchase of up to 100 million shares by March 31, 2025[151] Item 5. Other Information Executive Vice President Kenny G. Rocker adopted a Rule 10b5-1 trading plan to sell up to 27,387 shares of common stock - Executive Vice President Kenny G. Rocker adopted a Rule 10b5-1 trading plan to sell up to 27,387 shares of common stock[155] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and iXBRL financial data - Lists filed exhibits, including Sarbanes-Oxley certifications and iXBRL data files[158]