Union Pacific Annual Report 2021

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K(Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to ____________ Commission File Number 1-6075 UNION PACIFIC CORPORATION(Exact name of registrant as specified in its charter)Utah 13-2626465(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification No.)1400 Douglas Street, Omaha, Nebraska(Address of principal executive offices)68179(Zip Code)(402) 544-5000(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Title of each ClassTrading SymbolName of each exchange on which registeredCommon Stock (Par Value $2.50 per share)UNP New York Stock Exchange ■Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.☑Yes ☐ No■Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.☐Yes ☑ No■Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.☑Yes ☐ No■Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles).☑Yes ☐ No■Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oran emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growthcompany” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☑ Accelerated Filer ☐Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company☐ ■If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐■Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internalcontrol over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered accounting firm that prepared orissued its audit report. ☑■Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).☐Yes ☑ No■As of June 30, 2021, the aggregate market value of the registrant’s Common Stock held by non-affiliates (using the New York Stock Exchange closingprice) was $142.0 billion. The number of shares outstanding of the registrant’s Common Stock as of January 28, 2022, was 636,898,957. Table of Contents Documents Incorporated by Reference – Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held onMay 12, 2022, are incorporated by reference into Part III of this report. The registrant’s Proxy Statement will be filed with the Securities and ExchangeCommission (SEC) within 120 days after the end of the fiscal year that this report relates pursuant to Regulation 14A. UNION PACIFIC CORPORATIONTABLE OF CONTENTS Chairman’s Letter3 Directors and Senior Management4 PART I Item 1.Business5Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments12Item 2.Properties13Item 3.Legal Proceedings15Item 4.Mine Safety Disclosures16 Executive Officers of the Registrant and Principal Executive Officers of Subsidiaries17 PART II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of EquitySecurities18Item 6.[Reserved]19Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations19 Critical Accounting Estimates19 Cautionary Information32Item 7A.Quantitative and Qualitative Disclosures About Market Risk32Item 8.Financial Statements and Supplementary Data33 Report of Independent Registered Public Accounting Firm34Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure61Item 9A.Controls and Procedures61 Management’s Annual Report on Internal Control Over Financial Reporting61 Report of Independent Registered Public Accounting Firm62Item 9B.Other Information63Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections63 PART III Item 10.Directors, Executive Officers, and Corporate Governance63Item 11.Executive Compensation63Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters63Item 13.Certain Relationships and Related Transactions and Director Independence63Item 14.Principal Accountant Fees and Services64 PART IV Item 15.Exhibit and Financial Statement Schedules64Item 16.Form 10-K Summary67 Signatures68 Certifications72 2Table of Contents February 4, 2022 Fellow Shareholders: Union Pacific demonstrated again in 2021 that our team is “best in class” as we navigated challenges from the pandemic and numerous operationaldisruptions. The pandemic continued to impact our daily lives and disrupt supply chains in significant ways. Despite these wide-ranging impacts, theUnion Pacific team achieved record financial results. In 2021, we are reporting earnings per share of $9.95, which is a 26% increase versus 2020. Totalvolumes increased 4% versus 2020, as our economy continued to recover from the pandemic impacts. Operating ratio was a record 57.2%, 270 basispoints better than 2020’s 59.9% demonstrating continued focus on efficient operations. 2020 results were negatively impacted by a one-time $278 millionnon-cash impairment charge that reduced earnings per share by $0.31 and increased operating ratio by 140 basis points. Safety is foundational to everything we do at Union Pacific. 2021 safety results did not meet our expectations. In 2022, we are continuing toengage external experts to help us get back on track to world class industrial safety performance. We are implementing more effective ways to coach,train, and root-cause analyze, all while building a stronger, deeper safety culture. Nothing is more important than making sure every employee returnshome safely. During 2021, we rolled out a new strategic plan we call, “Serve, Grow, Win, Together.” Theessence of our strategy is unchanged; however, as our culture evolves, it’s imperative that wehave a strategic plan that clearly defines our path to long-term sustainable growth. Everything we do starts with Serve and the transportation products we provide our customers.Precision Scheduled Railroading (PSR) is the foundation for delivering customer-centeredoperational excellence and creating a more resilient and agile service product. In 2021,weather, wildfires, supply chain disruptions, and pandemic impacts to crew availability allimpeded our ability to further improve our service product. Freight car velocity was down 8%versus 2020, lowering Trip Plan Compliance for both Intermodal and Manifest/Autos 8 points.Beyond reliable service, our customers want “greener” transportation options. Every carload offreight we take off the highway saves fuel, lowers emissions, and reduces highway congestion.We took steps toward our long-term emission reduction goals by achieving a best-ever fuelconsumption rate, improving 1% versus 2020, helping our customers eliminate roughly 23million metric tons of greenhouse gas emissions by choosing rail versus truck. To support our service product, we continue to make significant investments in ourinfrastructure. In 2021, we invested approximately $3.0 billion, completing 15 sidingextensions, opening pop-up intermodal terminals in the Twin Cities, MN, and West Colton, CA,modernizing 100 locomotives, and hardening our infrastructure. We also invested in energymanagement systems to reduce fuel consumption and the resulting carbon emissions. These investments also underpin the next tenet of our strategy – Grow. We believe we have the best rail franchise in North America. By providing aquality service product, along with the lowest cost structure in the industry, we are well positioned to handle more business for new and existingcustomers. We see many opportunities to grow, whether by providing more services for our customers or by expanding our reach through new transloadfacilities or pop-up intermodal terminals. Improving the customer experience is critical and technology plays a key role. Our industry leading practicesprovide our customers with application programming interfaces (API), with over 50 services launched, we are integrating deeper into our customers’systems and supply chains. And our team is winning in the marketplace! We welcomed new customers in 2021, are onboarding more in 2022, andalready setting the stage for a great 2023 with a significant domestic intermodal win. Successful execution of our plans to “Serve” and “Grow” leads to Win. For our shareholders, winning means generating best-in-industry cash returns. In2021, we paid dividends of $2.8 billion, which included two 10% dividend increases during the year. In addition, we repurchased 33 million Union Pacificshares, decreasing our full-year average share count 3%. Combining dividends and share repurchases, Union Pacific returned $10.1 billion to ourshareholders in 2021. Our definition of “winning” extends to all UP’s stakeholders, which is the final piece of our strategy – Together. Our comprehensive approach toEnvironmental Social Governance (ESG) issues, “Building a Sustainable Future 2030”, is designed to address the evolving needs of our stakeholders. In2021, we took major steps on our ESG journey, beginning with the July release of our 2018, 2019, and 2020 EEO-1 reports, providing increasedtransparency to our workforce demographics. And we continue to report quarterly progress towards our long-term diversity representation goals. Further,in December, we released our initial Climate Action Plan, laying out our plan to achieve our 2030 carbon emission reduction goals, approved in Februaryby the Science Based Targets initiative (SBTi), and our commitment to Net Zero by 2050, the only U.S. rail to do so. Every year can bring real challenges to our “outdoor factory”, although the last two years were unique. In response, the resiliency of the Union Pacificteam has been on full display, and our employees have positioned our Company for even greater success in 2022. As we prepare to celebrate our 160thanniversary in 2022, we are focused on customer-centered operational excellence, growing with our customers, and winning together with all ourstakeholders. The future is very bright for Union Pacific. Chairman, President, and Chief Executive Officer 3Table of Contents DIRECTORS AND SENIOR MANAGEMENT BOARD OF DIRECTORS Andrew H. Card, Jr. Lance M. Fritz Thomas F. McLarty IIIFormer White House Chairman, President, and ChairmanChief of Staff Chief Executive Officer McLarty AssociatesBoard Committees: Compensationand Benefits, Corporate Governance Union Pacific Corporation andUnion Pacific Railroad Company Board Committees: Finance (Chair),Corporate Governance andand Nominating Nominating Deborah C. Hopkins William J. DeLaney Former Chief Executive Officer Jose H. VillarrealFormer Chief Executive Officer Citi Ventures and Former Retired AdvisorSysco Corporation Chief Innovation Officer Citi Akin, Gump, Strauss, Hauer, &Board Committees: Audit, Board Committees: Audit, Finance Feld, LLPCompensation and Benefits (Chair) Board Committees: Compensation Jane H. Lute and Benefits, Corporate GovernanceDavid B. Dillon Strategic Advisor and NominatingFormer Chairman and CEO SICPA, North America The Kroger Company Board Committees: Audit, Corporate Christopher J. WilliamsBoard Committees: Audit (Chair), Governance and Nominating ChairmanCompensation and Benefits Siebert Williams Shank & Co. Michael R. McCarthy Board Committees: Audit, FinanceSheri H. Edison Chairman – McCarthy Group, LLC Former Executive Vice President and Co-Chairman – Bridges Trust Company General Counsel Amcor plc Lead Independent Director Board Committees: Pending Assignment Board Committees: Corporate Governance and Nominating (Chair), Finance SENIOR MANAGEMENT* Lance M. Fritz Rahul Jalali Craig V. RichardsonChairman, President, and Senior Vice President – Information Executive Vice President, Chief LegalChief Executive Officer Technologies and Chief Information Officer, and Corporate Secretary Officer Prentiss W. Bolin, Jr. Kenny G. RockerVice President – External Relations Michael V. Miller Executive Vice President – Marketing Vice President and Treasurer and SalesBryan L. Clark Vice President – Tax Scott D. Moore Todd M. Rynaski Senior Vice President – Corporate Vice President and ControllerEric J. Gehringer Relations and Executive Vice President – Operations Chief Administrative Officer Elizabeth F. Whited Executive Vice President –Jennifer L. Hamann Clark J. Ponthier Sustainability and StrategyExecutive Vice President Senior Vice President – Supply Chain and Chief Financial Officer and Continuous Improvement *Senior management are elected officers of both Union Pacific Corporation and Union Pacific Railroad Company, except Messrs. Gehringer, Ponthier, andRocker are elected officers for Union Pacific Railroad Company. 4Table of Contents PART I Item 1. Business GENERAL Union Pacific Railroad Company is the principal operating company of Union Pacific Corporation. One of America's most recognized companies, UnionPacific Railroad Company connects 23 states in the western two-thirds of the country by rail, providing a critical link in the global supply chain. TheRailroad’s diversified business mix includes Bulk, Industrial, and Premium. Union Pacific serves many of the fastest-growing U.S. population centers,operates from all major West Coast and Gulf Coast ports to eastern gateways, connects with Canada's rail systems, and is the only railroad serving all sixmajor Mexico gateways. Union Pacific provides value to its roughly 10,000 customers by delivering products in a safe, reliable, fuel-efficient, andenvironmentally responsible manner. Union Pacific Corporation was incorporated in Utah in 1969 and maintains its principal executive offices at 1400 Douglas Street, Omaha, NE 68179. Thetelephone number at that address is (402) 544-5000. The common stock of Union Pacific Corporation is listed on the New York Stock Exchange (NYSE)under the symbol “UNP”. For purposes of this report, unless the context otherwise requires, all references herein to “UPC”, “Corporation”, “Company”, “we”, “us”, and “our” shall meanUnion Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which we separately refer to as “UPRR” or the “Railroad”. 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 foundationfor delivering customer-centered operational excellence by: 1.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 crews and rail assets. We aim to move cars faster and reduce the number of times each car is touched, resulting in terminal consolidation opportunities, improved assetutilization, and fewer car classifications, which in turn leads to products getting to the market quicker and more reliably. The result is a better customerexperience, which enables us to grow our market share. Grow: By harnessing the potential of the best rail franchise in the industry, we expect to generate growth in three ways – increasing profitable carloadsthat fit our network and transportation plan; providing more products and services to create value for our customers; and increasing the geographic reach ofour franchise through innovative supply chain solutions. Win: Driving strong financial performance resulting in significant shareholder returns. Execution of our plans to both serve and grow, leads to higherrevenues with improved margins and greater cash generation, creating long term enterprise value. Together: Engaging our four stakeholder groups – Communities, Customers, Employees, and Shareholders. Our comprehensive approach toEnvironmental Social Governance (ESG) issues, “Building a Sustainable Future 2030,” is designed to address the evolving needs of our stakeholders and isbuilt on four areas of concentration – Investing in our Workforce, Driving Sustainable Solutions, Championing Environmental Stewardship, and Strengtheningour Communities – to align with our stakeholder groups. We believe that operational excellence and an engaged workforce with deep market knowledge and strong customer relationships will support best-in-classsafety, 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 will continue guiding us. Our passion forperformance 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 surewe win together. OPERATIONS The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide revenue by commodity group, weanalyze the net financial results of the Railroad as one segment due to the integrated nature of our rail network. Additional information regarding ourbusiness and operations, including revenues, financial information and data, and other information regarding environmental matters, is presented in RiskFactors, Item 1A; Legal Proceedings, Item 3; Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7; and theFinancial Statements and Supplementary Data, Item 8 (which include information regarding revenues, statements of income, and total assets). 5Table of Contents Operations – UPRR is a Class I railroad operating in the U.S. We have32,452 route miles, connecting Pacific Coast and Gulf Coast ports with theMidwest and eastern U.S. gateways and providing several corridors to keyMexican gateways. We serve the Western two-thirds of the country andmaintain coordinated schedules with other rail carriers to move freight to andfrom the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest,Canada, and Mexico. Export and import traffic moves through Gulf Coast andPacific Coast ports and across the Mexican and Canadian borders. In 2021, wegenerated freight revenues totaling $20.2 billion from the following threecommodity groups:2021 Freight Revenues Bulk – The Company's Bulk shipments consist of grain and grain products, fertilizer, food and refrigerated, and coal and renewables. In 2021, this groupgenerated 33% of our freight revenues. We access most major grain markets, connecting the Midwest and Western U.S. producing areas to exportterminals in the Pacific Northwest and Gulf Coast ports as well as Mexico. We also serve significant domestic markets, including grain processors, animalfeeders, and ethanol producers in the Midwest and West. Fertilizer movements originate in the Gulf Coast region, Midwest, western U.S., and Canada(through interline access) for delivery to major agricultural users in those areas as well as abroad. The Railroad’s network supports the transportation ofcoal shipments to independent and regulated power companies and industrial facilities throughout the U.S. Through interchange gateways and ports,UPRR’s reach extends to eastern U.S. utilities as well as to Mexico and other international destinations. Coal traffic originating in the Powder River Basin(PRB) area of Wyoming is the largest portion of the Railroad’s coal business. Renewable shipments for customers committed to sustainability consistprimarily of biomass exports and wind turbine components. Industrial – Our extensive network facilitates the movement of numerous commodities between thousands of origin and destination points throughout NorthAmerica. The Industrial group consists of several categories, including construction, industrial chemicals, plastics, forest products, specialized products(primarily waste, salt, and roofing), metals and ores, petroleum, liquid petroleum gases (LPG), soda ash, and sand. Transportation of these productsaccounted for 36% of our freight revenues in 2021. 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. The industrial chemicals market consists of a vast number of chemical compounds that support the manufacturing of more complex chemicals. Plasticsshipments support automotive, housing, and the durable and disposable consumer goods markets. Forest product shipments include lumber and papercommodities. Lumber shipments originate primarily in the Pacific Northwest or western Canada and move throughout the U.S. for use in new homeconstruction and repairs and remodeling. Paper shipments primarily support packaging needs. Oil and gas drilling generates demand for raw steel, finishedpipe, stone, and drilling fluid commodities. The Company’s petroleum and LPG shipments are primarily impacted by refinery utilization rates, regional crudepricing differentials, pipeline capacity, and the use of asphalt for road programs. Soda ash originates in southwestern Wyoming and California, destined forchemical and glass producing markets in North America and abroad. Premium – In 2021, 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. International business consists of import and export traffic moving in 20 or 40-foot shipping containers, that mainly pass through West Coast ports, destined for one of the Company's many inland intermodal terminals. Domesticbusiness includes container and trailer traffic picked up and delivered within North America for intermodal marketing companies (primarily shipper agentsand logistics companies) as well as truckload carriers. We are the largest automotive carrier west of the Mississippi River and operate or access 38 vehicle distribution centers. The Railroad’s extensive franchiseserves five vehicle assembly plants and connects to West Coast ports, all six major Mexico gateways, and the Port of Houston to accommodate bothimport and export shipments. In addition to transporting finished vehicles, the Company provides expedited handling of automotive parts in both boxcarsand intermodal containers destined for Mexico, the U.S., and Canada. Seasonality – Some of the commodities we carry have peak shipping seasons, reflecting either or both the nature of the commodity (such as certainagricultural and food products that have specific growing and harvesting seasons) and the demand cycle for the commodity (such as intermodal traffic thatgenerally peaks during the third quarter to meet back-to-school and holiday-related demand for consumer goods during the fourth quarter). The peakshipping seasons for these commodities can vary considerably each year depending upon various factors, including the strength of domestic andinternational economies and currencies; consumer demand; the strength of harvests, which can be adversely affected by severe weather; and market pricesfor agricultural products. Proud & Engaged Workforce – Safety is a top priority at Union Pacific. We continue to improve technology, enhance processes, and foster a culturefocused on operating safely, remaining focused on identifying and managing risks, and training our employees. Our success is measured by our personalinjury rate (the number of reportable injuries for every 200,000 employee-hours worked), and our equipment incident rate (the number of reportableequipment incidents per million train miles). We provide both measures to the Federal Railroad Administration (FRA). Personal injuries are defined as onduty incidents or occupational illnesses that require employees to lose time away from work, modify their normal duties, or receive certain types of medicaltreatment. Equipment incidents are defined as any occurrence that causes damage to assets above the monetary reporting threshold regardless ofownership ($11,200 for 2021 and $11,300 for 2022). 6Table of Contents Our goal is to have every employee return home safely every day. Our 2021 personal injury rate of 0.98 and equipment incident rate of 3.80 did not meetexpectations and illustrates that we have work to do to achieve an incident-free environment. Our 2021 personal injury rate increased 9% and our equipmentincident rate increased 7% versus 2020. (See further discussion in Management’s Discussion and Analysis of Financial Condition and Results ofOperations, Item 7, of this report.) We recruit and develop talented individuals dedicated to our mission of service and who are passionate about performing to the best of their abilities whileworking as one team. We value people from all backgrounds and walks of life, and we empower employees to launch and grow their career within theCompany. As of December 31, 2021, the Company employed 32,124 employees. We believe a diverse workforce provides access to the skills and character we need to foster innovative ideas and drive optimal business growth. Drawingon different experiences and expertise is critical for strategic decision-making, problem-solving, leadership development, and creativity. Union Pacific’s commitment, today and for the future, is to further improve and strengthen performance through an inclusive workforce that reflects thediverse markets and communities we serve, where everyone is treated fairly, and differences are valued. To that end, Union Pacific established a goal toreach 40% people of color and 11% female representation in our workforce by 2030. As of December 31, 2021, workforce representation of people of colorand females was approximately 31.3% and 5.3%, respectively. Providing employees with meaningful work and fulfilling careers is important to us. We offer competitive compensation to our employees. We believeemployees are more productive when their financial success is aligned with the Company's success. In May 2021, our shareholders approved ouremployee stock purchase plan (ESPP), allowing participants to receive a 40% Company match of up to 5% of their base compensation (limited to $15,000annually) to purchase shares in the Company stock. Our Board of Directors evaluates our non-union compensation plans and reviews recommendationsfrom the Compensation and Benefits Committee, while collective bargaining agreements govern compensation for our union employees. The median annualcompensation for all employees employed as of December 31, 2021, was $81,179 (excluding the CEO). Labor Agreements – Approximately 84% of our full-time employees are represented by 13 major rail unions. Pursuant to the Railway Labor Act (RLA), ourcollective bargaining agreements are subject to modification every five years. Existing agreements remain in effect until new agreements are ratified or untilthe RLA procedures are exhausted. The RLA procedures include mediation, potential arbitration, cooling-off periods, and the possibility of PresidentialEmergency Boards and Congressional intervention. The current round of negotiations began on January 1, 2020, related to years 2020-2024, and allcollective bargaining groups are currently in the mediation phase. Contract negotiations historically continue for an extended period of time, and workstoppages during negotiations are rare (see “Strikes or Work Stoppages Could Adversely Affect Our Operations” in the Risk Factors in Item 1A of thisreport). Railroad Security – Our security efforts consist of a wide variety of measures, including employee training, engagement with our customers, training ofemergency responders, and partnerships with numerous federal, state, and local government agencies. While federal law requires us to protect theconfidentiality of our security plans designed to safeguard against terrorism and other security incidents, the following provides a general overview of oursecurity initiatives. UPRR Security Measures – We maintain a comprehensive security plan designed to both deter and respond to any potential or actual threats as theyarise. The plan includes four levels of alert status, each with its own set of countermeasures. We employ our own police force, consisting of commissionedand highly-trained officers. The police are certified state law enforcement officers with investigative and arrest powers. The Union Pacific Police Departmenthas achieved accreditation under the Commission on Accreditation for Law Enforcement Agencies, Inc. (CALEA) for complying with the highest lawenforcement standards. Our employees undergo recurrent security and preparedness training as well as federally mandated hazardous materials andsecurity training. We regularly review the sufficiency of our employee training programs. We maintain the capability to move critical operations to back-upfacilities in different locations. We operate an emergency response management center 24 hours a day. The center receives reports of emergencies, dangerous or potentially dangerousconditions, and other safety and security issues from our employees, the public, law enforcement, and other government officials. In cooperation withgovernment officials, we monitor both threats and public events, and, as necessary, we may alter rail traffic flow at times of concern to minimize risk tocommunities and our operations. We comply with the hazardous materials routing rules and other requirements imposed by federal law. We design ouroperating plan to expedite the movement of hazardous material shipments to minimize the time rail cars remain idle at yards and terminals located in ornear major population centers. Additionally, in compliance with Transportation Security Agency regulations, we deployed information systems andinstructed employees in tracking and documenting the handoff of Rail Security Sensitive Materials with customers and interchange partners. We established a number of our own innovative safety and security-oriented initiatives ranging from various investments in technology to The Officer on Trainprogram, which provides local law enforcement officers with the opportunity to ride with train crews to enhance their understanding of railroad operations andrisks. Our staff of information security professionals continually assess cybersecurity risks and implement mitigation programs that evolve with thechanging technology threat environment. For example, we released critical patches to address the vulnerability in Log4J, a component widely used in ourapplications and found in commercial software. To date, we have not experienced any material disruption of our operations due to a cyber threat or attackdirected at us. Cooperation with Federal, State, and Local Government Agencies – We work closely on physical and cybersecurity initiatives with government agencies,including the U.S. Department of Transportation (DOT); the Department of Homeland Security (DHS), along with its Cybersecurity & Infrastructure SecurityAgency (CISA) and Transportation Security Administration (TSA); as well as local police departments, fire departments, and other first responders. Inconnection with new guidance from the TSA, effective January 1, 2022, we are required to report cyber incidents to CISA, perform a cyber vulnerability self-assessment and submit results to the TSA (by March 31, 2022), assemble and adopt a cyber incident response plan (by June 29, 2022), andappoint cybersecurity coordinators. In conjunction with the Association of American Railroads (AAR), we sponsor Ask Rail, a mobile applicationthat provides first responders with secure links to electronic information, including commodity and emergency response information required by emergencypersonnel to respond to accidents and other situations. We also participate in the National Joint Terrorism Task Force, a multi-agency effort established bythe U.S. Department of Justice and the Federal Bureau of Investigation to combat and prevent terrorism. 7Table of Contents We work with the Coast Guard, U.S. Customs and Border Protection (CBP), and the Military Transport Management Command, which monitor shipmentsentering the UPRR rail network at U.S. border crossings and ports. We were the first railroad in the U.S. to be named a partner in CBP’s Customs-TradePartnership Against Terrorism, a partnership designed to develop, enhance, and maintain effective security processes throughout the global supply chain. Cooperation with Customers and Trade Associations – Through TransCAER (Transportation Community Awareness and Emergency Response), we workwith the AAR, the American Chemistry Council, the American Petroleum Institute, and other chemical trade groups to provide communities withpreparedness tools, including the training of emergency responders. In cooperation with the FRA and other interested groups, we are also working todevelop 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 amore 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. According to the Association of American Railroads (AAR), moving freight by rail instead of truck reduces greenhouse gas(GHG) emissions by up to 75%. Building on rail’s relative emissions benefits over other modes of transportation, we are taking additional actions to reduceour emissions. These actions are described in our initial Climate Action Plan, which we released in December 2021. Competition – see “We Face Competition from Other Railroads and Other Transportation Providers” in the Risk Factors in Item 1A of this report. Key Suppliers – see “We Are Dependent on Certain Key Suppliers of Locomotives and Rail” in the Risk Factors in Item 1A of this report. Available Information – Our Internet website is www.up.com. We make available free of charge on our website (under the “Investors” caption link) ourAnnual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our current reports on Form 8-K; our proxy statements; Forms 3, 4, and 5, filed onbehalf of our directors and certain executive officers; and amendments to such reports filed or furnished pursuant to the Securities Exchange Act of 1934,as amended (the Exchange Act). We provide these reports and statements as soon as reasonably practicable after such material is electronically filedwith, or furnished to, the SEC. We also make available on our website previously filed SEC reports and exhibits via a link to EDGAR on the SEC’s Internetsite at www.sec.gov. Additionally, our corporate governance materials, including By-Laws, Board Committee charters, governance guidelines and policies,and codes of conduct and ethics for directors, officers, and employees are available on our website. From time to time, the corporate governance materialson our website may be updated as necessary to comply with rules issued by the SEC and the NYSE or as desirable to promote the effective and efficientgovernance of our Company. Any security holder wishing to receive, without charge, a copy of any of our SEC filings or corporate governance materialsshould send a written request to: Secretary, Union Pacific Corporation, 1400 Douglas Street, Omaha, NE 68179. References to our website address in this report, including references in Management’s Discussion and Analysis of Financial Condition and Results ofOperations, Item 7, are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the informationcontained on, or available through, the website. Therefore, such information should not be considered part of this report. GOVERNMENTAL AND ENVIRONMENTAL REGULATION Governmental Regulation – Our operations are subject to a variety of federal, state, and local regulations, generally applicable to all businesses. (Seealso the discussion of certain regulatory proceedings in Legal Proceedings, Item 3.) The operations of the Railroad are subject to the regulations of the FRA and other federal and state agencies as well as the regulatory jurisdiction of theSurface Transportation Board (STB). The STB has jurisdiction over rates charged on certain regulated rail traffic; common carrier service of regulated traffic;freight car compensation; transfer, extension, or abandonment of rail lines; and acquisition of control of rail common carriers. The STB continues its effortsto explore expanding rail regulation and is reviewing proposed rulemaking in various areas, including reciprocal switching, commodity exemptions, andexpanding and easing procedures for smaller rate complaints. The STB also continues to explore changes to the methodology for determining railroadrevenue adequacy and the possible uses of revenue adequacy in regulating railroad rates. The STB posts quarterly reports on rate reasonablenesscases, maintains a database on service complaints, and has the authority to initiate investigations, among other things. DOT, the Occupational Safety and Health Administration, the Pipeline and Hazardous Materials Safety Administration, and DHS, along with other federalagencies, have jurisdiction over certain aspects of safety, movement of hazardous materials and hazardous waste, emissions requirements, and equipmentstandards. Additionally, various state and local agencies have jurisdiction over disposal of hazardous waste and seek to regulate movement of hazardousmaterials in ways not preempted by federal law. Environmental Regulation – We are subject to extensive federal and state environmental statutes and regulations pertaining to public health and theenvironment. The statutes and regulations are administered and monitored by the Environmental Protection Agency (EPA) and by various stateenvironmental agencies. The primary laws affecting our operations are the Resource Conservation and Recovery Act, regulating the management anddisposal of solid and hazardous wastes; the Comprehensive Environmental Response, Compensation, and Liability Act, regulating the cleanup ofcontaminated properties; the Clean Air Act, regulating air emissions; and the Clean Water Act, regulating wastewater discharges. Information concerning environmental claims and contingencies and estimated remediation costs is set forth in Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Critical Accounting Estimates– Environmental, Item 7, and Note 17 to the Financial Statements andSupplementary Data, Item 8. 8Table of Contents Item 1A. Risk Factors The following discussion addresses significant factors, events, and uncertainties that make an investment in our securities risky and provides importantinformation for the understanding of our “forward-looking statements,” which are discussed immediately preceding Item 7A of this Form 10-K and elsewhere.The risk factors set forth in this Item 1A should be read in conjunction with the rest of the information included in this report, including Management’sDiscussion and Analysis of Financial Condition and Results of Operations, Item 7, and Financial Statements and Supplementary Data, Item 8. We urge you to consider carefully the factors described below and the risks that they present for our operations as well as the risks addressed in otherreports and materials that we file with the SEC and the other information included or incorporated by reference in this Form 10-K. When the factors, events,and contingencies described below or elsewhere in this Form 10-K materialize, our business, reputation, financial condition, results of operations, cashflows, or prospects can be materially adversely affected. In such case, the trading price of our common stock could decline and you could lose part or all ofyour investment. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect ourbusiness, reputation, financial condition, results of operations, cash flows, and prospects. 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 ormore commodities or changes in consumer preferences that affect the businesses of our customers can lead to increased costs associated with resizingour operations, including higher unit operating costs and costs for the storage of locomotives, rail cars, and other equipment; work-force adjustments; andother related activities, which could have a material adverse effect on our results of operations, financial condition, and liquidity. If there is significantdemand for our services that exceeds the designed capacity of our network, we may experience network difficulties, including congestion and reducedvelocity, that could compromise the level of service we provide to our customers. This level of demand may also compound the impact of weather andweather-related events on our operations and velocity. Although we continue to improve our transportation plan, add capacity, improve operations at ouryards and other facilities, and improve our ability to address surges in demand for any reason with adequate resources, we cannot be sure that thesemeasures will fully or adequately address any service shortcomings resulting from demand exceeding our planned capacity. We may experience otheroperational or service difficulties related to network capacity, dramatic and unplanned fluctuations in our customers’ demand for rail service with respect toone or more commodities or operating regions, or other events that could negatively impact our operational efficiency, which could all have a materialadverse effect on our results of operations, financial condition, and liquidity. We Transport Hazardous Materials – We transport certain hazardous materials and other materials, including crude oil, ethanol, and toxic inhalation hazard(TIH) materials, such as chlorine, that pose certain risks in the event of a release or combustion. Additionally, U.S. laws impose common carrier obligationson railroads that require us to transport certain hazardous materials regardless of risk or potential exposure to loss. A rail accident or other incident oraccident on our network, at our facilities, or at the facilities of our customers involving the release or combustion of hazardous materials could involvesignificant costs and claims for personal injury, property damage, and environmental penalties and remediation in excess of our insurance coverage forthese risks, which could have a material adverse effect on our results of operations, financial condition, and liquidity. We Rely on Technology and Technology Improvements in Our Business Operations – We rely on information technology in all aspects of our business,including technology systems operated by us or under control of third-parties. If we do not have sufficient capital or do not deploy sufficient capital in atimely manner to acquire, develop, or implement new technology or maintain or upgrade current systems, such as Positive Train Control (PTC) or the latestversion of our transportation control systems, we may suffer a competitive disadvantage within the rail industry and with companies providing other modesof transportation service, which could have a material adverse effect on our results of operations, financial condition, and liquidity. We Are Subject to Cybersecurity Risks – We rely on information technology in all aspects of our business, including technology systems operated by us(whether created by us or purchased), under control of third-parties, or open-source software. Although we devote significant resources to protect ourtechnology systems and proprietary data, we have experienced and will likely continue to experience varying degrees of cyber incidents in the normalcourse of business. There can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will besufficient 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.Furthermore, due to the rising numbers and increasing sophistication of cyber-attacks, an increasingly complex information technology supply chain, andthe nature of zero-day exploits, we may be unable to anticipate or implement adequate preventative measures to prevent a security breach, including byransomware, human error, or other cyber-attack methods, from materially disrupting our systems or the systems of third-parties. A successful cyber-attackmay result in significant service interruption; safety failure; other operational difficulties; unauthorized access to (or the loss of access to) competitivelysensitive, confidential, or other critical data or systems; loss of customers; financial losses; regulatory fines; and misuse or corruption of critical data andproprietary information, which could all have a material adverse impact on our results of operations, financial condition, and liquidity. We may experiencesecurity breaches that could remain undetected for an extended period and, therefore, have a greater impact on the services we offer. Additionally, we maybe exposed to increased cybersecurity risk because we are a component of the critical U.S. infrastructure. Severe Weather Could Result in Significant Business Interruptions and Expenditures – As a railroad with a vast network, we are exposed to severe weatherconditions and other natural phenomena, including earthquakes, hurricanes, fires, floods, mudslides or landslides, extreme temperatures, avalanches, andsignificant precipitation. Line outages and other interruptions caused by these conditions can adversely affect our entire rail network, potentially negativelyaffecting revenue, costs, and liabilities, despite efforts we undertake to plan for these events. Our revenues can also be adversely affected by severeweather that causes damage and disruptions to our customers. These impacts caused by severe weather could have a material adverse effect on ourresults of operations, financial condition, and liquidity. 9Table of Contents A Significant Portion of Our Revenue Involves Transportation of Commodities to and from International Markets – Although revenues from our operationsare attributable to transportation services provided in the U.S., a significant portion of our revenues involves the transportation of commodities to and frominternational markets, including Mexico, Canada, and Southeast Asia, by various carriers and, at times, various modes of transportation. Significant andsustained interruptions of trade with Mexico, Canada, or countries in Southeast Asia, including China, could adversely affect customers and other entitiesthat, 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 amaterial adverse effect on our results of operations, financial condition, and liquidity. Any one or more of the following could cause a significant andsustained 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 regulatorybodies, including the United States-Mexico-Canada Agreement (USMCA) and a “Phase One” trade agreement with China; (c) actions of taxing authoritiesthat affect our customers doing business in foreign countries; (d) any significant adverse economic developments, such as extended periods of highinflation, material disruptions in the banking sector or in the capital markets of these foreign countries, and significant changes in the valuation of thecurrencies of these foreign countries that could materially affect the cost or value of imports or exports; (e) shifts in patterns of international trade thatadversely affect import and export markets; (f) a material reduction in foreign direct investment in these countries; and (g) public health crises, including theoutbreak of pandemic or contagious disease, such as the coronavirus and its variant strains (COVID). We Are Dependent on Certain Key Suppliers of Locomotives and Rail – Due to the capital-intensive nature and sophistication of locomotive equipment,parts, and maintenance, potential new suppliers face high barriers to entry. Therefore, if one of the domestic suppliers of high horsepower locomotivesdiscontinues manufacturing locomotives, supplying parts, or providing maintenance for any reason, including bankruptcy or insolvency or the inability tomanufacture locomotives that meet efficiency or regulatory emissions standards, we could experience significant cost increases and reduced availability ofthe locomotives that are necessary for our operations. Additionally, we utilize a limited number of steel producers that meet our specifications. Rail iscritical to our operations for rail replacement programs, maintenance, and for adding additional network capacity, new rail and storage yards, andexpansions of existing facilities. This industry similarly has high barriers to entry, and if one of these suppliers discontinues operations for any reason,including bankruptcy or insolvency, we could experience both significant cost increases for rail purchases and difficulty obtaining sufficient rail formaintenance and other projects. Changes to trade agreements or policies that result in increased tariffs on goods imported into the United States couldalso result in significant cost increases for rail purchases and difficulty obtaining sufficient rail. Human Capital Risks Strikes or Work Stoppages Could Adversely Affect Our Operations – The U.S. Class I railroads are party to collective bargaining agreements with variouslabor unions. The majority of our employees belong to labor unions and are subject to these agreements. Disputes over the terms of these agreements orour potential inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns, orlockouts, which could cause a significant disruption of our operations and have a material adverse effect on our results of operations, financial condition,and liquidity. Additionally, future national labor agreements, or renegotiation of labor agreements or provisions of labor agreements, could compromise ourservice reliability or significantly increase our costs for health care, wages, and other benefits, which could have a material adverse impact on our results ofoperations, financial condition, and liquidity. Labor disputes, work stoppages, slowdowns, or lockouts at loading/unloading facilities, ports, or othertransport access points could compromise our service reliability and have a material adverse impact on our results of operations, financial condition, andliquidity. Labor disputes, work stoppages, slowdowns, or lockouts by employees of our customers or our suppliers could compromise our service reliabilityand have a material adverse impact on our results of operations, financial condition, and liquidity. The Availability of Qualified Personnel Could Adversely Affect Our Operations – Changes in demographics, training requirements, and the availability ofqualified personnel for us, our customers, and throughout the supply chain, including the effects on availability from pandemic illnesses or restrictions(including, for example, any potential effects from the coronavirus vaccine mandates), could negatively affect our ability to meet demand for rail service.Unpredictable increases in demand for rail services and a lack of network fluidity may exacerbate such risks, which could have a negative impact on ouroperational efficiency and otherwise have a material adverse effect on our results of operations, financial condition, and liquidity. Legal and Regulatory Risks We Are Subject to Significant Governmental Regulation – We are subject to governmental regulation by a significant number of federal, state, and localauthorities covering a variety of health, safety, labor, environmental, economic (as discussed below), tax, and other matters. Many laws and regulationsrequire us to obtain and maintain various licenses, permits, and other authorizations, and we cannot guarantee that we will continue to be able to do so.Our failure to comply with applicable laws and regulations could have a material adverse effect on us. Governments or regulators may change the legislativeor regulatory frameworks that we operate in without providing us any recourse to address any adverse effects on our business, including, without limitation,regulatory determinations or rules regarding dispute resolution, increasing the amount of our traffic subject to common carrier regulation, businessrelationships with other railroads, calculation of our cost of capital or other inputs relevant to computing our revenue adequacy, the prices we charge,changes in tax rates, enactment of new tax laws, and revision in tax regulations. Significant legislative activity in Congress or regulatory activity by the STBcould expand regulation of railroad operations and pricing for rail services, which could reduce capital spending on our rail network, facilities, andequipment, and have a material adverse effect on our results of operations, financial condition, and liquidity. We May Be Subject to Various Claims and Lawsuits That Could Result in Significant Expenditures – As a railroad with operations in densely populatedurban areas and a vast rail network, we are exposed to the potential for various claims and litigation related to labor and employment, personal injury,property damage, environmental liability, and other matters. Any material changes to litigation trends or a catastrophic rail accident or series of accidentsinvolving any or all of property damage, personal injury, and environmental liability that exceed our insurance coverage for such risks could have a materialadverse effect on our results of operations, financial condition, and liquidity. 10Table of Contents We Are Subject to Significant Environmental Laws and Regulations – Due to the nature of the railroad business, our operations are subject to extensivefederal, state, and local environmental laws and regulations concerning, among other things, emissions to the air; discharges to waters; handling, storage,transportation, and disposal of waste and other materials; and hazardous material or petroleum releases. We generate and transport hazardous and non-hazardous waste in our operations. Environmental liability can extend to previously owned or operated properties, leased properties, properties owned bythird-parties, as well as properties we currently own. Environmental liabilities have arisen and may also arise from claims asserted by adjacent landownersor other third-parties in toxic tort litigation. We have been and may be subject to allegations or findings that we have violated, or are strictly liable under,these laws or regulations. We currently have certain obligations at existing sites for investigation, remediation, and monitoring, and we likely will haveobligations at other sites in the future. Liabilities for these obligations affect our estimate based on our experience and, as necessary, the advice andassistance of our consultants. However, actual costs may vary from our estimates due to any or all of several factors, including changes to environmentallaws or interpretations of such laws, technological changes affecting investigations and remediation, the participation and financial viability of other partiesresponsible for any such liability, and the corrective action or change to corrective actions required to remediate any existing or future sites. We could incursignificant costs as a result of any of the foregoing, and we may be required to incur significant expenses to investigate and remediate known, unknown, orfuture environmental contamination, which could have a material adverse effect on our results of operations, financial condition, and liquidity. 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. Our main railroad competitor is Burlington Northern Santa Fe LLC. Its primary subsidiary, BNSF Railway Company (BNSF), operates parallelroutes in many of our main traffic corridors. In addition, we operate in corridors served by other railroads and motor carriers. Motor carrier competition existsfor all three of our commodity groups (excluding most coal shipments). Because of the proximity of our routes to major inland and Gulf Coast waterways,barges can be particularly competitive, especially for grain and bulk commodities in certain areas where we operate. In addition to price competition, weface competition with respect to transit times, quality, and reliability of service from motor carriers and other railroads. Motor carriers in particular can havean advantage over railroads with respect to transit times and timeliness of service. However, railroads are much more fuel-efficient than trucks, whichreduces the impact of transporting goods on the environment and public infrastructure, and we have been making efforts to convert truck traffic to rail.Additionally, we must build or acquire and maintain our rail system, while trucks, barges, and maritime operators are able to use public rights-of-waymaintained by public entities. Any of the following could also affect the competitiveness of our transportation services for some or all of our commodities,which could have a material adverse effect on our results of operations, financial condition, and liquidity: (i) improvements or expenditures materiallyincreasing the quality or reducing the costs of these alternative modes of transportation, such as autonomous or more fuel efficient trucks, (ii) legislationthat eliminates or significantly increases the size or weight limitations applied to motor carriers, or (iii) legislation or regulatory changes that imposeoperating restrictions on railroads or that adversely affect the profitability of some or all railroad traffic. Many movements face product or geographiccompetition where our customers can use different products (e.g., natural gas instead of coal, sorghum instead of corn) or commodities from differentlocations (e.g., grain from states or countries that we do not serve, crude oil from different regions). Sourcing different commodities or different locationsallows shippers to substitute different carriers and such competition may reduce our volume or constrain prices. Additionally, any future consolidation of therail industry could materially affect our competitive environment. We May Be Affected by Climate Change and Market or Regulatory Responses to Climate Change – Climate change, including the impact of globalwarming, could have a material adverse effect on our results of operations, financial condition, and liquidity. Restrictions, caps, taxes, or other controls onemissions of GHGs, including diesel exhaust, could significantly increase our operating costs. Restrictions on emissions could also affect our customersthat (a) use commodities that we carry to produce energy, (b) use significant amounts of energy in producing or delivering the commodities we carry, or (c)manufacture or produce goods that consume significant amounts of energy or burn fossil fuels, including chemical producers, farmers and food producers,and automakers and other manufacturers. Significant cost increases, government regulation, or changes of consumer preferences for goods or servicesrelating to alternative sources of energy, emissions reductions, and GHG emissions could materially affect the markets for the commodities we carry anddemand for our services, which in turn could have a material adverse effect on our results of operations, financial condition, and liquidity. Governmentincentives encouraging the use of alternative sources of energy also could affect certain of our customers and the markets for certain of the commoditieswe carry in an unpredictable manner that could alter our traffic patterns, including, for example, increasing royalties charged to producers of PRB coal bythe U.S. Department of Interior and the impacts of ethanol incentives on farming and ethanol producers. We could face increased costs related to defendingand resolving legal claims and other litigation related to climate change and the alleged impact of our operations on climate change. Violent weathercaused by climate change, including earthquakes, hurricanes, fires, floods, extreme temperatures, avalanches, and significant precipitation could causeline outages and other interruptions to our infrastructure. Any of these factors, individually or in operation with one or more of the other factors, or otherunforeseen impacts of climate change could reduce the amount of traffic we handle and have a material adverse effect on our results of operations, financialcondition, and liquidity. While we work to implement our Climate Action Plan, our efforts to achieve emission reduction targets could significantly increaseour operational costs and capital expenditures. 11Table of Contents Our business, financial condition, and results of operations have been adversely affected, and in the future, could be materially adversely affected bypandemics or other public health crises – Our business, financial condition, and results of operations have been adversely affected by COVID. COVID hascaused, and is expected to continue to cause, a global slowdown of economic activity (including the decrease in demand for a broad variety of goods),disruptions in global supply chains, and significant volatility and disruption of financial markets, resulting further in adverse effects on workforces,customers, and regional and local economies. Other future pandemics or public health crises may cause these same or similar consequences. Becausethe severity, magnitude, and duration of the COVID pandemic and its economic consequences are rapidly changing, and difficult to predict, the impact onour business and financial condition remains uncertain. The ultimate impact of the COVID pandemic on our results of operations and financial conditionremains uncertain and depends on numerous evolving factors, which we may not be able to effectively respond to and are not entirely within our control.These factors also may be of importance for other pandemics or public health crises, including, but not limited to: governmental, business, and individuals’actions that have been and continue to be taken in response to a global pandemic or other public health crises (including restrictions on travel andtransport, workforce pressures, social distancing, and shelter-in-place orders); the effect of a pandemic or other public health crises on economic activityand actions taken in response; the effect on our customers and their demand for our services; the effect of a pandemic or other public health crises on thecredit-worthiness of our customers; national or global supply chain challenges or disruption; facility closures; commodity cost volatility; general economicuncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery as thepandemic subsides as well as response to a potential reoccurrence. Further, a pandemic or other public health crises, and the volatile regional and globaleconomic conditions stemming from such an event, could also precipitate and aggravate the other risk factors that we identify, which could materiallyadversely affect our business, financial condition, results of operations (including revenues and profitability), and/or stock price. Additionally, a pandemic orother public health crises also may affect our operating and financial results in a manner that is not presently known to us or that we currently do notconsider to present significant risks to our operations. Financial Risks We Are Affected By Fluctuating Fuel Prices – Fuel costs constitute a significant portion of our transportation expenses. Diesel fuel prices can be subjectto dramatic fluctuations, and significant price increases could have a material adverse effect on our operating results. Although we currently are able torecover a significant amount of our fuel expenses from our customers through revenue from fuel surcharges, we cannot be certain that we will always beable to mitigate rising or elevated fuel costs through our fuel surcharges. Additionally, future market conditions or legislative or regulatory activities couldadversely affect our ability to apply fuel surcharges or adequately recover increased fuel costs through fuel surcharges. As fuel prices fluctuate, our fuelsurcharge 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. International, political, and economic factors, events and conditions affect the volatility offuel prices and supplies. Weather can also affect fuel supplies and limit domestic refining capacity. A severe shortage of, or disruption to, domestic fuelsupplies could have a material adverse effect on our results of operations, financial condition, and liquidity. Alternatively, lower fuel prices could have apositive impact on the economy by increasing consumer discretionary spending that potentially could increase demand for various consumer products wetransport. However, lower fuel prices could have a negative impact on other commodities we transport, such as coal and domestic drilling-relatedshipments, which could have a material adverse effect on our results of operations, financial condition, and liquidity. We Rely on Capital Markets – Due to the significant capital expenditures required to operate and maintain a safe and efficient railroad, we rely on thecapital markets to provide some of our capital requirements. We utilize long-term debt instruments, bank financing, and commercial paper, and we pledgecertain amount of our receivables as collateral for credit. Significant instability or disruptions of the capital markets, including the credit markets, ordeterioration 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. A significantdeterioration of our financial condition could result in a reduction of our credit rating to below investment grade, which could restrict or, at certain creditlevels below investment grade, may prohibit us from utilizing our current receivables securitization facility (Receivables Facility). This may also limit ouraccess to external sources of capital and significantly increase the costs of short and long-term debt financing. General Risk Factors We Are Affected by General Economic Conditions – Prolonged, severe adverse domestic and global economic conditions or disruptions of financial andcredit markets, including inflation, may affect the producers and consumers of the commodities we carry and may have a material adverse effect on ouraccess to liquidity, results of operations, and financial condition. 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. Terrorist attacks, or other similar events, any government response thereto, and war or riskof war may adversely affect our results of operations, financial condition, and liquidity. In addition, insurance premiums for some or all of our currentcoverages could increase dramatically, or certain coverages may not be available to us in the future. Item 1B. Unresolved Staff Comments None. 12Table of Contents 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 32,452 route miles. We own 26,124 miles and operate on the remainder pursuant to trackage rights or leases. The following tabledescribes track miles at December 31, 2021 and 2020: 2021 2020 Route 32,452 32,313 Other main line 7,093 7,097 Passing lines and turnouts 3,412 3,382 Switching and classification yard lines 8,887 9,001 Total miles 51,844 51,793 HEADQUARTERS BUILDING We own our headquarters building in Omaha, Nebraska. The facility has 1.2 million square feet of space that can accommodate approximately 4,000employees. HARRIMAN DISPATCHING CENTER The Harriman Dispatching Center (HDC), located in Omaha, Nebraska, is our primary dispatching facility. It is linked to regional dispatching and locomotivemanagement facilities at various locations along our network. HDC employees coordinate moves of locomotives and trains, manage traffic and train crewson our network, and coordinate interchanges with other railroads. More than 500 employees currently work on-site in the facility. In the event of a disruptionof operations at HDC due to a cyber-attack, flooding or severe weather, pandemic outbreak, or other event, we maintain the capability to conduct criticaloperations at back-up facilities in different locations. 13Table of Contents RAIL FACILITIES In addition to our track structure, we operate numerous facilities, including terminals for intermodal and other freight; rail yards for building trains(classification yards), switching, storage-in-transit (the temporary storage of customer goods in rail cars prior to shipment), and other activities; offices toadminister and manage our operations; dispatching centers to direct traffic on our rail network; crew on duty locations for train crews along our network;and shops and other facilities for fueling, maintenance, and repair of locomotives and repair and maintenance of rail cars and other equipment. The followingtable includes the major yards and terminals on our system: Major Classification YardsMajor Intermodal Terminals North Platte, NebraskaJoliet (Global 4), Illinois North Little Rock, ArkansasGlobal II (Chicago), Illinois Englewood (Houston), TexasEast Los Angeles, California Livonia, LouisianaLathrop, California West Colton, CaliforniaLATC (Los Angeles), California Fort Worth, TexasMesquite, Texas Houston, TexasCity of Industry, California Roseville, CaliforniaICTF (Los Angeles), California RAIL EQUIPMENT Our equipment includes owned and leased locomotives and rail cars; heavy maintenance equipment and machinery; other equipment and tools in ourshops, offices, and facilities; and vehicles for maintenance, transportation of crews, and other activities. As of December 31, 2021, we owned or leased thefollowing units of equipment: Average Locomotives Owned Leased Total Age (yrs.) Multiple purpose 6,204 1,038 7,242 22.5 Switching 158 - 158 41.4 Other 15 61 76 41.3 Total locomotives 6,377 1,099 7,476 N/A Average Freight cars Owned Leased Total Age (yrs.) Covered hoppers 12,992 7,996 20,988 22.4 Open hoppers 5,108 817 5,925 34.8 Gondolas 5,468 2,671 8,139 28.8 Boxcars 2,210 6,604 8,814 40.6 Refrigerated cars 1,974 2,081 4,055 22.6 Flat cars 2,260 1,139 3,399 32.3 Other - 263 263 33.2 Total freight cars 30,012 21,571 51,583 N/A Average Highway revenue equipment Owned Leased Total Age (yrs.) Containers 48,962 1,856 50,818 10.5 Chassis 29,875 14,148 44,023 12.6 Total highway revenue equipment 78,837 16,004 94,841 N/A We continuously assess our need for equipment to run an efficient and reliable 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 aredifficult to assess or can change rapidly, we maintain a surge fleet to remain agile. Without the surge fleet, our ability to react quickly is hindered asequipment suppliers are limited and lead times to acquire equipment are long and may be in excess of a year. We believe our locomotive and freight carfleets are appropriately sized to meet our current and future business requirements. These fleets serve as the most reliable and efficient equipment tofacilitate growth without additional acquisitions. Locomotive and freight car in service utilization percentages for the year ended December 31, 2021, were62% and 80%, respectively. 14Table of Contents CAPITAL EXPENDITURES Our rail network requires significant annual capital investments for replacement, improvement, and expansion. These investments enhance safety, supportthe 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. 2021 Capital Program – During 2021, our capital program totaled approximately $3.0 billion. (See the cash capital investments table in Management’sDiscussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, Item 7, of this report.) 2022 Capital Plan – In 2022, we expect our capital plan to be approximately $3.3 billion, up 10% from 2021. (See further discussion of our 2022 capitalplan 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 $1.2 billion and $1.3 billion at December 31, 2021 and 2020, respectively,served as collateral for finance leases and other types of equipment obligations in accordance with the secured financing arrangements utilized to acquireor refinance such railroad equipment. Environmental Matters – Certain of our properties are subject to federal, state, and local laws and regulations governing the protection of the environment.(See discussion within this report of environmental issues in Business – Governmental and Environmental Regulation, Item 1; Management’s Discussionand Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Environmental, Item 7; and Note 17 to the FinancialStatements and Supplementary Data, Item 8.) Item 3. Legal Proceedings From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection with our business. We routinely assess our liabilitiesand contingencies in connection with these matters based upon the latest available information, and, when necessary, we seek input from our third-partyadvisors when making these assessments. Consistent with SEC rules and requirements, we describe below material pending legal proceedings (other thanordinary routine litigation incidental to our business), material proceedings known to be contemplated by governmental authorities, other proceedingsarising under federal, state, or local environmental laws and regulations (including governmental proceedings involving potential fines, penalties, or othermonetary sanctions in excess of $1,000,000), and such other pending matters that we may determine to be appropriate. ENVIRONMENTAL MATTERS We receive notices from the EPA and state environmental agencies alleging that we are or may be liable under federal or state environmental laws forremediation costs at various sites throughout the U.S., including sites on the Superfund National Priorities List or state superfund lists. We cannot predictthe ultimate impact of these proceedings and suits because of the number of potentially responsible parties involved, the degree of contamination byvarious wastes, the scarcity and quality of volumetric data related to many of the sites, and the speculative nature of remediation costs. Information concerning environmental claims and contingencies and estimated remediation costs is set forth in this report in Management’s Discussion andAnalysis of Financial Condition and Results of Operations – Critical Accounting Estimates – Environmental, Item 7, and Note 17 to the FinancialStatements and Supplementary Data, Item 8. 15Table 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 whomwere represented by the same law firms) filed virtually identical antitrust lawsuits in various federal district courts against us and four other Class I railroadsin the U.S. Currently, UPRR and three other Class I railroads are the named defendants in the lawsuits. The original plaintiff filed the first of these claims inthe U.S. District Court in New Jersey on May 14, 2007. These suits alleged that the named railroads engaged in price-fixing by establishing common fuelsurcharges for certain rail traffic. On August 16, 2019, the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) affirmed the decision of U.S. District Court for the District ofColumbia (U.S. District Court) denying class certification (the Certification Denial). Only five plaintiffs remain in this multidistrict litigation (MDL) originallyfiled in 2007, which remains pending. They are proceeding on a consolidated basis in the U.S. District Court before the Honorable Paul L. Friedman (MDLI). Since the Certification Denial, approximately 111 lawsuits have been filed in federal court based on claims identical to those alleged in the classcertification case. The Judicial Panel on Multidistrict Litigation consolidated these suits for pretrial proceedings in the U.S. District Court before theHonorable 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 andprotect railroad communications made to further interline service (i.e., where two railroads are in the route). In August 2021, the D.C. Circuit agreed to hearDefendants' appeal. Oral argument is scheduled for March 7, 2022. The appeal will address whether the interline evidence the plaintiffs intend to utilize toprove the alleged conspiracy is admissible either for purposes of summary judgment or at trial. 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. On October20, 2021, Judge Friedman issued an order stating that he will not consider the motions for summary judgment until after the D.C. Circuit appeal mentionedabove is decided. 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 ofColumbia on June 7, 2011, by Oxbow Carbon & Minerals LLC and related entities (Oxbow). Just as it did in the MDL proceedings, Union Pacific filed amotion for summary judgment on May 14, 2021, and the briefing was completed in September 2021. As stated above, the court issued an order that willnot consider the motions for summary judgment until after the D.C. Circuit appeal mentioned above is decided. We continue to deny the allegations that our fuel surcharge programs violate the antitrust laws or any other laws. We believe that these lawsuits arewithout merit, and we will vigorously defend our actions. Therefore, we currently believe that these matters will not have a material adverse effect on any ofour results of operations, financial condition, and liquidity. Item 4. Mine Safety Disclosures Not applicable. 16Table 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 AnnualMeeting of Shareholders, and they hold office until their successors are elected. Executive officers also may be elected and designated throughout theyear, as the Board of Directors considers appropriate. There are no family relationships among the officers, nor is there any arrangement or understandingbetween any officer and any other person pursuant to which the officer was selected. The following table sets forth certain information current as ofFebruary 4, 2022, relating to the executive officers. Business Experience DuringNamePositionAgePast Five YearsLance M. FritzChairman, President, and Chief Executive Officer of UPC and the Railroad59Current PositionJennifer L. HamannExecutive Vice President and Chief Financial Officer of UPC and the Railroad54[1]Craig V. RichardsonExecutive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad60[2]Kenny G. RockerExecutive Vice President – Marketing and Sales of the Railroad50[3]Todd M. RynaskiVice President and Controller of UPC and the Railroad51Current PositionEric J. GehringerExecutive Vice President – Operations of the Railroad42[4]Elizabeth F. WhitedExecutive Vice President – Sustainability and Strategy of UPC and the Railroad56[5] [1]Ms. Hamann was elected Executive Vice President and Chief Financial Officer of UPC and the Railroad effective January 1, 2020. She previously served asSenior Vice President – Finance (April 2019 – December 2019), Vice President – Planning & Analysis (October 2017 – March 2019), and Vice President &General Manager – Marketing and Sales – Autos team (February 2016 – September 2017).[2]Mr. Richardson was elected Executive Vice President, Chief Legal Officer, and Corporate Secretary of UPC and the Railroad effective December 8, 2020. Hemost 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. Rocker previously served at the Railroadas Vice President – Marketing and Sales – Industrial team (October 2016 – August 2018).[4]Mr. Gehringer was elected Executive Vice President – Operations of the Railroad effective January 1, 2021. Mr. Gehringer previously served as Senior VicePresident – 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).[5]Ms. Whited was elected Executive Vice President – Sustainability and Strategy of UPC and the Railroad effective February 3, 2022. She previously servedas Executive Vice President and Chief Human Resources Officer (August 2018 – February 2022) and Executive Vice President and Chief Marketing Officer(December 2016 – August 2018). 17Table of Contents PART II 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 New York Stock Exchange (NYSE) under the symbol “UNP”. At January 28, 2022, there were 636,898,957 shares of common stock outstanding and 29,397 common shareholders of record. On that date, the closingprice of the common stock on the NYSE was $245.93. We paid dividends to our common shareholders during each of the past 122 years. Comparison Over One- and Three-Year Periods – The following table presents the cumulative total shareholder returns, assuming reinvestment ofdividends, over one- and three-year periods for the Corporation (UNP), a peer group index (comprised of CSX Corporation and Norfolk Southern Corporation),the Dow Jones Transportation Index (DJ Trans), and the Standard & Poor’s 500 Stock Index (S&P 500). Period UNP PeerGroup DJ Trans S&P 500 1 Year (2021) 23.3% 26.4% 33.2% 28.7%3 Year (2019 - 2021) 94.0 98.7 87.6 100.3 Five-Year Performance Comparison – The following graph provides an indicator of cumulative total shareholder returns for the Corporation as comparedto 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 UnionPacific Corporation and each index on December 31, 2016, and that all dividends were reinvested. The information below is historical in nature and is notnecessarily indicative of future performance. 18Table of Contents Purchases of Equity Securities – During 2021, we repurchased 33,760,492 shares of our common stock at an average price of $218.36. The followingtable presents common stock repurchases during each month for the fourth quarter of 2021: Period Total Number of SharesPurchased [a] Average Price Paid PerShare Total Number of SharesPurchased as Part of aPublicly Announced Plan orProgram Maximum Number ofShares Remaining Underthe Plan or Program [b] Oct. 1 through Oct. 31 2,418,989 $220.04 2,344,253 81,178,648 Nov. 1 through Nov. 30 1,479,605 240.95 1,432,039 79,746,609 Dec. 1 through Dec. 31 2,064,394 245.00 2,061,259 77,685,350 Total 5,962,988 $233.87 5,837,551 N/A [a]Total number of shares purchased during the quarter includes approximately 125,437 shares delivered or attested to UPC by employees to pay stock option exercise prices,satisfy excess tax withholding obligations for stock option exercises or vesting of retention units, and pay withholding obligations for vesting of retention shares.[b]Effective April 1, 2019, our Board of Directors authorized the repurchase of up to 150 million shares of our common stock by March 31, 2022, replacing our previous repurchaseprogram. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing andamount of these transactions. Item 6. [Reserved] Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Consolidated Financial Statements and applicable notes to the Financial Statements andSupplementary Data, Item 8, and other information in this report, including Risk Factors set forth in Item 1A and Critical Accounting Estimates andCautionary Information at the end of this Item 7. The following section generally discusses 2021 and 2020 items and year-to-year comparisonsbetween 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can befound in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, of the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2020. The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although revenue is analyzed by commodity, weanalyze the net financial results of the Railroad as one segment due to the integrated nature of the rail network. EXECUTIVE SUMMARY 2021 Results ●Coronavirus Pandemic – Our results during 2021 continued to be impacted by the effects of COVID. Most notably were supply chain issues in theautomotive industry due to semiconductor chip shortages and congestion in several parts of the intermodal supply chain. The impact of thesemiconductor chip shortage is masked in our year-over-year financial comparison for 2021 and 2020 as the second quarter of 2020 saw a temporarysuspension of automotive production due to the pandemic. Excluding the second quarter, automotive shipments were down 14% year-over-year. Thepandemic also upended the intermodal supply chain as demand for consumer goods remained high. The elevated demand adversely affected the ports,chassis availability, truck driver supply, and warehouse receiving capacity. These disruptions limited our revenue growth by slowing asset turns andincreasing costs through lower freight car velocity and multiple container handlings that impeded our operating efficiency. Rail carloadings also wereimpacted as adjustments made to compensate for constrained inland drayage and warehouse capacity shifted traffic patterns, driving declines ininternational intermodal shipments. Demand in other markets increased as the economy recovered. On October 11, 2021, the Company announced that it is complying with the Presidential Executive Order 14042 (EO) that mandates employees offederal contractors and subcontractors be fully vaccinated against COVID, unless employees are legally entitled to an accommodation. A federaldistrict court issued a nationwide injunction against the vaccine mandate in the EO. The company is complying with the injunction while continuing toencourage employees to get their vaccinations. Full implementation and enforcement of the COVID vaccine mandate may affect workforce availability ranging from, among other things, absences toobtain vaccination, recovery from any side-effects, resignations from unwillingness to comply with the mandate, and/or organized work stoppages fromany of our organized union labor workforce. After receiving communications from three of our unions objecting to the vaccination requirement, we filedlawsuits on October 15, 2021, to prevent any disruption to the national rail network. We seek to resolve any vaccination dispute through the variousdispute resolution procedures outlined in the Railway Labor Act. These lawsuits have been stayed pending a final disposition of the enforceability of theEO by the court. 19Table of Contents ●Safety – The health and wellbeing of our employees was a focal point in 2021 as we navigated the continuously changing environment due to COVID.We have and are continuing to adapt to protect the safety of our employees, our customers, and the communities we serve. Safety procedures andpolicies continue to be refined based on Centers for Disease Control and Prevention (CDC) guidelines. In this ever-changing environment, we remain intently focused on reducing risk and eliminating incidents for our employees, our customers, and thepublic. We continued to use Total Safety Culture, Courage to Care, COMMIT (Coaching, Observing, Mentoring, and Motivating with Integrity and Trust),and Peer to Peer throughout our operations to enhance employee safety and engagement. Throughout the year, we worked to implement a physicsengine and proprietary software to evaluate train and route characteristics to enable proactive intervention to prevent derailments. Despite these efforts,our safety results deteriorated year-over-year. Our reportable personal injury incidents rate per 200,000 employee-hours of 0.98 increased 9% from 2020and our reportable equipment incident rate per million train miles increased 7%. In the second half of 2021, we engaged a third-party expert to evaluatethe effectiveness of our safety programs and received recommendations for improvement, which we will implement in 2022. ●Network Operations – We faced many operational challenges throughout 2021, including Winter Storm Uri, global supply chain disruptions, wildfires,bridge outages, mudslides, and hurricanes. These challenges required adjustments to our transportation plans and impacted overall fluidity of thenetwork. As a result, many of our operating metrics deteriorated year-over-year. Freight car velocity decreased due to increased terminal dwell andhigher operating car inventory levels, which drove lower trip plan compliance. To assist with improving network fluidity we are maintaining higher crewand locomotive resources in the short-term. Once the network is balanced and service is restored, we will adjust our resources to the current volumelevels. Additional details on these metrics are discussed in Other Operating/Performance and Financial Statistics of this Item 7. ●Freight Revenues – Our freight revenues increased 11% year-over-year to $20.2 billion driven by a 4% increase in volume, higher fuel surchargerevenue, core pricing gains, and positive mix of traffic (for example, a relative increase in industrial shipments, which have a higher average revenue percar (ARC)). Volume increased in every key market segment compared to 2020 due to the recovery from the depressed economy brought on by theCOVID pandemic in 2020. While the markets rebounded from 2020, our 2021 volume levels were 4% below 2019 pre-pandemic levels. ●Financial Results – In 2021, we generated operating income of $9.3 billion, 19% above 2020, as we recovered from the impacts of COVID. In addition,2020 included a non-cash impairment charge of $278 million related to our Brazos yard investment. Higher fuel prices, increased volume-related costs,inflation, and costs associated with Winter Storm Uri and the wildfires in California drove operating expenses up 7% from 2020. Revenue from theadditional volume and traffic mix, higher fuel surcharge revenue, improved pricing, productivity initiatives, and intermodal accessorial charges more thanoffset the increased expenses, producing an all-time record 57.2% operating ratio, improving 2.7 points from 2020. Net income of $6.5 billion translatedinto earnings of $9.95 per diluted share, up 26% from 2020. ●Fuel Prices – Our average price of diesel fuel in 2021 was $2.23 per gallon, an increase of 49% from 2020. The higher price resulted in higheroperating expenses of $668 million (excluding any impact from year-over-year volume increases). Gross ton-miles increased 6% driving higher fuelexpense. Partially offsetting this increase was a 1% improvement to a record low fuel consumption rate, computed as gallons of fuel consumed dividedby gross ton-miles. ●Liquidity – We are continually evaluating our financial condition and liquidity. On December 31, 2021, we had $960 million of cash and cashequivalents. Despite the challenging year, we generated $9.0 billion of cash from operating activities, yielding free cash flow of $3.5 billion afterreductions of $2.7 billion for cash used in investing activities and $2.8 billion in dividends. We repurchased $7.3 billion of our shares. We have been,and we expect to continue to be, in compliance with our debt covenants. We have $2.0 billion of credit available under our revolving credit facility and upto $500 million undrawn on our Receivables Facility. As of December 31, 2021, none of the revolving credit facility was drawn. Additional details arediscussed in Liquidity and Capital Resources of this Item 7. 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 considereda 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 inthe same manner. We believe free cash flow is important to management and investors in evaluating our financial performance and measures our ability togenerate cash without additional external financing. Free cash flow should be considered in addition to, rather than as a substitute for, cash provided byoperating activities. The following table reconciles cash provided by operating activities (GAAP measure) to free cash flow (non-GAAP measure): Millions 2021 2020 2019 Cash provided by operating activities $9,032 $8,540 $8,609 Cash used in investing activities (2,709) (2,676) (3,435)Dividends paid (2,800) (2,626) (2,598)Free cash flow $3,523 $3,238 $2,576 20Table of Contents 2022 Outlook ●Safety – Operating a safe railroad benefits all our constituents: our employees, customers, shareholders, and the communities we serve. We willcontinue using a multi-faceted approach to safety utilizing technology, risk assessments, training, employee engagement, quality control, and targetedcapital investments. As mentioned previously, our initiatives will be informed by recommendations identified in the third-party assessment of theeffectiveness of our safety program. Consistent with these recommendations, we will continually evaluate and adjust deployment of Total SafetyCulture, Courage to Care, COMMIT, and Peer to Peer throughout our operations, which allows us to identify and implement best practices for employeeand operational safety. In addition, our Operating Practices Command Center will continue the implementation of our predictive technology and reducevariability by identifying causes of mainline service interruptions and develop solutions, in addition to, assisting employees with understanding policies,procedures, and best practices for handling trains. We will continue our efforts to utilize data to identify and mitigate risk, detect rail defects, improve orclose crossings, and educate the public and law enforcement agencies about crossing safety through a combination of our own programs (includingrisk assessment strategies), industry programs, and local community activities across the network. We also are dedicated to maintaining a healthyworkplace and continue monitoring the COVID case levels, modifying our policies as needed to protect employees and minimize the risk of workplacetransmission. ●Network Operations – In 2022, we will continue transforming our railroad to increase reliability of our service product, reduce variability in networkoperations, and improve resource utilization. Further train length initiatives allow us to efficiently add incremental volume growth to our existing trainnetwork. We will continue to make capital investments to improve operational performance and efficiency. A more efficient network requires fewerlocomotives, freight cars, and other resources. ●Financial Expectations – We expect volume to outpace industrial production in 2022 as the results of our business development efforts are bringingnew customers to our railroad. In the current environment, we expect continued margin improvement driven by pricing in excess of inflation and ongoingefficiency initiatives, better leveraging our resources and improving our service product. We expect to generate strong cash flow from operating activitiesallowing us to continue our industry leading dividend payout ratio and strong share repurchase programs. Economic uncertainties remain in 2022 asCOVID impacts linger and could have a material impact on our 2022 financial and operating results. Regardless of external factors, we will focus onefficiently managing operations; seeking new business opportunities; protecting our employees, customers, and communities; and providing excellentservice to our customers. ●Market Conditions – While current forecasts for industrial production indicate continued economic growth, we expect uncertainties with COVID andthe economy to continue in 2022. How governments and consumers react to the resurgence, mutation of the virus, and vaccine mandates could resultin or contribute to customer disruptions, an elongated recovery period, constrained workforce availability, or a general economic downturn from currentlevels. Disruptions in our customers’ supply chains caused by the pandemic or other factors may continue to impact our shipments. In addition, otherfactors such as changes in monetary policy 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 price spreads may drive demand for petroleum products and drillingmaterials; available truck capacity could impact our intermodal business; and international trade agreements could promote or hinder trade. ●Fuel Prices – Projections for crude oil and natural gas continue to fluctuate in the current environment. We again could see volatile fuel prices duringthe year, as they are sensitive to global and U.S. domestic demand, refining capacity, geopolitical events, weather conditions, and other factors. Asprices fluctuate, there will be a timing impact on earnings, as our fuel surcharge programs trail increases or decreases in fuel price by approximatelytwo months. Significant changes in fuel prices could have an impact on consumer discretionary spending, impacting demand for various consumer products wetransport. Alternatively, those changes could have an inverse impact on commodities such as coal, petroleum products, and domestic drilling-relatedshipments. ●Capital Plan – In 2022, we expect our capital plan to be approximately $3.3 billion, up 10% from 2021 as we make investments to support our growthstrategy. We will continue to harden our infrastructure, replace older assets, and improve the safety and resilience of the network. In addition, the planincludes targeted freight car acquisitions, investments in growth-related projects to drive more carloads to the network, certain ramps to efficientlyhandle volumes from new and existing intermodal customers, continuous modernization of our locomotive fleet, and projects intended to improveoperational efficiency. The capital plan may be revised if business conditions warrant or if new laws or regulations affect our ability to generate sufficientreturns on these investments. (See further discussion in this Item 7 under Liquidity and Capital Resources – Capital Plan.) 21Table of Contents RESULTS OF OPERATIONS Operating Revenues % Change % Change Millions 2021 2020 2019 2021 v 2020 2020 v 2019 Freight revenues $20,244 $18,251 $20,243 11% (10)%Other subsidiary revenues 741 743 880 - (16)Accessorial revenues 752 473 514 59 (8)Other 67 66 71 2 (7)Total $21,804 $19,533 $21,708 12% (10)% We generate freight revenues by transporting freight or other materials from our three commodity groups. Freight revenues vary with volume (carloads) andARC. Changes in price, traffic mix, and fuel surcharges drive ARC. Customer incentives, which are primarily provided for shipping to/from specific locationsor based on cumulative volumes, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based oncumulative volumes are estimated using the expected value method, which is based on available historical, current, and forecasted volumes, andrecognized as the related performance obligation is satisfied. We recognize freight revenues over time as shipments move from origin to destination. Theallocation of revenue between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Other subsidiary revenues (primarily logistics and commuter rail operations) are generally recognized over time as shipments move from origin todestination. The allocation of revenue between reporting periods is based on the relative transit time in each reporting period with expenses recognized asincurred. Accessorial revenues are recognized at a point in time as performance obligations are satisfied. Our freight revenues increased 11% year-over-year to $20.2 billion driven by a 4% increase in volume, higher fuel surcharge revenue, core pricing gains, andpositive mix of traffic (for example, a relative increase in industrial shipments, which have a higher ARC). Volume increased in every key market segmentcompared to 2020 due to the recovery from the depressed economy brought on by the COVID pandemic in 2020. While the markets have rebounded from2020, our 2021 volume levels are 4% below 2019 pre-pandemic levels. Our fuel surcharge programs generated freight revenues of $1.7 billion and $1.0 billion in 2021 and 2020, respectively. Fuel surcharge revenue in 2021increased $0.7 billion as a result of a 49% increase in fuel price and a 4% increase in carloadings, partially offset by the lag impact on fuel surcharge (itcan generally take up to two months for changing fuel prices to affect fuel surcharges recoveries). In 2021, other subsidiary revenues were flat with 2020 as the semiconductor shortage negatively impacting 2021 automotive production offset the recoveryfrom other COVID related declines in 2020. Accessorial revenue increased in 2021 compared to 2020 driven by increased intermodal accessorial chargestied to global supply chain disruptions. Other revenue was essentially flat year-over-year. 22Table 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 2021 2020 2019 2021 v 2020 2020 v 2019 Grain & grain products $3,181 $2,829 $2,776 12% 2%Fertilizer 697 660 653 6 1 Food & refrigerated 998 937 1,008 7 (7)Coal & renewables 1,780 1,534 2,092 16 (27)Bulk 6,656 5,960 6,529 12 (9)Industrial chemicals & plastics 1,943 1,845 1,885 5 (2)Metals & minerals 1,811 1,580 2,042 15 (23)Forest products 1,357 1,160 1,160 17 - Energy & specialized markets 2,212 2,037 2,385 9 (15)Industrial 7,323 6,622 7,472 11 (11)Automotive 1,761 1,680 2,123 5 (21)Intermodal 4,504 3,989 4,119 13 (3)Premium 6,265 5,669 6,242 11 (9)Total $20,244 $18,251 $20,243 11% (10)% Revenue Carloads % Change % Change Thousands 2021 2020 2019 2021 v 2020 2020 v 2019 Grain & grain products 805 745 708 8% 5%Fertilizer 201 193 190 4 2 Food & refrigerated 189 185 192 2 (4)Coal & renewables 819 797 997 3 (20)Bulk 2,014 1,920 2,087 5 (8)Industrial chemicals & plastics 606 587 611 3 (4)Metals & minerals 697 646 744 8 (13)Forest products 250 220 220 14 - Energy & specialized markets 559 539 624 4 (14)Industrial 2,112 1,992 2,199 6 (9)Automotive 701 692 858 1 (19)Intermodal [a] 3,211 3,149 3,202 2 (2)Premium 3,912 3,841 4,060 2 (5)Total 8,038 7,753 8,346 4% (7)% % Change % Change Average Revenue per Car 2021 2020 2019 2021 v 2020 2020 v 2019 Grain & grain products $3,953 $3,797 $3,919 4% (3)%Fertilizer 3,470 3,427 3,448 1 (1)Food & refrigerated 5,279 5,047 5,241 5 (4)Coal & renewables 2,173 1,926 2,098 13 (8)Bulk 3,305 3,104 3,128 6 (1)Industrial chemicals & plastics 3,207 3,144 3,087 2 2 Metals & minerals 2,598 2,445 2,745 6 (11)Forest products 5,424 5,269 5,264 3 - Energy & specialized markets 3,956 3,780 3,821 5 (1)Industrial 3,467 3,324 3,398 4 (2)Automotive 2,511 2,427 2,474 3 (2)Intermodal [a] 1,403 1,267 1,286 11 (1)Premium 1,601 1,476 1,538 8 (4)Average $2,519 $2,354 $2,425 7% (3)% [a]For intermodal shipments, each container or trailer equals one carload. 23Table of Contents Bulk – Bulk includes shipments of grain and grain products, fertilizer, food and refrigerated goods,and coal and renewables. Freight revenues from bulk shipments increased in 2021 comparedto 2020 due to a 5% volume increase, core pricing gains, higher fuel surcharge revenue, andpositive business mix. Despite weather disruptions in the first quarter of 2021, volume increasedwith strong demand for grain in the first half of the year and coal in the second half, due to highernatural gas prices. In addition, strength in the export potash market and recovery from the COVIDpandemic that negatively impacted production of imported beer, food products, and the demand forethanol and related products in 2020 contributed to additional increases in volume.2021 Bulk Carloads Industrial – Industrial includes shipments of industrial chemicals and plastics, metals and minerals,forest products, and energy and specialized markets. Freight revenues from industrial shipmentsincreased in 2021 versus 2020 due a 6% increase in volume, core pricing gains, higher fuelsurcharge, and positive mix of traffic. Strength from the pandemic recovery overcame the firstquarter 2021 losses caused by Winter Storm Uri disruptions in the Gulf Coast, which impacted theindustrial chemicals and plastics and metals and minerals industries. Additionally, forest productshipments increased due to higher demand for cardboard boxes and lumber.2021 Industrial CarloadsPremium – Premium includes shipments of finished automobiles, automotive parts, andmerchandise in intermodal containers, both domestic and international. Freight revenues frompremium shipments increased 11% in 2021 compared to 2020, despite the weather disruptions inthe first quarter of 2021, driven by higher fuel surcharges, core pricing gains, and a 2% volumeincrease. Automotive shipments of 173 thousand carloads in the second quarter of 2021 were morethan double the 79 thousand carloads in the same period in 2020 as North American manufacturingplants suspended production due to the pandemic in that year. This recovery masked the impact toautomotive shipments in 2021 due to the on-going shortage of semiconductors. Excluding thesecond quarter, automotive shipments are down 14% year-over-year. The pandemic also upendedthe intermodal supply chain as demand for consumer goods remained high. This high demandstrained port capacity, chassis availability, truck driver supply, and warehouse receiving capacity.Despite the global supply chain disruptions, intermodal shipments increased 2% in 2021 due toimproving economic conditions, inventory restocking, contract wins, and continued strength of e-commerce and parcel shipments.2021 Premium Carloads Mexico Business – Each of our commodity groups includes revenue from shipments to and from Mexico. Revenue from Mexico business was $2.4 billion in2021, up 13% compared to 2020, driven by a 3% increase in volume and higher fuel surcharge revenue, core pricing gains, and positive mix of traffic. Thevolume increase was driven by the recovery from the 2020 pandemic and an increase in petroleum and grain shipments, partially offset by the impact of theglobal supply chain disruptions on intermodal shipments and the semiconductor shortage in the automotive industry. Operating Expenses % Change % Change Millions 2021 2020 2019 2021 v 2020 2020 v 2019 Compensation and benefits $4,158 $3,993 $4,533 4% (12)%Depreciation 2,208 2,210 2,216 - - Fuel 2,049 1,314 2,107 56 (38)Purchased services and materials 2,016 1,962 2,254 3 (13)Equipment and other rents 859 875 984 (2) (11)Other 1,176 1,345 1,060 (13) 27 Total $12,466 $11,699 $13,154 7% (11)% 24Table of Contents Operating expenses increased $767 million in 2021 compared to 2020 driven by higher fuel prices,volume-related costs, inflation, higher casualty costs, 2020 management actions, weather andwildfire-related expenses, incentive compensation, and higher state and local taxes. Partiallyoffsetting these increases compared to 2020 include a $278 million impairment charge in 2020,productivity initiatives, a one-time bonus payment for agreement employees in 2020, and lowerseverance costs. Full year results of 2021 and 2020 both include a reduction of expense forweather and wildfire-related insurance reimbursements, $6 million and $25 million, respectively.2021 Operating ExpensesCompensation and Benefits – Compensation and benefits include wages, payroll taxes, health and welfare costs, pension costs, and incentive costs. In2021, expenses increased 4% compared to 2020, due to volume related costs, inflation, 2020 management actions responding to the sharp decline involume (temporary unpaid leave, salary reductions, and shop closures), incentive compensation, and higher costs due to weather and wildfire-relatedevents. Partially offsetting these increases were productivity initiatives resulting in employee levels that declined 3% compared to 2020 despite a 4%volume increase, a 2020 one-time bonus payment for agreement employees who worked during the pandemic, and lower severance costs. Depreciation – The majority of depreciation relates to road property, including rail, ties, ballast, and other track material. Depreciation expense was flat in2021 compared to 2020. Fuel – Fuel includes locomotive fuel and gasoline for highway and non-highway vehicles and heavy equipment. Locomotive diesel fuel prices, whichaveraged $2.23 per gallon (including taxes and transportation costs) in 2021, compared to $1.50 per gallon in 2020, increased expenses $668 million(excluding any impact from increased volume year-over-year). Gross ton-miles increased 6% driving higher fuel expense. Partially offsetting this increasewas a 1% improvement to a record low fuel consumption rate, computed as gallons of fuel consumed divided by gross ton-miles. Purchased Services and Materials – Expense for purchased services and materials includes the costs of services purchased from outside contractors andother service providers (including equipment maintenance and contract expenses incurred by our subsidiaries for external transportation services); materialsused to maintain the Railroad’s lines, structures, and equipment; costs of operating facilities jointly used by UPRR and other railroads; transportation andlodging for train crew employees; trucking and contracting costs for intermodal containers; leased automobile maintenance expenses; and tools andsupplies. Purchased services and materials increased 3% in 2021 compared to 2020 driven by inflation, higher professional services expense, volume-related costs associated with our intermodal business, higher costs due to weather and wildfire-related events, increased locomotive and freight carmaintenance expense as we added resources to the network, and higher costs for transportation of train crews. Equipment and Other Rents – Equipment and other rents expense primarily includes rental expense that the Railroad pays for freight cars owned by otherrailroads or private companies; freight car, intermodal, and locomotive leases; and office and other rent expenses, offset by equity income from certainequity method investments. Equipment and other rents expense decreased 2% compared to 2020 driven by lower rent on equipment in storage and higherequity income from our investment in TTX Company, partially offset by increased freight car rent expense due to volume increases and slower freight carvelocity. Other – Other expenses include state and local taxes, freight, equipment and property damage, utilities, insurance, personal injury, environmental,employee travel, telephone and cellular, computer software, bad debt, and other general expenses. Other expenses decreased 13% in 2021 comparedto 2020 as a result of a $278 million non-cash impairment charge related to our Brazos yard investment in 2020, lower write-offs of cancelled in-progresscapital projects, 2020 lease impairments, and higher equity income. Partially offsetting these decreases were increased casualty expenses, includingpersonal injury, damaged freight, and environmental, and higher state and local taxes. Both periods in 2021 and 2020 included a reduction of expense forweather and wildfire-related insurance reimbursements, $6 million and $25 million, respectively. Non-Operating Items % Change % Change Millions 2021 2020 2019 2021 v 2020 2020 v 2019 Other income, net $297 $287 $243 3% 18%Interest expense (1,157) (1,141) (1,050) 1 9 Income tax expense (1,955) (1,631) (1,828) 20 (11) Other Income, net – Other income increased in 2021 compared to 2020 due to a $36 million gain from the sale of an investment in a technology company,partially offset by lower real estate sale gains. Real estate sales in 2021 included a $50 million gain from a property sale to the Colorado Department ofTransportation, while 2020 included a $69 million gain from a land and permanent easement sale to the Illinois State Toll Highway Authority. Interest Expense – Interest expense increased in 2021 compared to 2020 due to an increased weighted-average debt level of $28.3 billion in 2021 from$27.9 billion in 2020. The effective interest rate was 4.1% for both periods. Income Taxes – Income tax expense increased in 2021 compared to 2020 due to higher pre-tax income. Our effective tax rates for 2021 and 2020 were23.1% and 23.4%, respectively. 25Table of Contents 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. Operating/Performance Statistics Management continuously measures these key operating metrics to evaluate our operational efficiency and asset utilization in striving to provide aconsistent, reliable service product to our customers. Railroad performance measures are included in the table below: % Change% Change 2021202020192021 v 20202020 v 2019 Gross ton-miles (GTMs) (billions)817.9771.8846.66%(9) %Revenue ton-miles (billions)411.3385.0423.47 (9) Freight car velocity (daily miles per car) [a]203221209(8) 6 Average train speed (miles per hour) [b]24.625.925.1(5) 3 Average terminal dwell time (hours) [b]23.722.724.84 (8) Locomotive productivity (GTMs per horsepower day)133137120(3) 14 Train length (feet)9,3348,7987,7476 14 Intermodal car trip plan compliance (%)738175(8)pts6 ptsManifest/Automotive car trip plan compliance (%)637165(8)pts6 ptsWorkforce productivity (car miles per employee)1,03894785710 11 Total employees (average)29,90530,96037,483(3) (17) Operating ratio57.259.960.6(2.7)pts(0.7) pts [a]2019 has been recast to conform to the current year presentation which reflects minor refinements.[b]As reported to the STB. Gross and Revenue Ton-Miles – Gross ton-miles are calculated by multiplying the weight of loaded and empty freight cars by the number of miles hauled.Revenue ton-miles are calculated by multiplying the weight of freight by the number of tariff miles. In 2021, gross ton-miles and revenue ton-miles increased6% and 7%, respectively, compared to 2020, driven by a 4% increase in carloadings. Changes in commodity mix drove the variance in year-over-yearincreases between gross ton-miles, revenue ton-miles, and carloads (smaller increases in our intermodal and automotive shipments, which are generallylighter, coupled with higher increases in grain and industrial shipments, which are generally heavier). Freight Car Velocity – Freight car velocity measures the average daily miles per car on our network. The two key drivers of this metric are the speed of thetrain between terminals (average train speed) and the time a rail car spends at the terminals (average terminal dwell time). Train speed slowed and terminaldwell increased in 2021 compared to the same periods in 2020 as the network handled additional volume and was impacted by weather and wildfire-relatedchallenges, bridge outages caused by the California wildfires, other incidents causing delays on the network, and global supply chain disruptions.Continued implementation of our operating plan helped to partially offset these impacts. Locomotive Productivity – Locomotive productivity is gross ton-miles per average daily locomotive horsepower. Locomotive productivity decreased 3% in2021 compared to 2020 driven by the increased active fleet needed to handle the 4% volume increase as well as manage network disruptions, partiallyoffset by transportation plan changes. Train Length – Train length is the average maximum train length on a route measured in feet. Our train length increased 6% compared to 2020 as a result ofblending service products and transportation plan changes designed to improve overall operational efficiency. However, in the second half of the year, trainlength declined slightly from the first half of 2021 due to California wildfire bridge outage reroutes in the third quarter and operational challenges in the fourthquarter. 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 tripplan compliance is broken into the intermodal and manifest/automotive products. Intermodal trip plan compliance deteriorated in 2021 compared to 2020primarily due to global supply chain disruptions. Manifest/automotive trip plan compliance deteriorated in 2021 compared to 2020 as our network slowedbecause of the outages and incidents described above that required increased resource allocation and rebalancing. Workforce Productivity – Workforce productivity is average daily car miles per employee. Workforce productivity improved 10%, reaching an all-time recordas employee counts were down 3% compared to 2020, while average daily car miles increased 6%. Productivity initiatives and a smaller capital workforceoffset higher train and engine employee levels due to weather and wildfire-related challenges, network disruptions, and reduced crew utilization keeping totalemployee levels lower than 2020. Operating Ratio – Operating ratio is our operating expenses reflected as a percentage of operating revenue. Our operating ratio of 57.2% was an all-timerecord and improved 2.7 points compared to 2020 mainly driven by a 2020 one-time impairment, core pricing gains, productivity initiatives, and positive mixof traffic, which were partially offset by higher fuel prices, inflation, and other cost increases. 26Table of Contents Return on Average Common Shareholders’ Equity Millions, Except Percentages 2021 2020 2019 Net income $6,523 $5,349 $5,919 Average equity $15,560 $17,543 $19,276 Return on average common shareholders' equity 41.9% 30.5% 30.7% Return on Invested Capital as Adjusted (ROIC) Millions, Except Percentages 2021 2020 2019 Net income $6,523 $5,349 $5,919 Interest expense 1,157 1,141 1,050 Interest on average operating lease liabilities 54 64 76 Taxes on interest (280) (282) (266)Net operating profit after taxes as adjusted $7,454 $6,272 $6,779 Average equity $15,560 $17,543 $19,276 Average debt 28,229 25,965 23,796 Average operating lease liabilities 1,682 1,719 2,052 Average invested capital as adjusted $45,471 $45,227 $45,124 Return on Invested Capital as Adjusted 16.4% 13.9% 15.0% 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 byother companies in the same manner. We believe this measure is important to management and investors in evaluating the efficiency and effectiveness ofour long-term capital investments. In addition, we currently use ROIC as a performance criterion in determining certain elements of equity compensation forour executives. ROIC should be considered in addition to, rather than as a substitute for, other information provided in accordance with GAAP. The mostcomparable GAAP measure is return on average common shareholders’ equity. The tables above provide reconciliations from return on average commonshareholders’ equity to ROIC. At December 31, 2021, 2020, and 2019, the incremental borrowing rate on operating leases was 3.2%, 3.7%, and 3.7%,respectively. Adjusted Debt / Adjusted EBITDA Millions, Except RatiosDec. 31,Dec. 31,Dec. 31,for the Twelve Months Ended202120202019Net income$6,523$5,349$5,919Add: Income tax expense/(benefit) 1,955 1,631 1,828Depreciation 2,208 2,210 2,216Interest expense 1,157 1,141 1,050EBITDA$11,843$10,331$11,013Adjustments: Other income, net (297) (287) (243)Interest on operating lease liabilities 56 59 68Adjusted EBITDA$11,602$10,103$10,838Debt$29,729$26,729$25,200Operating lease liabilities 1,759 1,604 1,833Unfunded/(funded) pension and other postretirement benefits, net of tax cost/(benefit) of ($21), $195, and $124 (72) 637 400Adjusted debt$31,416$28,970$27,433Adjusted debt / Adjusted EBITDA 2.7 2.9 2.5 Adjusted debt to adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and adjustments for other income and interest on presentvalue 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 definedand calculated by other companies in the same manner. We believe this measure is important to management and investors in evaluating the Company’sability to sustain given debt levels (including leases) with the cash generated from operations. In addition, a comparable measure is used by ratingagencies when reviewing the Company’s credit rating. Adjusted debt to adjusted EBITDA should be considered in addition to, rather than as a substitutefor, net income. The table above provides reconciliations from net income to adjusted debt to adjusted EBITDA. At December 31, 2021, 2020, and 2019, theincremental borrowing rate on operating leases was 3.2%, 3.7% and 3.7%, respectively. 27Table of Contents 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 generatecash. These analyses inform our liquidity plans and activities outlined below and indicate we have sufficient borrowing capacity to sustain an extendedperiod of lower volumes. At December 31, 2021, we had a working capital deficit due to upcoming debt maturities. At December 31, 2020, we had a surplus due to an increasedcash balance held due to the uncertainty related to COVID. It is not unusual for us to have a working capital deficit, and we believe it is not an indication ofa lack of liquidity. We also maintain adequate resources, including our credit facility and, when necessary, access the capital markets to meet anyforeseeable cash requirements. During the year, we generated $9.0 billion of cash from operating activities, completed a $1.7 billion debt exchange, and issued $3.5 billion of long-termdebt. We have been, and we expect to continue to be, in compliance with our debt covenants. We increased the dividend twice during 2021 paying out$2.8 billion and repurchased shares totaling $7.3 billion, including the completion of our $2 billion accelerated share repurchase programs entered into onMay 25, 2021. Our principal sources of liquidity include cash, cash equivalents, our Receivables Facility, our revolving credit facility, as well as the availability ofcommercial paper and other sources of financing through the capital markets. On December 31, 2021, we had $960 million of cash and cash equivalents,$2.0 billion of committed credit available under our revolving credit facility, and up to $500 million undrawn on the Receivables Facility. As of December 31,2021, none of the revolving credit facility was drawn, and we did not draw on our revolving credit facility at any time during 2021. At December 31, 2021, wehad $300 million of the Receivables Facility drawn, $400 million of commercial paper, and a $100 million term loan outstanding. Our access to theReceivables Facility may be reduced or restricted if our bond ratings fall to certain levels below investment grade. If our bond rating were to deteriorate, itcould 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 marketsas a source of liquidity. Access to liquidity through the capital markets is also dependent on our financial stability. We expect that we will continue to haveaccess to liquidity through any or all the following sources or activities: (i) increasing the utilization of our Receivables Facility, (ii) issuing commercialpaper, (iii) entering into bank loans, outside of our revolving credit facility, or (iv) issuing bonds or other debt securities to public or private investors based onour assessment of the current condition of the credit markets. The Company’s $2.0 billion revolving credit facility is intended to support the issuance ofcommercial paper by UPC and also serves as an additional source of liquidity to fund short-term needs. The Company currently does not intend to makeany borrowings under this facility. As described in the notes to the Consolidated Financial Statements and as referenced in the table below, we have contractual obligations that may affectour financial condition. Based on our assessment of the underlying provisions and circumstances of our contractual obligations, other than the risks that weand other similarly situated companies face with respect to the condition of the capital markets (as described in Item 1A of Part II of this report), there is noknown trend, demand, commitment, event, or uncertainty that is reasonably likely to occur that would have a material adverse effect on our consolidatedresults of operations, financial condition, or liquidity. In addition, our commercial obligations, financings, and commitments are customary transactions thatare like those of other comparable corporations, particularly within the transportation industry. The following table identifies material obligations as of December 31, 2021: Payments Due by December 31, Contractual Obligations After Millions Total 2022 2023 2024 2025 2026 2026 Debt [a] $53,942 $3,172 $2,337 $2,356 $2,336 $1,875 $41,866 Purchase obligations [b] 2,555 753 446 368 335 256 397 Operating leases [c] 1,966 333 293 285 285 215 555 Other post retirement benefits [d] 400 45 44 40 39 39 193 Finance lease obligations [e] 378 107 81 68 45 36 41 Total contractual obligations $59,241 $4,410 $3,201 $3,117 $3,040 $2,421 $43,052 [a]Excludes finance lease obligations of $336 million as well as unamortized discount and deferred issuance costs of ($1,763) million. Includes an interest component of$22,786 million.[b]Purchase obligations include locomotive maintenance contracts; purchase commitments for fuel purchases, ties, ballast, and rail; and agreements to purchase other goods andservices.[c]Includes leases for locomotives, freight cars, other equipment, and real estate. Includes an interest component of $207 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 $42 million. LIBOR Transition – See Note 14 to the Financial Statements and Supplementary Data, Item 8. The use of an alternative rate or benchmark may negativelyimpact the terms of our facilities, including in the form of an adverse effect on interest rates and higher borrowing costs and interest expense. 28Table of Contents Cash Flows Millions 2021 2020 2019 Cash provided by operating activities $9,032 $8,540 $8,609 Cash used in investing activities (2,709) (2,676) (3,435)Cash used in financing activities (7,158) (4,902) (5,646)Net change in cash, cash equivalents, and restricted cash $(835) $962 $(472) Operating Activities Cash provided by operating activities increased in 2021 compared to 2020 due primarily to an increase in net income, partially offset by higher receivablesand the partial payment of the deferred 2020 employment tax that was allowed by a provision in the Coronavirus Aid, Relief, and Economic Security Act(CARES Act). Cash Flow Conversion – Cash flow conversion is defined as cash provided by operating activities less cash used in capital investments as a ratio of netincome. Cash flow conversion rate is not considered a financial measure under GAAP by SEC Regulation G and Item 10 of SEC Regulation S-K and may not bedefined and calculated by other companies in the same manner. We believe cash flow conversion rate is important to management and investors inevaluating our financial performance and measures our ability to generate cash without additional external financing. Cash flow conversion rate should beconsidered in addition to, rather than as a substitute for, cash provided by operating activities. The following table reconciles cash provided by operating activities (GAAP measure) to cash flow conversion rate (non-GAAP measure): Millions, For the Year Ended December 31, 2021 2020 2019 Cash provided by operating activities $9,032 $8,540 $8,609 Cash used in capital investments (2,936) (2,927) (3,453)Total (a) 6,096 5,613 5,156 Net income (b) 6,523 5,349 5,919 Cash flow conversion rate (a/b) 93% 105% 87% Investing Activities Cash used in investing activities in 2021 increased compared to 2020 primarily driven by increased capital investment in road infrastructure replacements. The following tables detail cash capital investments and track statistics for the years ended December 31: Millions 2021 2020 2019 Ties $443 $507 $427 Rail and other track material 507 471 561 Ballast 215 225 271 Other [a] 700 584 694 Total road infrastructure replacements [b] 1,865 1,787 1,953 Line expansion and other capacity projects 284 332 357 Commercial facilities 243 171 183 Total capacity and commercial facilities 527 503 540 Locomotives and freight cars [c] 322 269 610 Positive train control 84 79 95 Technology and other 138 289 255 Total cash capital investments $2,936 $2,927 $3,453 [a]Other includes bridges and tunnels, signals, other road assets, and road work equipment.[b]Includes weather and wildfire-related damages to our property of $60 million, $40 million, and $113 million in 2021, 2020, and 2019, respectively.[c]Locomotives and freight cars include early lease buyouts of $34 million, $38 million, and $290 million in 2021, 2020, and 2019, respectively. 2021 2020 2019 Track miles of rail replaced 502 468 534 Track miles of rail capacity expansion 70 83 55 New ties installed (thousands) 4,058 4,671 3,475 Miles of track surfaced 10,441 10,414 7,741 29Table of Contents Capital Plan – In 2022, we expect our capital plan to be approximately $3.3 billion, up 10% compared to 2021. We will continue to harden ourinfrastructure, replace older assets, and improve the safety and resiliency of the network. In addition, the plan includes targeted freight caracquisitions, investments in growth-related projects to drive more carloads to the network, certain ramps to efficiently handle volumes from new and existingintermodal customers, continuous modernization of our locomotive fleet, and projects intended to improve operational efficiency. The capital plan may berevised 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 increased in 2021 compared to 2020 driven by increased share repurchases. See Note 14 to the Financial Statements and Supplementary Data, Item 8, for a description of all our outstanding financing arrangements and significantnew borrowings, and Note 18 to the Financial Statements and Supplementary Data, Item 8, for a description of our share repurchase programs. OTHER MATTERS Inflation – For capital-intensive companies, inflation significantly increases asset replacement costs for long-lived assets. As a result, assuming that wereplace all operating assets at current price levels, depreciation charges (on an inflation-adjusted basis) would be substantially greater than historicallyreported amounts. Sensitivity Analyses – The sensitivity analyses that follow illustrate the economic effect that hypothetical changes in interest and tax rates could have onour results of operations and financial condition. These hypothetical changes do not consider other factors that could impact actual results. Interest Rates – At December 31, 2021, we had variable-rate debt representing approximately 2.7% of our total debt. If variable interest rates average onepercentage point higher in 2022 than our December 31, 2021, variable rate, which was approximately 0.7%, our interest expense would increase byapproximately $8.0 million. This amount was determined by considering the impact of the hypothetical interest rate on the balances of our variable-rate debtat December 31, 2021. Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a hypothetical one percentage point decrease in interestrates as of December 31, 2021, and amounts to an increase of approximately $4.9 billion to the fair value of our debt at December 31, 2021. We estimatedthe 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. Future tax legislation, such as a change in the corporate taxrate, could have a material impact on our financial condition, results of operations, or liquidity. For example, a permanent 1% increase in future income taxrates would increase our deferred tax liability by approximately $500 million. Similarly, a permanent 1% decrease in future income tax rates would decreaseour 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. Indemnities – See Note 17 to the Financial Statements and Supplementary Data, Item 8. Climate Change – Although climate change could have an adverse impact on our operations and financial performance (see Risk Factors under Item 1A ofthis report), we are currently unable to predict the manner or severity of such impact. In December 2021, we released our initial Climate Action Plan, whichoutlines the steps we are taking to reduce our environmental impact. This plan aligns with our corporate strategy: Serve (improve operational efficiency andminimize fuel consumption), Grow (offer sustainable supply chain solutions), Win (decarbonize our footprint and the environment), Together (engage ourstakeholders and align interests). We continue to take steps and explore opportunities to reduce our operational impact on the environment, includingincreased usage of renewable fuels, investments in new technologies, using training programs and technology to reduce fuel consumption, and changingour operations to increase fuel efficiency (see "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 estimationand judgment that affect the reported amounts of revenues, expenses, assets, and liabilities. We base our estimates on historical experience and onvarious other assumptions that we believe are reasonable under the circumstances, the results form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparent from other sources. The following critical accounting estimates are a subset of our significantaccounting policies described in Note 2 to the Financial Statements and Supplementary Data, Item 8. These critical accounting estimates affect significantareas of our financial statements and involve judgment and estimates. If these estimates differ significantly from actual results, the impact on ourConsolidated Financial Statements may be material. 30Table 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 LawsuitsThat 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. There wereno material changes to the assumptions used in the latest actuarial analysis. Our personal injury liability balance and claims activity was as follows: 2021 2020 2019 Ending liability balance at December 31 (millions) $325 $270 $265 Open claims, beginning balance 1,897 1,985 2,025 New claims 2,719 2,577 3,025 Settled or dismissed claims (2,589) (2,665) (3,065)Open claims, ending balance at December 31 2,027 1,897 1,985 Environmental Costs – See Note 17 to the Financial Statements and Supplementary Data, Item 8, "We Are Subject to Significant Environmental Lawsand Regulations" in the Risk Factors, Item 1A, and Environmental Matters in the Legal Proceedings, Item 3. Our environmental liability is subject to several factors such as type of remediation, nature and volume of contaminate, and number and financial viability ofother potentially responsible parties, as well as uncertainty due to unknown alleged contamination, evolving trends in remediation techniques and finalremedies, and changes in laws and regulations. Our environmental liability balance and site activity was as follows: 2021 2020 2019 Ending liability balance at December 31 (millions) $243 $233 $227 Open sites, beginning balance 373 360 334 New sites 105 96 114 Closed sites (102) (83) (88)Open sites, ending balance at December 31 376 373 360 Property and Depreciation – See Note 11 to the Financial Statements and Supplementary Data, Item 8. Assets purchased or constructed throughout the year are capitalized if they meet applicable minimum units of property. Estimated service lives of depreciable railroad property may vary over time due to changes in physical use, technology, asset strategies, and other factorsthat will have an impact on the retirement profiles of our assets. We are not aware of any specific factors that are reasonably likely to significantly changethe estimated service lives of our assets. Actual use and retirement of our assets may vary from our current estimates, which would impact the amount ofdepreciation expense recognized in future periods. Changes in estimated useful lives of our assets due to the results of our depreciation studies could significantly impact future periods’ depreciation expenseand 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 $69 million. If the estimated useful lives of all depreciable assets were decreased by oneyear, annual depreciation expense would increase by approximately $73 million. We are projecting an increase in our depreciation expense byapproximately 2% in 2022 versus 2021. This is driven by an increase in our projected depreciable asset base. During the last three fiscal years, no gains or losses were recognized due to the retirement of depreciable railroad properties. Pension Plans – See Note 5 to the Financial Statements and Supplementary Data, Item 8. The critical assumptions used to measure pension obligations and expenses are the discount rates and expected rate of return on pension assets. 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 cost by using individual spot rates matched with separate cashflows for each future year. Discount rates are based on a Mercer yield curve of high-quality corporate bonds (rated AA by a recognized rating agency).●Expected return on plan assets is based on our asset allocation mix and our historical return, taking into consideration current and expected marketconditions. 31Table of Contents The following tables present the key assumptions used to measure net periodic pension cost/benefit for 2022 and the estimated impact on 2022 netperiodic pension cost/benefit relative to a change in those assumptions: Assumptions Discount rate for benefit obligations 2.80%Discount rate for interest on benefit obligations 2.41%Discount rate for service cost 2.91%Discount rate for interest on service cost 2.86%Expected return on plan assets 6.25% SensitivitiesIncrease inExpense Millions Pension 0.25% decrease in discount rates $16 0.25% decrease in expected return on plan assets $11 The following table presents the net periodic pension cost for the years ended December 31: Est. Millions 2022 2021 2020 2019 Net periodic pension cost $23 $85 $50 $34 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 oralstatements 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 andthe Securities Exchange Act of 1934. These forward-looking statements and information include, without limitation, statements in the Chairman’s letterpreceding Part I; statements regarding planned capital expenditures under the caption “2022 Capital Plan” in Item 2 of Part I; and statements andinformation set forth under the captions “2022 Outlook”; “Liquidity and Capital Resources” in Item 7 of Part II regarding our capital plan, share repurchaseprograms, contractual obligations, "Pension Benefits", and "Other Matters" in this Item 7 of Part II. Forward-looking statements and information also includeany other statements or information in this report (including information incorporated herein by reference) regarding: potential impacts of theCOVID pandemic on our business operations, financial results, liquidity, and financial position, and on the world economy (including our customers andsupply 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 regarding the effectiveness of steps taken or to be taken to improve operations,service, infrastructure improvements, and transportation plan modifications (including those discussed in our Climate Change Plan); expectations as to costsavings, revenue growth, and earnings; the time by which goals, targets, or objectives will be achieved; projections, predictions, expectations, estimates, orforecasts as to our business, financial, and operational results, future economic performance, and general economic conditions; proposed new productsand services; estimates and expectations regarding tax matters; expectations that claims, litigation, environmental costs, commitments, contingentliabilities, 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 may beidentified 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 should not be read as a guarantee of future performance, results or outcomes, and will not necessarily be accurate indicationsof the times that, or by which, such performance, results or outcomes will be achieved. Forward-looking statements and information are subject to risksand uncertainties, including the impact of the COVID pandemic and responses by governments, businesses, and individuals, that could cause actualperformance or results to differ materially from those expressed in the statements and information. Forward-looking statements and information reflect thegood faith consideration by management of currently available information, and may be based on underlying assumptions believed to be reasonable underthe circumstances. However, such information and assumptions (and, therefore, such forward-looking statements and information) are or may be subject tovariables or unknown or unforeseeable events or circumstances that management has little or no influence or control, and many of these risks anduncertainties are currently amplified by and may continue to be amplified by, or in the future may be amplified by, the COVID pandemic. The Risk Factorsin Item 1A of this report could affect our future results and could cause those results or other outcomes to differ materially from those expressed or impliedin any forward-looking statements or information. To the extent circumstances require or we deem it otherwise necessary, we will update or amend theserisk factors in a Form 10-Q, Form 8-K, or subsequent Form 10-K. All forward-looking statements are qualified by, and should be read in conjunction with,these Risk Factors. Forward-looking statements speak only as of the date the statement was made. We assume no obligation to update forward-looking information to reflectactual results, changes in assumptions, or changes in other factors affecting forward-looking information. If we do update one or more forward-lookingstatements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements. Item 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 ofOperations – Other Matters, Item 7.**************************************** 32Table of ContentsItem 8. Financial Statements and Supplementary DataIndex to Consolidated Financial StatementsPageReport of Independent Registered Public Accounting Firm (PCAOB ID No. 34)34Consolidated Statements of IncomeFor the Years Ended December 31, 2021, 2020, and 201936Consolidated Statements of Comprehensive IncomeFor the Years Ended December 31, 2021, 2020, and 201936Consolidated Statements of Financial PositionAt December 31, 2021 and 202037Consolidated Statements of Cash FlowsFor the Years Ended December 31, 2021, 2020, and 201938Consolidated Statements of Changes in Common Shareholders’ EquityFor the Years Ended December 31, 2021, 2020, and 201939Notes to the Consolidated Financial Statements4033REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Union Pacific Corporation Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Union Pacific Corporation and Subsidiary Companies (the "Corporation") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in common shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 4, 2022, expressed an unqualified opinion on the Corporation's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the Corporation's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 34 Capitalization of Properties — Refer to Notes 2 and 11 to the financial statements Critical Audit Matter Description The Corporation’s operations are highly capital intensive and their large network of assets turns over on a continuous basis. Each year, the Corporation develops a capital program for both the replacement of assets and for the acquisition or construction of new assets. In determining whether costs should be capitalized, the Corporation exercises significant judgment in determining whether expenditures meet the applicable minimum units of property criteria and extend the useful life, improve the safety of operations, or improve the operating efficiency of existing assets. The Corporation capitalizes all costs of capital projects necessary to make assets ready for their intended use and because a portion of the Corporation’s assets are self-constructed, management also exercises significant judgment in determining the amount of material, labor, work equipment, and indirect costs that qualify for capitalization. Properties, net were $54,871 million as of December 31, 2021 and, during 2021, the Corporation’s capital investments were $2.9 billion. We identified the capitalization of property as a critical audit matter because of the significant judgment exercised by management in determining whether costs meet the criteria for capitalization. This, in turn, required a high degree of auditor judgment when performing audit procedures to evaluate whether the criteria to capitalize costs were met and to evaluate sufficiency of audit evidence to support management’s conclusions. How the Critical Audit Matter Was Addressed in the Audit Our procedures related to capitalization of property included the following, among others: · We tested the effectiveness of controls over the Corporation’s determination of whether costs related to the Corporation’s capital program should be capitalized or expensed. · We evaluated the Corporation’s capitalization policy in accordance with accounting principles generally accepted in the United States of America. · · For a selection of capital projects, we performed the following: − Obtained the Corporation’s evaluation of each project and determined whether the amount of costs to be capitalized met the criteria for capitalization as outlined within the Corporation’s policy by unit of property. − Obtained supporting documentation that the project met the applicable minimum units of property criteria and was approved, and evaluated whether the project extended the useful life of an existing asset, improved the safety of operations, or improved the operating efficiency of existing assets. For a selection of capitalized costs during the year, we performed the following: − Evaluated whether the individual cost selected met the criteria for capitalization. − Evaluated whether the selection was accurately recorded at the appropriate amount based on the evidence obtained. Omaha, Nebraska February 4, 2022 We have served as the Corporation's auditor since 1967. 35 Table of Contents CONSOLIDATED STATEMENTS OF INCOMEUnion Pacific Corporation and Subsidiary Companies Millions, Except Per Share Amounts, for the Years Ended December 31, 2021 2020 2019 Operating revenues: Freight revenues $20,244 $18,251 $20,243 Other revenues 1,560 1,282 1,465 Total operating revenues 21,804 19,533 21,708 Operating expenses: Compensation and benefits 4,158 3,993 4,533 Depreciation 2,208 2,210 2,216 Fuel 2,049 1,314 2,107 Purchased services and materials 2,016 1,962 2,254 Equipment and other rents 859 875 984 Other 1,176 1,345 1,060 Total operating expenses 12,466 11,699 13,154 Operating income 9,338 7,834 8,554 Other income, net (Note 6) 297 287 243 Interest expense (1,157) (1,141) (1,050)Income before income taxes 8,478 6,980 7,747 Income tax expense (Note 7) (1,955) (1,631) (1,828)Net income $6,523 $5,349 $5,919 Share and Per Share (Note 8): Earnings per share - basic $9.98 $7.90 $8.41 Earnings per share - diluted $9.95 $7.88 $8.38 Weighted average number of shares - basic 653.8 677.3 703.5 Weighted average number of shares - diluted 655.4 679.1 706.1 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEUnion Pacific Corporation and Subsidiary Companies Millions, for the Years Ended December 31, 2021 2020 2019 Net income $6,523 $5,349 $5,919 Other comprehensive income/(loss): Defined benefit plans 723 (231) 42 Foreign currency translation (44) (6) 17 Total other comprehensive income/(loss) [a] 679 (237) 59 Comprehensive income $7,202 $5,112 $5,978 [a]Net of deferred taxes of ($237) million, $75 million, and ($15) million during 2021, 2020, and 2019, respectively. The accompanying notes are an integral part of these Consolidated Financial Statements. 36Table of Contents CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONUnion Pacific Corporation and Subsidiary Companies Millions, Except Share and Per Share Amounts as of December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $960 $1,799 Short-term investments (Note 13) 46 60 Accounts receivable, net (Note 10) 1,722 1,505 Materials and supplies 621 638 Other current assets 202 212 Total current assets 3,551 4,214 Investments 2,241 2,164 Properties, net (Note 11) 54,871 54,161 Operating lease assets (Note 16) 1,787 1,610 Other assets 1,075 249 Total assets $63,525 $62,398 Liabilities and Common Shareholders' Equity Current liabilities: Accounts payable and other current liabilities (Note 12) $3,578 $3,104 Debt due within one year (Note 14) 2,166 1,069 Total current liabilities 5,744 4,173 Debt due after one year (Note 14) 27,563 25,660 Operating lease liabilities (Note 16) 1,429 1,283 Deferred income taxes (Note 7) 12,675 12,247 Other long-term liabilities 1,953 2,077 Commitments and contingencies (Note 17) Total liabilities 49,364 45,440 Common shareholders' equity: Common shares, $2.50 par value, 1,400,000,000 authorized; 1,112,440,400 and 1,112,227,784 issued; 638,841,656 and 671,351,360 outstanding, respectively 2,781 2,781 Paid-in-surplus 4,979 4,864 Retained earnings 55,049 51,326 Treasury stock (47,734) (40,420)Accumulated other comprehensive loss (Note 9) (914) (1,593)Total common shareholders' equity 14,161 16,958 Total liabilities and common shareholders' equity $63,525 $62,398 The accompanying notes are an integral part of these Consolidated Financial Statements. 37Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWSUnion Pacific Corporation and Subsidiary Companies Millions, for the Years Ended December 31, 2021 2020 2019 Operating Activities Net income $6,523 $5,349 $5,919 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 2,208 2,210 2,216 Deferred and other income taxes 154 340 566 Gain on non-operating asset dispositions (98) (115) (20)Other operating activities, net 42 490 98 Changes in current assets and liabilities: Accounts receivable, net (217) 90 160 Materials and supplies 17 113 (9)Other current assets 31 (34) 87 Accounts payable and other current liabilities 184 (73) (179)Income and other taxes 188 170 (229)Cash provided by operating activities 9,032 8,540 8,609 Investing Activities Capital investments (2,936) (2,927) (3,453)Proceeds from asset sales 178 149 74 Maturities of short-term investments (Note 13) 94 141 130 Purchases of short-term investments (Note 13) (70) (136) (115)Other investing activities, net 25 97 (71)Cash used in investing activities (2,709) (2,676) (3,435)Financing Activities Share repurchase programs (Note 18) (7,291) (3,705) (5,804)Debt issued (Note 14) 4,201 4,004 3,986 Dividends paid (2,800) (2,626) (2,598)Debt repaid (1,299) (2,053) (817)Net issued/(paid) commercial paper (Note 14) 325 (127) (6)Debt exchange (Note 14) (270) (328) (387)Other financing activities, net (24) (67) (20)Cash used in financing activities (7,158) (4,902) (5,646)Net change in cash, cash equivalents, and restricted cash (835) 962 (472)Cash, cash equivalents, and restricted cash at beginning of year 1,818 856 1,328 Cash, cash equivalents, and restricted cash at end of year $983 $1,818 $856 Supplemental Cash Flow Information Non-cash investing and financing activities: Term loan renewals (Note 14) $100 $250 $250 Capital investments accrued but not yet paid 263 166 224 Locomotives sold for material credits - - 18 Cash paid during the year for: Income taxes, net of refunds $(1,658) $(1,214) $(1,382)Interest, net of amounts capitalized (1,087) (1,050) (1,033) The accompanying notes are an integral part of these Consolidated Financial Statements. 38Table of Contents CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITYUnion Pacific Corporation and Subsidiary Companies Millions CommonShares TreasuryShares CommonShares Paid-in-Surplus RetainedEarnings TreasuryStock AOCI[a] Total Balance at January 1, 2019 1,111.7 (386.6) $2,779 $4,449 $45,284 $(30,674) $(1,415) $20,423 Net income - - 5,919 - - 5,919 Other comprehensive income/(loss) - - - - 59 59 Conversion, stock option exercises, forfeitures, and other 0.3 1.7 1 46 - 82 - 129 Share repurchase programs (Note 18) - (35.0) - 28 - (5,832) - (5,804)Cash dividends declared ($3.70 per share) - - - - (2,598) - - (2,598)Balance at December 31, 2019 1,112.0 (419.9) $2,780 $4,523 $48,605 $(36,424) $(1,356) $18,128 Net income - - 5,349 - - 5,349 Other comprehensive income/(loss) - - - - (237) (237)Conversion, stock option exercises, forfeitures, and other 0.2 1.1 1 31 - 19 - 51 Share repurchase programs (Note 18) - (22.1) - 310 - (4,015) - (3,705)Cash dividends declared ($3.88 per share) - - - - (2,628) - - (2,628)Balance at December 31, 2020 1,112.2 (440.9) $2,781 $4,864 $51,326 $(40,420) $(1,593) $16,958 Net income - - 6,523 - - 6,523 Other comprehensive income/(loss) - - - - 679 679 Conversion, stock option exercises, forfeitures, and other 0.2 0.6 - 91 - 1 - 92 Share repurchase programs (Note 18) - (33.3) - 24 - (7,315) - (7,291)Cash dividends declared ($4.29 per share) - - - - (2,800) - - (2,800)Balance at December 31, 2021 1,112.4 (473.6) $2,781 $4,979 $55,049 $(47,734) $(914) $14,161 [a]AOCI = Accumulated Other Comprehensive Income/Loss (Note 9) The accompanying notes are an integral part of these Consolidated Financial Statements. 39Table of Contents NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSUnion Pacific Corporation and Subsidiary Companies For purposes of this report, unless the context otherwise requires, all references herein to the “Corporation”, “Company”, “UPC”, “we”, “us”, and “our” meanUnion Pacific Corporation and its subsidiaries, including Union Pacific Railroad Company, which will be separately referred to herein as “UPRR” or the“Railroad”. 1. Nature of Operations Operations and Segmentation – We are a Class I railroad operating in the U.S. Our network includes 32,452 route miles, connecting Pacific Coast andGulf Coast ports with the Midwest and Eastern U.S. gateways and providing several corridors to key Mexican and Canadian gateways. We own26,124 miles and operate on the remainder pursuant to trackage rights or leases. We serve the western two-thirds of the country and maintain coordinatedschedules with other rail carriers for the handling of freight to and from the Atlantic Coast, the Pacific Coast, the Southeast, the Southwest, Canada, andMexico. Export and import traffic is moved through Gulf Coast and Pacific Coast ports and across the Mexican and Canadian borders. The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide and analyze revenue by commoditygroup, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network. Our operating revenues are primarilyderived from contracts with customers for the transportation of freight from origin to destination. The following table represents a disaggregation of our freightand other revenues: Millions 2021 2020 2019 Bulk $6,656 $5,960 $6,529 Industrial 7,323 6,622 7,472 Premium 6,265 5,669 6,242 Total freight revenues $20,244 $18,251 $20,243 Other subsidiary revenues 741 743 880 Accessorial revenues 752 473 514 Other 67 66 71 Total operating revenues $21,804 $19,533 $21,708 Although our revenues are principally derived from customers domiciled in the U.S., the ultimate points of origination or destination for some products wetransport are outside the U.S. Each of our commodity groups includes revenue from shipments to and from Mexico. Included in the above table are freightrevenues from our Mexico business which amounted to $2.4 billion in 2021, $2.1 billion in 2020, and $2.3 billion in 2019. Basis of Presentation – The Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the U.S.(GAAP) as codified in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). 2. Significant Accounting Policies Principles of Consolidation – The Consolidated Financial Statements include the accounts of Union Pacific Corporation and all of its subsidiaries.Investments in affiliated companies (20% to 50% owned) are accounted for using the equity method of accounting. All intercompany transactions areeliminated. We currently have no less than majority-owned investments that require consolidation under variable interest entity requirements. Cash, Cash Equivalents, and Restricted Cash – Cash equivalents consist of investments with original maturities of three months or less. Amountsincluded in restricted cash represent those required to be set aside by contractual agreement. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Statements of FinancialPosition that sum to the total of the same such amounts shown on the Consolidated Statements of Cash Flows: Millions 2021 2020 2019 Cash and cash equivalents $960 $1,799 $831 Restricted cash equivalents in other current assets 19 7 13 Restricted cash equivalents in other assets 4 12 12 Total cash, cash equivalents, and restricted cash equivalents shown on the Statement of Cash Flows: $983 $1,818 $856 Accounts Receivable – Accounts receivable includes receivables reduced by an allowance for doubtful accounts. The allowance is based upon historicallosses, credit worthiness of customers, and current economic conditions. Receivables not expected to be collected in one year and the associatedallowances are classified as other assets in our Consolidated Statements of Financial Position. Investments – Investments represent our investments in affiliated companies (20% to 50% owned) that are accounted for under the equity method ofaccounting, and investments in companies (less than 20% owned) accounted for at fair value when there is a readily determined fair value or at cost minusimpairment when there are not readily determinable fair values. Our portion of income/loss on equity method investments that are integral to our operationsare recorded in operating expenses. Realized and unrealized gains and losses on investments that are not integral to our operations are recorded in otherincome. Materials and Supplies – Materials and supplies are carried at the lower of average cost or net realizable value. 40Table of Contents Property and Depreciation – Properties and equipment are carried at cost and are depreciated on a straight-line basis over their estimated service lives,which are measured in years, except for rail in high-density traffic corridors (i.e., all rail lines except for those subject to abandonment, and yard andswitching tracks), where lives are measured in millions of gross tons per mile of track. We use the group method of depreciation where all items withsimilar characteristics, use, and expected lives are grouped together in asset classes and are depreciated using composite depreciation rates. The groupmethod of depreciation treats each asset class as a pool of resources, not as singular items. We determine the estimated service lives of depreciablerailroad assets by means of depreciation studies. Under the group method of depreciation, no gain or loss is recognized when depreciable property isretired or replaced in the ordinary course of business. Impairment of Long-lived Assets – We review long-lived assets, including identifiable intangibles, for impairment when events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated futureundiscounted cash flows are less than the carrying value of the long-lived assets, the carrying value is reduced to the estimated fair value. Revenue Recognition – Freight revenues are derived from contracts with customers. We account for a contract when it has approval and commitmentfrom both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability ofconsideration is probable. Our contracts include private agreements, private rate/letter quotes, public circulars/tariffs, and interline/foreign agreements. Theperformance obligation in our contracts is typically delivering a specific commodity from a place of origin to a place of destination and our commitmentbegins with the tendering and acceptance of a freight bill of lading and is satisfied upon delivery at destination. We consider each freight shipment to be adistinct performance obligation. We recognize freight revenues over time as freight moves from origin to destination. The allocation of revenue between reporting periods is based on therelative transit time in each reporting period with expenses recognized as incurred. Outstanding performance obligations related to freight moves in transittotaled $169 million at December 31, 2021, and $151 million at December 31, 2020, and are expected to be recognized in the following quarter as wesatisfy our remaining performance obligations and deliver freight to destination. The transaction price is generally specified in a contract and may bedependent on the commodity, origin/destination, and route. Customer incentives, which are primarily provided for shipping to/from specific locations orbased on cumulative volumes, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based oncumulative volumes are estimated using the expected value method, which is based on available historical, current, and forecasted volumes, andrecognized as the related performance obligation is satisfied. Under typical payment terms, our customers pay us after each performance obligation is satisfied and there are no material contract assets or liabilitiesassociated with our freight revenues. Outstanding freight receivables are presented in our Consolidated Statements of Financial Position as accountsreceivable, net. Freight revenues related to interline transportation services that involve other railroads are reported on a net basis. The portion of the gross amount billed tocustomers that is remitted by the Company to another party is not reflected as freight revenues. Other revenues consist primarily of revenues earned by our other subsidiaries (primarily logistics and commuter rail operations) and accessorial revenues.Other subsidiary revenues are generally recognized over time as shipments move from origin to destination. The allocation of revenue between reportingperiods is based on the relative transit time in each reporting period with expenses recognized as incurred. Accessorial revenues are recognized at a pointin time as performance obligations are satisfied. Translation of Foreign Currency – Our portion of the assets and liabilities related to foreign investments are translated into U.S. dollars at the exchangerates in effect at the balance sheet date. Revenue and expenses are translated at the average rates of exchange prevailing during the year. Unrealizedgains or losses are reflected within common shareholders’ equity as accumulated other comprehensive income or loss. Fair Value Measurements – We use a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broadlevels. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that issignificant to the fair value measurement in its entirety. These levels include: Level 1: Quoted market prices in active markets for identical assets or liabilities.Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.Level 3: Unobservable inputs that are not corroborated by market data. We have applied fair value measurements to our short-term investments, certain equity investments, pension plan assets, and short- and long-term debt. Stock-Based Compensation – We issue treasury shares to cover stock option exercises, stock unit vestings, and ESPP shares, while new shares areissued when retention shares are granted. We measure and recognize compensation expense for all stock-based awards made to employees, including stock options and ESPP awards.Compensation expense is based on the fair value of the awards as measured at the grant date and is expensed ratably over the service period of theawards (generally the vesting period). The fair value of retention awards is the closing stock price on the date of grant, the fair value of stock options isdetermined by using the Black-Scholes option pricing model, and the fair value of ESPP awards is based on the Company contribution match. Earnings Per Share – Basic earnings per share are calculated on the weighted-average number of common shares outstanding during each period.Diluted earnings per share include shares issuable upon exercise of outstanding stock options and stock-based awards where the conversion of suchinstruments would be dilutive. 41Table of Contents Income Taxes – We account for income taxes by recording taxes payable or refundable for the current year and deferred tax assets and liabilities for theexpected future tax consequences of events that are reported in different periods for financial reporting and income tax purposes. The majority of ourdeferred tax assets relate to expenses that already have been recorded for financial reporting purposes but not deducted for tax purposes. The majority ofour deferred tax liabilities relate to differences between the tax bases and financial reporting amounts of our land and depreciable property, due toaccelerated tax depreciation (including bonus depreciation), revaluation of assets in purchase accounting transactions, and differences in capitalizationmethods. These expected future tax consequences are measured based on current tax law; the effects of future tax legislation are not anticipated. When appropriate, we record a valuation allowance against deferred tax assets to reflect that these tax assets may not be realized. In determining whethera valuation allowance is appropriate, we consider whether it is more likely than not that all or some portion of our deferred tax assets will not be realized,based on management’s judgments using available evidence for purposes of estimating whether future taxable income will be sufficient to realize a deferredtax asset. We recognize tax benefits that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as thelargest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for anytax benefits claimed in our tax returns that do not meet these recognition and measurement standards. Leases – We determine if an arrangement is or contains a lease at inception. Operating lease assets and operating lease liabilities are recognized basedon the present value of the future minimum lease payments over the lease term at commencement date. When an implicit rate is not available, we use acollateralized incremental borrowing rate for operating leases based on the information available at commencement date, including lease term, indetermining the present value of future payments. The operating lease asset also includes any lease payments made and excludes lease incentives andinitial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will beexercised. Operating leases are included in operating lease assets, accounts payable and other current liabilities, and operating lease liabilities on ourConsolidated Statements of Financial Position. Finance leases are included in properties, net, debt due within one year, and debt due after one year on ourConsolidated Statements of Financial Position. Operating lease expense is recognized on a straight-line basis over the lease term and primarily reported inequipment and other rents and financing lease expense is recorded as depreciation and interest expense in our Consolidated Statements of Income. We have lease agreements with lease and non-lease components, and we have elected to not separate lease and non-lease components for all classes ofunderlying assets. Leases with an initial term of 12 months or less are not recorded on our Consolidated Statements of Financial Position. Leases withinitial terms in excess of 12 months are recorded as operating or financing leases in our Consolidated Statements of Financial Position. Pension Benefits – In order to measure the expense associated with pension benefits, we must make various assumptions including discount rates usedto value certain liabilities, expected return on plan assets used to fund these expenses, compensation increases, employee turnover rates, and anticipatedmortality rates. The assumptions used by us are based on our historical experience as well as current facts and circumstances. We use an actuarialanalysis to measure the expense and liability associated with these benefits. Personal Injury – The cost of injuries to employees and others on our property is charged to expense based on estimates of the ultimate cost and numberof incidents each year. We use an actuarial analysis to measure the expense and liability, including unasserted claims. Our personal injury liability is notdiscounted to present value due to the uncertainty surrounding the timing of future payments. Legal fees and incidental costs are expensed as incurred. Environmental – When environmental issues have been identified with respect to property currently or formerly owned, leased, or otherwise used in theconduct of our business, we perform, with the assistance of our consultants, environmental assessments on such property. We expense the cost of theassessments as incurred. We accrue the cost of remediation where our obligation is probable and such costs can be reasonably estimated. We do notdiscount our environmental liabilities when the timing of the anticipated cash payments is not fixed or readily determinable. Legal fees and incidental costsare expensed as incurred. Use of Estimates – The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates andassumptions that affect certain reported assets and liabilities, the disclosure of certain contingent assets and liabilities as of the date of the ConsolidatedFinancial Statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual future results may differ from suchestimates. 3. Accounting Pronouncements In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU 2019-12), Income Taxes (Topic 740): Simplifying the Accounting forIncome Taxes, which simplifies the accounting and disclosure requirements for income taxes by clarifying existing guidance to improve consistency inapplication of Accounting Standards Codification (ASC) 740. The Company adopted the ASU on January 1, 2021 (the effective date), and it did not have amaterial impact on the Company’s Consolidated Financial Statements and related disclosures. In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU 2020-04), Reference Rate Reform (Topic 848): Facilitation of the Effectsof Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP principles to contracts, hedgingrelationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due toreference rate reform. This guidance was effective beginning on March 12, 2020, and can be adopted on a prospective basis no later than December 31,2022, with early adoption permitted. The Company is currently evaluating the effect that the new guidance will have on our Consolidated FinancialStatements and related disclosures. 42Table of Contents In November 2021, the FASB issued Accounting Standards Update No. 2021-10 (ASU 2021-10), Government Assistance (Topic 832): Disclosures byBusiness Entities about Government Assistance, which requires business entities to provide certain disclosures when they have received governmentassistance and use a grant or contribution accounting model by analogy to other accounting guidance. The guidance is effective for fiscal years beginningafter December 15, 2021. The Company is currently evaluating the effect that the new guidance will have on our related disclosures. 4. Stock Options and Other Stock Plans In April 2000, the shareholders approved the Union Pacific Corporation 2000 Directors Plan (Directors Plan) whereby 2,200,000 shares of our commonstock were reserved for issuance to our non-employee directors. Under the Directors Plan, each non-employee director, upon his or her initial election tothe Board of Directors, received a grant of 4,000 retention shares or retention stock units. In July 2018, the Board of Directors eliminated the retention grantfor directors newly elected in 2018 and all future years. As of December 31, 2021, 28,000 restricted shares were outstanding under the Directors Plan. The Union Pacific Corporation 2004 Stock Incentive Plan (2004 Plan) was approved by shareholders in April 2004. The 2004 Plan reserved 84,000,000shares of our common stock for issuance, plus any shares subject to awards made under previous plans that were outstanding on April 16, 2004, andbecame available for regrant pursuant to the terms of the 2004 Plan. Under the 2004 Plan, non-qualified stock options, stock appreciation rights, retentionshares, stock units, and incentive bonus awards may be granted to eligible employees of the Corporation and its subsidiaries. Non-employee directors arenot eligible for awards under the 2004 Plan. As of December 31, 2021, 37,778 stock options were outstanding under the 2004 Plan. We no longer grant anystock options or other stock or unit awards under this plan. The Union Pacific Corporation 2013 Stock Incentive Plan (2013 Plan) was approved by shareholders in May 2013. The 2013 Plan reserved 78,000,000shares of our common stock for issuance, plus any shares subject to awards made under previous plans as of February 28, 2013, that are subsequentlycancelled, expired, forfeited, or otherwise not issued under previous plans. Under the 2013 Plan, non-qualified stock options, incentive stock options,retention shares, stock units, and incentive bonus awards may be granted to eligible employees of the Corporation and its subsidiaries. Non-employeedirectors are not eligible for awards under the 2013 Plan. As of December 31, 2021, 1,706,288 stock options and 1,218,397 retention shares and stockunits were outstanding under the 2013 Plan. We no longer grant any stock options or other stock or unit awards under this plan. The Union Pacific Corporation 2021 Stock Incentive Plan (2021 Plan) was approved by shareholders in May 2021. The 2021 Plan reserved 23,000,000shares of our common stock for issuance, plus any shares subject to awards made under previous plans as of December 31, 2020, that are subsequentlycancelled, expired, forfeited, or otherwise not issued under previous plans. Under the 2021 Plan, non-qualified stock options, incentive stock options,retention shares, stock units, and incentive bonus awards may be granted to eligible employees of the Corporation and its subsidiaries. Non-employeedirectors are not eligible for awards under the 2021 Plan. As of December 31, 2021, 361,935 stock options and 389,207 retention shares were outstandingunder the 2021 Plan. The Union Pacific Corporation 2021 Employee Stock Purchase Plan (2021 ESPP) was approved by shareholders in May 2021. The 2021 ESPP reserved10,000,000 shares of our common stock for issuance. Under the 2021 ESPP, eligible employees of the Corporation and its subsidiaries may elect topurchase shares with a Company match award. Non-employee directors are not eligible for awards under the 2021 ESPP. As of December 31, 2021,97,641 shares were issued under the 2021 ESPP. Pursuant to the above plans 34,011,624; 69,867,405; and 70,318,887; shares of our common stock were authorized and available for grant at December 31,2021, 2020, and 2019, respectively. Stock-Based Compensation – We have several stock-based compensation plans under which employees receive nonvested stock options, nonvestedretention shares, and nonvested stock units. We refer to the nonvested shares and stock units collectively as “retention awards”. Employees are also ableto participate in our ESPP. Information regarding stock-based compensation appears in the table below: Millions 2021 2020 2019 Stock-based compensation, before tax: Stock options $15 $15 $16 Retention awards 66 58 77 ESPP 7 - - Total stock-based compensation, before tax $88 $73 $93 Excess tax benefits from equity compensation plans $26 $55 $52 43Table of Contents Stock Options – Stock options are granted at the closing price on the date of grant, have 10-year contractual terms, and vest no later than 3 years fromthe date of grant. None of the stock options outstanding at December 31, 2021, are subject to performance or market-based vesting conditions. The table below shows the annual weighted-average assumptions used for Black-Scholes valuation purposes: Weighted-Average Assumptions 2021 2020 2019 Risk-free interest rate 0.4% 1.5% 2.5%Dividend yield 1.9% 2.1% 2.2%Expected life (years) 4.6 4.9 5.2 Volatility 28.3% 23.4% 22.7%Weighted-average grant-date fair value of options granted $39.97 $32.20 $30.37 The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the expected dividend yield is calculated as the ratio of dividendspaid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; andexpected volatility is based on the historical volatility of our stock price over the expected life of the stock option. A summary of stock option activity during 2021 is presented below: Options(thous.) Weighted-AverageExercise Price Weighted-AverageRemainingContractual Term (yrs.) Aggregate IntrinsicValue (millions) Outstanding at January 1, 2021 2,569 $132.49 6.4 $195 Granted 387 204.45 N/A N/A Exercised (753) 118.11 N/A N/A Forfeited or expired (97) 154.62 N/A N/A Outstanding at December 31, 2021 2,106 $149.84 6.3 $215 Vested or expected to vest at December 31, 2021 2,083 $149.37 6.3 $214 Options exercisable at December 31, 2021 1,334 $126.38 5.2 $167 At December 31, 2021, there was $15 million of unrecognized compensation expense related to nonvested stock options, which is expected to berecognized over a weighted-average period of 1.0 year. Additional information regarding stock option exercises appears in the following table: Millions 2021 2020 2019 Intrinsic value of stock options exercised $84 $120 $193 Cash received from option exercises 58 95 130 Treasury shares repurchased for employee payroll taxes (15) (24) (37)Tax benefit realized from option exercises 16 28 48 Aggregate grant-date fair value of stock options vested 14 15 15 Retention Awards – Retention awards are granted at no cost to the employee, vest over periods lasting up to 4 years, and dividends and dividendequivalents are paid to participants during the vesting periods. Changes in our retention awards during 2021 were as follows: Shares (thous.) Weighted-AverageGrant-Date Fair Value Nonvested at January 1, 2021 1,476 $141.06 Granted 297 205.81 Vested (417) 109.23 Forfeited (69) 163.73 Nonvested at December 31, 2021 1,287 $165.10 At December 31, 2021, there was $87 million of total unrecognized compensation expense related to nonvested retention awards, which is expected to berecognized over a weighted-average period of 1.4 years. 44Table of Contents Performance Retention Awards – In February 2021, our Board of Directors approved performance stock unit grants. This plan is based on performancetargets for annual return on invested capital (ROIC) and operating income growth (OIG) compared to companies in the S&P 100 Industrials Index plus theClass I railroads. We define ROIC as net operating profit adjusted for interest expense (including interest on average operating lease liabilities) and taxes oninterest divided by average invested capital adjusted for average operating lease liabilities. The February 2021 stock units awarded to selected employees are subject to continued employment for 37 months, the attainment of certain levels ofROIC, and the relative three-year OIG. We expense two-thirds of the fair value of the units that are probable of being earned based on our forecasted ROICover the 3-year performance period, and with respect to the third year of the plan, the remaining one-third of the fair value is subject to the relative three-yearOIG. We measure the fair value of performance stock units based upon the closing price of the underlying common stock as of the date of grant. Dividendequivalents are accumulated during the service period and paid to participants only after the units are earned. The February 2020 and 2019 performance stock unit grants expense recognition and basic terms were similar to the February 2021 grant except therelative OIG targets were a modifier as compared to companies included in the S&P 500 Industrials Index. The modifier can be up to +/- 25% of the awardearned based on the ROIC achieved. Changes in our performance retention awards during 2021 were as follows: Shares (thous.) Weighted-AverageGrant-Date Fair Value Nonvested at January 1, 2021 773 $148.17 Granted 227 204.45 Vested (136) 141.93 Unearned (140) 126.47 Forfeited (83) 156.94 Nonvested at December 31, 2021 641 $173.03 At December 31, 2021, there was $16 million of total unrecognized compensation expense related to nonvested performance retention awards, which isexpected to be recognized over a weighted-average period of 1.2 years. This expense is subject to achievement of the performance measures establishedfor the performance stock unit grants. Employee Stock Purchase Plan - Our ESPP started in July 2021. Employee and Company contributions are used to issue treasury shares the monthafter employee contributions are withheld based on the settlement date closing price. The Company matches 40% contributed by the employee up to amaximum employee contribution of 5% of monthly salary (limited to $15,000 annually). We expense the Company contributions in the month the employeeservices were rendered (i.e., the month the employee contributions were withheld). 5. Retirement Plans Pension Benefits We provide defined benefit retirement income to eligible non-union employees through qualified and non-qualified (supplemental) pension plans. Qualifiedand non-qualified pension benefits are based on years of service and the highest compensation during the latest years of employment, with specificreductions made for early retirements. Non-union employees hired on or after January 1, 2018, are no longer eligible for pension benefits, but are eligible foran enhanced 401(k) benefit as described below in other retirement programs. Funded Status We are required by GAAP to separately recognize the overfunded or underfunded status of our pension plans as an asset or liability. The funded statusrepresents the difference between the projected benefit obligation (PBO) and the fair value of the plan assets. Our non-qualified (supplemental) pension planis unfunded by design. The PBO of the pension plans is the present value of benefits earned to date by plan participants, including the effect of assumedfuture compensation increases. Plan assets are measured at fair value. We use a December 31 measurement date for plan assets and obligations for allour retirement plans. 45Table of Contents Changes in our PBO and plan assets were as follows for the years ended December 31, 2021 and 2020: Funded Status Millions 2021 2020 Projected Benefit Obligation Projected benefit obligation at beginning of year $5,658 $4,847 Service cost 110 91 Interest cost 104 137 Actuarial (gain)/loss (346) 812 Gross benefits paid (230) (229)Projected benefit obligation at end of year $5,296 $5,658 Plan Assets Fair value of plan assets at beginning of year $5,016 $4,528 Actual (loss)/return on plan assets 737 686 Non-qualified plan benefit contributions 31 31 Gross benefits paid (230) (229)Fair value of plan assets at end of year $5,554 $5,016 Funded status at end of year $258 $(642) Actuarial gains that decreased the PBO were driven by an increase in 2021 discount rates from 2.42% to 2.80%. Amounts recognized in the statement of financial position as of December 31, 2021 and 2020, consist of: Millions 2021 2020 Noncurrent assets $807 $8 Current liabilities (31) (30)Noncurrent liabilities (518) (620)Net amounts recognized at end of year $258 $(642) Pre-tax amounts recognized in accumulated other comprehensive income/loss consist of $851 million and $1,805 million net actuarial loss as of December31, 2021 and 2020, respectively. Pre-tax changes recognized in other comprehensive income/loss as of December 31, 2021, 2020, and 2019, were as follows: Millions 2021 2020 2019 Net actuarial (loss)/gain $813 $(408) $(88)Amortization of: Actuarial loss 141 104 67 Total $954 $(304) $(21) Underfunded Accumulated Benefit Obligation – The accumulated benefit obligation (ABO) is the present value of benefits earned to date, assuming nofuture compensation growth. The underfunded accumulated benefit obligation represents the difference between the ABO and the fair value of plan assets. The following table discloses only the PBO, ABO, and fair value of plan assets for pension plans where the accumulated benefit obligation is in excess ofthe fair value of the plan assets as of December 31, 2021 and 2020: Underfunded Accumulated Benefit Obligation Millions 2021 2020 Projected benefit obligation $549 $605 Accumulated benefit obligation $513 $560 Fair value of plan assets - - Underfunded accumulated benefit obligation $(513) $(560) The ABO for all defined benefit pension plans was $4.9 billion and $5.2 billion at December 31, 2021 and 2020, respectively. Assumptions – The weighted-average actuarial assumptions used to determine benefit obligations at December 31, 2021 and 2020: Percentages 2021 2020 Discount rate 2.80% 2.42%Compensation increase 4.30% 4.40% 46Table of Contents Expense Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest coston those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of planassets that recognizes changes in fair value over a 5-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it canhave the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of returnassumptions. Differences in actual experience in relation to assumptions are not recognized in net income immediately, but are deferred in accumulatedother comprehensive income/loss and, if necessary, amortized as pension expense. The components of our net periodic pension cost were as follows for the years ended December 31, 2021, 2020, and 2019: Millions 2021 2020 2019 Net Periodic Pension Cost: Service cost $110 $91 $80 Interest cost 104 137 160 Expected return on plan assets (270) (282) (273)Amortization of: Actuarial loss 141 104 67 Net periodic pension cost $85 $50 $34 Assumptions – The weighted-average actuarial assumptions used to determine expense were as follows: Percentages 2021 2020 2019 Discount rate for benefit obligations 2.42% 3.26% 4.23%Discount rate for interest on benefit obligations 1.90% 2.89% 3.94%Discount rate for service cost 2.61% 3.42% 4.33%Discount rate for interest on service cost 2.53% 3.36% 4.30%Expected return on plan assets 6.25% 7.00% 7.00%Compensation increase 4.40% 4.10% 4.10% We measure the service cost and interest cost components of our net periodic pension cost by using individual spot discount rates matched with separatecash flows for each future year. The discount rates were based on a yield curve of high-quality corporate bonds. The expected return on plan assets isbased on our asset allocation mix and our historical return, taking into account current and expected market conditions. The actual return/loss on pensionplan assets, net of fees, was approximately 15% in 2021, 16% in 2020, and 20% in 2019. Cash Contributions The following table details cash contributions, if any, for the qualified and non-qualified (supplemental) pension plans: Millions Qualified Non-qualified 2021 $- $31 2020 - 31 Our policy with respect to funding the qualified plans is to fund at least the minimum required by law and not more than the maximum amount deductible fortax purposes. The non-qualified pension plans are not funded and are not subject to any minimum regulatory funding requirements. Benefit payments for each yearrepresent supplemental pension payments. We anticipate our 2022 supplemental pension payments will be made from cash generated from operations. 47Table of Contents Benefit Payments The following table details expected benefit payments for the years 2022 through 2031: Millions 2022 $229 2023 228 2024 227 2025 227 2026 228 Years 2027 - 2031 1,170 Asset Allocation Strategy Our pension plan asset allocation at December 31, 2021 and 2020, and target allocation for 2022, are as follows: Percentage of Plan Assets TargetDecember 31, Allocation 20222021 2020 Equity securities 45% to 55% 57% 63%Debt securities 45% to 55% 42 34 Real estate 0% to 2% 1 3 Total 100% 100% The pension plan investments are held in a master trust. The investment strategy for pension plan assets is to maintain a broadly diversified portfoliodesigned to achieve our target average long-term rate of return of 6.25%. While we believe we can achieve a long-term average rate of return of 6.25%, wecannot be certain that the portfolio will perform to our expectations. Assets are strategically allocated among equity, debt, and other investments in order toachieve a diversification level that reduces fluctuations in investment returns. Asset allocation target ranges for equity, debt, and other portfolios areevaluated at least every three years with the assistance of an independent consulting firm. Actual asset allocations are monitored monthly, and rebalancingactions are executed at least quarterly, as needed. Since 2020, the asset allocation targets for equity and debt have been adjusted annually to move from equity to debt as a de-risking measure. The currenttarget endpoint for this de-risking is 45% equity and 55% debt in 2023. Equity risks are balanced by investing a significant portion of the plans’ assets inhigh-quality debt securities. The average credit rating of the debt portfolio was A+ and A at December 31, 2021 and 2020, respectively. The debt portfolio isalso broadly diversified and invested primarily in U.S. Treasury, mortgage, and corporate securities. The weighted-average maturity of the debt portfolio was20 years and 17 years at December 31, 2021 and 2020, respectively. The investment of pension plan assets in securities issued by UPC is explicitly prohibited by the plan for both the equity and debt portfolios, other thanthrough index fund holdings. Fair Value Measurements The pension plan assets are valued at fair value. The following is a description of the valuation methodologies used for the investments measured at fairvalue, including the general classification of such instruments pursuant to the valuation hierarchy. Temporary Cash Investments – These investments consist of U.S. dollars, foreign currencies, and commercial paper held in master trust accounts atThe Northern Trust Company (the Trustee). Foreign currencies held are reported in terms of U.S. dollars based on currency exchange rates readily availablein active markets. U.S. dollars and foreign currencies are classified as Level 1 investments. Commercial paper assets are valued using a bid evaluationprocess with bid data provided by independent pricing sources. Commercial paper is classified as Level 2 investments. Registered Investment Companies – Registered Investment Companies are entities primarily engaged in the business of investing in securities and areregistered with the SEC. The plan’s holdings of Registered Investment Companies include both public and private fund vehicles. The public vehicles areexchange-traded funds (stocks), which are classified as Level 1 investments. The private vehicles (bonds) do not have published pricing and are valuedusing Net Asset Value (NAV). Federal Government Securities – Federal Government Securities consist of bills, notes, bonds, and other fixed income securities issued directly by theU.S. Treasury or by government-sponsored enterprises. These assets are valued using a bid evaluation process with bid data provided by independentpricing sources. Federal Government Securities are classified as Level 2 investments. Bonds and Debentures – Bonds and debentures consist of debt securities issued by U.S. and non-U.S. corporations as well as state and localgovernments. These assets are valued using a bid evaluation process with bid data provided by independent pricing sources. Corporate, state, andmunicipal bonds and debentures are classified as Level 2 investments. Corporate Stock – This investment category consists of common and preferred stock issued by U.S. and non-U.S. corporations. Most common sharesare traded actively on exchanges and price quotes for these shares are readily available. Common stock is classified as a Level 1 investment. Preferredshares included in this category are valued using a bid evaluation process with bid data provided by independent pricing sources. Preferred stock isclassified as a Level 2 investment. 48Table of Contents Venture Capital and Buyout Partnerships – This investment category is comprised of interests in limited partnerships that invest primarily in privately-held companies. Due to the private nature of the partnership investments, pricing inputs are not readily observable. Asset valuations are developed by thegeneral partners that manage the partnerships. These valuations are based on the application of public market multiples to private company cash flows,market transactions that provide valuation information for comparable companies, and other methods. The fair value recorded by the plan is calculated usingeach partnership’s NAV. Real Estate Funds – Most of the plan’s real estate investments are primarily interests in private real estate investment trusts, partnerships, limited liabilitycompanies, and similar structures. Valuations for the holdings in this category are not based on readily observable inputs and are primarily derived fromproperty appraisals. The fair value recorded by the plan is calculated using the NAV for each investment. Collective Trust and Other Funds – Collective trust and other funds are comprised of shares or units in commingled funds and limited liability companiesthat are not publicly traded. The underlying assets in these entities (U.S. stock funds, non-U.S. stock funds, commodity funds, hedge funds, and short-term investment funds) are publicly traded on exchanges and price quotes for the assets held by these funds are readily available. The fair value recordedby the plan is calculated using NAV for each investment. As of December 31, 2021, the pension plan assets measured at fair value on a recurring basis were as follows: Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Inputs Inputs Inputs Millions (Level 1) (Level 2) (Level 3) Total Plan assets at fair value: Temporary cash investments $9 $- $- $9 Registered investment companies [a] 10 - - 10 Federal government securities - 742 - 742 Bonds and debentures - 1,116 - 1,116 Corporate stock 1,980 10 - 1,990 Total plan assets at fair value $1,999 $1,868 $- $3,867 Plan assets at NAV: Registered investment companies [b] 185 Venture capital and buyout partnerships 710 Real estate funds 48 Collective trust and other funds 756 Total plan assets at NAV $1,699 Other assets/(liabilities) [c] (12)Total plan assets $5,554 As of December 31, 2020, the pension plan assets measured at fair value on a recurring basis were as follows: Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Inputs Inputs Inputs Millions (Level 1) (Level 2) (Level 3) Total Plan assets at fair value: Temporary cash investments $9 $- $- $9 Registered investment companies [a] 252 - - 252 Federal government securities - 150 - 150 Bonds and debentures - 831 - 831 Corporate stock 2,209 8 - 2,217 Total plan assets at fair value $2,470 $989 $- $3,459 Plan assets at NAV: Registered investment companies [b] 312 Venture capital and buyout partnerships 585 Real estate funds 161 Collective trust and other funds 498 Total plan assets at NAV $1,556 Other assets/(liabilities) [c] 1 Total plan assets $5,016 [a]Registered investment companies measured at fair value are stock investments.[b]Registered investment companies measured at NAV include bond investments.[c]Includes accrued receivables, net payables, and pending broker settlements. 49Table of Contents The master trust’s investments in limited partnerships and similar structures (used to invest in private equity and real estate) are valued at fair value basedon their proportionate share of the partnerships’ fair value as recorded in the limited partnerships’ audited financial statements. The limited partnershipsallocate gains, losses, and expenses to the partners based on the ownership percentage as described in the partnership agreements. At December 31,2021 and 2020, the master trust had future commitments for additional contributions to private equity partnerships totaling $115 million and $147 million,respectively, and to real estate partnerships and funds totaling $7 million and $7 million, respectively. Other Retirement Programs Other Postretirement Benefits (OPEB) – We provide medical and life insurance benefits for eligible retirees hired before January 1, 2004. These benefitsare funded as medical claims and life insurance premiums are paid. OPEB expense is determined based upon the annual service cost of benefits and theinterest cost on those liabilities, less the expected return on plan assets. Our OPEB liability was $165 million and $190 million at December 31, 2021 and2020, respectively. OPEB net periodic benefit cost/(benefit) was ($3) million in 2021, ($1) million in 2020, and $10 million in 2019. 401(k)/Thrift Plan – For non-union employees hired prior to January 1, 2018, and eligible union employees for whom we make matching contributions, weprovide a defined contribution plan (401(k)/thrift plan). We match 50% for each dollar contributed by employees up to the first 6% of compensationcontributed. For non-union employees hired on or after January 1, 2018, we match 100% for each dollar, up to the first 6% of compensation contributed, inaddition to contributing an annual amount of 3% of the employee’s annual base salary. Our plan contributions were $21 million in 2021, $19 million in 2020,and $20 million in 2019. Railroad Retirement System – All Railroad employees are covered by the Railroad Retirement System (the System). Contributions made to the Systemare expensed as incurred and amounted to approximately $550 million in 2021, $569 million in 2020, and $654 million in 2019. Collective Bargaining Agreements – Under collective bargaining agreements, we participate in multi-employer benefit plans that provide certainpostretirement health care and life insurance benefits for eligible union employees. Premiums paid under these plans are expensed as incurred andamounted to $30 million in 2021, $30 million in 2020, and $42 million in 2019. 6. Other Income Other income included the following for the years ended December 31: Millions 2021 2020 2019 Rental income $136 $123 $124 Gain on non-operating asset dispositions [a] 98 115 20 Gain from sale of investment 36 - - Net periodic pension costs 25 41 46 Interest income 5 12 32 Interest income on employment tax refund - - 31 Other (3) (4) (10)Total $297 $287 $243 [a]2021 includes a $50 million gain from a sale to the Colorado Department of Transportation. 2020 includes a $69 million gain from a land and permanent easement sale to theIllinois State Toll Highway Authority. 7. Income Taxes Components of income tax expense were as follows for the years ended December 31: Millions 2021 2020 2019 Current tax expense: Federal $1,446 $1,026 $1,000 State 347 259 254 Foreign 8 6 8 Total current tax expense 1,801 1,291 1,262 Deferred and other tax expense/(benefit): Federal 199 295 417 State [a] (44) 45 128 Foreign (1) - 21 Total deferred and other tax expense 154 340 566 Total income tax expense $1,955 $1,631 $1,828 [a]In 2021, Nebraska, Oklahoma, Idaho, Louisiana and Arkansas enacted corporate income tax legislation that resulted in a net $32 million reduction of our deferred tax expense. In2019, Arkansas enacted legislation to reduce their corporate income tax rate for future years resulting in a $21 million reduction of our deferred tax expense. 50Table of Contents For the years ended December 31, reconciliations between statutory and effective tax rates are as follows: Tax Rate Percentages 2021 2020 2019 Federal statutory tax rate 21.0% 21.0% 21.0%State statutory rates, net of federal benefits 3.7 3.7 3.7 Deferred tax adjustments (0.6) (0.1) (0.1)Dividends received deduction (0.5) (0.5) (0.6)Excess tax benefits from equity compensation plans (0.3) (0.8) (0.7)Other (0.2) 0.1 0.3 Effective tax rate 23.1% 23.4% 23.6% Deferred income tax assets/(liabilities) were comprised of the following at December 31, 2021 and 2020: Millions 2021 2020 Deferred income tax liabilities: Property $(12,657) $(12,474)Operating lease assets (441) (397)Other (534) (444)Total deferred income tax liabilities (13,632) (13,315)Deferred income tax assets: Operating lease liabilities 434 396 Accrued casualty costs 157 143 Accrued wages 45 40 Retiree benefits 39 255 Stock compensation 26 26 Other 256 208 Total deferred income tax assets 957 1,068 Net deferred income tax liability $(12,675) $(12,247) In 2021 and 2020, there were no valuation allowances against deferred tax assets. A reconciliation of changes in unrecognized tax benefits liabilities/(assets) from the beginning to the end of the reporting period is as follows: Millions 2021 2020 2019 Unrecognized tax benefits at January 1 $74 $64 $174 Decreases for positions taken in prior years (24) (19) (96)Refunds from/(payments to) and settlements with taxing authorities (12) - (11)Increases for positions taken in current year 3 18 20 Increases/(decreases) for interest and penalties (3) 5 (5)Increases for positions taken in prior years 1 7 44 Lapse of statutes of limitations (1) (1) (62)Unrecognized tax benefits at December 31 $38 $74 $64 We recognize interest and penalties as part of income tax expense. Total accrued liabilities/(receivables) for interest and penalties were ($1) million and$8 million at December 31, 2021 and 2020, respectively. Total interest and penalties recognized as part of income tax expense/(benefit) were ($5) million for2021, $5 million for 2020, and ($4) million for 2019. Several state tax authorities are examining our state income tax returns for years 2017 through 2019. We do not expect our unrecognized tax benefits to change significantly in the next 12 months. The portion of our unrecognized tax benefits that relates topermanent changes in tax and interest would reduce our effective tax rate, if recognized. The remaining unrecognized tax benefits relate to tax positions forwhich only the timing of the benefit is uncertain. The unrecognized tax benefits that would reduce our effective tax rate are $31 million for 2021, $52 millionfor 2020, and $39 million for 2019. 51Table of Contents 8. Earnings Per Share The following table provides a reconciliation between basic and diluted earnings per share for the years ended December 31, 2021, 2020 and 2019: Millions, Except Per Share Amounts 2021 2020 2019 Net income $6,523 $5,349 $5,919 Weighted-average number of shares outstanding: Basic 653.8 677.3 703.5 Dilutive effect of stock options 0.8 0.8 1.2 Dilutive effect of retention shares and units 0.8 1.0 1.4 Diluted 655.4 679.1 706.1 Earnings per share – basic $9.98 $7.90 $8.41 Earnings per share – diluted $9.95 $7.88 $8.38 Common stock options totaling 0.2 million, 0.3 million, and 0.5 million for 2021, 2020, and 2019, respectively, were excluded from the computation ofdiluted earnings per share because the exercise prices of these stock options exceeded the average market price of our common stock for the respectiveperiods, and the effect of their inclusion would be anti-dilutive. 9. Accumulated Other Comprehensive Income/Loss Reclassifications out of accumulated other comprehensive income/loss were as follows (net of tax): Millions Defined benefit plans Foreign currencytranslation Total Balance at January 1, 2021 $(1,381) $(212) $(1,593)Other comprehensive income/(loss) before reclassifications - (44) (44)Amounts reclassified from accumulated other comprehensive income/(loss) [a] 723 - 723 Net year-to-date other comprehensive income/(loss), net of taxes of ($237) million 723 (44) 679 Balance at December 31, 2021 $(658) $(256) $(914) Balance at January 1, 2020 $(1,150) $(206) $(1,356)Other comprehensive income/(loss) before reclassifications 2 (6) (4)Amounts reclassified from accumulated other comprehensive income/(loss) [a] (233) - (233)Net year-to-date other comprehensive income/(loss), net of taxes of $75 million (231) (6) (237)Balance at December 31, 2020 $(1,381) $(212) $(1,593) [a]The accumulated other comprehensive income/loss reclassification components are 1) prior service cost/credit and 2) net actuarial loss which are both included in thecomputation of net periodic pension cost. See Note 5 for additional details. 10. Accounts Receivable Accounts receivable includes freight and other receivables reduced by an allowance for doubtful accounts. At December 31, 2021 and 2020, our accountsreceivable were reduced by $10 million and $17 million, respectively. Receivables not expected to be collected in one year and the associated allowancesare classified as other assets in our Consolidated Statements of Financial Position. Receivables classified as other assets were reduced by allowances of$51 million at both December 31, 2021 and 2020. Receivables Securitization Facility – The Railroad maintains an $800 million, 3-year receivables securitization facility (the Receivables Facility) maturingin July 2022. Under the Receivables Facility, the Railroad sells most of its eligible third-party receivables to Union Pacific Receivables, Inc. (UPRI), aconsolidated, wholly-owned, bankruptcy-remote subsidiary that may subsequently transfer, without recourse, an undivided interest in accounts receivable toinvestors. The investors have no recourse to the Railroad’s other assets except for customary warranty and indemnity claims. Creditors of the Railroad donot have recourse to the assets of UPRI. The amount recorded under the Receivables Facility was $300 million and $0 at December 31, 2021 and 2020, respectively. The Receivables Facility wassupported by $1.3 billion and $1.2 billion of accounts receivable as collateral at December 31, 2021 and 2020, respectively, which, as a retained interest, isincluded in accounts receivable, net in our Consolidated Statements of Financial Position. The outstanding amount the Railroad maintains under the Receivables Facility may fluctuate based on current cash needs. The maximum allowed underthe facility is $800 million with availability directly impacted by eligible receivables, business volumes, and credit risks, including receivables paymentquality measures such as default and dilution ratios. If default or dilution ratios increase one percent, the allowable outstanding amount under theReceivables Facility would not materially change. The costs of the Receivables Facility include interest, which will vary based on prevailing benchmark and commercial paper rates, program fees paid toparticipating banks, commercial paper issuance costs, and fees of participating banks for unused commitment availability. The costs of the ReceivablesFacility are included in interest expense and were $4 million, $7 million, and $14 million for 2021, 2020, and 2019, respectively. 52Table of Contents 11. Properties The following tables list the major categories of property and equipment as well as the weighted-average estimated useful life for each category (in years): Millions, Except Estimated Useful Life Accumulated Net Book Estimated As of December 31, 2021 Cost Depreciation Value Useful Life Land $5,339 $N/A $5,339 N/A Road: Rail and other track material 17,980 6,844 11,136 44 Ties 11,364 3,516 7,848 34 Ballast 6,070 1,852 4,218 34 Other roadway [a] 21,593 4,657 16,936 47 Total road 57,007 16,869 40,138 N/A Equipment: Locomotives 9,371 3,779 5,592 17 Freight cars 2,227 822 1,405 24 Work equipment and other 1,161 411 750 18 Total equipment 12,759 5,012 7,747 N/A Technology and other 1,209 523 686 12 Construction in progress 961 - 961 N/A Total $77,275 $22,404 $54,871 N/A Millions, Except Estimated Useful Life Accumulated Net Book Estimated As of December 31, 2020 Cost Depreciation Value Useful Life Land $5,246 $N/A $5,246 N/A Road: Rail and other track material 17,620 6,631 10,989 42 Ties 11,051 3,331 7,720 34 Ballast 5,926 1,753 4,173 34 Other roadway [a] 21,030 4,329 16,701 48 Total road 55,627 16,044 39,583 N/A Equipment: Locomotives 9,375 3,555 5,820 17 Freight cars 2,118 789 1,329 25 Work equipment and other 1,107 351 756 18 Total equipment 12,600 4,695 7,905 N/A Technology and other 1,199 520 679 13 Construction in progress 748 - 748 N/A Total $75,420 $21,259 $54,161 N/A [a]Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets. Property and Depreciation – Our railroad operations are highly capital-intensive, and our large base of homogeneous, network-type assets turns over ona continuous basis. Each year we develop a capital program for the replacement of assets and for the acquisition or construction of assets that enable usto enhance our operations or provide new service offerings to customers. We currently have more than 60 depreciable asset classes, and we may increaseor decrease the number of asset classes due to changes in technology, asset strategies, or other factors. We determine the estimated service lives of depreciable railroad assets by means of depreciation studies. We perform depreciation studies at least every 3years for equipment and every 6 years for track assets (i.e., rail and other track material, ties, and ballast) and other road property. Our depreciationstudies take into account the following factors: ●Statistical analysis of historical patterns of use and retirements of each of our asset classes,●Evaluation of any expected changes in current operations and the outlook for continued use of the assets,●Evaluation of technological advances and changes to maintenance practices, and●Expected salvage to be received upon retirement. 53Table of Contents For rail in high-density traffic corridors, we measure estimated service lives in millions of gross tons per mile of track. It has been our experience that thelives of rail in high-density traffic corridors are closely correlated to usage (i.e., the amount of weight carried over the rail). The service lives also vary basedon rail weight, rail condition (e.g., new or secondhand), and rail type (e.g., straight or curve). Our depreciation studies for rail in high-density traffic corridorsconsider each of these factors in determining the estimated service lives. For rail in high-density traffic corridors, we calculate depreciation rates annuallyby dividing the number of gross ton-miles carried over the rail (i.e., the weight of loaded and empty freight cars, locomotives, and maintenance of wayequipment transported over the rail) by the estimated service lives of the rail measured in millions of gross tons per mile. For all other depreciable assets,we compute depreciation based on the estimated service lives of our assets as determined from the analysis of our depreciation studies. Changes in theestimated service lives of our assets and their related depreciation rates are implemented prospectively. Under the group method of depreciation, the historical cost (net of salvage) of depreciable property that is retired or replaced in the ordinary course ofbusiness is charged to accumulated depreciation and no gain or loss is recognized. The historical cost of certain track assets is estimated by multiplyingthe current replacement cost of track assets by a historical index factor derived from (i) inflation indices published by the Bureau of Labor Statistics and (ii)the estimated useful lives of the assets as determined by our depreciation studies. The indices were selected because they closely correlate with the majorcosts of the properties comprising the applicable track asset classes. Because of the number of estimates inherent in the depreciation and retirementprocesses and because it is impossible to precisely estimate each of these variables until a group of property is completely retired, we continually monitorthe estimated service lives of our assets and the accumulated depreciation associated with each asset class to ensure our depreciation rates areappropriate. In addition, we determine if the recorded amount of accumulated depreciation is deficient (or in excess) of the amount indicated by ourdepreciation studies. Any deficiency (or excess) is amortized as a component of depreciation expense over the remaining service lives of the applicableclasses of assets. For retirements of depreciable railroad properties that do not occur in the normal course of business, a gain or loss may be recognized if the retirementmeets each of the following three conditions: (i) is unusual, (ii) is material in amount, and (iii) varies significantly from the retirement profile identified throughour depreciation studies. A gain or loss is recognized in other income when we sell land or dispose of assets that are not part of our railroad operations. We review construction in progress assets that have not yet been placed into service, for impairment when events or changes in circumstances indicatethat the carrying amount of a long-lived asset or assets may not be recoverable. If impairment indicators are present and the estimated future undiscountedcash flows are less than the carrying value of construction in progress assets when grouped with other assets and liabilities at the lowest level whereidentifiable cash flows are largely independent, the carrying value is reduced to the estimated fair value. When we purchase an asset, we capitalize all costs necessary to make the asset ready for its intended use. However, many of our assets are self-constructed. A large portion of our capital expenditures is for replacement of existing track assets and other road properties, which is typically performed byour employees, and for track line expansion and other capacity projects. Costs that are directly attributable to capital projects (including overhead costs)are capitalized. Direct costs that are capitalized as part of self-constructed assets include material, labor, and work equipment. Indirect costs arecapitalized if they clearly relate to the construction of the asset. Costs incurred that extend the useful life of an asset, improve the safety of our operations, or improve operating efficiency are capitalized, while normalrepairs and maintenance are expensed as incurred. These costs are allocated using appropriate statistical bases. Total expense for repairs andmaintenance incurred was $2.1 billion for 2021, $2.0 billion for 2020, and $2.3 billion for 2019. Assets held under finance leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset atthe inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets orthe period of the related lease. Brazos Yard Impairment – In the fourth quarter of 2020, we made the strategic decision that our Brazos yard investments made to date will be used forfreight car block swapping activities, rather than proceeding with additional investments required to complete the freight car classification yard. As a result,we recorded a non-cash impairment charge of $278 million, recognized in other expense in our Consolidated Statements of Income. The Brazos yardinvestment was recorded as construction in progress as it had not yet been placed into service. We estimated the fair value of the remaining Brazosinvestments not used for freight car block swapping activities based on market values of similar assets, which are Level 2 inputs. 12. Accounts Payable and Other Current Liabilities Dec. 31, Dec. 31, Millions 2021 2020 Income and other taxes payable $823 $635 Accounts payable 752 612 Accrued wages and vacation 352 340 Interest payable 330 326 Current operating lease liabilities (Note 16) 330 321 Accrued casualty costs 187 177 Equipment rents payable 98 101 Other 706 592 Total accounts payable and other current liabilities $3,578 $3,104 54Table of Contents 13. Financial Instruments Short-Term Investments – All of the Company’s short-term investments consist of time deposits and government agency securities. These investmentsare considered Level 2 investments and are valued at amortized cost, which approximates fair value. As of December 31, 2021, the Company had$46 million of short-term investments. All short-term investments have a maturity of less than one year and are classified as held-to-maturity. Fair Value of Financial Instruments – The fair value of our short- and long-term debt was estimated using a market value price model, which utilizesapplicable U.S. Treasury rates along with current market quotes on comparable debt securities. All of the inputs used to determine the fair market value ofthe Corporation’s long-term debt are Level 2 inputs and obtained from an independent source. At December 31, 2021, the fair value of total debt was$32.9 billion, approximately $3.2 billion more than the carrying value. At December 31, 2020, the fair value of total debt was $31.9 billion, approximately$5.1 billion more than the carrying value. The fair value of the Corporation’s debt is a measure of its current value under present market conditions. The fairvalue of our cash equivalents approximates their carrying value due to the short-term maturities of these instruments. 14. Debt Total debt as of December 31, 2021 and 2020 is summarized below: Millions 2021 2020 Notes and debentures, 2.2% to 7.1% due through April 6, 2071 $29,508 $26,608 Equipment obligations, 2.6% to 6.2% due through January 2, 2031 848 885 Commercial paper, 0.2% to 0.3% due through January 26, 2022 400 75 Finance leases, 3.1% to 8.0% due through December 10, 2028 336 449 Receivables Facility (Note 10) 300 - Term loans - floating rate, due August 31, 2022 100 250 Unamortized discount and deferred issuance costs (1,763) (1,538)Total debt 29,729 26,729 Less: current portion (2,166) (1,069)Total long-term debt $27,563 $25,660 Debt Maturities – The following table presents aggregate debt maturities as of December 31, 2021, excluding market value adjustments: Millions 2022 $2,180 2023 1,385 2024 1,439 2025 1,429 2026 1,016 Thereafter 24,043 Total principal 31,492 Unamortized discount and deferred issuance costs (1,763)Total debt $29,729 Equipment Encumbrances – Equipment with a carrying value of approximately $1.2 billion and $1.3 billion at December 31, 2021 and 2020, respectively,served as collateral for finance leases and other types of equipment obligations in accordance with the secured financing arrangements utilized to acquireor refinance such railroad equipment. Debt Redemptions – On November 1, 2020, we redeemed all $500 million of outstanding 4.0% notes due February 1, 2021, at a redemption price equal to100% of the principal amount of the notes plus accrued and unpaid interest. Debt Exchange - On April 6, 2021, we exchanged approximately $1.7 billion of various outstanding notes and debentures due between 2028 and 2065(Existing Notes) for $701 million of 2.891% notes due April 6, 2036 (New 2036 Notes) and $1.0 billion of 3.799% notes due April 6, 2071 (New 2071 Notes),plus cash consideration of approximately $257 million in addition to $14 million for accrued and unpaid interest on the Existing Notes. In accordance withASC 470-50-40, Debt-Modifications and Extinguishments-Derecognition, this transaction was accounted for as a debt exchange, as the exchanged debtinstruments are not considered to be substantially different. The cash consideration was recorded as an adjustment to the carrying value of debt, and thebalance of the unamortized discount and issue costs from the Existing Notes is being amortized as an adjustment of interest expense over the terms of thenew notes. No gain or loss was recognized as a result of the exchange. Costs related to the debt exchange that were payable to parties other than thedebt holders totaled approximately $13 million and were included in interest expense during 2021. 55Table of Contents On September 16, 2020, we exchanged $1,047 million of various outstanding notes and debentures due between May 1, 2037, and March 1, 2049 (theExisting Notes), for $1,047 million of 2.973% notes (the New Notes) due September 16, 2062, plus cash consideration of approximately $319 million inaddition to $4 million for accrued and unpaid interest on the Existing Notes. In accordance with ASC 470-50-40, Debt-Modifications and Extinguishments-Derecognition, this transaction was accounted for as a debt exchange, as the exchanged debt instruments are not considered to be substantially different.The cash consideration was recorded as an adjustment to the carrying value of debt, and the balance of the unamortized discount and issue costs from theExisting Notes is being amortized as an adjustment of interest expense over the terms of the New Notes. No gain or loss was recognized as a result of theexchange. Costs related to the debt exchange that were payable to parties other than the debt holders totaled approximately $9 million and were includedin interest expense during the quarter ended September 30, 2020. Credit Facilities – At December 31, 2021, we had $2.0 billion of credit available under our revolving credit facility, which is designated for general corporatepurposes and supports the issuance of commercial paper. Credit facility withdrawals totaled $0 during 2021. Commitment fees and interest rates payableunder the Facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The Facility allows for borrowings at floating ratesbased on LIBOR, plus a spread, depending upon credit ratings for our senior unsecured debt. The 5-year facility, set to expire on June 8, 2023, requiresUPC to maintain a debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) coverage ratio. The definition of debt used for purposes of calculating the debt-to-EBITDA coverage ratio includes, among other things, certain credit arrangements, financeleases, guarantees, unfunded and vested pension benefits under Title IV of ERISA, and unamortized debt discount and deferred debt issuance costs. AtDecember 31, 2021, the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $41.2 billion of debt (asdefined in the Facility), and we had $31.5 billion of debt (as defined in the Facility) outstanding at that date. The Facility does not include any other financialrestrictions, credit rating triggers (other than rating-dependent pricing), or any other provision that could require us to post collateral. The Facility alsoincludes a $150 million cross-default provision and a change-of-control provision. During 2021, we issued $2.1 billion and repaid $1.8 billion of commercial paper with maturities ranging from 7 to 86 days. As of December 31, 2021 and2020, we had $400 million and $75 million of commercial paper outstanding, respectively. Our revolving credit facility supports our outstanding commercialpaper balances, and, unless we change the terms of our commercial paper program, our aggregate issuance of commercial paper will not exceed theamount of borrowings available under the Facility. In May 2020, we entered into three bilateral revolving credit lines, totaling $600 million of available credit. Since entering into the three bilateral revolvingcredit lines, we drew $300 million and repaid $300 million. All three bilateral revolving credit lines matured by May 18, 2021. Shelf Registration Statement and Significant New Borrowings – We filed an automatic shelf registration statement with the SEC that becameeffective on February 10, 2021. The Board of Directors authorized the issuance of up to $6 billion of debt securities, replacing the prior Board authorizationin November 2019, which had $2.25 billion of authority remaining. Under our shelf registration, we may issue, from time to time any combination of debtsecurities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings. During 2021, we issued the following unsecured, fixed-rate debt securities under our shelf registration: DateDescription of SecuritiesMay 20, 2021$850 million of 2.375% Notes due May 20, 2031 $1.0 billion of 3.200% Notes due May 20, 2041 $650 million of 3.550% Notes due May 20, 2061September 10, 2021$150 million of 2.375% Notes due May 20, 2031 $850 million of 2.950% Notes due March 10, 2052 We used the net proceeds from the offerings for general corporate purposes, including the repurchase of common stock pursuant to our share repurchaseprograms. These debt securities include change-of-control provisions. At December 31, 2021, we had remaining authority to issue up to $2.5 billion of debtsecurities under our shelf registration. On February 3, 2022, the Board of Directors renewed its authorization for the Company to issue up to $12.0 billion of debt securities under the Shelf. Thisreauthorization replaces the authorization in 2021. Receivables Securitization Facility – As of December 31, 2021 and 2020, we recorded $300 million and $0, respectively, of borrowings under ourReceivables Facility, as secured debt. (See further discussion of our receivables securitization facility in Note 10.) LIBOR Transition – Each of our $2.0 billion revolving credit facility, term loan, and Receivables Facility currently use LIBOR as the benchmark forthe floating interest rates. Authorities that regulate LIBOR have announced plans to phase out LIBOR so that it will, at some point, cease to exist as abenchmark for floating interest rates. To address the phase out of LIBOR, the agreements for substantially all of these facilities include a mechanism toreplace LIBOR with an alternative rate or benchmark under specified circumstances through an amendment to the agreements. As part of this process, wewill need to renegotiate our agreements to reference that alternative rate or benchmark, and may need to modify our existing benchmark replacementlanguage, or obtain replacement facilities. 56Table of Contents 15. Variable Interest Entities We have entered into various lease transactions in which the structure of the leases contain variable interest entities (VIEs). These VIEs were createdsolely for the purpose of doing lease transactions (principally involving railroad equipment and facilities) and have no other activities, assets, or liabilitiesoutside of the lease transactions. Within these lease arrangements, we have the right to purchase some or all of the assets at fixed prices. Depending onmarket conditions, fixed-price purchase options available in the leases could potentially provide benefits to us; however, these benefits are not expected tobe significant. We maintain and operate the assets based on contractual obligations within the lease arrangements, which set specific guidelines consistent within therailroad industry. As such, we have no control over activities that could materially impact the fair value of the leased assets. We do not hold the power todirect the activities of the VIEs and, therefore, do not control the ongoing activities that have a significant impact on the economic performance of the VIEs.Additionally, we do not have the obligation to absorb losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to theVIEs. We are not considered to be the primary beneficiary and do not consolidate these VIEs because our actions and decisions do not have the most significanteffect on the VIE’s performance and our fixed-price purchase options are not considered to be potentially significant to the VIEs. The future minimum leasepayments associated with the VIE leases totaled $1.1 billion as of December 31, 2021, and are recorded as operating lease liabilities at present value inour Consolidated Statements of Financial Position. 16. Leases We lease certain locomotives, freight cars, and other property for use in our rail operations. The following are additional details related to our lease portfolio: Dec. 31, Dec. 31, MillionsClassification 2021 2020 Assets Operating leasesOperating lease assets $1,787 $1,610 Finance leasesProperties, net [a] 366 370 Total leased assets $2,153 $1,980 Liabilities Current OperatingAccounts payable and other current liabilities $330 $321 FinanceDebt due within one year 92 109 Noncurrent OperatingOperating lease liabilities 1,429 1,283 FinanceDebt due after one year 244 340 Total lease liabilities $2,095 $2,053 [a]Finance lease assets are recorded net of accumulated amortization of $687 million and $737 million as of December 31, 2021 and 2020, respectively. The lease cost components are classified as follows: Millions Dec 31,2021 Dec 31,2020 Operating lease cost [a] $303 $317 Short-term lease cost 25 26 Variable lease cost 11 10 Finance lease cost Amortization of leased assets [b] 69 66 Interest on lease liabilities [c] 20 27 Net lease cost $428 $446 [a]Operating lease cost is primarily reported in equipment and other rents in our Consolidated Statements of Income.[b]Amortization of leased assets is reported in depreciation in our Consolidated Statements of Income.[c]Interest on lease liabilities is reported in interest expense in our Consolidated Statements of Income. 57Table of Contents The following table presents aggregate lease maturities as of December 31, 2021: Millions OperatingLeases FinanceLeases Total 2022 $333 $107 $440 2023 293 81 374 2024 285 68 353 2025 285 45 330 2026 215 36 251 After 2026 555 41 596 Total lease payments $1,966 $378 $2,344 Less: Interest 207 42 249 Present value of lease liabilities $1,759 $336 $2,095 The following table presents the weighted average remaining lease term and discount rate: Dec. 31, 2021 Weighted-average remaining lease term (years) Operating leases 7.3 Finance leases 4.8 Weighted-average discount rate (%) Operating leases 3.2 Finance leases 4.9 The following table presents other information related to our operating and finance leases for the years ended December 31: Millions 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $292 $323 Investing cash flows from operating leases 27 30 Operating cash flows from finance leases 26 29 Financing cash flows from finance leases 106 113 Leased assets obtained in exchange for finance lease liabilities - - Leased assets obtained in exchange for operating lease liabilities 442 93 17. Commitments and Contingencies Asserted and Unasserted Claims – Various claims and lawsuits are pending against us and certain of our subsidiaries. We cannot fully determine theeffect of all asserted and unasserted claims on our consolidated results of operations, financial condition, or liquidity. To the extent possible, we haverecorded a liability where asserted and unasserted claims are considered probable and where such claims can be reasonably estimated. We do not expectthat any known lawsuits, claims, environmental costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on ourconsolidated results of operations, financial condition, or liquidity after taking into account liabilities and insurance recoveries previously recorded for thesematters. Personal Injury – The Federal Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages are assessedbased on a finding of fault through litigation or out-of-court settlements. We offer a comprehensive variety of services and rehabilitation programs foremployees who are injured at work. Approximately 94% of the recorded liability is related to asserted claims and approximately 6% is related to unasserted claims at December 31, 2021.Because of the uncertainty surrounding the ultimate outcome of personal injury claims, it is reasonably possible that future costs to settle these claimsmay range from approximately $325 million to $358 million. We record an accrual at the low end of the range as no amount of loss within the range is moreprobable than any other. Estimates can vary over time due to evolving trends in litigation. 58Table of Contents Our personal injury liability activity was as follows: Millions 2021 2020 2019 Beginning balance $270 $265 $271 Current year accruals 93 72 78 Changes in estimates for prior years 48 (3) (11)Payments (86) (64) (73)Ending balance at December 31 $325 $270 $265 Current portion, ending balance at December 31 $64 $60 $63 Environmental Costs – We are subject to federal, state, and local environmental laws and regulations. We have identified 376 sites where we are or maybe liable for remediation costs associated with alleged contamination or for violations of environmental requirements. This includes 28 sites that are thesubject of actions taken by the U.S. government, 18 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes jointand several liability for the remediation of identified sites; consequently, our ultimate environmental liability may include costs relating to activities of otherparties, in addition to costs relating to our own activities at each site. Our environmental liability activity was as follows: Millions 2021 2020 2019 Beginning balance $233 $227 $223 Accruals 69 76 67 Payments (59) (70) (63)Ending balance at December 31 $243 $233 $227 Current portion, ending balance at December 31 $60 $65 $62 The environmental liability includes future costs for remediation and restoration of sites, as well as ongoing monitoring costs, but excludes any anticipatedrecoveries from third-parties. Cost estimates are based on information available for each site, financial viability of other potentially responsible parties, andexisting technology, laws, and regulations. The ultimate liability for remediation is difficult to determine because of the number of potentially responsibleparties, site-specific cost sharing arrangements with other potentially responsible parties, the degree of contamination by various wastes, the scarcity andquality of volumetric data related to many of the sites, and the speculative nature of remediation costs. Estimates of liability may vary over time due tochanges in federal, state, and local laws governing environmental remediation. Current obligations are not expected to have a material adverse effect on ourconsolidated results of operations, financial condition, or liquidity. Insurance – The Company has a consolidated, wholly-owned captive insurance subsidiary (the captive), that provides insurance coverage for certain risksincluding FELA claims and property coverage that are subject to reinsurance. The captive entered into annual reinsurance treaty agreements that insureworkers compensation, general liability, auto liability, and FELA risk. The captive cedes a portion of its FELA exposure through the treaty and assumes aproportionate share of the entire risk. The captive receives direct premiums, which are netted against the Company’s premium costs in other expenses inthe Consolidated Statements of Income. The treaty agreements provide for certain protections against the risk of treaty participants’ non-performance, andwe do not believe our exposure to treaty participants’ non-performance is material at this time. We record both liabilities and reinsurance receivables usingan actuarial analysis based on historical experience in our Consolidated Statements of Financial Position. Effective January 2019, the captive insurancesubsidiary no longer participates in the reinsurance treaty agreement. The Company established a trust in the fourth quarter of 2018 for the purpose ofproviding collateral as required under the reinsurance treaty agreement for prior years’ participation. Indemnities – Our maximum potential exposure under indemnification arrangements, including certain tax indemnifications, can range from a specifieddollar amount to an unlimited amount, depending on the nature of the transactions and the agreements. Due to uncertainty as to whether claims will bemade or how they will be resolved, we cannot reasonably determine the probability of an adverse claim or reasonably estimate any adverse liability or thetotal maximum exposure under these indemnification arrangements. We do not have any reason to believe that we will be required to make any materialpayments under these indemnity provisions. 59Table of Contents 18. Share Repurchase Programs Effective April 1, 2019, our Board of Directors authorized the repurchase of up to 150 million shares of our common stock by March 31, 2022, replacing ourprevious repurchase program. These repurchases may be made on the open market or through other transactions. Our management has sole discretionwith respect to determining the timing and amount of these transactions. As of December 31, 2021, we repurchased a total of $48.2 billion of our commonstock since commencement of our repurchase programs in 2007. The table below represents shares repurchased under repurchase programsduring 2021 and 2020: Number of SharesPurchased Average Price Paid [a] 2021 2020 2021 2020 First quarter [b] 6,691,421 14,305,793 $209.50 $178.66 Second quarter [c] 12,204,409 - 222.46 - Third quarter [d] 8,604,239 4,045,575 210.31 98.87 Fourth quarter 5,837,551 3,780,743 233.71 198.07 Total 33,337,620 22,132,111 $218.69 $167.39 Remaining number of shares that may be repurchased under current authority 77,685,350 [a]In the period of the final settlement, the average price paid under the accelerated share repurchase programs is calculated based on the total program value less the valueassigned to the initial delivery of shares. The average price of the completed 2021 and 2020 accelerated share repurchase programs was $217.56 and $155.86, respectively.[b]Includes 8,786,380 shares repurchased in February 2020 under accelerated share repurchase programs.[c]Includes 7,209,156 shares repurchased in May 2021 under accelerated share repurchase programs.[d]Includes an incremental 1,983,859 and 4,045,575 shares received upon final settlement in September 2021 and July 2020, respectively, under accelerated share repurchaseprograms. Management's assessments of market conditions and other pertinent factors guide the timing and volume of all repurchases. We expect to fund any sharerepurchases under this program through cash generated from operations, the sale or lease of various operating and non-operating properties, debtissuances, and cash on hand. Open market repurchases are recorded in treasury stock at cost, which includes any applicable commissions and fees. From January 1, 2022, through February 3, 2022, we repurchased 2.4 million shares at an aggregate cost of approximately $590 million. On February 3, 2022, the Board of Directors approved a new share repurchase authorization, enabling the Company to buy up to 100 million of its commonshares by March 31, 2025. The new authorization is effective April 1, 2022, and replaces the current authorization, which will expire on March 31, 2022. Accelerated Share Repurchase Programs – The Company has established accelerated share repurchase programs (ASRs) with financial institutions torepurchase shares of our common stock. These ASRs have been structured so that at the time of commencement, we pay a specified amount to thefinancial institutions and receive an initial delivery of shares. Additional shares may be received at the time of settlement. The final number of shares to bereceived is based on the volume weighted average price of the Company’s common stock during the ASR term, less a discount and subject to potentialadjustments pursuant to the terms of such ASR. On May 26, 2021, the Company received 7,209,156 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. Upon settlementof these ASRs in the third quarter of 2021, we received 1,983,859 additional shares. On February 19, 2020, the Company received 8,786,380 shares of its common stock repurchased under ASRs for an aggregate of $2.0 billion. Uponsettlement of these ASRs in the third quarter of 2020, we received 4,045,575 additional shares. ASRs are accounted for as equity transactions, and at the time of receipt, shares are included in treasury stock at fair market value as of thecorresponding initiation or settlement date. The Company reflects shares received as a repurchase of common stock in the weighted average commonshares outstanding calculation for basic and diluted earnings per share. 19. Related Parties UPRR and other North American railroad companies jointly own TTX Company (TTX). UPRR has a 36.79% economic and voting interest in TTX while theother North American railroads own the remaining interest. In accordance with ASC 323 Investments - Equity Method and Joint Venture, UPRR applies theequity method of accounting to our investment in TTX. TTX is a rail car pooling company that owns rail cars and intermodal wells to serve North America’s railroads. TTX assists railroads in meeting the needs oftheir customers by providing rail cars in an efficient, pooled environment. All railroads have the ability to utilize TTX rail cars through car hire by renting railcars at stated rates. UPRR had $1.6 billion and $1.5 billion recognized as investments related to TTX in our Consolidated Statements of Financial Position as of December 31,2021 and 2020, respectively. TTX car hire expenses of $375 million in 2021, $375 million in 2020, and $407 million in 2019 are included in equipment andother rents in our Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $57 million and $59 million at December 31, 2021and 2020, respectively. 60Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of theCorporation’s management, including the Corporation’s Chief Executive Officer (CEO) and Executive Vice President and Chief Financial Officer (CFO), ofthe effectiveness of the design and operation of the Corporation’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15.In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving the desired control objectives. Based upon that evaluation, the CEO and theCFO concluded that, as of the end of the period covered by this report, the Corporation’s disclosure controls and procedures were effective to providereasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within thetime periods specified by the SEC, and that such information is accumulated and communicated to management, including the CEO and CFO, asappropriate, to allow timely decisions regarding required disclosure. Additionally, the CEO and CFO determined that there were no changes to the Corporation’s internal control over financial reporting (as defined in ExchangeAct Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’sinternal control over financial reporting. MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of Union Pacific Corporation and Subsidiary Companies (the Corporation) is responsible for establishing and maintaining adequateinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The Corporation’s internal control system was designedto provide reasonable assurance to the Corporation’s management and Board of Directors regarding the preparation and fair presentation of publishedfinancial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provideonly reasonable assurance with respect to financial statement preparation and presentation. The Corporation’s management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2021. In makingthis assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control –Integrated Framework (2013). Based on our assessment, management believes that, as of December 31, 2021, the Corporation’s internal control overfinancial reporting is effective based on those criteria. The Corporation’s independent registered public accounting firm has issued an attestation report on the effectiveness of the Corporation’s internal controlover financial reporting. This report appears on the next page. February 3, 2022 61REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Union Pacific Corporation Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Union Pacific Corporation and Subsidiary Companies (the “Corporation”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Corporation and our report dated February 4, 2022, expressed an unqualified opinion on those financial statements. Basis for Opinion The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Omaha, Nebraska February 4, 2022 62 Table of Contents Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers, and Corporate Governance (a)Directors of Registrant. Information as to the names, ages, positions, and offices with UPC, terms of office, periods of service, business experience during the past five years,and certain other directorships held by each director or person nominated to become a director of UPC is set forth in the Election of Directors segmentof the Proxy Statement and is incorporated herein by reference. Information concerning our Audit Committee and the independence of its members, along with information about the audit committee financial expert(s)serving on the Audit Committee, is set forth in the Audit Committee segment of the Proxy Statement and is incorporated herein by reference. (b)Executive Officers of Registrant. Information concerning the executive officers of UPC and its subsidiaries is presented in Part I of this report under Information About Our ExecutiveOfficers and Principal Executive Officers of Our Subsidiaries. (c)Delinquent Section 16(a) Reports. Information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth in the Section 16(a) Beneficial OwnershipReporting Compliance segment of the Proxy Statement and is incorporated herein by reference. (d)Code of Ethics for Chief Executive Officer and Senior Financial Officers of Registrant. The Board of Directors of UPC has adopted the UPC Code of Ethics for the Chief Executive Officer and Senior Financial Officers (the Code). A copy ofthe Code may be found on the Internet at our website www.up.com/investor/governance. We intend to disclose any amendments to the Code or anywaiver from a provision of the Code on our website. Item 11. Executive Compensation Information concerning compensation received by our directors and our named executive officers is presented in the Compensation Discussion andAnalysis, Summary Compensation Table, Grants of Plan-Based Awards in Fiscal Year 2021, Outstanding Equity Awards at 2021 Fiscal Year-End, OptionExercises and Stock Vested in Fiscal Year 2021, Pension Benefits at 2021 Fiscal Year-End, Nonqualified Deferred Compensation at 2021 Fiscal Year-End,Potential Payments Upon Termination or Change in Control and Director Compensation in Fiscal Year 2021 segments of the Proxy Statement and isincorporated herein by reference. Additional information regarding compensation of directors, including Board committee members, is set forth in the By-Laws of UPC and the Stock Unit Grant and Deferred Compensation Plan for the Board of Directors, both of which are included as exhibits to this report.Information regarding the Compensation and Benefits Committee is set forth in the Compensation Committee Interlocks and Insider Participation andCompensation Committee Report segments of the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information as to the number of shares of our equity securities beneficially owned by each of our directors and nominees for director, our named executiveofficers, our directors and executive officers as a group, and certain beneficial owners is set forth in the Security Ownership of Certain Beneficial Ownersand Management segment of the Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions and Director Independence Information on related transactions is set forth in the Certain Relationships and Related Transactions and Compensation Committee Interlocks and InsiderParticipation segments of the Proxy Statement and is incorporated herein by reference. We do not have any relationship with any outside third-party thatwould enable such a party to negotiate terms of a material transaction that may not be available to, or available from, other parties on an arm’s-lengthbasis. Information regarding the independence of our directors is set forth in the Director Independence segment of the Proxy Statement and is incorporated hereinby reference. 63Table of Contents Item 14. Principal Accountant Fees and Services Information concerning the fees billed by our independent registered public accounting firm and the nature of services comprising the fees for each of thetwo most recent fiscal years in each of the following categories: (i) audit fees, (ii) audit-related fees, (iii) tax fees, and (iv) all other fees, is set forth in theIndependent Registered Public Accounting Firm’s Fees and Services segment of the Proxy Statement and is incorporated herein by reference. Information concerning our Audit Committee’s policies and procedures pertaining to pre-approval of audit and non-audit services rendered by ourindependent registered public accounting firm is set forth in the Audit Committee segment of the Proxy Statement and is incorporated herein by reference. PART IV Item 15. Exhibit and Financial Statement Schedules (a)Financial Statements, Financial Statement Schedules, and Exhibits: (1) Financial Statements The financial statements filed as part of this filing are listed on the index to the Financial Statements and Supplementary Data, Item 8, on page 33. (2) Financial Statement Schedules Schedules have been omitted because they are not applicable or not required or the information required to be set forth therein is included in theFinancial Statements and Supplementary Data, Item 8, or notes thereto. (3) Exhibits Exhibits are listed in the exhibit index beginning on page 64. The exhibits include management contracts, compensatory plans and arrangementsrequired to be filed as exhibits to the Form 10-K by Item 601 (10) (iii) of Regulation S-K. UNION PACIFIC CORPORATIONExhibit Index Exhibit No.Description Filed with this Statement 10(a)†Form of Performance Stock Unit Agreement dated February 3, 2022. 10(b)†Form of Non-Qualified Stock Option Agreement for Executives dated February 3, 2022. 10(c)†Union Pacific Corporation Key Employee Continuity Plan, as amended December 10, 2021. 21List of the Corporation’s significant subsidiaries and their respective states of incorporation. 23Independent Registered Public Accounting Firm’s Consent. 24Powers of attorney executed by the directors of UPC. 31(a)Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Lance M. Fritz. 31(b)Certifications Pursuant to Rule 13a-14(a), of the Exchange Act, as Adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 –Jennifer L. Hamann. 32Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002- Lance M. Fritz and Jennifer L. Hamann. 64Table of Contents 101The following financial and related information from Union Pacific Corporation’s Annual Report on Form 10-K for the yearended December 31, 2021 (filed with the SEC on February 4, 2022), formatted in Inline Extensible Business ReportingLanguage (iXBRL) includes (i) Consolidated Statements of Income for the years ended December 31, 2021, 2020, and2019, (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020, and 2019, (iii)Consolidated Statements of Financial Position at December 31, 2021 and 2020, (iv) Consolidated Statements of CashFlows for the years ended December 31, 2021, 2020, and 2019, (v) Consolidated Statements of Changes in CommonShareholders’ Equity for the years ended December 31, 2021, 2020, and 2019, and (vi) the Notes to the ConsolidatedFinancial Statements. 104Cover Page Interactive Data File, formatted in Inline XBRL (contained in Exhibit 101). Incorporated by Reference 3(a)Restated Articles of Incorporation of UPC, as amended and restated through June 27, 2011, and as further amended May15, 2014, are incorporated herein by reference to Exhibit 3(a) to the Corporation’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2014. 3(b)By-Laws of UPC, as amended, effective November 19, 2015, are incorporated herein by reference to Exhibit 3.2 to theCorporation’s Current Report on Form 8-K dated November 19, 2015. 4(a)Description of securities registered under Section 12 of the Exchange Act is incorporated herein by reference to Exhibit4(a) to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019. 4(b)Indenture, dated as of December 20, 1996, between UPC and Wells Fargo Bank, National Association, as successor toCitibank, N.A., as Trustee, is incorporated herein by reference to Exhibit 4.1 to UPC’s Registration Statement on Form S-3(No. 333-18345). 4(c)Indenture, dated as of April 1, 1999, between UPC and The Bank of New York, as successor to JP Morgan Chase Bank,formerly The Chase Manhattan Bank, as Trustee, is incorporated herein by reference to Exhibit 4.2 to UPC’s RegistrationStatement on Form S-3 (No. 333-75989). 4(d)Form of 2.375% Note due 2031 is incorporated by reference to Exhibit 4.1 to the Corporation’s Current Report on Form 8-Kdated May 20, 2021. 4(e)Form of 3.200% Note due 2041 is incorporated by reference to Exhibit 4.2 to the Corporation’s Current Report on Form 8-Kdated May 20, 2021. 4(f)Form of 3.550% Note due 2061 is incorporated by reference to Exhibit 4.3 to the Corporation’s Current Report on Form 8-Kdated May 20, 2021. 4(g)Form of 2.375% Note due 2031 is incorporated by reference to Exhibit 4.1 to the Corporation’s Current Report on Form 8-Kdated September 10, 2021. 4(h)Form of 2.950% Note due 2052 is incorporated by reference to Exhibit 4.2 to the Corporation’s Current Report on Form 8-Kdated September 10, 2021. Certain instruments evidencing long-term indebtedness of UPC are not filed as exhibits because the total amount ofsecurities authorized under any single such instrument does not exceed 10% of the Corporation’s total consolidatedassets. UPC agrees to furnish the Commission with a copy of any such instrument upon request by the Commission. 10(d)†Supplemental Thrift Plan (409A Grandfathered Component) of Union Pacific Corporation, as amended March 1, 2013, isincorporated herein by reference to Exhibit 10(d) to the Corporation’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2013. 10(e)†Supplemental Thrift Plan (409A Non-Grandfathered Component) of Union Pacific Corporation, as amended January 1, 2018,is incorporated herein by reference to Exhibit 10(d) to the Corporation’s Annual Report on Form 10-K for the year endedDecember 31, 2017. 10(f)†Supplemental Pension Plan for Officers and Managers (409A Grandfathered Component) of Union Pacific Corporation andAffiliates, as amended February 1, 2013, and March 1, 2013 is incorporated herein by reference to Exhibit 10(f) to theCorporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. 10(g)†Supplemental Pension Plan for Officers and Managers (409A Non-Grandfathered Component) of Union Pacific Corporationand Affiliates, as amended December 9, 2020, is incorporated herein by reference to Exhibit 10(d) to the Corporation’sAnnual Report on Form 10-K for the year ended December 31, 2020. 65Table of Contents 10(h)†Deferred Compensation Plan (409A Grandfathered Component) of Union Pacific Corporation, as amended March 1, 2013,is incorporated herein by reference to Exhibit 10(b) to the Corporation’s Quarterly Report on Form 10-Q for the quarterended March 31, 2013. 10(i)†Deferred Compensation Plan (409A Non-Grandfathered Component) of Union Pacific Corporation, as amended December9, 2020, is incorporated herein by reference to Exhibit 10(c) to the Corporation’s Annual Report on Form 10-K for the yearended December 31, 2020. 10(j)†Union Pacific Corporation 2000 Directors Plan, effective as of April 21, 2000, as amended November 16, 2006, January 30,2007 and January 1, 2009 is incorporated herein by reference to Exhibit 10(j) to the Corporation’s Annual Report on Form10-K for the year ended December 31, 2008. 10(k)†Union Pacific Corporation Stock Unit Grant and Deferred Compensation Plan for the Board of Directors (409A Non-Grandfathered Component), effective as of January 1, 2009 is incorporated herein by reference to Exhibit 10(k) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2008. 10(l)†Union Pacific Corporation Stock Unit Grant and Deferred Compensation Plan for the Board of Directors (409AGrandfathered Component), as amended and restated in its entirety, effective as of January 1, 2009 is incorporated hereinby reference to Exhibit 10(l) to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008. 10(m)†UPC 2004 Stock Incentive Plan amended March 1, 2013, is incorporated herein by reference to Exhibit 10(g) to theCorporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. 10(n)†Union Pacific Corporation Policy for Recoupment of Incentive Compensation, effective January 1, 2020 is incorporatedherein by reference to Exhibit 10(c) to the Corporation’s Annual Report on Form 10-K for the year ended December 31,2019. 10(o)†Union Pacific Corporation 2013 Stock Incentive Plan, effective May 16, 2013, as amended effective as of January 1, 2020is incorporated herein by reference to Exhibit 10(d) to the Corporation’s Annual Report on Form 10-K for the year endedDecember 31, 2019. 10(p)†Union Pacific Corporation Executive Incentive Plan, effective May 5, 2005, amended and restated effective January 1, 2020is incorporated herein by reference to Exhibit 10(e) to the Corporation’s Annual Report on Form 10-K for the year endedDecember 31, 2019. 10(q)† Union Pacific Corporation 2021 Stock Incentive Plan, effective as of May 13, 2021 is incorporated by reference to Exhibit99.1 to the Corporation's Form S-8 dated May 25, 2021. 10(r)Amended and Restated Registration Rights Agreement, dated as of July 12, 1996, among UPC, UP Holding Company,Inc., Union Pacific Merger Co. and Southern Pacific Rail Corporation (SP) is incorporated herein by reference to Annex J tothe Joint Proxy Statement/Prospectus included in Post-Effective Amendment No. 2 to UPC’s Registration Statement onForm S-4 (No. 33-64707). 10(s)Agreement, dated September 25, 1995, among UPC, UPRR, Missouri Pacific Railroad Company (MPRR), SP, SouthernPacific Transportation Company (SPT), The Denver & Rio Grande Western Railroad Company (D&RGW), St. LouisSouthwestern Railway Company (SLSRC) and SPCSL Corp. (SPCSL), on the one hand, and Burlington Northern RailroadCompany (BN) and The Atchison, Topeka and Santa Fe Railway Company (Santa Fe), on the other hand, is incorporatedby reference to Exhibit 10.11 to UPC’s Registration Statement on Form S-4 (No. 33-64707). 10(t)Supplemental Agreement, dated November 18, 1995, between UPC, UPRR, MPRR, SP, SPT, D&RGW, SLSRC andSPCSL, on the one hand, and BN and Santa Fe, on the other hand, is incorporated herein by reference to Exhibit 10.12 toUPC’s Registration Statement on Form S-4 (No. 33-64707). 10(u)†Form of Non-Qualified Stock Option Agreement for Executives is incorporated herein by reference to Exhibit 10(c) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2012. 10(v)†Form of Stock Unit Agreement for Executives is incorporated herein by reference to Exhibit 10(b) to the Corporation’sAnnual Report on Form 10-K for the year ended December 31, 2012. 66Table of Contents 10(w)†Form of Non-Qualified Stock Option Agreement for Executives is incorporated herein by reference to Exhibit 10(c) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2013. 10(x)†Form of Stock Unit Agreement for Executives is incorporated herein by reference to Exhibit 10(b) to the Corporation’sAnnual Report on Form 10-K for the year ended December 31, 2013. 10(y)†Form of 2019 Long Term Plan Stock Unit Agreement is incorporated herein by reference to Exhibit 10(a) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2018. 10(z)†Form of 2020 Long Term Plan Stock Unit Agreement is incorporated herein by reference to Exhibit 10(a) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2019. 10(aa)†Form of 2021 Long Term Plan Stock Unit Agreement is incorporated herein by reference to Exhibit 10(a) to theCorporation’s Annual Report on Form 10-K for the year ended December 31, 2020. 10(bb)†Executive Incentive Plan (2005) – Deferred Compensation Program, dated December 21, 2005 is incorporated herein byreference to Exhibit 10(g) to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005. † Indicates a management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary None. 67Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on this 4th day of February, 2022. UNION PACIFIC CORPORATION By/s/ Lance M. Fritz Lance M. Fritz, Chairman, President and Chief Executive Officer Union Pacific Corporation Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, on this 4th day of February, 2022, by the followingpersons on behalf of the registrant and in the capacities indicated. PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR: By/s/ Lance M. Fritz Lance M. Fritz, Chairman, President and Chief Executive Officer Union Pacific Corporation PRINCIPAL FINANCIAL OFFICER: By/s/ Jennifer L. Hamann Jennifer L. Hamann Executive Vice President and Chief Financial Officer PRINCIPAL ACCOUNTING OFFICER: By/s/ Todd M. Rynaski Todd M. Rynaski, Vice President and Controller DIRECTORS: Andrew H. Card, Jr.*Jane H. Lute*William J. DeLaney*Michael R. McCarthy*David B. Dillon*Thomas F. McLarty III*Sheri H. Edison*Jose H. Villarreal*Deborah C. Hopkins*Christopher J. Williams* * By/s/ Craig V. Richardson Craig V. Richardson, Attorney-in-fact 68Exhibit 21 SIGNIFICANT SUBSIDIARIES OF UNION PACIFIC CORPORATION Name of Corporation State of Incorporation Union Pacific Railroad Company Delaware Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Post-Effective Amendment No. 1 to Registration Statement No. 33-12513, Registration Statement No. 33-53968, Registration Statement No. 33-49785, Registration Statement No. 33-49849, Registration Statement No. 333-10797, Registration Statement No. 333-88709, Registration Statement No. 333-42768, Registration Statement No. 333-106707, Registration Statement No. 333-106708, Registration Statement No. 333-105714, Registration Statement No. 333- 105715, Registration Statement No. 333-116003, Registration Statement No. 333-132324, Registration Statement No. 333-155708, Registration Statement No. 333-170209, Registration Statement No. 333- 170208, Registration Statement No. 333-188671, Registration Statement No. 333-260789, Registration Statement No. 333-260788, and Registration Statement No. 333-256460 on Form S-8, Registration Statement No. 333-214407, Registration Statement No. 333-236860, Registration Statement No. 333- 258422, and Registration Statement No. 333-252948 on Form S-4, and Registration Statement No. 333- 201958, Registration Statement No. 333-222979, and Registration Statement No. 333-252947 on Form S-3 of our reports dated February 4, 2022, relating to the consolidated financial statements of Union Pacific Corporation and Subsidiary Companies (the Corporation), and the effectiveness of the Corporation's internal control over financial reporting, appearing in this Annual Report on Form 10-K for the year ended December 31, 2021. Omaha, Nebraska February 4, 2022 Exhibit 24 UNION PACIFIC CORPORATIONPowers of Attorney Each of the undersigned directors of Union Pacific Corporation, a Utah corporation (the Company), do hereby appoint each of Lance M. Fritz and Craig V.Richardson his or her true and lawful attorney-in-fact and agent, to sign on his or her behalf the Company’s Annual Report on Form 10-K, for the year endedDecember 31, 2021, and any and all amendments thereto, and to file the same, with all exhibits thereto, with the Securities and Exchange Commission. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney as of February 3, 2022. /s/ Andrew H. Card, Jr. /s/ Jane H. LuteAndrew H. Card, Jr. Jane H. Lute /s/ William J. DeLaney /s/ Michael R. McCarthyWilliam J. DeLaney Michael R. McCarthy /s/ David B. Dillon /s/ Thomas F. McLarty IIIDavid B. Dillon Thomas F. McLarty III /s/ Sheri H. Edison /s/ Jose H. VillarrealSheri H. Edison Jose H. Villarreal /s/ Deborah C. Hopkins /s/ Christopher J. WilliamsDeborah C. Hopkins Christopher J. Williams Exhibit 31(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Lance M. Fritz, certify that: 1. I have reviewed this annual report on Form 10-K of Union Pacific Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 4, 2022 /s/ Lance M. Fritz Lance M. Fritz Chairman, President and Chief Executive Officer Exhibit 31(b) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Jennifer L. Hamann, certify that: 1. I have reviewed this annual report on Form 10-K of Union Pacific Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 4, 2022 /s/ Jennifer L. Hamann Jennifer L. Hamann Executive Vice President and Chief Financial Officer Exhibit 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Annual Report of Union Pacific Corporation (the Corporation) on Form 10-K for the period ending December 31, 2021, asfiled with the Securities and Exchange Commission on the date hereof (the Report), I, Lance M. Fritz, Chairman, President and Chief Executive Officer of theCorporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By: /s/ Lance M. FritzLance M. FritzChairman, President andChief Executive OfficerUnion Pacific Corporation February 4, 2022 A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished tothe Securities and Exchange Commission or its staff upon request. CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Annual Report of Union Pacific Corporation (the Corporation) on Form 10-K for the period ending December 31, 2021, asfiled with the Securities and Exchange Commission on the date hereof (the Report), I, Jennifer L. Hamann, Executive Vice President and Chief Financial Officerof the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. By: /s/ Jennifer L. HamannJennifer L. HamannExecutive Vice President andChief Financial OfficerUnion Pacific Corporation February 4, 2022 A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished tothe Securities and Exchange Commission or its staff upon request.

Continue reading text version or see original annual report in PDF format above