10-Q 1 unp20220331_10q.htm FORM 10-Q unp20220331_10q.htm
0000100885 UNION PACIFIC CORP false --12-31 Q1 2022 2.50 2.50 1,400,000,000 1,400,000,000 1,112,643,596 1,112,440,400 628,202,430 638,841,656 0.97 1.18 3 0 3 5 8 3 1 1 1.25 2.800 February 14, 2032 0.50 3.375 February 14, 2042 1.25 3.500 February 14, 2053 0.50 3.850 February 14, 2072 April 15, 2022 1.6 AOCI = Accumulated Other Comprehensive Income/Loss (Note 8) Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets. Net of deferred taxes of ($5) million and ($8) million during the three months ended March 31, 2022 and 2021, respectively. 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 value assigned to the initial delivery of shares. The average price of the initial settlement of the 2022 accelerated share repurchase programs was $250.99. Includes 7,012,232 shares repurchased in February 2022 under accelerated share repurchase programs. ESPP = employee stock purchase plan (Note 4) The accumulated other comprehensive income/loss reclassification components are 1) prior service cost/(credit) and 2) net actuarial loss which are both included in the computation of net periodic pension cost. 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

 

For 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. Employer

incorporation 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 Class

Trading Symbol

Name of each exchange on which registered

Common Stock (Par Value $2.50 per share)

UNP

New York Stock Exchange

 

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 1934 during 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 filing requirements 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 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” 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 any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes     ☒ No

As of April 15, 2022, there were 628,025,156 shares of the Registrant's Common Stock outstanding.



 

TABLE OF CONTENTS

UNION PACIFIC CORPORATION

AND SUBSIDIARY COMPANIES

 

PART I. FINANCIAL INFORMATION
     

Item 1.

Condensed Consolidated Financial Statements:

 
 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

 
 

For the Three Months Ended March 31, 2022 and 2021

3
     
 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 
 

For the Three Months Ended March 31, 2022 and 2021

3
     
 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

 
 

At March 31, 2022, and December 31, 2021

4
     
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 
 

For the Three Months Ended March 31, 2022 and 2021

5
     
 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS’ EQUITY (Unaudited)

 
 

For the Three Months Ended March 31, 2022 and 2021

6
     
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7
     

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

18
     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28
     

Item 4.

Controls and Procedures

28
     
PART II. OTHER INFORMATION
     

Item 1.

Legal Proceedings

29
     

Item 1A.

Risk Factors

29
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29
     

Item 3.

Defaults Upon Senior Securities

30
     

Item 4.

Mine Safety Disclosures

30
     

Item 5.

Other Information

30

     

Item 6.

Exhibits

30

   

Signatures

31

   

Certifications

32

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

Condensed Consolidated Statements of Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

 

Millions, Except Per Share Amounts, for the Three Months Ended March 31,

 

2022

   

2021

 

Operating revenues:

               

Freight revenues

  $ 5,440     $ 4,649  

Other revenues

    420       352  

Total operating revenues

    5,860       5,001  

Operating expenses:

               

Compensation and benefits

    1,101       1,026  

Fuel

    714       411  

Purchased services and materials

    561       490  

Depreciation

    555       549  

Equipment and other rents

    215       212  

Other

    337       320  

Total operating expenses

    3,483       3,008  

Operating income

    2,377       1,993  

Other income, net (Note 6)

    47       51  

Interest expense

    (307 )     (290 )

Income before income taxes

    2,117       1,754  

Income taxes

    (487 )     (413 )

Net income

  $ 1,630     $ 1,341  

Share and Per Share (Note 7):

               

Earnings per share - basic

  $ 2.58     $ 2.01  

Earnings per share - diluted

  $ 2.57     $ 2.00  

Weighted average number of shares - basic

    632.2       667.6  

Weighted average number of shares - diluted

    633.6       669.2  

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies

 

Millions, for the Three Months Ended March 31,

 

2022

  

2021

 

Net income

 $1,630  $1,341 

Other comprehensive income/(loss):

        

Defined benefit plans

  15   25 

Foreign currency translation

  21   (26)

Total other comprehensive income/(loss) [a]

  36   (1)

Comprehensive income

 $1,666  $1,340 

 

[a]

Net of deferred taxes of ($5) million and ($8) million during the three months ended March 31, 2022 and 2021, respectively.

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

Condensed Consolidated Statements of Financial Position (Unaudited)

Union Pacific Corporation and Subsidiary Companies

 

  

Mar. 31,

  

Dec. 31,

 

Millions, Except Share and Per Share Amounts

 

2022

  

2021

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $909  $960 

Short-term investments (Note 12)

  46   46 

Accounts receivable, net (Note 9)

  1,958   1,722 

Materials and supplies

  726   621 

Other current assets

  237   202 

Total current assets

  3,876   3,551 

Investments

  2,279   2,241 

Properties, net (Note 10)

  55,064   54,871 

Operating lease assets

  1,727   1,787 

Other assets

  1,105   1,075 

Total assets

 $64,051  $63,525 

Liabilities and Common Shareholders' Equity

        

Current liabilities:

        

Accounts payable and other current liabilities (Note 11)

 $3,903  $3,578 

Debt due within one year (Note 13)

  1,559   2,166 

Total current liabilities

  5,462   5,744 

Debt due after one year (Note 13)

  30,680   27,563 

Operating lease liabilities

  1,291   1,429 

Deferred income taxes

  12,739   12,675 

Other long-term liabilities

  1,982   1,953 

Commitments and contingencies (Note 14)

          

Total liabilities

  52,154   49,364 

Common shareholders' equity:

        

Common shares, $2.50 par value, 1,400,000,000 authorized; 1,112,643,596 and

        

1,112,440,400 issued; 628,202,430 and 638,841,656 outstanding, respectively

  2,782   2,781 

Paid-in-surplus

  4,571   4,979 

Retained earnings

  55,937   55,049 

Treasury stock

  (50,515)  (47,734)

Accumulated other comprehensive loss (Note 8)

  (878)  (914)

Total common shareholders' equity

  11,897   14,161 

Total liabilities and common shareholders' equity

 $64,051  $63,525 

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

Union Pacific Corporation and Subsidiary Companies

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Operating Activities

               

Net income

  $ 1,630     $ 1,341  

Adjustments to reconcile net income to cash provided by operating activities:

               

Depreciation

    555       549  

Deferred and other income taxes

    60       54  

Other operating activities, net

    (43 )     (131 )

Changes in current assets and liabilities:

               

Accounts receivable, net

    (236 )     (105 )

Materials and supplies

    (105 )     (21 )

Other current assets

    (43 )     (1 )

Accounts payable and other current liabilities

    63       (67 )

Income and other taxes

    355       339  

Cash provided by operating activities

    2,236       1,958  

Investing Activities

               

Capital investments

    (848 )     (536 )

Proceeds from asset sales

    32       17  

Maturities of short-term investments (Note 12)

    -       24  

Purchases of short-term investments (Note 12)

    -       (24 )

Other investing activities, net

    (20 )     14  

Cash used in investing activities

    (836 )     (505 )

Financing Activities

               

Debt issued (Note 13)

    3,490       -  

Share repurchase programs (Note 15)

    (2,743 )     (1,347 )

Debt repaid

    (866 )     (47 )

Dividends paid

    (743 )     (650 )

Accelerated share repurchase programs pending final settlement (Note 15)

    (440 )     -  

Net issued/(paid) commercial paper (Note 13)

    (100 )     (15 )

Other financing activities, net

    (51 )     (14 )

Cash used in financing activities

    (1,453 )     (2,073 )

Net Change in Cash, Cash Equivalents, and Restricted Cash

    (53 )     (620 )

Cash, cash equivalents, and restricted cash at beginning of year

    983       1,818  

Cash, cash equivalents, and restricted cash at end of period

  $ 930     $ 1,198  

Supplemental Cash Flow Information

               

Non-cash investing and financing activities:

               

Capital investments accrued but not yet paid

  $ 157     $ 99  

Common shares repurchased but not yet paid

    10       55  

Cash (paid for)/received from:

               

Income taxes, net of refunds

  $ (7 )   $ (1 )

Interest, net of amounts capitalized

    (382 )     (394 )

Reconciliation of cash, cash equivalents, and restricted cash

to the Condensed Consolidated Statement of Financial Position:

Cash and cash equivalents

  $ 909     $ 1,183  

Restricted cash equivalents in other current assets

    17       3  

Restricted cash equivalents in other assets

    4       12  

Total cash, cash equivalents and restricted cash equivalents per above

  $ 930     $ 1,198  

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

Condensed Consolidated Statements of Changes in Common Shareholders Equity (Unaudited)

Union Pacific Corporation and Subsidiary Companies

 

Millions

 Common Shares  Treasury Shares  Common Shares  Paid-in-Surplus  Retained Earnings  Treasury Stock  AOCI [a]  

Total

 

Balance at January 1, 2021

  1,112.2   (440.9) $2,781  $4,864  $51,326  $(40,420) $(1,593) $16,958 

Net income

          -   -   1,341   -   -   1,341 

Other comprehensive income/(loss)

          -   -   -   -   (1)  (1)

Conversion, stock option exercises, forfeitures, ESPP, and other [b]

  0.3   0.2   -   10   -   (4)  -   6 

Share repurchase programs (Note 15)

  -   (6.7)  -   -   -   (1,402)  -   (1,402)

Dividends declared ($0.97 per share)

  -   -   -   -   (648)  -   -   (648)

Balance at March 31, 2021

  1,112.5   (447.4) $2,781  $4,874  $52,019  $(41,826) $(1,594) $16,254 
                                 

Balance at January 1, 2022

  1,112.4   (473.6) $2,781  $4,979  $55,049  $(47,734) $(914) $14,161 

Net income

          -   -   1,630   -   -   1,630 

Other comprehensive income/(loss)

          -   -   -   -   36   36 

Conversion, stock option exercises, forfeitures, ESPP, and other [b]

  0.2   0.2   1   32   -   (28)  -   5 

Share repurchase programs (Note 15)

  -   (11.0)  -   (440)  -   (2,753)  -   (3,193)

Dividends declared ($1.18 per share)

  -   -   -   -   (742)  -   -   (742)

Balance at March 31, 2022

  1,112.6   (484.4) $2,782  $4,571  $55,937  $(50,515) $(878) $11,897 

 

[a]

AOCI = Accumulated Other Comprehensive Income/Loss (Note 8)

[b] ESPP = employee stock purchase plan (Note 4)

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

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

 

1. Basis of Presentation

 

Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, this Quarterly Report on Form 10-Q should be read in conjunction with our Consolidated Financial Statements and notes thereto contained in our 2021 Annual Report on Form 10-K. Our Consolidated Statement of Financial Position at December 31, 2021, is derived from audited financial statements. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results for the entire year ending December 31, 2022.

 

The Condensed Consolidated Financial Statements are presented in accordance with GAAP as codified in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

 

2. Accounting Pronouncements

 

In November 2021, the FASB issued Accounting Standards Update No. (ASU) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to provide certain disclosures when they have received government assistance and use a grant or contribution accounting model by analogy to other accounting guidance. The ASU was effective January 1, 2022, and had no material impact on our consolidated financial statements and related disclosures.

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP principles to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference 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 financial statements and related disclosures.

 

3. Operations and Segmentation

 

The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide and analyze revenue by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network. Our operating revenues are primarily derived from contracts with customers for the transportation of freight from origin to destination.

 

7

 

The following table represents a disaggregation of our freight and other revenues:

 

Millions, for the Three Months Ended March 31,

 

2022

  

2021

 

Bulk

 $1,832  $1,512 

Industrial

  1,921   1,656 

Premium

  1,687   1,481 

Total freight revenues

 $5,440  $4,649 

Other subsidiary revenues

  205   177 

Accessorial revenues

  201   161 

Other

  14   14 

Total operating revenues

 $5,860  $5,001 

 

Although our revenues are principally derived from customers domiciled in the U.S., the ultimate points of origin or destination for some products we transport are outside the U.S. Each of our commodity groups includes revenue from shipments to and from Mexico. Included in the above table are freight revenues from our Mexico business which amounted to $654 million and $565 million, respectively, for the three months ended March 31, 2022 and 2021

 

4. Stock-Based Compensation

 

We have several stock-based compensation plans under which employees receive nonvested stock options, nonvested retention shares, and nonvested stock units. We refer to the nonvested shares and stock units collectively as “retention awards”. Starting in July 2021, employees are also able to participate in our employee stock purchase plan (ESPP). 

 

Information regarding stock-based compensation appears in the table below:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Stock-based compensation, before tax:

               

Stock options

  $ 4     $ 4  

Retention awards

    22       16  

ESPP

    4       -  

Total stock-based compensation, before tax

  $ 30     $ 20  

Excess tax benefits from equity compensation plans

  $ 17     $ 15  

 

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 from the date of grant. None of the stock options outstanding at March 31, 2022, 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

 

2022

   

2021

 

Risk-free interest rate

    1.6 %     0.4 %

Dividend yield

    1.9 %     1.9 %

Expected life (years)

    4.4       4.6  

Volatility

    28.7 %     28.3 %

Weighted-average grant-date fair value of options granted

  $ 51.92     $ 39.97  

 

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 dividends paid 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; and expected volatility is based on the historical volatility of our stock price over the expected life of the stock option.

 

8

 

A summary of stock option activity during the three months ended March 31, 2022, is presented below:

 

 

Options (thous.)

Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (millions)  

Outstanding at January 1, 2022

    2,106     $ 149.84       6.3     $ 215  

Granted

    328       244.35       N/A       N/A  

Exercised

    (322 )     127.49       N/A       N/A  

Forfeited or expired

    (6 )     206.59       N/A       N/A  

Outstanding at March 31, 2022

    2,106     $ 167.82       6.8     $ 222  

Vested or expected to vest at March 31, 2022

    2,086     $ 167.27       6.8     $ 221  

Options exercisable at March 31, 2022

    1,407     $ 142.05       5.6     $ 185  

 

At March 31, 2022, there was $28 million of unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.7 years. Additional information regarding stock option exercises appears in the following table:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Intrinsic value of stock options exercised

  $ 42     $ 23  

Cash received from option exercises

    15       30  

Treasury shares repurchased for employee payroll taxes

    (5 )     (6 )

Tax benefit realized from option exercises

    5       4  

Aggregate grant-date fair value of stock options vested

    13       14  

 

Retention Awards – Retention awards are granted at no cost to the employee, vest over periods lasting up to 4 years, and dividends and dividend equivalents are paid to participants during the vesting periods.

 

Changes in our retention awards during the three months ended March 31, 2022, were as follows:

 

   

Shares (thous.)

    Weighted-Average Grant-Date Fair Value  

Nonvested at January 1, 2022

    1,287     $ 165.10  

Granted

    232       244.40  

Vested

    (402 )     125.26  

Forfeited

    (18 )     187.57  

Nonvested at March 31, 2022

    1,099     $ 196.05  

 

At March 31, 2022, there was $128 million of total unrecognized compensation expense related to nonvested retention awards, which is expected to be recognized over a weighted-average period of 2.2 years.

 

Performance Retention Awards – In February 2022, our Board of Directors approved performance stock unit grants. This plan is based on performance targets for annual return on invested capital (ROIC) and operating income growth (OIG) compared to companies in the S&P 100 Industrials Index plus the Class I railroads. We define ROIC as net operating profit adjusted for interest expense (including interest on average operating lease liabilities) and taxes on interest divided by average invested capital adjusted for average operating lease liabilities.

 

The February 2022 stock units awarded to selected employees are subject to continued employment for 37 months, the attainment of certain levels of ROIC, 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 ROIC over 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-year OIG. 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. Dividend equivalents are accumulated during the service period and paid to participants only after the units are earned.
 
9

 

Changes in our performance retention awards during the three months ended March 31, 2022, were as follows:

 

   

Shares (thous.)

   

Weighted-Average Grant-Date Fair Value

 

Nonvested at January 1, 2022

    641     $ 173.03  

Granted

    209       244.35  

Vested

    (54 )     161.57  

Unearned

    (163 )     161.57  

Forfeited

    (8 )     200.18  

Nonvested at March 31, 2022

    625     $ 200.51  

 

At March 31, 2022, there was $45 million of total unrecognized compensation expense related to nonvested performance retention awards, which is expected to be recognized over a weighted-average period of 1.9 years. This expense is subject to achievement of the performance measures established for the performance stock unit grants.

 

5. Retirement Plans

 

We provide defined benefit retirement income to eligible non-union employees through qualified and non-qualified (supplemental) pension plans. Qualified and non-qualified pension benefits are based on years of service and the highest compensation during the latest years of employment, with specific reductions made for early retirements. Non-union employees hired on or after January 1, 2018, are no longer eligible for pension benefits, but are eligible for an enhanced 401(k) plan.

 

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 cost on 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 plan assets 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 can have the effect of delaying the recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Differences in actual experience in relation to assumptions are not recognized in net income immediately, but are deferred in accumulated other comprehensive income/loss and, if necessary, amortized as pension expense.

 

The components of our net periodic pension cost were as follows:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Service cost

  $ 26     $ 30  

Interest cost

    31       26  

Expected return on plan assets

    (73 )     (67 )

Amortization of actuarial loss

    22       36  

Net periodic pension cost

  $ 6     $ 25  

 

Cash Contributions

 

For the three months ended March 31, 2022, cash contributions totaled $0 to the qualified pension plans. Any contributions made during 2022 will be based on cash generated from operations and financial market considerations. Our policy with respect to funding the qualified pension plans is to fund at least the minimum required by law and not more than the maximum amount deductible for tax purposes. At March 31, 2022, we do not have minimum cash funding requirements for 2022.

 

10

 

6. Other Income

 

Other income included the following:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Rental income

  $ 36     $ 33  
Environmental remediation and restoration     (26 )     (4 )

Net periodic pension costs

    20       5  

Other

    17       17  

Total

  $ 47     $ 51  
 

7. Earnings Per Share

 

The following table provides a reconciliation between basic and diluted earnings per share:

 

Millions, Except Per Share Amounts, for the Three Months Ended March 31,

 

2022

   

2021

 

Net income

  $ 1,630     $ 1,341  

Weighted-average number of shares outstanding:

               

Basic

    632.2       667.6  

Dilutive effect of stock options

    0.7       0.8  

Dilutive effect of retention shares and units

    0.7       0.8  

Diluted

    633.6       669.2  

Earnings per share – basic

  $ 2.58     $ 2.01  

Earnings per share – diluted

  $ 2.57     $ 2.00  

Stock options excluded as their inclusion would be anti-dilutive

    0.1       0.3  
 

8. Accumulated Other Comprehensive Income/Loss

 

Reclassifications out of accumulated other comprehensive income/loss were as follows (net of tax):

 

Millions

Defined benefit plansForeign currency translation

Total

 

Balance at January 1, 2022

 $(658) $(256) $(914)

Other comprehensive income/(loss) before reclassifications

  -   21   21 

Amounts reclassified from accumulated other comprehensive income/(loss) [a]

  15   -   15 

Net year-to-date other comprehensive income/(loss), net of taxes of ($5) million

  15   21   36 

Balance at March 31, 2022

 $(643) $(235) $(878)
             

Balance at January 1, 2021

 $(1,381) $(212) $(1,593)

Other comprehensive income/(loss) before reclassifications

  (1)  (26)  (27)

Amounts reclassified from accumulated other comprehensive income/(loss) [a]

  26   -   26 

Net year-to-date other comprehensive income/(loss), net of taxes of ($8) million

  25   (26)  (1)

Balance at March 31, 2021

 $(1,356) $(238) $(1,594)

 

[a]

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

 

9. Accounts Receivable

 

Accounts receivable includes freight and other receivables reduced by an allowance for doubtful accounts. At March 31, 2022, and December 31, 2021, our accounts receivable were reduced by $9 million and $10 million, respectively. Receivables not expected to be collected in one year and the associated allowances are classified as other assets in our Condensed Consolidated Statements of Financial Position. At March 31, 2022, and December 31, 2021, receivables classified as other assets were reduced by allowances of $50 million and $51 million, respectively.

 

11

 

Receivables Securitization Facility – The Railroad maintains an $800 million, 3-year receivables securitization facility (the Receivables Facility) maturing in July 2022, with the intent to renew under comparable terms and conditions. Under the Receivables Facility, the Railroad sells most of its eligible third-party receivables to Union Pacific Receivables, Inc. (UPRI), a consolidated, wholly-owned, bankruptcy-remote subsidiary that may subsequently transfer, without recourse, an undivided interest in accounts receivable to investors. The investors have no recourse to the Railroad’s other assets except for customary warranty and indemnity claims. Creditors of the Railroad do not have recourse to the assets of UPRI.

 

The amount recorded under the Receivables Facility was $0 and $300 million at March 31, 2022, and December 31, 2021, respectively. The Receivables Facility was supported by $1.6 billion and $1.3 billion of accounts receivable as collateral at March 31, 2022, and December 31, 2021, respectively, which, as a retained interest, is included in accounts receivable, net in our Condensed 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 under the facility is $800 million with availability directly impacted by eligible receivables, business volumes, and credit risks, including receivables payment quality measures such as default and dilution ratios. If default or dilution ratios increase one percent, the allowable outstanding amount under the Receivables 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 to participating banks, commercial paper issuance costs, and fees of participating banks for unused commitment availability. The costs of the Receivables Facility are included in interest expense and were $1 million for both the three months ended   March 31, 2022 and 2021 .

 

Subsequent Event On April 14, 2022, the Railroad drew $600 million on the Receivables Facility, increasing the amount recorded to $600 million in the second quarter. We used the net proceeds for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs and the early redemption of one of our outstanding corporate notes.

 

10. 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 March 31, 2022

 

Cost

   

Depreciation

   

Value

   

Useful Life

 

Land

  $ 5,336     $ N/A     $ 5,336       N/A  

Road:

                               

Rail and other track material

    18,102       6,910       11,192       43  

Ties

    11,455       3,563       7,892       34  

Ballast

    6,104       1,878       4,226       34  

Other roadway [a]

    21,791       4,730       17,061       47  

Total road

    57,452       17,081       40,371       N/A  

Equipment:

                               

Locomotives

    9,230       3,660       5,570       18  

Freight cars

    2,339       839       1,500       23  

Work equipment and other

    1,172       428       744       18  

Total equipment

    12,741       4,927       7,814       N/A  

Technology and other

    1,271       523       748       13  

Construction in progress

    795       -       795       N/A  

Total

  $ 77,595     $ 22,531     $ 55,064       N/A  

 

[a]

Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets.

 

12

 

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  

 

[a]

Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets.

 

11. Accounts Payable and Other Current Liabilities

 

 

Mar. 31,

Dec. 31,

 

Millions

 

2022

   

2021

 

Income and other taxes payable

  $ 1,178     $ 823  

Accounts payable

    868       752  

Accrued wages and vacation

    355       352  

Current operating lease liabilities

    305       330  

Interest payable

    237       330  

Accrued casualty costs

    202       187  

Equipment rents payable

    96       98  

Other

    662       706  

Total accounts payable and other current liabilities

  $ 3,903     $ 3,578  
 

12. Financial Instruments

 

Short-Term Investments – All of the Company’s short-term investments consist of time deposits and government agency securities. These investments are considered Level 2 investments and are valued at amortized cost, which approximates fair value. As of March 31, 2022, 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 utilizes applicable U.S. Treasury rates along with current market quotes on comparable debt securities. All of the inputs used to determine the fair market value of the Corporation’s long-term debt are Level 2 inputs and obtained from an independent source. At March 31, 2022, the fair value of total debt was $32.0 billion, approximately $0.2 billion less than the carrying value. At December 31, 2021, the fair value of total debt was $32.9 billion, approximately $3.2 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 fair value of our cash equivalents approximates their carrying value due to the short-term maturities of these instruments.

 

13

 

13. Debt

 

Credit Facilities – At March 31, 2022, we had $2.0 billion of credit available under our revolving credit facility (the Facility), which is designated for general corporate purposes and supports the issuance of commercial paper. Credit facility withdrawals totaled $0 during the three months ended March 31, 2022. Commitment fees and interest rates payable under the Facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The Facility allows for borrowings at floating rates based 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, requires UPC 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, finance leases, guarantees, unfunded and vested pension benefits under Title IV of ERISA, and unamortized debt discount and deferred debt issuance costs. At  March 31, 2022 , the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $43.0 billion of debt (as defined in the Facility), and we had $34.0 billion of debt (as defined in the Facility) outstanding at that date. The Facility does not include any other financial restrictions, credit rating triggers (other than rating-dependent pricing), or any other provision that could require us to post collateral. The Facility also includes a $150 million cross-default provision and a change-of-control provision.
 

During the three months ended March 31, 2022, we issued $1.2 billion and repaid $1.3 billion of commercial paper with maturities ranging from 8 to 86 days, and at March 31, 2022, we had $300 million of commercial paper outstanding. Our revolving credit facility supports our outstanding commercial paper balances, and, unless we change the terms of our commercial paper program, our aggregate issuance of commercial paper will not exceed the amount of borrowings available under the Facility.

 

Shelf Registration Statement and Significant New Borrowings – 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 Company’s current three-year shelf registration filed on February 10, 2021. This reauthorization replaces the original Board authorization which had $2.5 billion in remaining authority. Under our shelf registration, we may issue, from time to time any combination of debt securities, preferred stock, common stock, or warrants for debt securities or preferred stock in one or more offerings.

 

During the three months ended March 31, 2022, we issued the following unsecured, fixed-rate debt securities under our shelf registration:

 

Date

Description of Securities

February 14, 2022

$1.25 billion of 2.800% Notes due February 14, 2032

 

$0.50 billion of 3.375% Notes due February 14, 2042

 

$1.25 billion of 3.500% Notes due February 14, 2053

 

$0.50 billion of 3.850% Notes due February 14, 2072

 

We used the net proceeds from the offerings for general corporate purposes, including the repurchase of common stock pursuant to our share repurchase programs. These debt securities include change-of-control provisions. At March 31, 2022, we had remaining authority to issue up to $8.5 billion of debt securities under our shelf registration.

 

Receivables Securitization Facility – As of March 31, 2022, and December 31, 2021, we recorded $0 and $300 million, respectively, of borrowings under our Receivables Facility as secured debt. (See further discussion of our receivables securitization facility in Note 9).

 

Subsequent Event – On April 15, 2022, we redeemed all $750 million of outstanding 4.163% notes due July 15, 2022, at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest. 

 

14

 

14. Commitments and Contingencies

 

Asserted and Unasserted Claims – Various claims and lawsuits are pending against us and certain of our subsidiaries. We cannot fully determine the effect of all asserted and unasserted claims on our consolidated results of operations, financial condition, or liquidity. To the extent possible, we have recorded a liability where asserted and unasserted claims are considered probable and where such claims can be reasonably estimated. We do not expect that any known lawsuits, claims, environmental costs, commitments, contingent liabilities, or guarantees will have a material adverse effect on our consolidated results of operations, financial condition, or liquidity after taking into account liabilities and insurance recoveries previously recorded for these matters.

 

Personal Injury – The Federal Employers’ Liability Act (FELA) governs compensation for work-related accidents. Under FELA, damages are assessed based on a finding of fault through litigation or out-of-court settlements. We offer a comprehensive variety of services and rehabilitation programs for employees who are injured at work.

 

Approximately 94% of the recorded liability is related to asserted claims and approximately 6% is related to unasserted claims at March 31, 2022. Because of the uncertainty surrounding the ultimate outcome of personal injury claims, it is reasonably possible that future costs to settle these claims may range from approximately $332 million to $366 million. We record an accrual at the low end of the range as no amount of loss within the range is more probable than any other. Estimates can vary over time due to evolving trends in litigation.

 

Our personal injury liability activity was as follows:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Beginning balance

  $ 325     $ 270  

Current year accruals

    23       18  

Changes in estimates for prior years

    6       21  

Payments

    (22 )     (16 )

Ending balance at March 31,

  $ 332     $ 293  

Current portion, ending balance at March 31,

  $ 67     $ 60  

 

Environmental Costs – We are subject to federal, state, and local environmental laws and regulations. We have identified 367 sites where we are or may be liable for remediation costs associated with alleged contamination or for violations of environmental requirements. This includes 28 sites that are the subject of actions taken by the U.S. government, 18 of which are currently on the Superfund National Priorities List. Certain federal legislation imposes joint and several liability for the remediation of identified sites; consequently, our ultimate environmental liability may include costs relating to activities of other parties, in addition to costs relating to our own activities at each site.

 

Our environmental liability activity was as follows:

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

 

Beginning balance

  $ 243     $ 233  

Accruals

    40       12  

Payments

    (15 )     (11 )

Ending balance at March 31,

  $ 268     $ 234  

Current portion, ending balance at March 31,

  $ 64     $ 63  

 

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

 

15

 

Insurance – The Company has a consolidated, wholly-owned captive insurance subsidiary (the captive), that provides insurance coverage for certain risks including workers compensation, general liability, auto liability, and FELA claims. The captive receives direct premiums, which are netted against the Company’s premium costs in other expenses in the Condensed Consolidated Statements of Income. We record both liabilities and reinsurance receivables using an actuarial analysis based on historical experience in our Condensed Consolidated Statements of Financial Position.

 

Indemnities – Our maximum potential exposure under indemnification arrangements, including certain tax indemnifications, can range from a specified dollar amount to an unlimited amount, depending on the nature of the transactions and the agreements. Due to uncertainty as to whether claims will be made or how they will be resolved, we cannot reasonably determine the probability of an adverse claim or reasonably estimate any adverse liability or the total maximum exposure under these indemnification arrangements. We do not have any reason to believe that we will be required to make any material payments under these indemnity provisions.

 

15. Share Repurchase Programs

 

Effective April 1, 2022, our Board of Directors authorized the repurchase of up to 100 million shares of our common stock by March 31, 2025. These repurchases may be made on the open market or through other transactions. Our management has sole discretion with respect to determining the timing and amount of these transactions.

 

Our previous authorization, which was effective April 1, 2019, through March 31, 2022, was approved by our Board of Directors for up to 150 million shares of common stock. As of March 31, 2022, we repurchased a total of 83.3 million of our common stock under the 2019 authorization.

 

The table below represents shares repurchased under the repurchase program in the first quarter of 2022 and 2021:

 

  

Number of Shares Purchased

  

Average Price Paid [a]

 
  

2022

  

2021

  

2022

  

2021

 

First quarter [b]

  11,014,201   6,691,421  $249.95  $209.50 

 

[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 value assigned to the initial delivery of shares. The average price of the initial settlement of the 2022 accelerated share repurchase programs was $250.99.

[b]

Includes 7,012,232 shares repurchased in February 2022 under accelerated share repurchase programs.

 

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

 

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

 

16

 

On February 18, 2022, the Company received 7,012,232 shares of its common stock repurchased under ASRs for an aggregate of $2.2 billion. When the shares were received, the exchange was accounted for as an equity transaction with $1.8 billion of the aggregate amount allocated to treasury stock and the remaining $0.4 billion allocated to paid-in-surplus. This delivery of shares represents the initial and likely minimum number of shares that we may receive under the ASRs initiated in 2022. The final settlement is expected to be completed prior to the end of the third quarter of 2022.

 

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 settlement of these ASRs in the third quarter of 2021, we received 1,983,859 additional shares.

 

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

 

16. Related Parties

 

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

 

TTX is a rail car pooling company that owns rail cars and intermodal wells to serve North America’s railroads. TTX assists railroads in meeting the needs of their 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 rail cars at stated rates.

 

UPRR had $1.6 billion recognized as investments related to TTX in our Condensed Consolidated Statements of Financial Position as of both March 31, 2022, and December 31, 2021. TTX car hire expenses of $94 million and $96 million for the three months ended March 31, 2022 and 2021, are included in equipment and other rents in our Condensed Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $63 million and $57 million as of March 31, 2022, and December 31, 2021, respectively. 

 

17

 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES

RESULTS OF OPERATIONS

 

Three Months Ended March 31, 2022, Compared to

Three Months Ended March 31, 2021

 

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

 

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and applicable notes to the Condensed Consolidated Financial Statements, Item 1, and other information included in this report. Our Condensed Consolidated Financial Statements are unaudited and reflect all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (GAAP).

 

The Railroad, along with its subsidiaries and rail affiliates, is our one reportable business segment. Although we provide and analyze revenues by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network.

 

Critical Accounting Estimates

 

We base our discussion and analysis of our financial condition and results of operations upon our Condensed Consolidated Financial Statements. The preparation of these financial statements requires estimation and judgment that affect the reported amounts of revenues, expenses, assets, and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If these estimates differ materially from actual results, the impact on the Condensed Consolidated Financial Statements may be material. Our critical accounting estimates are available in Item 7 of our 2021 Annual Report on Form 10-K. There have not been any significant changes with respect to these policies during the first three months of 2022.

 

RESULTS OF OPERATIONS

 

Quarterly Summary

 

The Company reported earnings of $2.57 per diluted share on net income of $1.6 billion and an operating ratio of 59.4% in the first quarter of 2022 compared to earnings of $2.00 per diluted share on net income of $1.3 billion and an operating ratio of 60.1% for the first quarter of 2021. Freight revenues increased 17% in the quarter compared to the same period in 2021 driven by increases in average revenue per car (ARC) and volume of 12% and 4%, respectively. The ARC increase was due to higher fuel surcharge revenue, core pricing gains, and positive mix of traffic (for example, a relative increase in industrial shipments, which have a higher ARC). As the economy strengthened in the first quarter of 2022, volume growth was seen in all commodity groups except the energy and specialized markets, driven by lower petroleum shipments, and intermodal, due to the on-going supply chain disruptions. Weather events did not have a significant impact on our operations in the first quarter 2022. Revenues and costs improved year-over-year due to the impact of Winter Storm Uri on first quarter 2021, which reduced carloads and increased operating costs. 

 

With the onset of the Russia-Ukraine conflict (the conflict) in late February 2022, crude oil prices rose to over $100 a barrel driving a 59% increase in our average fuel price for the quarter. In addition, in response to the conflict and ensuing Office of Foreign Assets Controls (OFAC) sanctions we evaluated our customer and supplier relationships to safeguard the Company against violations of these sanctions. If any of our business partners with known Russian ties become sanctioned or if we take proactive steps in light of the ongoing conflict, we do not expect such actions to have a material adverse effect on our results of operations, financial condition, and liquidity. Along with the higher cost of fuel, costs increased due to inflation, volume, and the reduced fluidity of our network. These increased costs only partially offset the higher revenue, resulting in a 19% increase in operating income in the first quarter compared to the same period in 2021.

 

 

Operating Revenues

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

   

Change

%

Freight revenues

  $ 5,440     $ 4,649       17

%

Other subsidiary revenues

    205       177       16  

Accessorial revenues

    201       161       25  

Other

    14       14       -  

Total

  $ 5,860     $ 5,001       17

%

 

We generate freight revenues by transporting products from our three commodity groups. Freight revenues vary with volume (carloads) and ARC. Changes in price, traffic mix, and fuel surcharges drive ARC. Customer incentives, which are primarily provided for shipping to/from specific locations or based on cumulative volumes, are recorded as a reduction to operating revenues. Customer incentives that include variable consideration based on cumulative volumes are estimated using the expected value method, which is based on available historical, current, and forecasted volumes, and recognized as the related performance obligation is satisfied. We recognize freight revenues over time as shipments move from origin to destination. The allocation of revenues 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 to destination. The allocation of revenues between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Accessorial revenues are recognized at a point in time as performance obligations are satisfied.

 

Freight revenues increased 17% during the first quarter of 2022 compared to 2021, resulting from higher fuel surcharges, a 4% volume increase, core pricing gains, and positive mix of traffic. Volume growth in coal, metals and minerals, industrial chemicals and plastics, and automotive parts were partially offset by declines in international intermodal and petroleum shipments.

 

Each of our commodity groups includes revenues from fuel surcharges. Freight revenues from fuel surcharge programs increased to $635 million in the first quarter of 2022 compared to $260 million in the same period of 2021 due to higher fuel prices.

 

Other subsidiary revenues increased in the first quarter compared to 2021 primarily driven by revenues at our subsidiary that brokers intermodal and transload logistics services as a result of the recovery of automotive parts shipments and contract wins. Accessorial revenue increased in the first quarter compared to 2021 driven by increased intermodal accessorial charges resulting from the ongoing global supply chain disruptions.

 

 

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

 

Freight Revenues

                 

 

 

Millions, for the Three Months Ended March 31,

 

2022

   

2021

   

Change

%

Grain & grain products

  $ 877     $ 766       14

%

Fertilizer

    180       170       6  

Food & refrigerated

    267       235       14  

Coal & renewables

    508       341       49  

Bulk

    1,832       1,512       21  

Industrial chemicals & plastics

    520       435       20  

Metals & minerals

    485       375       29  

Forest products

    364       316       15  

Energy & specialized markets

    552       530       4  

Industrial

    1,921       1,656       16  

Automotive

    501       447       12  

Intermodal

    1,186       1,034       15  

Premium

    1,687       1,481       14  

Total

  $ 5,440     $ 4,649       17

%

 

Revenue Carloads

                 

 

 

Thousands, for the Three Months Ended March 31,

 

2022

   

2021

   

Change

%

Grain & grain products

    205       203       1

%

Fertilizer

    45       44       2  

Food & refrigerated

    47       45       4  

Coal & renewables

    225       174