Company Quick10K Filing
Quick10K
Union Pacific
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$167.98 1,112 $186,810
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-18 Earnings, Exhibits
8-K 2019-02-25 Regulation FD
8-K 2019-02-19 Other Events, Exhibits
8-K 2019-02-08 Officers
8-K 2019-01-29 Officers
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-09 Earnings
8-K 2019-01-07 Officers, Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-09-17 Regulation FD, Exhibits
8-K 2018-09-06 Officers, Exhibits
8-K 2018-08-24 Regulation FD
8-K 2018-08-15 Officers, Regulation FD, Exhibits
8-K 2018-07-26 Regulation FD, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-06-14 Regulation FD
8-K 2018-06-08 Other Events, Exhibits
8-K 2018-06-01 Regulation FD
8-K 2018-05-11 Shareholder Vote
8-K 2018-04-06 Regulation FD
8-K 2018-02-22 Regulation FD
8-K 2018-02-14 Officers
8-K 2018-02-13 Regulation FD
8-K 2018-01-25 Earnings, Exhibits
8-K 2018-01-09 Regulation FD
BHGE Baker Hughes A Ge 26,780
AVA Avista 2,750
OSIS OSI Systems 1,590
TUP Tupperware Brands 1,300
FBK FB Financial 1,080
KNDI Kandi Technologies Group 279
AUBN Auburn National Bancorporation 134
AMPE Ampio Pharmaceuticals 57
INTX Intersections 0
IDTI Integrated Device Technology 0
UNP 2019-03-31
Part II. Other Information
EX-31.A unp-20190331xex31_a.htm
EX-31.B unp-20190331xex31_b.htm
EX-32 unp-20190331xex32.htm

Union Pacific Earnings 2019-03-31

UNP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 unp-20190331x10q.htm 10-Q 20190331 10-Q



 





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,  2019

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)





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  12,  2019, there were 707,838,173 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, 2019 and 2018

3



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 



For the Three Months Ended March 31, 2019 and 2018

3



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)

 



At March 31, 2019 and December 31, 2018

4



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 



For the Three Months Ended March 31, 2019 and 2018

5



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

 



For the Three Months Ended March 31, 2019 and 2018

6



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33



PART II. OTHER INFORMATION

 

 

2


 

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,

2019  2018 

Operating revenues:

 

 

 

 

     Freight revenues

$

5,010 

$

5,122 

     Other revenues

 

374 

 

353 

Total operating revenues

 

5,384 

 

5,475 

Operating expenses:

 

 

 

 

     Compensation and benefits

 

1,205 

 

1,273 

     Purchased services and materials

 

576 

 

599 

     Depreciation

 

549 

 

543 

     Fuel

 

531 

 

589 

     Equipment and other rents

 

258 

 

266 

     Other

 

305 

 

266 

Total operating expenses

 

3,424 

 

3,536 

Operating income

 

1,960 

 

1,939 

Other income/(expense) (Note 6)

 

77 

 

(42)

Interest expense

 

(247)

 

(186)

Income before income taxes

 

1,790 

 

1,711 

Income taxes

 

(399)

 

(401)

Net income

$

1,391 

$

1,310 

Share and Per Share (Note 8):

 

 

 

 

     Earnings per share - basic

$

1.94 

$

1.69 

     Earnings per share - diluted

$

1.93 

$

1.68 

     Weighted average number of shares - basic

 

716.8 

 

776.4 

     Weighted average number of shares - diluted

 

719.5 

 

779.6 





Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Union Pacific Corporation and Subsidiary Companies







 

 

 

 



 

 

 

 

Millions,

 

 

 

 

for the Three Months Ended March 31,

2019  2018 

Net income

$

1,391 

$

1,310 

Other comprehensive income/(loss):

 

 

 

 

    Defined benefit plans

 

10 

 

19 

    Foreign currency translation

 

27 

 

 -

Total other comprehensive income/(loss) [a]

 

37 

 

19 

Comprehensive income

$

1,428 

$

1,329 



[a]Net of deferred taxes of $(4) million and $(6) million during the three months ended March 31, 2019, and 2018, respectively.

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





 

3


 

Condensed Consolidated Statements of Financial Position (Unaudited)

Union Pacific Corporation and Subsidiary Companies







 

 

 

 



 

 

 

 



March 31,

December 31,

Millions, Except Share and Per Share Amounts

2019  2018 

Assets

 

 

 

 

Current assets:

 

 

 

 

     Cash and cash equivalents

$

1,059 

$

1,273 

     Short-term investments (Note 13)

 

60 

 

60 

     Accounts receivable, net (Note 10)

 

1,672 

 

1,755 

     Materials and supplies

 

780 

 

742 

     Other current assets

 

382 

 

333 

Total current assets

 

3,953 

 

4,163 

Investments

 

1,951 

 

1,912 

Net properties (Note 11)

 

52,856 

 

52,679 

Operating lease assets (Note 16)

 

2,146 

 

 -

Other assets

 

413 

 

393 

Total assets

$

61,319 

$

59,147 

Liabilities and Common Shareholders' Equity

 

 

 

 

Current liabilities:

 

 

 

 

     Accounts payable and other current liabilities (Note 12)

$

3,559 

$

3,160 

     Debt due within one year (Note 14)

 

1,703 

 

1,466 

Total current liabilities

 

5,262 

 

4,626 

Debt due after one year (Note 14)

 

23,409 

 

20,925 

Operating lease liabilities (Note 16)

 

1,663 

 

 -

Deferred income taxes

 

11,408 

 

11,302 

Other long-term liabilities

 

1,835 

 

1,871 

Commitments and contingencies (Note 17)

 

 

 

 

Total liabilities

 

43,577 

 

38,724 

Common shareholders' equity:

 

 

 

 

     Common shares, $2.50 par value, 1,400,000,000 authorized;   

 

 

 

 

     1,112,062,832 and 1,111,739,781 issued; 708,456,092 and 725,056,690

 

 

 

 

     outstanding, respectively

 

2,780 

 

2,779 

     Paid-in-surplus

 

3,929 

 

4,449 

     Retained earnings

 

46,049 

 

45,284 

     Treasury stock

 

(33,638)

 

(30,674)

     Accumulated other comprehensive loss (Note 9)

 

(1,378)

 

(1,415)

Total common shareholders' equity

 

17,742 

 

20,423 

Total liabilities and common shareholders' equity

$

61,319 

$

59,147 



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

 

 

4


 

Condensed Consolidated Statements of Cash Flows (Unaudited)

Union Pacific Corporation and Subsidiary Companies







 

 

 

 



 

 

 

 

Millions,

 

 

for the Three Months Ended March 31,

2019  2018 

Operating Activities

 

 

 

 

Net income

$

1,391 

$

1,310 

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

 

 

 

 

  Depreciation

 

549 

 

543 

  Deferred and other income taxes

 

103 

 

112 

  Other operating activities, net

 

(53)

 

339 

  Changes in current assets and liabilities:

 

 

 

 

     Accounts receivable, net

 

83 

 

(78)

     Materials and supplies

 

(38)

 

(59)

     Other current assets

 

(57)

 

(112)

     Accounts payable and other current liabilities

 

(259)

 

(379)

     Income and other taxes

 

240 

 

225 

Cash provided by operating activities

 

1,959 

 

1,901 

Investing Activities

 

 

 

 

Capital investments

 

(752)

 

(910)

Purchases of short-term investments (Note 13)

 

(90)

 

(60)

Maturities of short-term investments (Note 13)

 

90 

 

60 

Proceeds from asset sales

 

14 

 

12 

Other investing activities, net

 

(46)

 

(21)

Cash used in investing activities

 

(784)

 

(919)

Financing Activities

 

 

 

 

Debt issued (Note 14)

 

2,992 

 

150 

Common share repurchases (Note 18)

 

(2,987)

 

(1,166)

Dividends paid

 

(626)

 

(568)

Debt repaid

 

(560)

 

(237)

Accelerated share repurchase programs pending final settlement

 

(500)

 

 -

Net issuance of commercial paper (Note 14)

 

299 

 

636 

Other financing activities, net

 

(23)

 

(24)

Cash used in financing activities

 

(1,405)

 

(1,209)

Net change in cash, cash equivalents and restricted cash

 

(230)

 

(227)

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

 

1,328 

 

1,275 

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

$

1,098 

$

1,048 

Supplemental Cash Flow Information

 

 

 

 

  Non-cash investing and financing activities:

 

 

 

 

     Capital investments accrued but not yet paid

$

149 

$

74 

     Common shares repurchased but not yet paid

 

22 

 

64 

  Cash (paid for)/received from:

 

 

 

 

     Income taxes, net of refunds

$

(1)

$

     Interest, net of amounts capitalized

 

(356)

 

(230)

Reconciliation of cash, cash equivalents, and restricted cash

 

 

 

 

to the Condensed Consolidated Statement of Financial Position:

 

 

 

 

Cash and cash equivalents

$

1,059 

$

1,048 

Restricted cash equivalents in other current assets

 

27 

 

 -

Restricted cash equivalents in other assets

 

12 

 

 -

Total cash, cash equivalents and restricted cash equivalents per above

$

1,098 

$

1,048 



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

 

 

5


 

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, 2018

1,111.4  (330.5)

 

 

$   2,778 

 

$   4,476 

 

$   41,317 

 

$   (22,574)

 

$   (1,141)

 

$    24,856 

Net income

 

 

 

 

 -

 

 -

 

1,310 

 

 -

 

 -

 

1,310 

Other comprehensive income

 

 

 

 

 -

 

 -

 

 -

 

 -

 

19 

 

19 

Conversion, stock option
   exercises, forfeitures, and other

0.4  0.5 

 

 

 

(3)

 

 -

 

 

 -

 

Share repurchase programs
    (Note 18)

 -

(9.3)

 

 

 -

 

 -

 

 -

 

(1,230)

 

 -

 

(1,230)

Cash dividends declared
    ($0.73 per share)

 -

 -

 

 

 -

 

 -

 

(568)

 

 -

 

 -

 

(568)

Reclassification due to ASU
    2018-02 adoption

 -

 -

 

 

 -

 

 -

 

300 

 

 -

 

(300)

 

 -

Balance at March 31, 2018

1,111.8  (339.3)

 

 

$   2,779 

 

$   4,473 

 

$   42,359 

 

$   (23,800)

 

$   (1,422)

 

$    24,389 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

1,111.7  (386.6)

 

 

$   2,779 

 

$   4,449 

 

$   45,284 

 

$   (30,674)

 

$   (1,415)

 

$    20,423 

Net income

 

 

 

 

 -

 

 -

 

1,391 

 

 -

 

 -

 

1,391 

Other comprehensive income

 

 

 

 

 -

 

 -

 

 -

 

 -

 

37 

 

37 

Conversion, stock option
   exercises, forfeitures, and other

0.3  1.1 

 

 

 

(20)

 

 -

 

45 

 

 -

 

26 

Share repurchase programs
    (Note 18)

 -

(18.1)

 

 

 -

 

(500)

 

 -

 

(3,009)

 

 -

 

(3,509)

Cash dividends declared
    ($0.88 per share)

 -

 -

 

 

 -

 

 -

 

(626)

 

 -

 

 -

 

(626)

Balance at March 31, 2019

1,112.0  (403.6)

 

 

$   2,780 

 

$   3,929 

 

$   46,049 

 

$   (33,638)

 

$   (1,378)

 

$    17,742 



[a]AOCI = Accumulated Other Comprehensive Income/(Loss) (Note 9)

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

 

 

6


 

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 2018 Annual Report on Form 10-K. Our Consolidated Statement of Financial Position at December 31, 2018, is derived from audited financial statements. The results of operations for the three months ended March 31,  2019, are not necessarily indicative of the results for the entire year ending December 31, 2019.  



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 February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires companies to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.  We implemented an enterprise-wide lease management system to support the new reporting requirements, and effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842).    We elected an initial application date of January 1, 2019 and will not recast comparative periods in transition to the new standard.  In addition, we elected certain practical expedients which permit us to not reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, and to not separate lease and nonlease components for all classes of underlying assets.  We also made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet for all classes of underlying assets. Adoption of the new standard resulted in an increase in the Company’s assets and liabilities of approximately $2 billion.    The ASU did not have an impact on our consolidated results of operations or cash flows.



 



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,

2019  2018 

Agricultural Products

$

1,067 

$

1,098 

Energy

 

982 

 

1,173 

Industrial

 

1,410 

 

1,340 

Premium

 

1,551 

 

1,511 

Total freight revenues

$

5,010 

$

5,122 

Other subsidiary revenues

 

223 

 

217 

Accessorial revenues

 

133 

 

121 

Other

 

18 

 

15 

Total operating revenues

$

5,384 

$

5,475 

 

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 $576 million and $579 million, respectively, for the three months ended March 31,  2019, and March 31,  2018



4. Stock-Based Compensation



We have several stock-based compensation plans under which employees and non-employee directors receive stock options, nonvested retention shares, and nonvested stock units. We refer to the nonvested shares and stock units collectively as “retention awards”. We have elected to issue treasury shares to cover option exercises and stock unit vestings, while new shares are issued when retention shares are granted.



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





 

 

 

 



 

 

 

 

Millions,

 

 

 

 

for the Three Months Ended March 31,

2019  2018 

Stock-based compensation, before tax:

 

 

 

 

     Stock options

$

$

     Retention awards

 

22 

 

21 

Total stock-based compensation, before tax

$

27 

$

25 

Excess tax benefits from equity compensation plans

$

39 

$

15 



Stock Options – We estimate the fair value of our stock option awards using the Black-Scholes option pricing model. The table below shows the annual weighted-average assumptions used for valuation purposes:





 

 

 

 



 

 

 

 

Weighted-Average Assumptions

2019  2018 

Risk-free interest rate

 

2.5% 

 

2.6% 

Dividend yield

 

2.2% 

 

2.3% 

Expected life (years)

 

5.2 

 

5.3 

Volatility

 

22.7% 

 

21.1% 

Weighted-average grant-date fair value of options granted

$

30.37 

$

21.70 

 

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 option.



 

8


 

A summary of stock option activity during the three months ended March 31,  2019, is presented below:



 

 

 

 

 

 

 



 

 

 

 

 

 

 



Options (thous.)

Weighted-Average
Exercise Price

Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value (millions)

Outstanding at January 1, 2019

5,170 

$

92.06  5.4 

yrs.

$

239 

Granted

573 

 

160.84 

 

N/A

 

N/A

Exercised

(1,505)

 

68.66 

 

N/A

 

N/A

Forfeited or expired

(36)

 

119.14 

 

N/A

 

N/A

Outstanding at March 31, 2019

4,202 

$

109.59  6.6 

yrs.

$

242 

Vested or expected to vest at March 31, 2019

4,161 

$

109.31  6.6 

yrs.

$

241 

Options exercisable at March 31, 2019

2,856 

$

97.12  5.6 

yrs.

$

200 

 

Stock options are granted at the closing price on the date of grant, have ten-year contractual terms, and vest no later than three years from the date of grant. None of the stock options outstanding at March 31, 2019, are subject to performance or market-based vesting conditions.



At March 31, 2019, there was $30 million of unrecognized compensation expense related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.6 years. Additional information regarding stock option exercises appears in the table below:





 

 

 

 



 

 

 

 

Millions,

 

 

 

 

for the Three Months Ended March 31,

2019  2018 

Intrinsic value of stock options exercised

$

138 

$

33 

Cash received from option exercises

 

72 

 

26 

Treasury shares repurchased for employee taxes

 

(22)

 

(8)

Tax benefit realized from option exercises

 

34 

 

Aggregate grant-date fair value of stock options vested

 

15 

 

18 

 

Retention Awards – The fair value of retention awards is based on the closing price of the stock on the grant date. Dividends and dividend equivalents are paid to participants during the vesting periods.



Changes in our retention awards during the three months ended March 31,  2019, were as follows:





 

 

 



 

 

 



Shares
(thous.)

Weighted-Average
Grant-Date Fair Value

Nonvested at January 1, 2019

2,070 

$

104.55 

Granted

374 

 

161.56 

Vested

(419)

 

120.91 

Forfeited

(40)

 

109.51 

Nonvested at March 31, 2019

1,985 

$

111.74 

 

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



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



 

9


 

Stock units awarded to selected employees under these grants are subject to continued employment for 37 months and the attainment of certain levels of ROIC, modified for the relative OIG. We expense 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 relative OIG modifier. We measure the fair value of these performance stock units based upon the closing price of the underlying common stock as of the date of grant, reduced by the present value of estimated future dividends. Dividend equivalents are paid to participants only after the units are earned.



The assumptions used to calculate the present value of estimated future dividends related to the February 2019 grant were as follows:





 

 



 

 



2019 

Dividend per share per quarter

$

0.88 

Risk-free interest rate at date of grant

 

2.5% 

 

Changes in our performance retention awards during the three months ended March 31,  2019, were as follows:





 

 

 



 

 

 



Shares
(thous.)

Weighted-Average
Grant-Date Fair Value

Nonvested at January 1, 2019

1,092 

$

95.12 

Granted

308 

 

151.33 

Vested

(267)

 

70.57 

Unearned

(127)

 

70.09 

Forfeited

(28)

 

109.39 

Nonvested at March 31, 2019

978 

$

122.37 

 

At March 31,  2019, there was $54 million of total unrecognized compensation expense related to nonvested performance retention awards, which is expected to be recognized over a weighted-average period of 1.6 years. This expense is subject to achievement of the performance measures established for the performance stock unit grants.

 

5. Retirement Plans



Pension and Other Postretirement Benefits



Pension 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 as described below in other retirement programs.



Other Postretirement Benefits (OPEB) – We provide medical and life insurance benefits for eligible retirees hired before January 1, 2004. These benefits are funded as medical claims and life insurance premiums are paid.



Expense



Both pension and OPEB expense are 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 five-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 and, if necessary, amortized as pension or OPEB expense.

 

10


 

The components of our net periodic pension and OPEB cost were as follows for the three months ended March 31:





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Millions,

Pension

 

OPEB

for the Three Months Ended March 31,

2019  2018 

 

2019  2018 

Service cost

$

22 

$

27 

 

$

 -

$

 -

Interest cost

 

40 

 

36 

 

 

 

Expected return on plan assets

 

(68)

 

(68)

 

 

 -

 

 -

Amortization of actuarial loss

 

16 

 

23 

 

 

 

Net periodic benefit cost

$

10 

$

18 

 

$

$



Cash Contributions



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

 

6. Other Income / (Expense)



Other income / (expense) included the following:





 

 

 

 



 

 

 

 

Millions,

 

 

 

 

for the Three Months Ended March 31,

2019  2018 

Rental income

$

29 

$

28 

Interest income

 

 

Net periodic pension and OPEB costs

 

 

Net gain on non-operating asset dispositions

 

 

Early extinguishment of debt [a]

 

 -

 

(85)

Non-operating environmental costs and other [b]

 

27 

 

Total

$

77 

$

(42)



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

(Note 14).

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



7. Income Taxes



The Internal Revenue Service (IRS) is performing limited scope audits of UPC’s 2016 and 2017 tax returns.  The statute of limitations has run for all years prior to 2015. Several state tax authorities are examining our state tax returns for years 2015 through 2017. At March 31, 2019, we had a net liability for unrecognized tax benefits of $176 million.



On April 9, 2019, Arkansas enacted legislation to decrease its corporate income tax rate effective 2021. In the second quarter of 2019, we will decrease our deferred tax expense by $21 million to reflect the decreased tax rate.



 

11


 

8. 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,

2019  2018 

Net income

$

1,391 

$

1,310 

Weighted-average number of shares outstanding:    

 

 

 

 

    Basic

 

716.8 

 

776.4 

    Dilutive effect of stock options

 

1.3 

 

1.8 

    Dilutive effect of retention shares and units 

 

1.4 

 

1.4 

Diluted

 

719.5 

 

779.6 

Earnings per share – basic

$

1.94 

$

1.69 

Earnings per share – diluted

$

1.93 

$

1.68 

Stock options excluded as their inclusion would be anti-dilutive

 

0.4 

 

0.5 

 



9. Accumulated Other Comprehensive Income/(Loss)



Reclassifications out of accumulated other comprehensive income/(loss) for the three months ended March 31,  2019, and 2018, were as follows (net of tax):





 

 

 

 

 

 



 

 

 

 

 

 

Millions

Defined
benefit
plans

Foreign
currency
translation

Total

Balance at January 1, 2019

$

(1,192)

$

(223)

$

(1,415)

Other comprehensive income/(loss) before reclassifications

 

(3)

 

27 

 

24 

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

 

13 

 

 -

 

13 

Net year-to-date other comprehensive income/(loss),
net of taxes of $(4) million

 

10 

 

27 

 

37 

Balance at March 31, 2019

$

(1,182)

$

(196)

$

(1,378)



 

 

 

 

 

 

Balance at January 1, 2018

$

(1,029)

$

(112)

$

(1,141)

Other comprehensive income/(loss) before reclassifications

 

 -

 

 -

 

 -

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

 

19 

 

 -

 

19 

Net year-to-date other comprehensive income/(loss),
net of taxes of $(6) million

 

19 

 

 -

 

19 

Reclassification due to ASU 2018-02 adoption [b]

 

(225)

 

(75)

 

(300)

Balance at March 31, 2018

$

(1,235)

$

(187)

$

(1,422)



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

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





 

 

 

 

 

 





 

12


 

10. Accounts Receivable



Accounts receivable includes freight and other receivables reduced by an allowance for doubtful accounts. The allowance is based upon historical losses, credit worthiness of customers, and current economic conditions. At March 31,  2019, and December 31, 2018, our accounts receivable were reduced by $6 million and $3 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,  2019, and December 31, 2018, receivables classified as other assets were reduced by allowances of $28 million and $27 million, respectively.



Receivables Securitization Facility – The Railroad maintains a $650 million, 3-year receivables securitization facility (the Receivables Facility) maturing in July 2019. 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 $400 million at both March 31,  2019, and December 31, 2018. The Receivables Facility was supported by $1.3 billion and $1.4 billion of accounts receivable as collateral at March 31,  2019, and December 31, 2018, 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 is allowed to maintain under the Receivables Facility, with a maximum of $650 million, may fluctuate based on the availability of eligible receivables and is directly affected by 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 $4 million for both the three months ended March 31,  2019, and 2018.

 

 

13


 

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 March 31, 2019

Cost

 Depreciation

Value

Useful Life

Land

$

5,266 

$

N/A

$

5,266 

N/A

Road:

 

 

 

 

 

 

 

  Rail and other track material

 

16,872 

 

6,213 

 

10,659  42 

  Ties

 

10,496 

 

3,075 

 

7,421  34 

  Ballast

 

5,594 

 

1,619 

 

3,975  34 

  Other roadway [a]

 

19,703 

 

3,844 

 

15,859  48 

Total road 

 

52,665 

 

14,751 

 

37,914 

N/A

Equipment:

 

 

 

 

 

 

 

  Locomotives

 

9,638 

 

3,739 

 

5,899  18 

  Freight cars

 

2,198 

 

906 

 

1,292  24 

  Work equipment and other

 

1,056 

 

311 

 

745  19 

Total equipment 

 

12,892 

 

4,956 

 

7,936 

N/A

Technology and other

 

1,121 

 

496 

 

625  12 

Construction in progress

 

1,115 

 

 -

 

1,115 

N/A

Total

$

73,059 

$

20,203 

$

52,856 

N/A

 





 

 

 

 

 

 

 



 

 

 

 

 

 

 

Millions, Except Estimated Useful Life

 

 Accumulated

Net Book

Estimated

As of December 31, 2018

Cost

 Depreciation

Value

Useful Life

Land

$

5,264 

$

      N/A

$

5,264 

N/A

Road:

 

 

 

 

 

 

 

  Rail and other track material

 

16,785 

 

6,156 

 

10,629  43 

  Ties

 

10,409 

 

3,025 

 

7,384  34 

  Ballast

 

5,561 

 

1,595 

 

3,966  34 

  Other roadway [a]

 

19,584 

 

3,766 

 

15,818  48 

Total road 

 

52,339 

 

14,542 

 

37,797 

N/A

Equipment:

 

 

 

 

 

 

 

  Locomotives

 

9,792 

 

3,861 

 

5,931  19 

  Freight cars

 

2,229 

 

929 

 

1,300  24 

  Work equipment and other

 

1,040 

 

301 

 

739  19 

Total equipment 

 

13,061 

 

5,091 

 

7,970 

N/A

Technology and other

 

1,117 

 

493 

 

624  12 

Construction in progress

 

1,024 

 

 -

 

1,024 

N/A

Total

$

72,805 

$

20,126 

$

52,679 

N/A



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

 

 

14


 

12. Accounts Payable and Other Current Liabilities





 

 

 

 



 

 

 

 



Mar. 31,

Dec. 31,

Millions

2019  2018 

Income and other taxes payable

$

934 

$

694 

Accounts payable

 

794 

 

872 

Current operating lease liabilities (Note 16)

 

417 

 

 -

Accrued wages and vacation

 

381 

 

384 

Accrued casualty costs

 

219 

 

211 

Interest payable

 

198 

 

317 

Equipment rents payable

 

107 

 

107 

Other

 

509 

 

575 

Total accounts payable and other current liabilities

$

3,559 

$

3,160 

 

13. Financial Instruments



Short-Term InvestmentsAll of the Company’s short-term investments consist of time deposits. These investments are considered level 2 investments and are valued at amortized cost, which approximates fair value. As of March 31, 2019, the Company had $90 million of short-term investments, of which $30 million are in a trust for the purpose of providing collateral for payment of certain other long-term liabilities, and as such are reclassified as other assets. All short-term investments have a maturity of less than one year and are classified as held-to-maturity. There were no transfers out of Level 2 during the three months ended March 31,  2019.



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,  2019, the fair value of total debt was $25.7 billion, approximately $0.6 billion more than the carrying value. At December 31, 2018, the fair value of total debt was $21.9 billion, approximately $0.5 billion less 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.

 







14. Debt



Credit Facilities  At March 31,  2019, we had $2.0 billion of credit available under our revolving credit facility, which is designated for general corporate purposes and supports the issuance of commercial paper. We did not draw on the facility at any time during the three months ended March 31,  2019. 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 London Interbank Offered Rates, plus a spread, depending upon credit ratings for our senior unsecured debt. The facility matures in June 2023 under a five-year term and 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, capital leases, guarantees, unfunded and vested pension benefits under Title IV of ERISA, and unamortized debt discount and deferred debt issuance costs. At March 31, 2019, the Company was in compliance with the debt-to-EBITDA coverage ratio, which allows us to carry up to $38.1 billion of debt (as defined in the Facility), and we had $26.0 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, 2019, we issued $2.95 billion and repaid $2.65 billion of commercial paper with maturities ranging from 1 to 31 days, and at March 31, 2019, we had $500 million of commercial paper outstanding. Our revolving credit facility supports our outstanding commercial paper

 

15


 

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



Shelf Registration Statement and Significant New Borrowings  – In 2018, the Board of Directors reauthorized the issuance of up to $6 billion of debt securities.  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,  2019, we issued the following unsecured, fixed-rate debt securities under our current shelf registration:



 



 

Date

Description of Securities

February 19, 2019

$500 million of 2.950% Notes due March 1, 2022



$500 million of 3.150% Notes due March 1, 2024



$1.0 billion of 3.700% Notes due March 1, 2029



$1.0 billion of 4.300% Notes due March 1, 2049



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



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



Debt Redemption – Effective as of March 15, 2018, we redeemed, in entirety, the Missouri Pacific 5% Income Debentures due 2045, the Chicago and Eastern Illinois 5% Income Debentures due 2054, and the Missouri Pacific 4.75% General Mortgage Income Bonds Series A due 2020 and Series B due 2030.  The debentures had principal outstanding of $96 million and $2 million, respectively, and the bonds had principal outstanding of $30 million and $27 million, respectively.  The bonds and debentures were assumed by the Railroad in the 1982 acquisition of the Missouri Pacific Railroad Company, with a weighted average interest rate of 4.9%.  The carrying value of all four bonds and debentures at the time of redemption was $70 million, due to fair value purchase accounting adjustments related to the acquisition. The redemption resulted in an early extinguishment charge of $85 million in the first quarter of 2018.

 

15. Variable Interest Entities



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



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



We are not considered to be the primary beneficiary and do not consolidate these VIEs because our actions and decisions do not have the most significant effect on the VIE’s performance and our fixed-price purchase options are not considered to be potentially significant to the VIEs. The future minimum lease payments associated with the VIE leases totaled $1.6 billion as of March 31,  2019.

 

16


 

16. Leases



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



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



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



 

 

 

 

 

The following are additional details related to our lease portfolio:

 

 

 

 







 

 

 



 

 

 



 

Mar. 31,

Millions

Classification

2019 

Assets

 

 

 

     Operating leases

Operating lease assets

$

2,146 

     Finance leases

Net properties [a]

 

516 

Total leased assets

 

$

2,662 

Liabilities

 

 

 

  Current

 

 

 

     Operating

Accounts payable and other current liabilities

$

417 

     Finance

Debt due within one year

 

99 

  Noncurrent

 

 

 

     Operating

Operating lease liabilities

 

1,663 

     Finance

Debt due after one year

 

560 

Total lease liabilities

 

$

2,739 



 [a]   Finance lease assets are recorded net of accumulated amortization of $717 million as of March 31, 2019.



The lease cost components are classified as follows:







 

 

 



 

 

 

Millions,

 

 

for the Three Months Ended March 31,

Classification

2019 

Operating lease cost [a]

Equipment and other rents

$

93 

Finance lease cost

 

 

 

Amortization of leased assets

Depreciation

 

18 

Interest on lease liabilities

Interest expense

 

Net lease cost

 

$

120 



 

 

 

[a]   Includes short-term lease costs of $0.2 million and variable lease costs of $1.9 million.



 

17


 

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







 

 

 

 

 

 



 

 

 

 

 

 

Millions

 

Operating Leases

 

Finance Leases

 

Total

2019

$

196 

$

72 

$

268 

2020

 

384 

 

143 

 

527 

2021

 

308 

 

147 

 

455 

2022

 

273 

 

130 

 

403 

2023

 

235 

 

88 

 

323 

After 2023

 

1,040 

 

199 

 

1,239 

Total lease payments

$

2,436 

$

779 

$

3,215 

Less: Interest [a]

 

356 

 

120 

 

476 

Present value of lease liabilities

$

2,080 

$

659 

$

2,739 



 

 

 

 

 

 

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







 

 

 

 



 

 

 

 

Millions

Operating
Leases

Capital
Leases

2019

$

419 

$

148 

2020

 

378 

 

155 

2021

 

303 

 

159 

2022

 

272 

 

142 

2023

 

234 

 

94 

Later years

 

1,040 

 

200 

Total minimum lease payments

$

2,646 

$

898 

Amount representing interest

 

N/A

 

(144)

Present value of minimum lease payments

 

N/A

$

754 





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





 

 

 



 

 

 



 

Mar. 31



 

2019 

 Weighted-average remaining lease term (years)

 

 

 

     Operating leases

 

 

9.0 

      Finance leases

 

 

6.6 

 Weighted-average discount rate

 

 

 

     Operating leases

 

 

3.7 

      Finance leases

 

 

5.3 



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



















 

 



 

 

Millions,

 

for the Three Months Ended March 31,

2019 

Cash paid for amounts included in the measurement of lease liabilities

 

 

Operating cash flows from operating leases

$

215 

Operating cash flows from finance leases

 

17 

Financing cash flows from finance leases

 

58 

Leased assets obtained in exchange for new finance lease liabilities

 

 -

Leased assets obtained in exchange for new operating lease liabilities

 



 



 

18


 

17. Commitments and Contingencies



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



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

 

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



Our personal injury liability activity was as follows:





 

 

 

 



 

 

 

 

Millions,

 

 

 

 

for the Three Months Ended March 31,

2019  2018 

Beginning balance

$

271 

$

285 

Current year accruals

 

18 

 

19 

Changes in estimates for prior years

 

(2)

 

(11)

Payments

 

(21)

 

(21)

Ending balance at March 31

$

266 

$

272