Financial Analysis

Pending Acquisition Norfolk Southern Corporation (Norfolk Southern), a Virginia corporation, is one of the nations premier transportation companies, moving goods and materials that help drive the U.S. economy. Norfolk Southern connects customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Its Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. Norfolk Southern is a major transporter of industrial products, including agriculture, forest, and consumer products, chemicals, and metals and construction materials. In addition, in the East, it serves every major container port and operates the most extensive intermodal network. Norfolk Southern is also a principal carrier of coal, automobiles, and automotive parts. Norfolk Southerns stock is publicly traded on the NYSE under the ticker symbol NSC. On July 28, 2025, Union Pacific, Norfolk Southern, Ruby Merger Sub 1 Corporation, and Ruby Merger Sub 2 LLC, entered into an agreement and plan of merger (the merger agreement). The merger agreement provides, among other things, for the acquisition of Norfolk Southern by Union Pacific, subject to the satisfaction or waiver of the conditions specified therein, through two mergers: (i) first, Ruby Merger Sub 1 Corporation will merge with and into Norfolk Southern with Norfolk Southern surviving as a direct, wholly owned subsidiary of Union Pacific (the first merger); and (ii) second …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"Debt Total debt as of December 31, 2025 and 2024, is summarized below: Millions 2025 2024 Notes and debentures, 2.3% to 7.2% due through February 14, 2072 $ 32,694 $ 32,044 Equipment obligations, 2.6% to 6.2% due through January 2, 2031 [a] 693 732 Finance leases, 3.1% to 6.8% due through August 21, 2029 105 109 Unamortized discount and deferred issuance costs (1,678) (1,693) Total debt 31,814 31,192 Less: current portion (1,520) (1,425) Total long-term debt $ 30,294 $ 29,767 [a] Equipment obligations are secured by an interest in certain railroad equipment with a carrying value of approximately $0.8 billion at both December 31, 2025 and 2024. Debt maturities The following table presents aggregate debt maturities as of December 31, 2025, excluding market value adjustments: Millions 2026 $ 1,521 2027 1,291 2028 1,239 2029 1,276 2030 753 Thereafter 27,412 Total principal 33,492 Unamortized discount and deferred issuance costs (1,678) Total debt $ 31,814 Credit facilities At December 31, 2025, 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. During 2025, we issued $0 and repaid $0 through the Facility. As of both December 31, 2025 and 2024, we had $0 outstanding with the Facility. Commitment fees and interest rates payable under the Facility are similar to fees and rates available to comparably rated, investment-grade borrowers. The Facili …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Stock Options and Other Stock Plans In April 2000, the shareholders approved the Union Pacific Corporation 2000 Directors Plan (Directors Plan) whereby 2,200,000 shares of our common stock were reserved for issuance to our non-employee directors. Under the Directors Plan, each non-employee director, upon his or her initial election to the Board of Directors, received a grant of 4,000 retention shares or retention stock units. In July 2018, the Board of Directors eliminated the retention grant for directors newly elected in 2018 and all future years. As of December 31, 2025, 16,000 restricted shares were outstanding under the Directors Plan. The Union Pacific Corporation 2013 Stock Incentive Plan (2013 Plan) was approved by shareholders in May 2013. The 2013 Plan reserved 78,000,000 shares of our common stock for issuance, plus any shares subject to awards made under previous plans as of February 28, 2013, that are subsequently cancelled, expired, forfeited, or otherwise not issued under previous plans. Under the 2013 Plan, non-qualified stock options, incentive stock options, retention shares, stock units, and incentive bonus awards may be granted to eligible employees of the Corporation and its subsidiaries. Non-employee directors are not eligible for awards under the 2013 Plan. As of December 31, 2025, 501,049 stock options and no retention shares and stock units were outstanding under the 2013 Plan. We no longer grant any stock options or other stock or unit awards under t …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Income Taxes Components of income tax expense were as follows for the years ended December 31: Millions 2025 2024 2023 Current tax expense: Federal 1,460 1,649 1,417 State 321 359 314 Foreign 6 11 6 Total current tax expense 1,787 2,019 1,737 Deferred and other tax expense/(benefit): Federal 351 47 219 State [a] (114) (24) (104) Foreign 4 5 2 Total deferred and other tax expense 241 28 117 Total income tax expense $ 2,028 $ 2,047 $ 1,854 [a] In 2025, Kansas enacted corporate income tax legislation that resulted in a $115 million reduction of our deferred tax expense. In 2024, Louisiana and Arkansas enacted corporate income tax legislation that resulted in a $34 million reduction of our deferred tax expense. In 2023, Nebraska, Iowa, Kansas, and Arkansas enacted corporate income tax legislation that resulted in a $114 million reduction of our deferred tax expense. For the years ended December 31, reconciliations between statutory and effective tax rates are as follows: Millions, except percentages 2025 2024 2023 Federal Taxes $ 1,925 21.0 % $ 1,847 21.0 % $ 1,729 21.0 % State and local income tax, net of federal benefit 163 1.8 264 3.0 166 2.0 Foreign tax effects 10 0.1 16 0.2 8 0.1 Effect of cross-border tax laws (2) - 1 - (2) - Tax credits (50) (0.6) (45) (0.5) (21) (0.3) Nontaxable or nondeductible items (16) (0.2) (36) (0.4) (37) (0.4) Changes in unrecognized tax benefits (2) - - - (1) - Other adjustments - - - - 12 0.1 Effective tax rate $ 2,028 22.1 % $ 2,047 23.3 % $ 1,8 …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases We lease certain locomotives, freight cars, and other property for use in our rail operations. The following are details related to our lease portfolio as of December 31: Millions Classification 2025 2024 Assets Operating leases Operating lease assets $ 1,036 $ 1,297 Finance leases Properties, net [a] 185 172 Total leased assets $ 1,221 $ 1,469 Liabilities Current Operating Accounts payable and other current liabilities $ 270 $ 346 Finance Debt due within one year 39 37 Noncurrent Operating Operating lease liabilities 738 925 Finance Debt due after one year 66 72 Total lease liabilities $ 1,113 $ 1,380 [a] Finance lease assets are recorded net of accumulated amortization of $456 million and $472 million as of December 31, 2025 and 2024, respectively. The following table presents the classification of lease cost components for the year-ended December 31: Millions 2025 2024 Operating lease cost [a] $ 305 $ 340 Short-term lease cost 23 24 Variable lease cost 39 37 Finance lease cost Amortization of leased assets [b] 28 31 Interest on lease liabilities [c] 5 5 Net lease cost $ 400 $ 437 [a] Operating lease cost is primarily reported in equipment and other rents in our Consolidated Statements of Income. [b] Amortization of leased assets is reported in depreciation in our Consolidated Statements of Income. [c] Interest on lease liabilities is reported in interest expense in our Consolidated Statements of Income. The following table presents aggregate lease maturities as of D …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

In December 2023, the FASB issued Accounting Standards Update No. (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires business entities to expand their annual disclosures of the effective rate reconciliation and income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024, may be adopted on a prospective or retrospective basis, and early adoption is permitted. The Company adopted this ASU on December 31, 2025, on a retrospective basis. See the Supplemental Cash Flow Information of the Consolidated Statements of Cash Flows and Note 7 Income Taxes. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disclosure of additional information about specific expense categories in the notes to the financial statements. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, may be adopted on a prospective or retrospective basis, and early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on our related disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which allows a practical expedie …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Retirement Plans Pension benefits 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) benefit as described below in other retirement programs. Funded status We are required by GAAP to separately recognize the overfunded or underfunded status of our pension plans as an asset or liability. The funded status represents the difference between the projected benefit obligation (PBO) and the fair value of the plan assets. Our non-qualified (supplemental) pension plan is unfunded by design. The PBO of the pension plans is the present value of benefits earned to date by plan participants, including the effect of assumed future compensation increases. Plan assets are measured at fair value. We use a December 31 measurement date for plan assets and obligations for all our retirement plans. Changes in our PBO and plan assets were as follows for the years ended December 31: Funded status Millions 2025 2024 Projected benefit obligation Projected benefit obligation at beginning of year $ 3,513 $ 3,880 Service cost 41 52 Interest cost 179 186 Actuarial loss/(gain) (41) (26 …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Related Parties UPRR and other North American railroad companies jointly own TTX Company (TTX). UPRR has a 37.03% economic 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 Americas railroads. TTX assists railroads in meeting the needs of their customers by providing rail cars in an efficient, pooled environment. All railroads may utilize TTX rail cars through car hire by renting rail cars at stated rates. UPRR had $2.0 billion and $1.9 billion recognized as investments related to TTX in our Consolidated Statements of Financial Position as of December 31, 2025 and 2024, respectively. TTX car hire expense of $447 million in 2025, $432 million in 2024, and $399 million in 2023 are included in equipment and other rents in our Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $72 million and $70 million at December 31, 2025 and 2024, respectively. …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

Significant Accounting Policies Principles of consolidation The Consolidated Financial Statements include the accounts of Union Pacific Corporation and all of its subsidiaries. Investments in affiliated companies (20% to 50% owned) are accounted for using the equity method of accounting. All intercompany transactions are eliminated. We currently have no less than majority-owned investments that require consolidation under variable interest entity requirements. Cash, cash equivalents, and restricted cash Cash equivalents consist of investments with original maturities of three months or less. Amounts included in restricted cash represent those required to be set aside by contractual agreement. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Statements of Financial Position that sum to the total of the same such amounts shown on the Consolidated Statements of Cash Flows: Millions 2025 2024 2023 Cash and cash equivalents $ 1,266 $ 1,016 $ 1,055 Restricted cash equivalents in other current assets 9 4 10 Restricted cash equivalents in other assets 5 8 9 Total cash, cash equivalents, and restricted cash equivalents $ 1,280 $ 1,028 $ 1,074 Accounts receivable Accounts receivable includes receivables reduced by an allowance for doubtful accounts. The allowance is based upon historical losses, credit worthiness of customers, and current economic conditions. Receivables not expected to be collected in one yea …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Pending Acquisition Norfolk Southern Corporation (Norfolk Southern), a Virginia corporation, is one of the nations premier transportation companies, moving goods and materials that help drive the U.S. economy. Norfolk Southern connects customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Its Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. Norfolk Southern is a major transporter of industrial products, including agriculture, forest, and consumer products, chemicals, and metals and construction materials. In addition, in the East, it serves every major container port and operates an extensive intermodal network. Norfolk Southern is also a principal carrier of coal, automobiles, and automotive parts. Norfolk Southerns stock is publicly traded on the NYSE under the ticker symbol NSC. On July 28, 2025, Union Pacific, Norfolk Southern, Ruby Merger Sub 1 Corporation, and Ruby Merger Sub 2 LLC, entered into an agreement and plan of merger (the merger agreement). The merger agreement provides, among other things, for the acquisition of Norfolk Southern by Union Pacific, subject to the satisfaction or waiver of the conditions specified therein, through two mergers: (i) first, Ruby Merger Sub 1 Corporation will merge with and into Norfolk Southern with Norfolk Southern surviving as a direct, wholly owned subsidiary of Union Pacific (the first merger); and (ii) second, imme …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

"Debt Credit facilities During the second quarter 2026, we replaced our $2.0 billion revolving credit facility, which was scheduled to expire on May 20, 2027, with a new $2.0 billion facility that expires May 20, 2031 (the Facility). The Facility is based on substantially similar terms as those in the previous credit facility as described below. At June 30, 2026, 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. During the six months ended June 30, 2026, we issued $0 and repaid $0 through the Facility. As of June 30, 2026, we had $0 outstanding with the Facility. 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 Term Secured Overnight Financing Rate (SOFR), plus a spread, depending upon credit ratings for our senior unsecured debt. The Facility requires UPC to maintain an adjusted debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) coverage ratio. The definition of debt used for purposes of calculating the adjusted debt-to-EBITDA coverage ratio includes, among other things, certain credit arrangements, finance leases, guarantees, unfunded and vested pension benefits under Title IV of Employee Retirement Income Security Act of 1974 (ERISA), and unamor …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Stock-Based Compensation We have several stock-based compensation plans where 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. Employees may also participate in our employee stock purchase plan (ESPP). Information regarding stock-based compensation expense appears in the table below: Three months ended June 30, Six months ended June 30, Millions 2026 2025 2026 2025 Stock-based compensation, before tax: Stock options $ 5 $ 7 $ 10 $ 13 Retention awards 23 26 44 48 ESPP [a] 3 4 6 10 Total stock-based compensation, before tax $ 31 $ 37 $ 60 $ 71 Excess income tax benefits from equity compensation plans $ 3 $ 1 $ 12 $ 8 [a] Effective with the June 10, 2025, purchase (for employee services rendered in May 2025), the Company match was changed from 40% to 20% of amounts contributed by the employee up to a maximum employee contribution of 5% of monthly salary (limited to $15,000 annually). 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. At June 30, 2026, outstanding stock options are not 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 2026 2025 Risk-free interest rate 3.7% 4.3% Dividend yield …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Income Taxes In the second quarter of 2026, changes in state tax laws and other state tax matters resulted in a $27 million reduction of our deferred tax expense. In the second quarter of 2025, the state of Kansas enacted corporate income tax legislation that resulted in a $115 million reduction of our deferred tax expense.

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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 benefit/cost were as follows: Three months ended June 30, Six months ended June 30, Millions 2026 2 …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Related Parties UPRR and other North American railroad companies jointly own TTX Company (TTX). UPRR has a 37.03% economic 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 Americas railroads. TTX assists railroads in meeting the needs of their customers by providing rail cars in an efficient, pooled environment. All railroads may utilize TTX rail cars through car hire by renting rail cars at stated rates. UPRR had $2.0 billion recognized as investments related to TTX in our Condensed Consolidated Statements of Financial Position as of both June 30, 2026, and December 31, 2025. TTX car hire expense of $111 million and $109 million for the three months ended June 30, 2026 and 2025, respectively, and $216 million and $221 million for the six months ended June 30, 2026 and 2025, respectively, are included in equipment and other rents in our Condensed Consolidated Statements of Income. In addition, UPRR had accounts payable to TTX of $74 million and $72 million at June 30, 2026, and December 31, 2025, respectively. …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

Operations and Segmentation The Railroad, along with its subsidiaries and rail affiliates, is our one reportable operating segment. Although we provide and analyze revenues by commodity group, we treat the financial results of the Railroad as one segment due to the integrated nature of our rail network. The Companys Chief Operating Decision Maker (CODM) is our Chief Executive Officer. The CODM assesses performance for our rail network and decides how to allocate resources based on net income as reported on our Consolidated Statements of Income. The measure of segment assets is reported on our Consolidated Statements of Financial Position as total assets. Our operating revenues are primarily derived from contracts with customers for the transportation of freight from origin to destination. Although our revenues are principally derived from customers domiciled in the U.S., the ultimate points of origination or destination for some products we transport are outside the U.S. Freight revenues from each of our commodity groups, as described in the table below, includes revenues from shipments to and from Mexico, which amounted to $828 million and $751 million for the three months ended June 30, 2026 and 2025, respectively, and $1.6 billion and $1.5 billion for the six months ended June 30, 2026 and 2025, respectively. Our significant segment expenses as monitored by the CODM are shown in the table below. This breakout of revenues and expenses is used by the CODM to monitor and asse …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing