What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-23 compared with 2025-07-29 · 127 added, 122 removed, 192 unchanged (56% of the section changed)

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Our network serves a majority of the country's population and manufacturing base, with connections to every major container port on the Atlantic coast as well as major ports across the Gulf Coast and Great Lakes.

Throughout the first half of 2025, we have remained focused on managing what we can control, including providing safe and reliable service for our customers while continuing efforts to drive productivity in our organization.

During the quarter, we delivered revenue growth that helped drive improved financial performance amid ongoing macroeconomic uncertainty.

We were able to handle additional volumes while generating improvements in labor productivity and fuel efficiency.

Additionally, we continued to experience recoveries related to the Eastern Ohio Incident (as defined further and described in Note 12 in the Notes to Consolidated Financial Statements) in excess of incremental expenses, which further benefited our financial results.

For the second quarter, we achieved an operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 62.2%, and an adjusted operating ratio of 63.4% (see our non-GAAP reconciliations beginning on page 28).

On July 28, 2025, we entered into a Merger Agreement with Union Pacific, an agreement to create America’s first transcontinental railroad.

Details are further described in Note 1 in the Notes to Consolidated Financial Statements.

Our third quarter financial results reflected continued improvements in labor productivity and fuel efficiency while also delivering revenue growth driven by increased automotive and chemicals traffic.

Significantly impacting the comparison of our financial results to the prior year is the absence of $380 million in gains on sales of railway lines that occurred in 2024.

Additionally, net benefits related to the Eastern Ohio Incident (as defined further and described in Note 15 in the Notes to Consolidated Financial Statements) were lower in the current year.

For the third quarter, we achieved an operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 64.6%, and an adjusted operating ratio of 63.3% (see our non-GAAP reconciliations beginning on page 29).

We remain committed to being a safe, productive, resilient, and efficient railroad with industry-competitive margins.

SUMMARIZED RESULTS OF OPERATIONS

Second Quarter First Six Months

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

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Railway operating ratio (percent) 64.6 47.7 35% 62.9 67.7 (7%)

Income from railway operations increased in both periods.

Second quarter financial results rose due to higher railway operating revenues driven by increased volumes, leading to gains in income from railway operations, net income, and diluted earnings per share.

For the first six months, financial results improved primarily as a result of lower railway operating expenses associated with the Eastern Ohio Incident, as insurance and other recoveries exceeded incremental Incident-related costs, in addition to lower expenses associated with restructuring activities.

As a result, we improved our railway operating ratio and delivered significant increases in income from railway operations, net income, and diluted earnings per share.

The following tables adjust our GAAP financial results for the second quarter and first six months of 2025 and 2024 to exclude restructuring and other charges and the effects of the Incident.

The adjusted results for the second quarter and first six months of 2024 also exclude shareholder advisory costs and a deferred income tax adjustment.

Income from railway operations, net income, and diluted earnings per share decreased in the third quarter but increased for the first nine months.

The decrease in the third quarter was the result of higher railway operating expenses as 2024 included significant gains on sales of railway lines and higher insurance recoveries related to the Eastern Ohio Incident.

For the first nine months, railway operating expenses were lower.

In 2025, insurance and other recoveries resulting from the Incident exceeded incremental Incident-related costs.

Additionally, expenses associated with restructuring activities were lower.

Partially offsetting those items were lower gains from the sales of railway lines and properties.

Both periods reflect higher railway operating revenues, driven by a combination of improved traffic mix, favorable pricing, and increased volume, which was partially offset by lower fuel surcharge revenue.

The following tables adjust our GAAP financial results for the third quarter and first nine months of 2025 to exclude Merger-related expenses, restructuring and other charges, and the overall impact on operating expenses resulting from costs and recoveries associated with the Incident.

The following tables adjust our GAAP financial results for the third quarter and first nine months of 2024 to exclude gains on railway line sales, restructuring and other charges, and costs and recoveries associated with the Incident.

Additionally, the adjusted results for the first nine months of 2024 exclude shareholder advisory costs and a deferred income tax adjustment.

The income tax effects of these non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustments related.

We use these non-GAAP financial measures internally and believe this

information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding these items.

We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding these items.

While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP.

In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

Non-GAAP Reconciliation for Second Quarter 2025

Reported (GAAP) Restructuring and Other Charges Eastern Ohio Incident Adjusted

Non-GAAP Reconciliation for Third Quarter 2025

Reported (GAAP) Merger - Related Expenses Restructuring and Other Charges Eastern Ohio Incident Adjusted (non-GAAP)

($ in millions, except per share amounts)

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Railway operating ratio (percent) 64.6 (0.5) (0.4) (0.4) 63.3

Non-GAAP Reconciliation for Second Quarter 2024

Reported (GAAP) Restructuring and Other Charges Eastern Ohio Incident Shareholder Advisory Costs Adjusted

Non-GAAP Reconciliation for Third Quarter 2024

Reported (GAAP) Gains on Railway Line Sales Restructuring and Other Charges Eastern Ohio Incident Adjusted

($ in millions, except per share amounts)

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Railway operating ratio (percent) 47.7 12.5 (2.0) 5.2 63.4

In the table below, references to the results for the second quarters of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the tables above.

Second Quarter

In the table below, references to the results for the third quarters of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the tables above.

Third Quarter

Adjusted 2025

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Railway operating ratio (percent) 63.3 63.4 —%

Non-GAAP Reconciliation for First Six Months 2025

Reported (GAAP) Restructuring and Other Charges Eastern Ohio Incident Adjusted

Non-GAAP Reconciliation for First Nine Months 2025

Reported (GAAP) Merger - Related Expenses Restructuring and Other Charges Eastern Ohio Incident Adjusted

($ in millions, except per share amounts)

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Railway operating ratio (percent) 62.9 (0.2) (0.3) 2.4 64.8

Non-GAAP Reconciliation for First Six Months 2024

Reported (GAAP) Restructuring and Other Charges Eastern Ohio Incident Shareholder Advisory Costs Deferred Income Tax Adjustment Adjusted

Non-GAAP Reconciliation for First Nine Months 2024

Reported (GAAP) Gains on Railway Line Sales Restructuring

and Other Charges Eastern Ohio Incident Shareholder Advisory Costs Deferred Income Tax Adjustment Adjusted 2024

($ in millions, except per share amounts)

Railway operating $ 6,159 $ 380 $ (156) $ (368) $ — $ — $ 6,015

Income from railway $ 1,344 $ 96 $ 527 $ — $ — $ 1,967

railway $ 2,940 $ (380) $ 156 $ 368 $ — $ — $ 3,084

Net income $ 1,889 $ (287) $ 104 $ 279 $ 38 $ (27) $ 1,996

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ratio (percent)

In the table below, references to the results for the first six months of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliation in the tables above.

First Six Months

In the table below, references to the results for the first nine months of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliation in the tables above.

First Nine Months

Adjusted 2025

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Railway operating ratio (percent) 64.8 66.1 (2%)

On an adjusted basis, income from railway operations increased in both periods due to higher railway operating revenues, driven by higher volumes, and lower adjusted railway operating expenses.

The declines in adjusted railway operating expenses in both periods reflect lower fuel costs and purchased services.

On an adjusted basis, income from railway operations increased in both periods.

Railway operating revenues were higher in both periods, driven by a combination of improved traffic mix, favorable pricing, and increased volume, which was partially offset by lower fuel surcharge revenue.

Adjusted railway operating expenses increased in the third quarter but decreased for the first nine months.

Both periods reflect higher expenses in compensation and benefits, equipment rents, claims, and materials, which were partially offset by higher gains from the sales of operating property in the current year.

The first nine months includes the impact of lower fuel prices, while the third quarter reflects higher fuel prices.

DETAILED RESULTS OF OPERATIONS

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The following tables present a comparison of revenues ($ in millions), units (in thousands), and average revenue per unit ($ per unit) by commodity group.

Second Quarter First Six Months

Third Quarter First Nine Months

Revenues 2025 2024 % change 2025 2024 % change

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Total 1,721 1,694 2% 1,725 1,729 —%

Railway operating revenues increased $66 million and $55 million in the second quarter and first six months, respectively.

Railway operating revenues increased $52 million and $107 million in the third quarter and first nine months, respectively.

The table below reflects the components of the revenue change by major commodity group ($ in millions).

Second Quarter First Six Months

Third Quarter First Nine Months

Merchandise Intermodal Coal Merchandise Intermodal Coal

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Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges.

Revenues associated with these surcharges totaled $203 million and $259 million in the second quarters of 2025 and 2024, respectively, and $405 million and $519 million for the first six months of 2025 and 2024, respectively.

Revenues associated with these surcharges totaled $208 million and $238 million in the third quarters of 2025 and 2024, respectively, and $613 million and $757 million for the first nine months of 2025 and 2024, respectively.

The decrease in fuel surcharge revenues is driven by lower fuel commodity prices.

For the remainder of 2025, while we acknowledge the uncertainty in the economy, we currently expect revenue to increase compared to 2024, driven by higher volume.

Merchandise revenues increased in both periods due to higher volume.

Volume growth in the second quarter was partially offset by lower average revenue per unit, driven by lower fuel surcharge revenue.

The first six months experienced increased average revenue per unit, driven by increased pricing and favorable mix partially offset by lower fuel surcharge revenue.

Agriculture, forest and consumer products volume rose in both periods due to increases in corn and ethanol.

Higher corn volume was the result of increased rail demand.

Ethanol increased due to improved terminal access and new business.

Chemicals volume rose in both periods, primarily due to increased sand and natural gas liquids shipments.

Sand volume increased due to strong demand to support natural gas drilling.

Merchandise revenues increased in both periods due to higher volume and increased average revenue per unit, driven by increased pricing and favorable mix partially offset by lower fuel surcharge revenue.

Agriculture, forest and consumer products volume decreased in third quarter but was flat for the first nine months.

Corn shipments declined in the third quarter due to decreased demand for shipments to the southeast over the prior year.

Chemicals volume rose in both periods, primarily due to increased natural gas liquids and sand shipments, where the mix of traffic had an unfavorable impact on revenue per unit.

Natural gas liquids volume rose due to increased demand for product bound for export markets.

Metals and construction volume increased in the second quarter but decreased for the first six months.

Sand volume increased due to strong demand to support natural gas drilling.

Metals and construction volume increased in the third quarter but was flat for the first nine months.

Scrap metal and iron and steel volume increased in both periods due to stronger demand.

Additionally, volume increased in the second quarter due to higher empty equipment repositioning.

Volume declined in aggregates and coil steel for both periods, driving the decline in the first six months.

Weather-related impacts negatively impacted shipments of aggregates and coil steel volume decreased due to lower demand.

Automotive volumes increased in both periods, driven by shippers increasing volume in anticipation of potential changes to tariffs and growth with existing customers.

Intermodal revenues were nearly flat in the second quarter and increased for the first six months.

Both periods reflect higher volumes, partially offset by lower average revenue per unit primarily driven by lower fuel surcharge revenue.

Weather-related impacts earlier in the year negatively impacted shipments of aggregates.

Automotive volumes increased in both periods, driven by shippers increasing volume in anticipation of potential changes to tariffs, growth with existing customers and the absence of customer production issues seen in the prior year.

Intermodal revenues decreased in the third quarter but increased for the first nine months.

The third quarter decline was due to lower volume, partially offset by higher average revenue per unit, driven by increased pricing, partially offset by lower fuel surcharge revenue and adverse mix.

The increase in the first nine months was the result of higher volumes and flat average revenue per unit with increased pricing being offset by lower fuel surcharge revenue and adverse mix.

Intermodal units (in thousands) by market were as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

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Total 1,032.1 1,052.2 (2%) 3,065.9 3,044.5 1 %

Domestic volume decreased in the second quarter but was flat for the first six months.

While domestic volume was positively impacted during both periods by shippers increasing volume in anticipation of potential changes to tariffs, these increases were offset by reduced premium shipments related to economic uncertainties.

Additionally, the second quarter was impacted by reduced traffic originating from the West coast.

International volume rose in both periods primarily driven by new business with existing customers, including increased volume in anticipation of potential changes to tariffs.

Coal revenues declined in both periods due to lower average revenue per unit, driven by reduced pricing, adverse mix, and lower fuel surcharge revenue, partially offset by higher volume.

Domestic volume decreased in both periods driven by reduced traffic originating on the West Coast and reduced premium shipments.

International volume was flat in the third quarter but increased for the first nine months primarily driven by increased volume during the first six months in anticipation of potential changes to tariffs.

Coal revenues declined in both periods due to lower average revenue per unit, driven by reduced pricing, adverse mix, and lower fuel surcharge revenue.

Volume decreased in the third quarter but increased for the first nine months.

Coal tonnage (in thousands) by market was as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

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Utility tonnage increased in both periods due to higher electricity demand and higher natural gas prices.

Export tonnage increased in the second quarter, as prior year volumes were negatively impacted by the temporary closure of the Baltimore port in 2024.

Export tonnage in the second quarter and first six months of 2025 was negatively impacted by unfavorable coal pricing.

Domestic metallurgical and industrial coal tonnage rose in both periods as a result of increased demand.

Export tonnage decreased in both periods due to soft global demand and unfavorable seaborne coal pricing.

Domestic metallurgical tonnage decreased in the third quarter due to customer outages.

Industrial coal tonnage increased for the first nine months as a result of increased demand.

Railway Operating Expenses

Railway operating expenses summarized by major classifications follow ($ in millions):

Second Quarter First Six Months

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

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Other (32) (350) 91% 45 (250) 118%

Merger-related expenses 15 — 15 —

Restructuring and other charges 12 60 (80%) 22 156 (86%)

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Total $ 2,005 $ 1,455 38% $ 5,787 $ 6,159 (6%)

Compensation and benefits expense decreased in both periods as follows:

• employee activity levels (down $28 million for the quarter and $68 million for the first six months),

• health and welfare benefits (down $11 million for the quarter and $23 million for the first six months),

• incentive compensation (up $6 million for the quarter and $44 million for the first six months),

• pay rates (up $24 million for the quarter and $43 million for the first six months), and

• other (up $1 million for the quarter but down $1 million for the first six months).

Average rail headcount for the quarter was down by approximately 970 compared with the second quarter of 2024.

Compensation and benefits expense increased in both periods as follows:

• incentive and stock-based compensation (up $52 million for the quarter and $105 million for the first nine months),

• pay rates (up $17 million for the quarter and $60 million for the first nine months),

• health and welfare benefits (down $9 million for the quarter and $32 million for the first nine months),

• employee activity levels (down $8 million for the quarter and $76 million for the first nine months), and

• other (down $4 million for the quarter and $14 million for the first nine months).

Average rail headcount for the quarter was down by approximately 510 compared with the third quarter of 2024.

Purchased services includes the costs of services purchased from external vendors and contractors, including the net costs of operating joint facilities with other railroads.

Expense decreased in both periods driven by network performance improvements and productivity initiatives, partially offset by higher intermodal lift costs and, for the first six months, increased weather-related response costs.

Equipment rents , which includes our cost of using equipment (mostly freight cars) owned by other railroads or private owners less the rent paid to us for the use of our equipment, increased in both periods due to higher automotive equipment expense as a result of higher volumes, partially offset by lower short-term locomotive resource costs for the first six months.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations decreased in both periods.

Locomotive fuel price decreased in both periods (down 15% in the second quarter and 13% for the first six months).

Locomotive fuel consumption was flat in the second quarter and down 2% for the first six months.

These expenses increased in the third quarter but decreased in the first nine months.

The third quarter increase was due to higher derailment-related and bridge repair expenses.

The decrease in the first nine months was driven by productivity initiatives, partially offset by higher intermodal lift costs and weather-related response costs.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations increased in the third quarter, but decreased in the first nine months.

Locomotive fuel price increased 11% in the third quarter, but decreased 6% for the first nine months.

Locomotive fuel consumption decreased in both periods (down 1% in the third quarter and 2% for the first nine months).

Depreciation expense increased in both periods due to a higher asset base.

Materials expense increased in both periods due to higher expenses related to intermodal and engineering material consumption.

Materials expense increased in both periods due to higher expenses related to intermodal and engineering material consumption while the third quarter also reflected increased locomotive material consumption.

Claims expense includes costs related to personal injury, property damage, and environmental matters.

Claims expense increased in both periods as a result of higher expenses related to personal injury case development, increased accident-related costs, and higher insurance premiums.

Additionally, for the first six months, expenses incurred on environmental matters, unrelated to the Incident, were higher and included costs related to weather events in the first quarter.

The increases in both periods were partially offset by a favorable third-party settlement for recovery of previously incurred costs.

Other expense increased in the second quarter but decreased for the first six months.

The second quarter increased due to higher allowances for losses, partially offset by increased gains from operating property sales.

The first six months decreased due to higher gains from operating property sales partially offset by higher allowances for losses.

Gains from operating property sales totaled $34 million and $25 million for the second quarter in 2025 and 2024, respectively, and $57 million and $25 million in the first six months of 2025 and 2024, respectively.

Restructuring and other charges

During the second quarter of 2025, we recorded $10 million in expenses primarily related to the restructuring of certain technology functions.

During the first six months of 2024, we recorded $96 million in expense associated with our voluntary and involuntary separation programs that reduced our management workforce, as well as costs associated with the appointment of our new chief operating officer.

Eastern Ohio incident

During the second quarters of 2025 and 2024, insurance and other recoveries exceeded additional Incident-related expenses by $47 million and $65 million, respectively.

For the first six months of 2025, our recoveries exceeded additional Incident-related expenses by $232 million whereas we incurred expenses of $527 million for costs associated with the Incident, net of recoveries, for the same period last year.

Recoveries collected exceeded incremental cash expenditures by $234 million for the first six months of 2025, while cash expenditures attributable to the Incident, net of recovery proceeds, were $133 million for the first six months of 2024, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows.

Claims expense was higher in both periods as a result of increased expenses associated with environmental matters unrelated to the Incident, personal injury case development, and insurance premiums.

Other expense increased in both periods primarily due to the absence of railway line sales in the current year.

In 2024, the sale of railway lines in the states of Virginia and North Carolina generated gains of $380 million.

Gains from the sales of operating property totaled $85 million and $20 million in the third quarters of 2025 and 2024, respectively, and $142 million and $45 million in the first nine months of 2025 and 2024, respectively.

The gains for the third quarter and first nine months of 2025 were largely driven by a significant land sale that we expect to result in additional traffic volumes in the future.

Merger-related expenses primarily relate to third-party advisor fees, legal fees, and costs associated with employee retention arrangements and were $15 million in the third quarter of 2025.

Restructuring and other charges in 2025 includes expenses associated with the rationalization of certain software development projects that had not been placed into service and the restructuring of certain technology functions, including severance costs for impacted employees.

Restructuring and other charges in 2024 includes expenses associated with our voluntary and involuntary separation programs that reduced our management workforce, expenses associated with the rationalization of certain software development projects that had not been placed into service, costs associated with the appointment of our new chief operating officer, and the disposition of an asset class.

We incurred expenses of $12 million and $60 million in the third quarters of 2025 and 2024, respectively, and $22 million and $156 million for the first nine months of 2025 and 2024, respectively.

Eastern Ohio incident activity during the third quarters of 2025 and 2024 pertained to insurance and other recoveries that exceeded additional Incident-related expenses by $11 million and $159 million, respectively.

For the first nine months of 2025, our recoveries exceeded additional Incident-related expenses by $243 million whereas we incurred expenses of $368 million for costs associated with the Incident, net of recoveries, for the same period last year.

Recoveries collected exceeded incremental cash expenditures by $227 million for the first nine months of 2025, while cash expenditures attributable to the Incident, net of recovery proceeds, were $32 million for the first nine months of 2024, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows.

For further details regarding the Incident, see Note 15 in the Notes to Consolidated Financial Statements.

Other income – net

Other income – net increased $7 million in the second quarter and $20 million for the first six months.

Both periods were impacted by the absence of costs associated with shareholder matters incurred in 2024 and a $20 million curtailment gain on our other postretirement benefit plan in 2024.

The effective tax rate for the second quarter and first six months of 2025 was 23.0% and 23.2% compared with 21.9% and 18.9% for the same periods last year.

Both periods in 2024 reflect a $13 million deferred income tax benefit due to a change in a state corporate income tax rate, while the first six months also includes a $27 million deferred income tax benefit, which was the result of a subsidiary restructuring.

Other income – net decreased $11 million in the third quarter, but increased $9 million for the first nine months.

Both periods were impacted by lower returns on COLI and higher pension and postretirement benefits expense, partially offset by higher interest income.

The first nine months also reflect the absence of costs associated with shareholder matters incurred in 2024 and a $20 million curtailment gain on our other postretirement benefit plan in 2024.

The effective tax rate for both the third quarter and first nine months of 2025 was 23.1% compared with 23.0% and 21.3% for the same periods last year.

The rate for the first nine months of 2024 reflects a $13 million deferred income tax benefit due to a change in state corporate income tax rate and a $27 million deferred income tax benefit from subsidiary restructuring.

On July 4, 2025, OBBBA was signed into law.

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FASB ASC 740 “ Income Taxes ” requires that the effect of changes in tax rates and laws be recognized in the period in which the legislation is enacted.

The Company is evaluating the impact of OBBBA but expects that the primary effect will be a shift between current and deferred taxes.

The primary effect of OBBBA was a reclassification from current to deferred taxes.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was $2.0 billion for the first six months of 2025, compared with $1.9 billion for the same period of 2024.

Cash provided by operating activities, our principal source of liquidity, was $3.3 billion for the first nine months of 2025, compared with $3.1 billion for the same period of 2024.

The increase reflects improved operating results.

We had negative working capital of $760 million and $357 million at June 30, 2025 and December 31, 2024, respectively, with the increase driven in part by COLI loan repayments.

Cash and cash equivalents totaled $1.3 billion at June 30, 2025.

Cash used in investing activities was $1.4 billion for the first six months of 2025, compared with $2.6 billion for the same period last year.

The decrease was driven by the prior year acquisition of the assets of the Cincinnati Southern Railway (CSR), partially offset by an increase in COLI loan repayments in the current year.

Cash used in financing activities was $930 million for the first six months of 2025, compared with $217 million for the same period last year.

The increase reflects increased repurchases of Common Stock and lower proceeds from borrowing.

We repurchased $456 million of Common Stock, inclusive of excise taxes, during the first six months of 2025, while we did not repurchase any Common Stock during the same period last year.

As of June 30, 2025, $6.4 billion remains authorized by our Board of Directors for future repurchase activity.

The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors.

Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) and Rule 10b-18 under the Securities and Exchange Act of 1934.

Any near-term purchases under the program are expected to be made with internally-generated cash, cash on hand, or proceeds from borrowings.

We had negative working capital of $488 million and $357 million at September 30, 2025 and December 31, 2024, respectively.

Our negative working capital position improved as compared to June 30, 2025, and we expect to accumulate cash and cash equivalents throughout the period in which the Merger is subject to review and approval.

Cash and cash equivalents totaled $1.4 billion at September 30, 2025.

Cash used in investing activities was $1.9 billion for the first nine months of 2025, compared with $2.8 billion for the same period last year.

The decrease was driven by the prior year acquisition of the assets of the Cincinnati Southern Railway (CSR) and lower property additions in the current year, which was partially offset by lower proceeds from property sales and other transactions and increased COLI loan repayments.

Cash used in financing activities was $1.6 billion for the first nine months of 2025, compared with $903 million for the same period last year.

The increase reflects increased repurchases of Common Stock and lower proceeds from borrowing, partially offset by lower debt repayments.

We repurchased $534 million of Common Stock, inclusive of excise taxes paid, during the first nine months of 2025, while we did not repurchase any Common Stock during the same period last year.

As of September 30, 2025, $6.3 billion remains authorized by our Board of Directors for future repurchase activity.

With limited exceptions, the Merger Agreement prohibits the Company from repurchasing shares of its common stock without approval by Union Pacific.

As a result, the Company has suspended share repurchase activities.

In May 2025, we issued $400 million of 5.10% senior notes due 2035.

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The term of our accounts receivable securitization program expires in May 2026.

We had no amounts outstanding under this program and our available borrowing capacity was $400 million at both June 30, 2025 and December 31, 2024.

We had no amounts outstanding under this program and our available borrowing capacity was $400 million at both September 30, 2025 and December 31, 2024.

In June 2024, we entered into an agreement that provides us the ability to issue up to $800 million of unsecured commercial paper and is backed by our credit agreement.

The unsecured short-term commercial paper program provides for borrowing at prevailing rates and includes covenants.

At both June 30, 2025 and December 31, 2024, we had no outstanding commercial paper.

At both September 30, 2025 and December 31, 2024, we had no outstanding commercial paper.

In January 2024, we renewed and amended our $800 million credit agreement.

The amended agreement expires in January 2029, and provides for borrowings at prevailing rates and includes covenants.

We had no amounts outstanding under this facility at either June 30, 2025 or December 31, 2024, and we are in compliance with all of its covenants.

We had no amounts outstanding under this facility at either September 30, 2025 or December 31, 2024, and we are in compliance with all of its covenants.

In addition, we have investments in general purpose COLI policies and have the ability to borrow against these policies.

We had no amounts borrowed against these policies at June 30, 2025 and $605 million borrowed at December 31, 2024.

Our remaining borrowing capacity was $600 million and $40 million at June 30, 2025 and December 31, 2024, respectively.

Our debt-to-total capitalization ratio was 54.0% at June 30, 2025 and 54.6% at December 31, 2024.

We had no amounts borrowed against these policies at September 30, 2025 and $605 million borrowed at December 31, 2024.

Our remaining borrowing capacity was approximately $600 million and $40 million at September 30, 2025 and December 31, 2024, respectively.

Our debt-to-total capitalization ratio was 53.0% at September 30, 2025 and 54.6% at December 31, 2024.

We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations.

In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to decrease shareholder distributions, provide additional flexibility to meet our ongoing obligations.

additional senior notes (see Note 9) and over $400 million of additional unconditional purchase obligations, which extend through 2030.

In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to decrease shareholder distributions provide additional flexibility to meet our ongoing obligations, subject to certain restrictions on the incurrence of additional indebtedness under the Merger Agreement.

There have been no material changes to the information on future contractual obligations, including those that may have material cash requirements, contained in our Form 10-K for the year ended December 31, 2024, with the exception of additional senior notes (see Note 12) and over $600 million of additional unconditional purchase obligations, which extend through 2030.

CRITICAL ACCOUNTING ESTIMATES

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In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on the replacement cost of property.

As a capital-intensive company, we have most of our capital invested in long-lived assets.

As a capital-intensive company, we have most of our capital invested in long-

lived assets.

The replacement cost of these assets, as well as the related depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.

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Certain statements in this report, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations, are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended.

These statements relate to future events or our future

financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements.

These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements.

In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “project,” “consider,” “predict,” “potential,” “feel,” or other comparable terminology.

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• a significant cybersecurity incident or other disruption to our technology infrastructure;

• the occurrence of any event, change or other circumstance that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between Union Pacific and the Company providing for the acquisition of the Company by Union Pacific (the “Transaction”);

the possibility that the Transaction does not close when expected or at all because required Surface Transportation Board, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Transaction);

the risk that the combined company will not realize expected benefits, cost savings, accretion, synergies and/or growth from the Transaction, or that such benefits may take longer to realize or be more costly to achieve than expected;

disruption to the Company’s business as a result of the announcement and pendency of the Transaction;

the costs associated with the anticipated length of time of the pendency of the Transaction, including the restrictions contained in the definitive merger agreement on the ability of the Company to operate its business outside the ordinary course during the pendency of the Transaction;

• our ability to complete the Mergers with Union Pacific;

• the occurrence of any event, change or other circumstance that could give rise to the right of one or both of the Company or Union Pacific to terminate the Merger Agreement;

• the possibility that the Mergers do not close when expected or at all because required Surface Transportation Board review and approval, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Mergers);

• the risk that the combined company will not realize expected benefits, cost savings, accretion, synergies and/or growth from the Mergers, or that such benefits may take longer to realize or be more costly to achieve than expected;

• disruption to the Company’s business as a result of the announcement and pendency of the Mergers;

• the costs associated with the anticipated length of time of the pendency of the Mergers, including the restrictions contained in the Merger Agreement on the ability of the Company to operate its business outside the ordinary course during the pendency of the Mergers;

• the diversion of the Company’s management’s attention and time from ongoing business operations and opportunities on Merger-related matters;

and reputational risk and potential adverse reactions of Union Pacific’s or the Company’s customers, suppliers, employees, labor unions or other business partners, including those resulting from the announcement or completion of the Transaction.

• the possibility that the Mergers may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

• the reputational risk and adverse reactions of customers, suppliers, employees, labor unions or other business partners, including those resulting from the announcement or completion of the Mergers.

The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis