Union Pacific 2009 Annual Report Download - page 17

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and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources –
Financial Condition, Item 7). Our capital plan included the acquisition of 127 locomotives at a cost of
$287 million. We financed 44 of the 127 locomotives with a value of $100 million through a capital lease
financing.
Infrastructure Expansion – With expected long-term growth in the intermodal market, we commenced
construction of a new intermodal terminal in Joliet, Illinois in August 2009, with completion of the initial
phase scheduled in August 2010. This new facility will support customer growth by increasing the
Railroad’ s international and domestic container capacity and improving rail traffic efficiencies in
Chicago, the nation’ s largest rail center. Once on line, customers from across our network will benefit
from the Joliet facility’ s annual capacity of 500,000 ocean-going containers. The integrated facility will
include four 8,000-foot working tracks plus twelve 8,000-foot support tracks to stage and switch rail cars;
3,400 parking stalls; four cranes; an advanced yard system that coordinates all movement of rail cars,
trucks, trailers and containers at the facility; and advanced gate technology and security systems.
2010 Capital Expenditures – In 2010, we expect to make capital investments of approximately $2.5
billion, including expenditures for PTC, which may be revised if business conditions or new laws or
regulations affect our ability to generate sufficient returns on these investments. See discussion of our
2010 capital plan in Management’ s Discussion and Analysis of Financial Condition and Results of
Operations – 2010 Outlook, Item 7.
Equipment Encumbrance – Equipment with a carrying value of approximately $3.4 billion and $2.7
billion at December 31, 2009 and 2008, respectively, serves as collateral for capital leases and other types
of equipment obligations in accordance with the secured financing arrangements utilized to acquire such
railroad equipment.
As a result of the merger of Missouri Pacific Railroad Company (MPRR) with and into UPRR on January
1, 1997, and pursuant to the underlying indentures for the MPRR mortgage bonds, UPRR must maintain
the same value of assets after the merger in order to comply with the security requirements of the
mortgage bonds. As of the merger date, the value of the MPRR assets that secured the mortgage bonds
was approximately $6.0 billion. In accordance with the terms of the indentures, this collateral value must
be maintained during the entire term of the mortgage bonds irrespective of the outstanding balance of
such bonds.
Environmental Matters – Certain of our properties are subject to federal, state, and local laws and
regulations governing the protection of the environment (see discussion of environmental issues in
Business – Governmental and Environmental Regulation, Item 1, and Management’ s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting Policies –
Environmental, Item 7).
Item 3. Legal Proceedings
From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection
with our business. We routinely assess our liabilities and contingencies in connection with these matters
based upon the latest available information and, when necessary, we seek input from our third-party
advisors when making these assessments. Consistent with SEC rules and requirements, we describe below
material pending legal proceedings (other than ordinary routine litigation incidental to our business),
material proceedings known to be contemplated by governmental authorities, other proceedings arising
under federal, state, or local environmental laws and regulations (including governmental proceedings
involving potential fines, penalties, or other monetary sanctions in excess of $100,000) and such other
pending matters that we may determine to be appropriate.