Union Pacific 2009 Annual Report Download - page 37

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37
Debt to Capital / Adjusted Debt to Capital
Millions of Dollars, Except Percentages 2009 2008
Debt (a) $ 9,848 $ 8,927
Equity 16,941 15,447
Capital (b) $ 26,789 $ 24,374
Debt to capital (a/b) 36.8% 36.6%
Millions of Dollars, Except Percentages 2009 2008
Debt $ 9,848 $ 8,927
Net present value of operating leases 3,672 3,690
Value of sold receivables 400 584
Unfunded pension and OPEB 456 733
Adjusted debt (a) $ 14,376 $ 13,934
Equity 16,941 15,447
Adjusted capital (b) $ 31,317 $ 29,381
Adjusted debt to capital (a/b) 45.9% 47.4%
Adjusted debt to capital is a non-GAAP financial measure under SEC Regulation G and Item 10 of SEC
Regulation S-K. We believe this measure is important to management and investors in evaluating the total
amount of leverage in our capital structure, including off-balance sheet lease obligations, which we
generally incur in connection with financing the acquisition of locomotives and freight cars and certain
facilities. Operating leases were discounted using 6.3% at December 31, 2009 and 8.0% at December 31,
2008. The lower discount rate reflects changes to interest rates and our current financing costs. We
monitor the ratio of adjusted debt to capital as we manage our capital structure to balance cost-effective
and efficient access to the capital markets with the Corporation’ s overall cost of capital. Adjusted debt to
capital should be considered in addition to, rather than as a substitute for, debt to capital. The tables above
provide a reconciliation from debt to capital to adjusted debt to capital. Our December 31, 2009 debt to
capital ratios increased as a result of a $921 million net increase in debt from December 31, 2008. Equity
at December 31, 2008, was reduced by $704 million for other comprehensive losses. Other
comprehensive losses in 2008 were related primarily to pensions. See Note 9 to our consolidated
financial statements in Item 8 for more information.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2009, our principal sources of liquidity included cash, cash equivalents, the sale of
certain receivables, and our revolving credit facility, as well as the availability of commercial paper and
other sources of financing through the capital markets. We had $1.9 billion of committed credit available
under our credit facility, with no borrowings outstanding as of December 31, 2009. We did not make any
borrowings under this facility during 2009. The value of the outstanding undivided interest held by
investors under the sale of receivables program was $400 million as of December 31, 2009. The sale of
receivables program is subject to certain requirements, including maintenance of an investment grade
bond rating. If our bond rating were to deteriorate, it could have an adverse impact on our liquidity.
Access to commercial paper as well as other capital market financings is dependent on market conditions.
Deterioration of our operating results or financial condition due to internal or external factors could
negatively impact our ability to utilize commercial paper as a source of liquidity. Access to liquidity
through the capital markets is also dependent on our financial stability. We expect that we will continue to