Union Pacific 2009 Annual Report Download - page 40

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40
used in financing activities increased in 2008 versus 2007 due to higher debt repayments of $416 million,
an increase of $234 million for the repurchase of common shares (see further discussion of common
shares in Market for the Registrant’ s Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities - Purchases of Equity Securities Part II, Item 5) and an increase of dividends paid,
reflecting a higher quarterly dividend. Higher debt issuances of $676 million partially offset these
increases.
Credit Facilities – On December 31, 2009, we had $1.9 billion of credit available under our revolving
credit facility (the facility). The facility is designated for general corporate purposes and supports the
issuance of commercial paper. We did not draw on the facility during 2009. 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 borrowings at floating rates based on London Interbank Offered
Rates, plus a spread, depending upon our senior unsecured debt ratings. The facility requires Union
Pacific Corporation to maintain a debt-to-net-worth coverage ratio as a condition to making a borrowing.
At December 31, 2009, and December 31, 2008 (and at all times during these periods), we were in
compliance with this covenant.
The definition of debt used for purposes of calculating the debt-to-net-worth coverage ratio includes,
among other things, certain credit arrangements, capital leases, guarantees and unfunded and vested
pension benefits under Title IV of ERISA. At December 31, 2009, the debt-to-net-worth coverage ratio
allowed us to carry up to $33.9 billion of debt (as defined in the facility), and we had $10.4 billion of debt
(as defined in the facility) outstanding at that date. Under our current capital plans, we expect to continue
to satisfy the debt-to-net-worth coverage ratio; however, many factors beyond our reasonable control
(including the Risk Factors in Item 1A of this report) could affect our ability to comply with this
provision in the future. 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 $75 million cross-default provision and a change-of-control provision. The facility
will expire in April 2012 in accordance with its terms, and we currently intend to replace the facility with
a substantially similar credit agreement on or before the expiration date, which is consistent with our past
practices with respect to our credit facilities.
At December 31, 2009, we had no commercial paper outstanding. Our commercial paper balance is
supported by our revolving credit facility but does not reduce the amount of borrowings available under
the facility. During 2009, we issued $100 million of commercial paper and repaid $200 million.
At December 31, 2009, we reclassified as long-term debt approximately $320 million of debt due within
one year that we intend to refinance. This reclassification reflected our ability and intent to refinance any
short-term borrowings and certain current maturities of long-term debt on a long-term basis. At December
31, 2008, we reclassified as long-term debt approximately $400 million of debt due within one year that
we intended to refinance at that time.
Ratio of Earnings to Fixed Charges
For each of the years ended December 31, 2009, 2008, and 2007, our ratio of earnings to fixed charges
was 4.9, 5.9, and 5.1, respectively. The ratio of earnings to fixed charges was computed on a consolidated
basis. Earnings represent income from continuing operations, less equity earnings net of distributions,
plus fixed charges and income taxes. Fixed charges represent interest charges, amortization of debt
discount, and the estimated amount representing the interest portion of rental charges. See Exhibit 12 to
this report for the calculation of the ratio of earnings to fixed charges.