Union Pacific 2009 Annual Report Download - page 43

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Amount of Commitment Expiration per Period
Other Commercial Commitments After
Millions of Dollars Total 2010 2011 2012 2013 2014 2014
Credit facilities [a] $ 1,900 $ - $- $ 1,900 $ - $- $-
Sale of receivables [b] 600 600 - - - - -
Guarantees [c] 416 29 76 24 8 214 65
Standby letters of credit [d] 22 22 - - - - -
Total commercial commitments $ 2,938 $ 651 $ 76 $ 1,924 $ 8 $ 214 $ 65
[a]
N
one of the credit facility was used as of December 31, 2009.
[b] $400 million of the sale of receivables program was utilized at December 31, 2009.
[c]
I
ncludes guaranteed obligations related to our headquarters building, equipment financings, and affiliate
d
operations.
[d]
N
one of the letters of credit were drawn upon as of December 31, 2009.
Off-Balance Sheet Arrangements
Sale of Receivables – The Railroad transfers most of its accounts receivable to Union Pacific
Receivables, Inc. (UPRI), a bankruptcy-remote subsidiary, as part of a sale of receivables facility. UPRI
sells, without recourse on a 364-day revolving basis, an undivided interest in such accounts receivable to
investors. The total capacity to sell undivided interests to investors under the facility was $600 million
and $700 million at December 31, 2009 and 2008, respectively. The value of the outstanding undivided
interest held by investors under the facility was $400 million and $584 million at December 31, 2009 and
2008, respectively. During 2009, UPRI reduced the outstanding undivided interest held by investors due
to a decrease in available receivables. The value of the undivided interest held by investors is not included
in our Consolidated Financial Statements. The value of the undivided interest held by investors was
supported by $817 million and $1,015 million of accounts receivable held by UPRI at December 31, 2009
and 2008, respectively. At December 31, 2009 and 2008, the value of the interest retained by UPRI was
$417 million and $431 million, respectively. This retained interest is included in accounts receivable in
our Consolidated Financial Statements. The interest sold to investors is sold at carrying value, which
approximates fair value, and there is no gain or loss recognized from the transaction.
The value of the outstanding undivided interest held by investors could fluctuate based upon the
availability of eligible receivables and is directly affected by changing business volumes and credit risks,
including default and dilution. If default or dilution ratios increase one percent, the value of the
outstanding undivided interest held by investors would not change as of December 31, 2009. Should our
credit rating fall below investment grade, the value of the outstanding undivided interest held by investors
would be reduced, and, in certain cases, the investors would have the right to discontinue the facility.
The Railroad services the sold receivables; however, the Railroad does not recognize any servicing asset
or liability, as the servicing fees adequately compensate us for these responsibilities. The Railroad
collected approximately $13.8 billion and $17.8 billion during the years ended December 31, 2009 and
2008, respectively. UPRI used certain of these proceeds to purchase new receivables under the facility.
The costs of the sale of receivables program are included in other income and were $9 million, $23
million, and $35 million for 2009, 2008, and 2007, respectively. The costs include interest, which will
vary based on prevailing commercial paper rates, program fees paid to banks, commercial paper issuing
costs, and fees for unused commitment availability. The decrease in the 2009 costs was primarily
attributable to lower commercial paper rates and a decrease in the outstanding interest held by investors.