Union Pacific 2011 Annual Report Download - page 35

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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2011, our principal sources of liquidity included cash, cash equivalents, our
receivables securitization facility, and our revolving credit facility, as well as the availability of commercial
paper and other sources of financing through the capital markets. We had $1.8 billion of committed credit
available under our credit facility, with no borrowings outstanding as of December 31, 2011. We did not
make any borrowings under this facility during 2011. The value of the outstanding undivided interest held
by investors under the receivables securitization facility was $100 million as of December 31, 2011, and is
included in our Consolidated Statements of Financial Position as debt due after one year. The
receivables securitization facility obligates us to maintain 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 access capital markets 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 have access to liquidity by
issuing bonds to public or private investors based on our assessment of the current condition of the credit
markets.
At December 31, 2011 and 2010, we had a working capital surplus. This reflects a strong cash position,
which provides enhanced liquidity in an uncertain economic environment. In addition, we believe we have
adequate access to capital markets to meet cash requirements, and we have sufficient financial capacity
to satisfy our current liabilities.
Cash Flows
Millions 2011 2010 2009
Cash provided by operating activities $ 5,873 $ 4,105 $ 3,204
Cash used in investing activities (3,119) (2,488) (2,145)
Cash used in financing activities (2,623) (2,381) (458)
Net change in cash and cash equivalents $ 131 $ (764) $ 601
Operating Activities
Higher net income and lower cash income tax payments in 2011 increased cash provided by operating
activities compared to 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010, enacted in December 2010, provided for 100% bonus depreciation for qualified
investments made during 2011, and 50% bonus depreciation for qualified investments made during 2012.
As a result of the Act, the Company deferred a substantial portion of its 2011 income tax expense. This
deferral decreased 2011 income tax payments, thereby contributing to the positive operating cash flow.
In future years, however, additional cash will be used to pay income taxes that were previously deferred.
In addition, the adoption of a new accounting standard in January of 2010 changed the accounting
treatment for our receivables securitization facility from a sale of undivided interests (recorded as an
operating activity) to a secured borrowing (recorded as a financing activity), which decreased cash
provided by operating activities by $400 million in 2010. Higher net income in 2010 increased cash
provided by operating activities compared to 2009.
Investing Activities
Higher capital investments partially offset by higher proceeds from asset sales in 2011 drove the increase
in cash used in investing activities compared to 2010. Higher capital investments and lower proceeds
from asset sales in 2010 drove the increase in cash used in investing activities compared to 2009.