Union Pacific 2011 Annual Report Download - page 37

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Credit Facilities – During the second quarter of 2011, we replaced our $1.9 billion revolving credit
facility, which was scheduled to expire in April 2012, with a new $1.8 billion facility that expires in May
2015 (the facility). The facility is based on substantially similar terms as those in the previous credit
facility. On December 31, 2011, we had $1.8 billion of credit available under the facility, which is
designated for general corporate purposes and supports the issuance of commercial paper. We did not
draw on either facility during 2011. 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 for
borrowings at floating rates based on London Interbank Offered Rates, plus a spread, depending upon
our senior unsecured debt ratings. The facility requires the Corporation to maintain a debt-to-net-worth
coverage ratio as a condition to making a borrowing. At December 31, 2011, and December 31, 2010
(and at all times during the year), 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, 2011, the debt-to-net-worth coverage ratio
allowed us to carry up to $37.2 billion of debt (as defined in the facility), and we had $9.5 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.
During 2011, we did not issue or repay any commercial paper and, at December 31, 2011 and 2010, we
had no commercial paper outstanding. Our revolving credit facility supports outstanding commercial
paper balances, which do not reduce the amount of borrowings available under the facility.
At December 31, 2011 and 2010, we reclassified as long-term debt approximately $100 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.
Ratio of Earnings to Fixed Charges
For each of the years ended December 31, 2011, 2010, and 2009, our ratio of earnings to fixed charges
was 8.4, 6.9, and 4.9, 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.)
Common Shareholders’ Equity
Dividend Restrictions – Our revolving credit facility includes a debt-to-net worth covenant (discussed in
the Credit Facilities section above) that, under certain circumstances, restricts the payment of cash
dividends to our shareholders. The amount of retained earnings available for dividends was $13.8 billion
and $12.9 billion at December 31, 2011 and 2010, respectively.