Union Pacific 2012 Annual Report Download - page 34

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34
At December 31, 2012 and 2011, 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 any foreseeable cash requirements, and we have sufficient
financial capacity to satisfy our current liabilities.
Cash Flows
Millions 2012 2011 2010
Cash provided by operating activities $ 6,161 $ 5,873 $ 4,105
Cash used in investing activities (3,633) (3,119) (2,488)
Cash used in financing activities (2,682) (2,623) (2,381)
Net change in cash and cash equivalents $ (154) $ 131 $ (764)
Operating Activities
Higher net income in 2012 increased cash provided by operating activities compared to 2011, partially
offset by lower tax benefits from bonus depreciation (as explained below) and payments for past wages
based on national labor negotiations settled earlier this year.
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 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.
Investing Activities
Higher capital investments in 2012 drove the increase in cash used in investing activities compared to
2011. Included in capital investments in 2012 was $75 million for the early buyout of 165 locomotives
under long-term operating and capital leases during the first quarter of 2012, which we exercised due to
favorable economic terms and market conditions.
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.