Union Pacific 2012 Annual Report Download - page 40

40
Amount of Commitment Expiration per Period
Other Commercial Commitments
A
fte
r
Millions Tota
l
2013 2014 2015 2016 2017 2017
Credit facilities [a] $ 1,800 $ - $ - $ 1,800 $ - $ - $ -
Receivables securitization facility [b] 600 600 - - - - -
Guarantees [c] 307 8 214 12 30 10 33
Standby letters of credit [d] 25 24 1 - - - -
Total commercial commitments $ 2,732 $ 632 $ 215 $ 1,812 $ 30 $ 10 $ 33
[a] None of the credit facility was used as of December 31, 2012.
[b] $100 million of the receivables securitization facility was utilized at December 31, 2012, which is accounted for as debt. The
full program matures in July 2013.
[c] Includes guaranteed obligations related to our headquarters building, equipment financings, and affiliated operations.
[d] None of the letters of credit were drawn upon as of December 31, 2012.

Off-Balance Sheet Arrangements
Guarantees – At December 31, 2012, we were contingently liable for $307 million in guarantees. We
have recorded a liability of $2 million for the fair value of these obligations as of December 31, 2012 and
2011. We entered into these contingent guarantees in the normal course of business, and they include
guaranteed obligations related to our headquarters building, equipment financings, and affiliated
operations. The final guarantee expires in 2022. We are not aware of any existing event of default that
would require us to satisfy these guarantees. We do not expect that these guarantees will have a material
adverse effect on our consolidated financial condition, results of operations, or liquidity.
OTHER MATTERS
Labor Agreements – Approximately 86% of our 45,928 full-time-equivalent employees are represented
by 14 major rail unions. During the year, we concluded the most recent round of negotiations, which
began in 2010, with the ratification of new agreements by several unions that continued negotiating into
2012. All of the unions executed similar multi-year agreements that provide for higher employee cost
sharing of employee health and welfare benefits and higher wages. The current agreements will remain in
effect until renegotiated under provisions of the Railway Labor Act. The next round of negotiations will
begin in early 2015.
Inflation – Long periods of inflation significantly increase asset replacement costs for capital-intensive
companies. As a result, assuming that we replace all operating assets at current price levels, depreciation
charges (on an inflation-adjusted basis) would be substantially greater than historically reported amounts.
Derivative Financial Instruments – We may use derivative financial instruments in limited instances to
assist in managing our overall exposure to fluctuations in interest rates and fuel prices. We are not a party
to leveraged derivatives and, by policy, do not use derivative financial instruments for speculative
purposes. Derivative financial instruments qualifying for hedge accounting must maintain a specified level
of effectiveness between the hedging instrument and the item being hedged, both at inception and
throughout the hedged period. We formally document the nature and relationships between the hedging
instruments and hedged items at inception, as well as our risk-management objectives, strategies for
undertaking the various hedge transactions, and method of assessing hedge effectiveness. Changes in
the fair market value of derivative financial instruments that do not qualify for hedge accounting are
charged to earnings. We may use swaps, collars, futures, and/or forward contracts to mitigate the risk of
adverse movements in interest rates and fuel prices; however, the use of these derivative financial
instruments may limit future benefits from favorable price movements.
Market and Credit Risk – We address market risk related to derivative financial instruments by selecting
instruments with value fluctuations that highly correlate with the underlying hedged item. We manage
credit risk related to derivative financial instruments, which is minimal, by requiring high credit standards
for counterparties and periodic settlements. At December 31, 2012 and 2011, we were not required to
provide collateral, nor had we received collateral, relating to our hedging activities.