Union Pacific 2012 Annual Report Download - page 78

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sold them to financing parties and entered into capital lease financing agreements with these parties. We
did not recognize any gains or losses as a result of these transactions. Capital lease obligations totaling
$286 million are reported in our Consolidated Statements of Financial Position as debt at December 31,
2012.
Debt Exchange – On June 23, 2011, we exchanged $857 million of various outstanding notes and
debentures due between 2013 and 2019 (Existing Notes) for $750 million of 4.163% notes (New Notes)
due July 15, 2022, plus cash consideration of approximately $267 million and $17 million for accrued and
unpaid interest on the Existing Notes. In accordance with ASC 470-50-40, Debt-Modifications and
Extinguishments-Derecognition, this transaction was accounted for as a debt exchange, as the
exchanged debt instruments are not considered to be substantially different. The cash consideration was
recorded as an adjustment to the carrying value of debt, and the balance of the unamortized discount and
issue costs from the Existing Notes is being amortized as an adjustment of interest expense over the term
of the New Notes. No gain or loss was recognized as a result of the exchange. Costs related to the debt
exchange that were payable to parties other than the debt holders totaled approximately $6 million and
were included in interest expense during the three months ended June 30, 2011.
The following table lists the outstanding notes and debentures that were exchanged:
Principal amount
Millions exchanged
7.875% Notes due 2019 $ 196
5.450% Notes due 2013 50
5.125% Notes due 2014 45
5.375% Notes due 2014 55
5.700% Notes due 2018 277
5.750% Notes due 2017 178
7.000% Debentures due 2016 38
5.650% Notes due 2017 18
Total $ 857
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Debt Redemptions – On November 30, 2012, we redeemed all $450 million of our outstanding 5.45%
notes due January 31, 2013. The redemption resulted in an early extinguishment charge of $4 million.
On April 28, 2012, we redeemed all $100 million of our outstanding 5.70% Tooele County, Utah
Hazardous Waste Treatment Revenue Bonds due November 1, 2026. The redemption resulted in an
early extinguishment charge of $2 million in the second quarter of 2012.
On December 19, 2011, we redeemed the remaining $175 million of our 6.5% notes due April 15, 2012,
and all $300 million of our outstanding 6.125% notes due January 15, 2012. The redemptions resulted in
an early extinguishment charge of $5 million.
On March 22, 2010, we redeemed $175 million of our 6.5% notes due April 15, 2012. The redemption
resulted in an early extinguishment charge of $16 million in the first quarter of 2010.
On November 1, 2010, we redeemed all $400 million of our outstanding 6.65% notes due January 15,
2011. The redemption resulted in a $5 million early extinguishment charge.
Receivables Securitization Facility – As of December 31, 2012 and 2011, we have recorded $100
million as secured debt under our receivables securitization facility. (See further discussion of our
receivables securitization facility in Note 10).
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15. Variable Interest Entities
We have entered into various lease transactions in which the structure of the leases contain variable
interest entities (VIEs). These VIEs were created solely for the purpose of doing lease transactions
(principally involving railroad equipment and facilities, including our headquarters building) and have no
other activities, assets or liabilities outside of the lease transactions. Within these lease arrangements,
we have the right to purchase some or all of the assets at fixed prices. Depending on market conditions,