Form 10-K - Union Pacific
Form 10-K - Union Pacific
Form 10-K - Union Pacific
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The redemptions resulted in an early extinguishment charge of $5 million. On March 22, 20<strong>10</strong>, we<br />
redeemed $175 million of our 6.5% notes due April 15, 2012. The redemption resulted in an early<br />
extinguishment charge of $16 million in the first quarter of 20<strong>10</strong>. On November 1, 20<strong>10</strong>, we redeemed all<br />
$400 million of our outstanding 6.65% notes due January 15, 2011. The redemption resulted in a $5<br />
million early extinguishment charge.<br />
Receivables Securitization Facility – As of December 31, 2011 and 20<strong>10</strong>, we have recorded $<strong>10</strong>0<br />
million as secured debt under our receivables securitization facility. (See further discussion of our<br />
receivables securitization facility in Note <strong>10</strong>).<br />
15. Variable Interest Entities<br />
We have entered into various lease transactions in which the structure of the leases contain variable<br />
interest entities (VIEs). These VIEs were created solely for the purpose of doing lease transactions<br />
(principally involving railroad equipment and facilities, including our headquarters building) and have no<br />
other activities, assets or liabilities outside of the lease transactions. Within these lease arrangements,<br />
we have the right to purchase some or all of the assets at fixed prices. Depending on market conditions,<br />
fixed-price purchase options available in the leases could potentially provide benefits to us; however,<br />
these benefits are not expected to be significant.<br />
We maintain and operate the assets based on contractual obligations within the lease arrangements,<br />
which set specific guidelines consistent within the railroad industry. As such, we have no control over<br />
activities that could materially impact the fair value of the leased assets. We do not hold the power to<br />
direct the activities of the VIEs and, therefore, do not control the ongoing activities that have a significant<br />
impact on the economic performance of the VIEs. Additionally, we do not have the obligation to absorb<br />
losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to the<br />
VIEs.<br />
We are not considered to be the primary beneficiary and do not consolidate these VIEs because our<br />
actions and decisions do not have the most significant effect on the VIE’s performance and our fixed-price<br />
purchase price options are not considered to be potentially significant to the VIE’s. The future minimum<br />
lease payments associated with the VIE leases totaled $3.9 billion as of December 31, 2011.<br />
16. Leases<br />
We lease certain locomotives, freight cars, and other property. The Consolidated Statement of Financial<br />
Position as of December 31, 2011 and 20<strong>10</strong> included $2,458 million, net of $915 million of accumulated<br />
depreciation, and $2,520 million, net of $901 million of accumulated depreciation, respectively, for<br />
properties held under capital leases. A charge to income resulting from the depreciation for assets held<br />
under capital leases is included within depreciation expense in our Consolidated Statements of Income.<br />
Future minimum lease payments for operating and capital leases with initial or remaining non-cancelable<br />
lease terms in excess of one year as of December 31, 2011, were as follows:<br />
Millions<br />
Operating<br />
Leases<br />
Capital<br />
Leases<br />
2012 $ 525 $ 297<br />
2013 489 269<br />
2014 415 276<br />
2015 372 276<br />
2016 347 262<br />
Later years 2,380 1,179<br />
Total minimum lease payments $ 4,528 $ 2,559<br />
Amount representing interest N/A (685)<br />
Present value of minimum lease payments N/A $ 1,874<br />
The majority of capital lease payments relate to locomotives. Rent expense for operating leases with<br />
terms exceeding one month was $637 million in 2011, $624 million in 20<strong>10</strong>, and $686 million in 2009.<br />
When cash rental payments are not made on a straight-line basis, we recognize variable rental expense<br />
on a straight-line basis over the lease term. Contingent rentals and sub-rentals are not significant.<br />
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