Summary
Union Pacific Corporation (UNP) announced on April 5, 2018, the redemption of $155 million of outstanding debentures and mortgage bonds. These bonds were originally acquired in 1982 during the acquisition of Missouri Pacific Railroad Company. The weighted average interest rate on these redeemed debt instruments was 4.9%. The redemption, funded by cash from financing activities, resulted in a non-cash, pre-tax charge of $85 million. This charge is due to the difference between the par value of the debt and its carrying value at the time of redemption, which was $70 million, attributed to fair value purchase accounting adjustments from the 1982 acquisition. The company expects this charge to reduce its diluted earnings per share by approximately 8 cents in the first quarter of 2018.
Key Highlights
- 1Redemption of $155 million in debentures and mortgage bonds.
- 2Debt originally acquired in the 1982 Missouri Pacific Railroad Company acquisition.
- 3Weighted average interest rate of redeemed debt was 4.9%.
- 4A non-cash, pre-tax charge of $85 million was recognized.
- 5The charge is due to accounting adjustments from the 1982 acquisition.
- 6Expected impact on diluted EPS in Q1 2018 is a reduction of approximately 8 cents.
- 7Redemption funded by cash from financing activities.