Q1 adjusted earnings per share climb to $2.26
CALGARY, April 21, 2015 /CNW/ - Canadian Pacific Railway
Limited (TSX: CP) (NYSE: CP) today announced the lowest
first-quarter operating ratio in the company's history and the
highest-ever net income for the period.
Revenues climbed 10 percent to a first-quarter record of
$1.67 billion. Net income rose to an
all-time quarterly high of $320
million, or $1.92 per diluted
share, an improvement of 33 percent. Adjusted earnings per share
improved 59 percent to $2.26.
"CP's success in the first quarter of the year is the result of
hard work by its people and a business model that responds nimbly
to any shift in economic conditions," said E. Hunter Harrison, CP's Chief Executive
Officer. "CP's relentless focus on rail safety and cost control has
created a solid foundation for growth, innovation and creative
collaboration with customers."
FIRST-QUARTER 2015 HIGHLIGHTS
- Revenue climbed 10 percent to $1.67
billion
- OR fell to a first-quarter record 63.2 percent, an
880-basis-point improvement
- Adjusted earnings per share advanced 59 percent to $2.26
"The diversity of the business and efficiency of CP's network
and team has the company well positioned for the rest of the year,"
Harrison said. "Amid persistent uncertainty in the pace of the
North American economic recovery, CP continues to demonstrate the
ability to recognize and capitalize on new business opportunities
and operational efficiencies."
"We are confident in our plan and our people, and are committed
to achieving our goals for 2015," Harrison said.
Non-GAAP Measures
For further information regarding non-GAAP measures, including
reconciliations to the nearest GAAP measures, see the attached
supplementary schedule Non-GAAP Measures.
Note on forward-looking information
This news release contains certain forward-looking information
within the meaning of applicable securities laws relating, but not
limited, to our operations, priorities and plans, anticipated
financial performance, including our 2015 full-year guidance,
business prospects, planned capital expenditures, programs and
strategies. This forward-looking information also includes, but is
not limited to, statements concerning expectations, beliefs, plans,
goals, objectives, assumptions and statements about possible future
events, conditions, and results of operations or performance.
Forward-looking information may contain statements with words or
headings such as "financial expectations", "key assumptions",
"anticipate", "believe", "expect", "plan", "will", "outlook",
"should" or similar words suggesting future outcomes. To the extent
that CP has provided guidance using non-GAAP financial measures,
the Company may not be able to provide a reconciliation to a GAAP
measure, due to unknown variables and uncertainty related to future
results.
Undue reliance should not be placed on forward-looking
information as actual results may differ materially from the
forward-looking information. Forward-looking information is not a
guarantee of future performance. By its nature, CP's
forward-looking information involves numerous assumptions, inherent
risks and uncertainties that could cause actual results to differ
materially from the forward-looking information, including but not
limited to the following factors: the key assumptions identified
above; changes in business strategies; general North American and
global economic, credit and business conditions; risks in
agricultural production such as weather conditions and insect
populations; the availability and price of energy commodities; the
effects of competition and pricing pressures; industry capacity;
shifts in market demand; changes in commodity prices; uncertainty
surrounding timing and volumes of commodities being shipped via CP;
inflation; changes in laws and regulations, including regulation of
rates; changes in taxes and tax rates; potential increases in
maintenance and operating costs; uncertainties of investigations,
proceedings or other types of claims and litigation; labour
disputes; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; currency and interest rate fluctuations;
effects of changes in market conditions and discount rates on the
financial position of pension plans and investments; and various
events that could disrupt operations, including severe weather,
droughts, floods, avalanches and earthquakes as well as security
threats and governmental response to them, and technological
changes. The foregoing list of factors is not exhaustive.
These and other factors are detailed from time to time in
reports filed by CP with securities regulators in Canada and the
United States. Reference should be made to "Management's
Discussion and Analysis" in CP's annual and interim reports, Annual
Information Form and Form 40-F. Readers are cautioned not to place
undue reliance on forward-looking information. Forward-looking
information is based on current expectations, estimates and
projections and it is possible that predictions, forecasts,
projections, and other forms of forward-looking information will
not be achieved by CP. Except as required by law, CP undertakes no
obligation to update publicly or otherwise revise any
forward-looking information, whether as a result of new
information, future events or otherwise.
About Canadian Pacific
Canadian Pacific (TSX:CP)(NYSE:CP) is a transcontinental railway in
Canada and the United States with direct links to eight
major ports, including Vancouver
and Montreal, providing North
American customers a competitive rail service with access to key
markets in every corner of the globe. CP is growing with its
customers, offering a suite of freight transportation services,
logistics solutions and supply chain expertise. Visit cpr.ca to see
the rail advantages of Canadian Pacific.
INTERIM CONSOLIDATED STATEMENTS
OF INCOME |
|
|
|
|
|
|
|
|
|
|
|
(in millions of Canadian dollars,
except per share data) |
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
|
ended March 31 |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Freight |
|
|
|
$ |
|
1,630 |
|
|
$ |
|
1,474 |
|
Non-freight |
|
|
|
|
|
35 |
|
|
|
|
35 |
Total revenues |
|
|
|
|
|
1,665 |
|
|
|
|
1,509 |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
|
|
|
|
378 |
|
|
|
|
345 |
|
Fuel |
|
|
|
|
|
195 |
|
|
|
|
271 |
|
Materials |
|
|
|
|
|
52 |
|
|
|
|
52 |
|
Equipment rents |
|
|
|
|
|
42 |
|
|
|
|
41 |
|
Depreciation and amortization |
|
|
|
|
|
146 |
|
|
|
|
141 |
|
Purchased services and other (Note
4) |
|
|
|
|
|
240 |
|
|
|
|
236 |
Total operating expenses |
|
|
|
|
|
1,053 |
|
|
|
|
1,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
612 |
|
|
|
|
423 |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Other income and charges (Note
13) |
|
|
|
|
|
73 |
|
|
|
|
- |
|
Net interest expense |
|
|
|
|
|
85 |
|
|
|
|
70 |
Income before income tax
expense |
|
|
|
|
|
454 |
|
|
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (Note
5) |
|
|
|
|
|
134 |
|
|
|
|
99 |
Net income |
|
|
|
$ |
|
320 |
|
|
$ |
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (Note
6) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
$ |
|
1.94 |
|
|
$ |
|
1.45 |
|
Diluted earnings per share |
|
|
|
$ |
|
1.92 |
|
|
$ |
|
1.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares
(millions) (Note 6) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
164.9 |
|
|
|
|
175.5 |
|
Diluted |
|
|
|
|
|
166.3 |
|
|
|
|
177.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
share |
|
|
|
$ |
|
0.3500 |
|
|
$ |
|
0.3500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of the comparative figures have been reclassified in
order to be consistent with the 2015 presentation. (Note
15) |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME |
(in millions of Canadian dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months |
|
|
|
|
ended March
31 |
|
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
$ |
|
|
320 |
|
|
$ |
|
|
254 |
|
Net loss on foreign currency
translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments, net of hedging activities |
|
|
|
|
|
|
(37) |
|
|
|
|
|
- |
|
Change in derivatives designated as cash flow
hedges |
|
|
|
|
|
|
(69) |
|
|
|
|
|
(1) |
|
Change in pension and post-retirement defined
benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans |
|
|
|
|
|
|
72 |
|
|
|
|
|
31 |
|
Other comprehensive (loss) income before income
tax recovery |
|
|
|
|
|
|
(34) |
|
|
|
|
|
30 |
|
Income tax recovery |
|
|
|
|
|
|
46 |
|
|
|
|
|
8 |
Other comprehensive income (Note
3) |
|
|
|
|
|
|
12 |
|
|
|
|
|
38 |
Comprehensive income |
|
|
|
$ |
|
|
332 |
|
|
$ |
|
|
292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Interim Consolidated
Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONSOLIDATED BALANCE SHEETS AS
AT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Canadian dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31 |
|
|
December 31 |
|
|
|
|
|
|
|
2015 |
|
|
2014 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
$ |
|
|
|
184 |
|
|
$ |
226 |
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
776 |
|
|
|
702 |
|
Materials and supplies |
|
|
|
|
|
|
|
|
|
171 |
|
|
|
177 |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
76 |
|
|
|
56 |
|
Other current assets |
|
|
|
|
|
|
|
|
|
67 |
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
1,274 |
|
|
|
1,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
125 |
|
|
|
112 |
Properties |
|
|
|
|
|
|
|
|
|
14,933 |
|
|
|
14,438 |
Assets held for sale (Note
7) |
|
|
|
|
|
|
|
|
|
200 |
|
|
|
182 |
Goodwill and intangible
assets |
|
|
|
|
|
|
|
|
|
192 |
|
|
|
176 |
Pension asset (Note 12) |
|
|
|
|
|
|
|
|
|
385 |
|
|
|
304 |
Other assets (Note 4) |
|
|
|
|
|
|
|
|
|
140 |
|
|
|
151 |
Total assets |
|
|
|
|
|
$ |
|
|
|
17,249 |
|
|
$ |
16,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders'
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities |
|
|
|
|
|
$ |
|
|
|
1,280 |
|
|
$ |
1,277 |
|
Long-term debt maturing within one
year |
|
|
|
|
|
|
|
|
|
91 |
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
1,371 |
|
|
|
1,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other benefit liabilities
(Note 12) |
|
|
|
|
|
|
|
|
|
760 |
|
|
|
755 |
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
437 |
|
|
|
432 |
Long-term debt (Note 9) |
|
|
|
|
|
|
|
|
|
6,358 |
|
|
|
5,659 |
Deferred income taxes |
|
|
|
|
|
|
|
|
|
2,905 |
|
|
|
2,773 |
Total liabilities |
|
|
|
|
|
|
|
|
|
11,831 |
|
|
|
11,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital (Note 8) |
|
|
|
|
|
|
|
|
|
2,177 |
|
|
|
2,185 |
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
38 |
|
|
|
36 |
|
Accumulated other comprehensive loss
(Note 3) |
|
|
|
|
|
|
|
|
|
(2,207) |
|
|
|
(2,219) |
|
Retained earnings |
|
|
|
|
|
|
|
|
|
5,410 |
|
|
|
5,608 |
|
|
|
|
|
|
|
|
|
|
|
5,418 |
|
|
|
5,610 |
Total liabilities and
shareholders' equity |
|
|
|
|
|
$ |
|
|
|
17,249 |
|
|
$ |
16,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Interim Consolidated
Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
|
|
|
|
|
(in millions of Canadian dollars) |
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
ended March 31 |
|
|
|
|
2015 |
|
|
2014 |
Operating activities |
|
|
|
|
|
|
|
|
|
Net income |
|
|
$ |
320 |
|
|
$ |
254 |
|
Reconciliation of net income to cash
provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
|
146 |
|
|
|
141 |
|
Deferred income taxes
(Note 5) |
|
|
|
32 |
|
|
|
89 |
|
Pension funding in
excess of expense (Note 12) |
|
|
|
(10) |
|
|
|
(32) |
|
Other operating activities,
net |
|
|
|
23 |
|
|
|
17 |
|
Change in non-cash working capital
balances related to operations |
|
|
|
44 |
|
|
|
(182) |
Cash provided by operating
activities |
|
|
|
555 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
Additions to properties |
|
|
|
(263) |
|
|
|
(224) |
|
Proceeds from sale of properties and
other assets (Note 4) |
|
|
|
52 |
|
|
|
5 |
|
Change in restricted cash and cash
equivalents used to collateralize letters of credit |
|
|
|
- |
|
|
|
2 |
|
Other (Note 4) |
|
|
|
20 |
|
|
|
- |
Cash used in investing
activities |
|
|
|
(191) |
|
|
|
(217) |
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
|
(58) |
|
|
|
(61) |
|
Issuance of CP common shares |
|
|
|
16 |
|
|
|
14 |
|
Purchase of CP common shares (Note
8) |
|
|
|
(529) |
|
|
|
(85) |
|
Net repayment of commercial paper
(Note 9) |
|
|
|
(593) |
|
|
|
- |
|
Issuance of long-term debt, excluding
commercial paper (Note 9) |
|
|
|
810 |
|
|
|
- |
|
Repayment of long-term debt,
excluding commercial paper |
|
|
|
(58) |
|
|
|
(143) |
Cash used in financing
activities |
|
|
|
(412) |
|
|
|
(275) |
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency
fluctuations on U.S. dollar-denominated cash and cash |
|
|
|
|
|
|
|
|
equivalents |
|
|
|
6 |
|
|
|
8 |
Cash position |
|
|
|
|
|
|
|
|
|
Decrease in cash and cash
equivalents |
|
|
|
(42) |
|
|
|
(197) |
|
Cash and cash equivalents at
beginning of period |
|
|
|
226 |
|
|
|
476 |
Cash and cash equivalents at end of
period |
|
|
$ |
184 |
|
|
$ |
279 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information: |
|
|
|
|
|
|
|
|
|
Income taxes (refunded) paid |
|
|
$ |
(3) |
|
|
$ |
9 |
|
Interest paid |
|
|
$ |
67 |
|
|
$ |
72 |
|
|
|
|
|
|
|
|
|
|
See Notes to Interim Consolidated
Financial Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY |
(in millions of Canadian dollars, except common
share amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
shares |
|
|
|
|
|
|
Additional |
|
other |
|
|
|
|
|
|
Total |
|
|
(in |
|
Share |
|
paid-in |
|
comprehensive |
|
Retained |
|
shareholders' |
|
|
millions) |
|
capital |
|
capital |
|
loss |
|
earnings |
|
equity |
Balance at January 1, 2015 |
|
166.1 |
|
$ |
|
|
2,185 |
|
$ |
36 |
|
$ |
(2,219) |
|
$ |
|
|
5,608 |
|
$ |
5,610 |
Net income |
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
320 |
|
|
320 |
Other comprehensive income (Note 3) |
|
- |
|
|
|
|
- |
|
|
- |
|
|
12 |
|
|
|
|
- |
|
|
12 |
Dividends declared |
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
(57) |
|
|
(57) |
Effect of stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense |
|
- |
|
|
|
|
- |
|
|
6 |
|
|
- |
|
|
|
|
- |
|
|
6 |
CP common shares repurchased
(Note 8) |
|
(2.3) |
|
|
|
|
(29) |
|
|
- |
|
|
- |
|
|
|
|
(461) |
|
|
(490) |
Shares issued under stock option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans |
|
0.2 |
|
|
|
|
21 |
|
|
(4) |
|
|
- |
|
|
|
|
- |
|
|
17 |
Balance at March 31, 2015 |
|
164.0 |
|
$ |
|
|
2,177 |
|
$ |
38 |
|
$ |
(2,207) |
|
$ |
|
|
5,410 |
|
$ |
5,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
shares |
|
|
|
|
|
|
Additional |
|
other |
|
|
|
|
|
|
Total |
|
|
(in |
|
Share |
|
paid-in |
|
comprehensive |
|
Retained |
|
shareholders' |
|
|
millions) |
|
capital |
|
capital |
|
loss |
|
earnings |
|
equity |
Balance at January 1, 2014 |
|
175.4 |
|
$ |
|
|
2,240 |
|
$ |
34 |
|
$ |
(1,503) |
|
$ |
|
|
6,326 |
|
$ |
7,097 |
Net income |
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
254 |
|
|
254 |
Other comprehensive income (Note 3) |
|
- |
|
|
|
|
- |
|
|
- |
|
|
38 |
|
|
|
|
- |
|
|
38 |
Dividends declared |
|
- |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
(61) |
|
|
(61) |
Effect of stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense |
|
- |
|
|
|
|
- |
|
|
6 |
|
|
- |
|
|
|
|
- |
|
|
6 |
CP common shares repurchased (Note 8) |
|
(0.6) |
|
|
|
|
(7) |
|
|
- |
|
|
- |
|
|
|
|
(80) |
|
|
(87) |
Shares issued under stock option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plans |
|
0.3 |
|
|
|
|
20 |
|
|
(4) |
|
|
- |
|
|
|
|
- |
|
|
16 |
Balance at March 31, 2014 |
|
175.1 |
|
$ |
|
|
2,253 |
|
$ |
36 |
|
$ |
(1,465) |
|
$ |
|
|
6,439 |
|
$ |
7,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Interim Consolidated Financial Statements. |
NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
March 31, 2015
(unaudited)
1 Basis of presentation
These unaudited interim consolidated financial statements of
Canadian Pacific Railway Limited ("CP", or "the Company"),
expressed in Canadian dollars, reflect management's estimates and
assumptions that are necessary for their fair presentation in
conformity with generally accepted accounting principles in
the United States of America
("GAAP"). They do not include all disclosures required under GAAP
for annual financial statements and should be read in conjunction
with the 2014 annual consolidated financial statements. The
accounting policies used are consistent with the accounting
policies used in preparing the 2014 annual consolidated financial
statements.
CP's operations can be affected by seasonal fluctuations such as
changes in customer demand and weather-related issues. This
seasonality could impact quarter-over-quarter comparisons.
In management's opinion, the unaudited interim consolidated
financial statements include all adjustments (consisting of normal
and recurring adjustments) necessary to present fairly such
information. Interim results are not necessarily indicative of the
results expected for the fiscal year.
2 Future accounting changes
Amendments to the Consolidation Analysis
In February 2015, the Financial
Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") 2015-02, Amendments to the Consolidation Analysis
under FASB Accounting Standards Codification ("ASC") Topic 810. The
amendments require reporting entities to evaluate whether they
should consolidate certain legal entities under the revised
consolidation model. Specifically, the amendments modify the
evaluation of whether limited partnerships and similar legal
entities are variable interest entities ("VIEs") or voting interest
entities, eliminate the presumption that a general partner should
consolidate a limited partnership and affect the consolidation
analysis of reporting entities that are involved with VIEs,
particularly those that have fee arrangements and related party
relationships. This ASU will be effective for public entities for
fiscal years, and interim periods within those years, beginning
after December 15, 2015. Entities
have the option of using either a full retrospective or a modified
retrospective approach to adopt this ASU. The Company is currently
evaluating the impact on the consolidated financial statements the
adoption of this ASU will have.
Simplifying the presentation of debt issuance costs
In April 2015, the FASB issued ASU
2015-03, Simplifying the Presentation of Debt Issuance Costs under
FASB ASC Topic 835. The amendments require that debt issuance costs
related to a recognized debt liability be presented in the balance
sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by
the amendments. This ASU will be effective for public entities for
fiscal years, and interim periods within those years, beginning
after December 15, 2015, and will be
applied retrospectively. Early adoption of the amendments is
permitted for financial statements that have not been previously
issued. The Company will include appropriate disclosures related to
debt issuance costs in accordance with ASU 2015-03 when it adopts
the provisions of this ASU.
3 Changes in accumulated other comprehensive loss
(AOCL) by component
|
|
|
|
For the three months ended March
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of Canadian
dollars) |
|
|
|
Foreign
currency net
of hedging
activities(1) |
|
Derivatives
and other(1) |
|
Pension and
post-
retirement
defined
benefit plans(1) |
|
Total(1) |
January 1, 2015 |
|
|
|
$ |
115 |
|
$ |
(52) |
|
$ |
(2,282) |
|
$ |
|
|
|
(2,219) |
Other comprehensive income
(loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
reclassifications |
|
|
|
|
10 |
|
|
(52) |
|
|
5 |
|
|
|
|
|
(37) |
Amounts reclassified from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss |
|
|
|
|
- |
|
|
1 |
|
|
48 |
|
|
|
|
|
49 |
Net current-period other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income
(loss) |
|
|
|
|
10 |
|
|
(51) |
|
|
53 |
|
|
|
|
|
12 |
March 31, 2015 |
|
|
|
$ |
125 |
|
$ |
(103) |
|
$ |
(2,229) |
|
$ |
|
|
|
(2,207) |
January 1, 2014 |
|
|
|
$ |
105 |
|
$ |
(15) |
|
$ |
(1,593) |
|
$ |
|
|
|
(1,503) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
reclassifications |
|
|
|
|
17 |
|
|
10 |
|
|
- |
|
|
|
|
|
27 |
Amounts reclassified from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss |
|
|
|
|
- |
|
|
(11) |
|
|
22 |
|
|
|
|
|
11 |
Net current-period other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income
(loss) |
|
|
|
|
17 |
|
|
(1) |
|
|
22 |
|
|
|
|
|
38 |
March 31, 2014 |
|
|
|
$ |
122 |
|
$ |
(16) |
|
$ |
(1,571) |
|
$ |
|
|
|
(1,465) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts are presented net of tax. |
|
|
Amounts in Pension and post-retirement
defined benefit plans reclassified from Accumulated |
other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
|
|
|
|
|
ended March 31 |
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
Amortization of prior service
costs(a) |
|
|
|
|
|
|
|
|
$ |
|
|
|
(1) |
|
|
$ |
|
|
|
(17) |
Recognition of net actuarial
loss(a) |
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
48 |
Total before income tax |
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
31 |
Income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
(18) |
|
|
|
|
|
|
(9) |
Net of income tax |
|
|
|
|
|
|
|
|
$ |
|
|
|
48 |
|
|
$ |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Impacts Compensation and benefits on the Interim
Consolidated Statements of Income. |
4 Gain on settlement of legal proceedings
related to the purchase and sale of a building
In 2013, CP provided an interest free loan pursuant to a court
order to a corporation owned by a court appointed trustee ("the
judicial trustee") to facilitate the acquisition of a building. The
building was held in trust during the legal proceedings with regard
to CP's entitlement to an exercised purchase option of the building
("purchase option"). As at December 31,
2014, the loan of $20 million
and the purchase option with a carrying value of $8 million, were recorded as "Other assets" in
the Company's Consolidated Balance Sheets.
In the first quarter of 2015, CP reached a settlement with a
third party that, following the sale of the building to an arm's
length third party, resulted in resolution of legal proceedings. CP
received $59 million for the sale of
the building which included repayment of the aforementioned loan to
the judicial trustee. A gain of $31
million ($27 million after
tax) was recorded as a credit within "Operating expenses".
5 Income taxes
|
|
|
|
|
|
|
|
|
|
|
For the three
months |
|
|
|
|
|
|
|
|
|
|
|
ended March
31 |
(in millions of Canadian
dollars) |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
2014 |
Current income tax expense |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
102 |
|
|
$ |
|
|
|
10 |
Deferred income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
89 |
Income tax expense |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
134 |
|
|
$ |
|
|
|
99 |
The estimated 2015 annual effective tax rate for the first
quarter, excluding the discrete item (foreign exchange loss on
long-term debt included in "Other income and charges"), is 27.5%,
compared to the estimate of 28% for the same period in 2014.
The effective tax rate in the first quarter, including discrete
item, is 29.5%.
This higher rate in the quarter compared to the estimated 2015
annual effective tax rate was the result of tax recoveries of
$8 million related to the foreign
exchange loss on long-term debt of $64
million which was taxed at a significantly lower rate than
the estimated 2015 annual effective tax rate of 27.5%.
6 Earnings per share
At March 31, 2015, the number of
shares outstanding was 164.0 million (March
31, 2014 - 175.1 million).
Basic earnings per share have been calculated using net income
for the period divided by the weighted-average number of shares
outstanding during the period.
The number of shares used in earnings per share calculations is
reconciled as follows:
|
|
|
|
|
|
For the three
months |
|
|
|
|
|
|
ended March
31 |
(in millions) |
|
|
|
|
|
2015 |
|
2014 |
Weighted-average basic shares outstanding |
|
|
|
|
|
164.9 |
|
175.5 |
Dilutive effect of stock options |
|
|
|
|
|
1.4 |
|
1.5 |
Weighted-average diluted shares
outstanding |
|
|
|
|
|
166.3 |
|
177.0 |
For the three months ended March 31,
2015, 195,971 options were excluded from the computation of
diluted earnings per share because their effects were not dilutive
(three months ended March 31, 2014 -
122,017 options).
7 Assets held for sale
During the first quarter of 2015, the Company finalized a sales
agreement with Norfolk Southern Corporation ("NS") for the portion
of Delaware and Hudson Railway
Company, Inc.'s line between Sunbury,
Pennsylvania and Schenectady, New
York. The assets expected to be sold to NS, for proceeds of
approximately U.S. $215 million
subject to closing adjustments, have been classified as "Assets
held for sale" on the Company's Consolidated Balance Sheets at
March 31, 2015 and December 31, 2014. The sale, which is subject to
regulatory approval by the U.S. Surface Transportation Board, is
expected to close later in 2015.
8 Shareholders' equity
In February of 2014, the Board of Directors of the Company
approved a share repurchase program, and in March 2014, the Company filed a new normal course
issuer bid ("bid") to purchase, for cancellation, up to 5.3 million
of its outstanding common shares. During September of 2014, the
Company announced the amendment of the bid to increase the maximum
number of its common shares that may be purchased from 5.3 million
to 12.7 million of its outstanding common shares. Under the filing,
share purchases could be made during the twelve month period that
began March 17, 2014. The Company
completed the purchase of the bid prior to the March 16, 2015 expiry date of the program.
On March 16, 2015, the Company
announced the renewal of the NCIB, commencing March 18, 2015 to March
17, 2016, to purchase up to 9.14 million of its outstanding
Common shares for cancellation.
All purchases are made in accordance with the bid at prevalent
market prices plus brokerage fees, or such other prices that may be
permitted by the Toronto Stock Exchange, with consideration
allocated to share capital up to the average carrying amount of the
shares, and any excess allocated to retained earnings. The
following table provides the activities under the share repurchase
program:
|
|
|
|
|
|
For the three
months end March 31 |
|
|
|
|
|
|
2015 |
|
|
2014 |
Number of common shares repurchased |
|
|
|
|
|
|
2,174,788 |
|
|
|
567,750 |
Weighted-average price per
share(1) |
|
|
|
|
|
$ |
225.12 |
|
|
$ |
154.07 |
Amount of repurchase (in
millions)(1) |
|
|
|
|
|
$ |
490 |
|
|
$ |
87 |
|
(1) Includes brokerage fees. |
9 Debt
Issuance of long-term debt
During the first quarter of 2015, the Company issued U.S.
$700 million 2.900% 10-year notes due
February 1, 2025 for net proceeds of
U.S. $694 million (CDN $873 million). These notes pay interest
semi-annually and are unsecured but carry a negative pledge. In
addition, the Company settled a notional U.S. $700 million of forward starting
floating-to-fixed interest rate swap agreements ("forward starting
swaps") for a payment of U.S. $50
million (CDN$63 million) cash
(see Note 10). This payment was included in the same line item as
the related hedged item on the Consolidated Statements of Cash
Flows. Inclusive of the settlement of the forward starting swap,
the annualized effective yield at issuance was 3.61%.
Commercial paper program
During the fourth quarter of 2014, the Company established a
commercial paper program which enables it to issue commercial paper
up to a maximum aggregate principal amount of U.S. $1 billion in the form of unsecured promissory
notes. The commercial paper is backed by a U.S. $1 billion committed, revolving credit facility,
which matures on September 26, 2016.
As at March 31, 2015, the Company had
total commercial paper borrowings of U.S. $200 million (CDN $254
million), presented in "Long-term debt" on the Interim
Consolidated Balance Sheets (December 31,
2014 - U.S. $675 million (CDN
$783 million)) as the Company has the
intent and the ability to renew these borrowings on a long-term
basis. The weighted-average interest rate on these borrowings was
0.60% (December 31, 2014 -
0.44%).
The Company presents issuances and repayments of commercial
paper in the Consolidated Statements of Cash Flows on a net basis,
all of which have a maturity of less than 90 days.
10 Financial instruments
A. Fair values of financial
instruments
The Company categorizes its financial assets and liabilities
measured at fair value in line with the fair value hierarchy
established by GAAP that prioritizes, with respect to reliability,
the inputs to valuation techniques used to measure fair
value. This hierarchy consists of three broad levels.
Level 1 inputs consist of quoted prices (unadjusted) in active
markets for identical assets and liabilities and give the highest
priority to these inputs. Level 2 and 3 inputs are based on
significant other observable inputs and significant unobservable
inputs, respectively, and give lower priority to these inputs.
When possible, the estimated fair value is based on quoted
market prices and, if not available, estimates from third party
brokers. For non-exchange traded derivatives classified in
Level 2, the Company uses standard valuation techniques to
calculate fair value. Primary inputs to these techniques
include observable market prices (interest, foreign exchange ("FX")
and commodity) and volatility, depending on the type of derivative
and nature of the underlying risk. The Company uses inputs
and data used by willing market participants when valuing
derivatives and considers its own credit default swap spread as
well as those of its counterparties in its determination of fair
value.
The carrying values of financial instruments equal or
approximate their fair values with the exception of long-term debt
which has a fair value of approximately $7,756 million at March
31, 2015 (December 31, 2014 -
$6,939 million) and a carrying value
of $6,449 million (December 31, 2014 - $5,793
million). The estimated fair value of current and long-term
borrowings has been determined based on market information where
available, or by discounting future payments of interest and
principal at estimated interest rates expected to be available to
the Company at period end. All derivatives and long-term debt
are classified as Level 2.
B. Financial risk management
Derivative financial instruments
Derivative financial instruments may be used to selectively
reduce volatility associated with fluctuations in interest rates,
FX rates, the price of fuel and stock-based compensation
expense. Where derivatives are designated as hedging
instruments, the relationship between the hedging instruments and
their associated hedged items is documented, as well as the risk
management objective and strategy for the use of the hedging
instruments. This documentation includes linking the
derivatives that are designated as fair value or cash flow hedges
to specific assets or liabilities on the Interim Consolidated
Balance Sheets, commitments or forecasted transactions. At
the time a derivative contract is entered into, and at least
quarterly thereafter, an assessment is made whether the derivative
item is effective in offsetting the changes in fair value or cash
flows of the hedged items. The derivative qualifies for hedge
accounting treatment if it is effective in substantially mitigating
the risk it was designed to address.
It is not the Company's intent to use financial derivatives or
commodity instruments for trading or speculative purposes.
Foreign exchange management
The Company conducts business transactions and owns assets in
both Canada and the United States. As a result, the
Company is exposed to fluctuations in value of financial
commitments, assets, liabilities, income or cash flows due to
changes in FX rates. The Company may enter into FX risk
management transactions primarily to manage fluctuations in the
exchange rate between Canadian and U.S. currencies. FX
exposure is primarily mitigated through natural offsets created by
revenues, expenditures and balance sheet positions incurred in the
same currency. Where appropriate, the Company may negotiate
with customers and suppliers to reduce the net exposure.
Net investment hedge
The FX gains and losses on long-term debt are mainly unrealized
and can only be realized when U.S. dollar denominated long-term
debt matures or is settled. The Company also has long-term FX
exposure on its investment in U.S. affiliates. The majority
of the Company's U.S. dollar denominated long-term debt has been
designated as a hedge of the net investment in foreign
subsidiaries. This designation has the effect of mitigating
volatility on net income by offsetting long-term FX gains and
losses on U.S. dollar denominated long-term debt and gains and
losses on its net investment. The effective portion
recognized in "Other comprehensive income" for the three months
ended March 31, 2015 was an
unrealized FX loss of $356 million
(three months ended March 31, 2014 -
$131 million). There was no
ineffectiveness during the three months ended March 31, 2015 and March
31, 2014.
Interest rate management
The Company is exposed to interest rate risk, which is the risk
that the fair value or future cash flows of a financial instrument
will vary as a result of changes in market interest rates. In order
to manage funding needs or capital structure goals, the Company
enters into debt or capital lease agreements that are subject to
either fixed market interest rates set at the time of issue or
floating rates determined by on-going market conditions. Debt
subject to variable interest rates exposes the Company to
variability in interest expense, while debt subject to fixed
interest rates exposes the Company to variability in the fair value
of debt.
To manage interest rate exposure, the Company accesses diverse
sources of financing and manages borrowings in line with a targeted
range of capital structure, debt ratings, liquidity needs, maturity
schedule, and currency and interest rate profiles. In anticipation
of future debt issuances, the Company may enter into forward rate
agreements, that are designated as cash flow hedges, to
substantially lock in all or a portion of the effective future
interest expense. The Company may also enter into swap agreements,
designated as fair value hedges, to manage the mix of fixed and
floating rate debt.
Forward starting swaps
During the fourth quarter of 2014, the Company entered into
forward starting swaps totaling a notional U.S. $1.4 billion to fix the benchmark rate on cash
flows associated with highly probable forecasted issuances of
long-term notes.
During the three months ended March 31,
2015, the Company settled a notional U.S. $700 million of forward starting swaps related to
the U.S. $700 million 2.900% 10-year
notes issued in first quarter of 2015. Inclusive of the settlement
of the forward starting swap, the annualized effective yield at
issuance was 3.61%. The fair value of these derivative instruments
was a loss of U.S. $50 million at the
time of the settlement. The effective portion of changes in fair
value on the forward starting swaps of U.S. $48 million (CDN $60
million), was recorded in "Accumulated other comprehensive
loss", and is amortized to "Net interest expense" until the
underlying notes, which were hedged, are repaid. At March 31, 2015, a loss of $1 million related to these previously settled
derivatives has been reclassified to "Net interest expense" and the
Company expects that during the next 12 months, $6 million of losses will be reclassified to "Net
interest expense". The ineffective portion of U.S. $2 million (CDN $2
million), was recorded immediately in income as "Net
interest expense".
As at March 31, 2015, the
unrealized loss of $56 million
derived from the remaining forward starting swaps was included in
"Other long-term liabilities" with the offset reflected in "Other
comprehensive income" on the Interim Consolidated Statement of
Comprehensive Income.
As at December 31, 2014, the
unrealized loss derived from the forward starting swaps was
$46 million of which $21 million was included in "Accounts payable and
accrued liabilities" and $25 million
in "Other long-term liabilities" with the offset reflected in
"Other comprehensive income" on the Consolidated Statements of
Comprehensive Income.
Interest rate swaps
During the fourth quarter of 2014, the Company entered into
floating-to-fixed interest rate swap agreements totaling U.S.
$600 million to hedge the variability
in cash flow associated with fluctuations in interest rates on
commercial paper issuances. These swaps expire in 2015 and are
accounted for as a cash flow hedge. The effective portion of
changes in fair value of the swaps is recorded in "Accumulated
other comprehensive loss", net of tax. Subsequent to the commercial
paper issuance, the amounts recorded in "Accumulated other
comprehensive loss" are reclassified to "Net interest expense".
At March 31, 2015, a negligible
realized gain was reclassified from "Accumulated other
comprehensive loss" to "Net interest expense" related to the
settled derivatives. The unrealized insignificant loss from the
remaining derivatives was recorded in "Other current assets" on the
Interim Consolidated Balance Sheets with the offset reflected in
"Other comprehensive income" on the Interim Consolidated Statements
of Comprehensive Income.
At December 31, 2014, the
unrealized gain recorded in "Other current assets" on the
Consolidated Balance Sheets, was not significant. The offset was
reflected in "Other comprehensive income" on the Consolidated
Statements of Comprehensive Income.
11 Stock-based compensation
At March 31, 2015, the Company had
several stock-based compensation plans, including stock option
plans, various cash settled liability plans and an employee stock
savings plan. These plans resulted in an expense for the
three months ended March 31, 2015 of
$29 million (three months ended
March 31, 2014 - $22 million).
Regular options
In the first three months of 2015, under CP's stock option plans,
the Company issued 280,315 regular options at the weighted average
price of $218.69 per share, based on
the closing price on the grant date.
Pursuant to the employee plan, these regular options may be
exercised upon vesting, which is between 12 months and 48 months
after the grant date, and will expire after 10 years.
Under the fair value method, the fair value of the regular
options at the grant date was approximately $14 million. The weighted average fair
value assumptions were approximately:
|
|
|
|
|
|
For the three
months |
|
|
|
|
|
|
ended March, 31 2015 |
Grant price |
|
|
|
|
|
$ |
|
|
|
218.69 |
|
Expected option life (years)(1) |
|
|
|
|
|
|
|
|
|
5.25 |
|
Risk-free interest rate(2) |
|
|
|
|
|
|
|
|
|
1.10 |
% |
Expected stock price volatility(3) |
|
|
|
|
|
|
|
|
|
26.06 |
% |
Expected annual dividends per
share(4) |
|
|
|
|
|
$ |
|
|
|
1.40 |
|
Expected forfeiture rate(5) |
|
|
|
|
|
|
|
|
|
1.4 |
% |
Weighted-average grant date fair value per regular
options
granted during the period |
|
|
|
|
|
$ |
|
|
|
50.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents the period of time that awards are expected to be
outstanding. Historical data on exercise behaviour, or when
available, specific expectations regarding future exercise
behaviour, were used to estimate the expected life of the
option. |
(2) |
Based on the implied yield available on zero-coupon government
issues with an equivalent remaining term at the time of the
grant. |
(3) |
Based on the historical stock price volatility of the Company's
stock over a period commensurate with the expected term of the
option. |
(4) |
Determined by the current annual dividend at the time of
grant. The Company does not employ different dividend yields
throughout the contractual term of the option. |
(5) |
The Company estimated forfeitures based on past
experience. This rate is monitored on a periodic basis. |
Performance share unit ("PSU") plan
In the three months ended March 31,
2015, the Company issued 127,825 PSUs with a grant date fair
value of approximately $27
million. These units attract dividend equivalents in
the form of additional units based on the dividends paid on the
Company's Common Shares. PSUs vest and are settled in cash,
or in CP common shares approximately three years after the grant
date, contingent upon CP's performance (performance factor).
The fair value of PSUs is measured, both on the grant date and each
subsequent quarter until settlement, utilizing a Monte Carlo
simulation model. The model utilizes multiple input variables
that determine the probability of satisfying the performance and
market conditions stipulated in the grant.
Deferred share unit ("DSU") plan
In the three months ended March 31,
2015, the Company granted 12,563 DSUs with a grant date fair
value of approximately $3
million. DSUs vest over various periods of up to 48
months and are only redeemable for a specified period after
employment is terminated. An expense to income for DSUs is
recognized over the vesting period for both the initial
subscription price and the change in value between reporting
periods.
12 Pensions and other benefits
In the three months ended March 31,
2015, the Company made contributions of $21 million (three months ended March 31, 2014 - $19
million) to its defined benefit pension plans. The
elements of net periodic benefit cost for defined benefit pension
plans and other benefits recognized in the quarter included the
following components:
|
|
|
|
|
|
For the three months ended March
31 |
|
|
|
|
|
|
Pensions |
|
|
Other benefits |
(in millions of Canadian dollars) |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
Current service cost (benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by employees in the period) |
|
|
|
|
|
$ |
|
32 |
|
|
$ |
|
27 |
|
|
$ |
|
|
|
3 |
|
|
$ |
|
|
3 |
Interest cost on benefit obligation |
|
|
|
|
|
|
|
115 |
|
|
|
|
119 |
|
|
|
|
|
|
5 |
|
|
|
|
|
6 |
Expected return on fund assets |
|
|
|
|
|
|
|
(201) |
|
|
|
|
(189) |
|
|
|
|
|
|
- |
|
|
|
|
|
- |
Recognized net actuarial loss |
|
|
|
|
|
|
|
66 |
|
|
|
|
47 |
|
|
|
|
|
|
1 |
|
|
|
|
|
1 |
Amortization of prior service costs |
|
|
|
|
|
|
|
(1) |
|
|
|
|
(17) |
|
|
|
|
|
|
- |
|
|
|
|
|
- |
Net periodic benefit cost (recovery) |
|
|
|
|
|
$ |
|
11 |
|
|
$ |
|
(13) |
|
|
$ |
|
|
|
9 |
|
|
$ |
|
|
10 |
13 Other income and charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended March 31 |
(in millions of Canadian dollars) |
|
|
|
|
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange loss on long-term debt |
|
|
|
|
|
$ |
64 |
|
$ |
- |
Other foreign exchange losses (gains) |
|
|
|
|
|
|
6 |
|
|
(3) |
Other |
|
|
|
|
|
|
3 |
|
|
3 |
Total other income and charges |
|
|
|
|
|
$ |
73 |
|
$ |
- |
14 Contingencies
In the normal course of its operations, the Company becomes
involved in various legal actions, including claims relating to
injuries and damage to property. The Company maintains provisions
it considers to be adequate for such actions. While the final
outcome with respect to actions outstanding or pending at
March 31, 2015 cannot be predicted
with certainty, it is the opinion of management that their
resolution will not have a material adverse effect on the Company's
financial position or results of operations.
Legal proceedings related to Lac-Mégantic rail
accident
On July 6, 2013, a train carrying
crude oil operated by Montreal Maine and Atlantic Railway
("MM&A") derailed and exploded in Lac-Mégantic, Quebec on a section of railway line owned by
MM&A. The previous day CP had interchanged the train to
MM&A, and after that interchange MM&A exercised exclusive
control over the train.
Following this incident, the Minister of Sustainable
Development, Environment, Wildlife and Parks of Quebec issued an order directing certain named
parties to recover the contaminants and to clean up and
decontaminate the derailment site. CP was added as a named
party on August 14, 2013. CP is
a party to an administrative appeal with respect to this
order. No hearing date on the merits of CP's appeal has been
scheduled.
A class action lawsuit has also been filed in the Superior Court
of Quebec on behalf of a class of
persons and entities residing in, owning or leasing property in,
operating a business in or physically present in
Lac-Mégantic. The lawsuit seeks damages caused by the
derailment including for wrongful deaths, personal injuries, and
property damages. CP was added as a defendant on August 16, 2013. The Superior Court of
Quebec is expected to release its
judgment on the authorization of the class action shortly.
In the wake of the derailment and ensuing litigation, MM&A
filed for bankruptcy in Canada and
the United States. In an
Adversary Proceeding filed by the MM&A U.S. bankruptcy trustee
against CP, Irving Oil and the World Fuel entities, CP has been
accused of failing to ensure that World Fuel or Irving properly
classified the oil lading and of not refusing to ship the oil in
DOT-111 tank cars. CP intends to move to withdraw the bankruptcy
court reference and will thereafter seek to have the claim against
CP dismissed as federally preempted.
On March 31, 2015 the Canadian
Monitor in the MM&A bankruptcy filed a Plan of Arrangement
under the Companies' Creditors Arrangement Act ("CCAA") whereby the
Monitor seeks court approval of the Plan. If accepted by
MM&A's creditors and approved by the court, the Plan would
provide for the distribution of a fund of approximately
$293 million amongst those who claim
loss or damage as a result of the derailment and would release
those parties which contributed to the fund from any further
liability. CP has not contributed to the Fund and objects to
the release of parties which were responsible for the
derailment. The Canadian Monitor has announced that it will
seek Court approval of the Plan in mid-June
2015, or perhaps later in the year.
In addition, CP has received two damage to cargo notices of
claims from the shipper of the oil on the derailed train, Western
Petroleum. Western Petroleum has submitted U.S. and Canadian
notices of claims for the same damages and, under the Carmack
Amendment (the U.S. damage to cargo statute), seeks to recover for
all injuries associated with, and indemnification for all claims
arising from, the derailment. Both jurisdictions permit a
shipper to recover the value of damaged lading against any carrier
in the delivery chain, subject to limitations in the carrier's
tariffs. CP's tariffs significantly restrict shipper damage
claim rights.
At this early stage in the legal proceedings, any potential
liability and the quantum of potential loss cannot be
determined. Nevertheless, CP denies liability for MM&A's
derailment and will vigorously defend itself in the proceedings
described above and in any proceeding that may be commenced in the
future.
Environmental liabilities
Environmental remediation accruals, recorded on an undiscounted
basis unless a reliably determinable estimate as to an amount and
timing of costs can be established, cover site-specific remediation
programs.
The accruals for environmental remediation represent CP's best
estimate of its probable future obligation and include both
asserted and unasserted claims, without reduction for anticipated
recoveries from third parties. Although the recorded accruals
include CP's best estimate of all probable costs, CP's total
environmental remediation costs cannot be predicted with
certainty. Accruals for environmental remediation may change
from time to time as new information about previously untested
sites becomes known, environmental laws and regulations evolve and
advances are made in environmental remediation technology.
The accruals may also vary as the courts decide legal proceedings
against outside parties responsible for contamination. These
potential charges, which cannot be quantified at this time, are not
expected to be material to CP's financial position, but may
materially affect income in the particular period in which a charge
is recognized. Costs related to existing, but as yet unknown,
or future contamination will be accrued in the period in which they
become probable and reasonably estimable.
The expense included in "Purchased services and other" for the
three months ended March 31, 2015 was
$3 million (three months ended
March 31, 2014 - $1 million). Provisions for environmental
remediation costs are recorded in "Other long-term liabilities",
except for the current portion which is recorded in "Accounts
payable and accrued liabilities". The total amount provided
at March 31, 2015 was $99 million (December 31,
2014 - $ 91 million).
Payments are expected to be made over 10 years to 2025.
15 Reclassification of comparative
figures
Billings to third parties for the recovery of costs incurred for
freight car repairs and servicing have been reclassified from
"Purchased services and other" to "Compensation and benefits" and
"Materials" within "Operating expenses", in order to match the
billings with the costs incurred on behalf of third parties. As a
result, the changes to these components of "Operating expenses" for
the three months ended March 31, 2014
is noted below. "Operating expenses" in total were unchanged
as a result of this reclassification.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased |
|
|
|
|
Compensation |
|
|
|
|
|
|
|
|
|
|
services and |
(in millions of Canadian dollars) |
|
|
|
and
benefits |
|
|
Material |
|
|
other |
For the three months ended March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously reported |
|
|
|
$ |
355 |
|
|
$ |
|
|
|
|
89 |
|
|
$ |
189 |
(Decrease) increase |
|
|
|
|
(10) |
|
|
|
|
|
|
|
(37) |
|
|
|
47 |
As reclassified |
|
|
|
$ |
345 |
|
|
$ |
|
|
|
|
52 |
|
|
$ |
236 |
Summary of Rail
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
Financial (millions, except per
share data) |
|
2015 |
|
|
2014 |
|
|
Change |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight revenues |
|
$ |
|
1,630 |
|
|
$ |
|
1,474 |
|
|
$ |
|
156 |
|
|
11 |
|
Non-freight revenues |
|
|
|
35 |
|
|
|
|
35 |
|
|
|
|
- |
|
|
- |
Total revenues |
|
|
|
1,665 |
|
|
|
|
1,509 |
|
|
|
|
156 |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits(1) |
|
|
|
378 |
|
|
|
|
345 |
|
|
|
|
33 |
|
|
10 |
|
Fuel |
|
|
|
195 |
|
|
|
|
271 |
|
|
|
|
(76) |
|
|
(28) |
|
Materials(1) |
|
|
|
52 |
|
|
|
|
52 |
|
|
|
|
- |
|
|
- |
|
Equipment rents |
|
|
|
42 |
|
|
|
|
41 |
|
|
|
|
1 |
|
|
2 |
|
Depreciation and amortization |
|
|
|
146 |
|
|
|
|
141 |
|
|
|
|
5 |
|
|
4 |
|
Purchased services and other
(1) |
|
|
|
240 |
|
|
|
|
236 |
|
|
|
|
4 |
|
|
2 |
Total operating expenses |
|
|
|
1,053 |
|
|
|
|
1,086 |
|
|
|
|
(33) |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
612 |
|
|
|
|
423 |
|
|
|
|
189 |
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and charges |
|
|
|
73 |
|
|
|
|
- |
|
|
|
|
73 |
|
|
- |
|
Net interest expense |
|
|
|
85 |
|
|
|
|
70 |
|
|
|
|
15 |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense |
|
|
|
454 |
|
|
|
|
353 |
|
|
|
|
101 |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
134 |
|
|
|
|
99 |
|
|
|
|
35 |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
320 |
|
|
$ |
|
254 |
|
|
$ |
|
66 |
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating ratio (%) |
|
|
|
63.2 |
|
|
|
|
72.0 |
|
|
|
|
(8.8) |
|
|
(880) |
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
|
1.94 |
|
|
$ |
|
1.45 |
|
|
$ |
|
0.49 |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
|
1.92 |
|
|
$ |
|
1.44 |
|
|
$ |
|
0.48 |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding
(millions) |
|
|
|
164.9 |
|
|
|
|
175.5 |
|
|
|
|
(10.6) |
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of diluted shares
outstanding (millions) |
|
|
|
166.3 |
|
|
|
|
177.0 |
|
|
|
|
(10.7) |
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average foreign exchange rate
(US$/Canadian$) |
|
|
|
0.81 |
|
|
|
|
0.92 |
|
|
|
|
(0.11) |
|
|
(12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average foreign exchange rate
(Canadian$/US$) |
|
|
|
1.24 |
|
|
|
|
1.09 |
|
|
|
|
0.15 |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Billings to third parties for the recovery of costs incurred
for freight car repairs and servicing have been
reclassified from Purchased services and other to Compensation and
benefits and Materials within
Operating expenses. |
|
|
Summary of Rail
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter |
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenues
(millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian Grain |
|
|
|
$ |
256 |
|
|
$ |
221 |
|
|
$ |
|
35 |
|
|
|
|
16 |
|
|
- U.S. Grain |
|
|
|
|
137 |
|
|
|
106 |
|
|
|
|
31 |
|
|
|
|
29 |
|
|
- Coal |
|
|
|
|
160 |
|
|
|
148 |
|
|
|
|
12 |
|
|
|
|
8 |
|
|
- Potash |
|
|
|
|
93 |
|
|
|
80 |
|
|
|
|
13 |
|
|
|
|
16 |
|
|
- Fertilizers and sulphur |
|
|
|
|
71 |
|
|
|
54 |
|
|
|
|
17 |
|
|
|
|
31 |
|
|
- Forest products |
|
|
|
|
57 |
|
|
|
48 |
|
|
|
|
9 |
|
|
|
|
19 |
|
|
- Chemicals and plastics |
|
|
|
|
178 |
|
|
|
147 |
|
|
|
|
31 |
|
|
|
|
21 |
|
|
- Crude |
|
|
|
|
98 |
|
|
|
104 |
|
|
|
|
(6) |
|
|
|
|
(6) |
|
|
- Metals, minerals, and consumer
products |
|
|
|
|
159 |
|
|
|
161 |
|
|
|
|
(2) |
|
|
|
|
(1) |
|
|
- Automotive |
|
|
|
|
82 |
|
|
|
88 |
|
|
|
|
(6) |
|
|
|
|
(7) |
|
|
- Domestic intermodal |
|
|
|
|
194 |
|
|
|
177 |
|
|
|
|
17 |
|
|
|
|
10 |
|
|
- International intermodal |
|
|
|
|
145 |
|
|
|
140 |
|
|
|
|
5 |
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenues |
|
|
|
$ |
1,630 |
|
|
$ |
1,474 |
|
|
$ |
|
156 |
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of Revenue Ton-Miles
(RTM) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian Grain |
|
|
|
|
6,405 |
|
|
|
5,846 |
|
|
|
|
559 |
|
|
|
|
10 |
|
|
- U.S. Grain |
|
|
|
|
2,944 |
|
|
|
2,539 |
|
|
|
|
405 |
|
|
|
|
16 |
|
|
- Coal |
|
|
|
|
5,704 |
|
|
|
5,441 |
|
|
|
|
263 |
|
|
|
|
5 |
|
|
- Potash |
|
|
|
|
3,675 |
|
|
|
3,293 |
|
|
|
|
382 |
|
|
|
|
12 |
|
|
- Fertilizers and sulphur |
|
|
|
|
1,115 |
|
|
|
1,074 |
|
|
|
|
41 |
|
|
|
|
4 |
|
|
- Forest products |
|
|
|
|
1,019 |
|
|
|
920 |
|
|
|
|
99 |
|
|
|
|
11 |
|
|
- Chemicals and plastics |
|
|
|
|
3,570 |
|
|
|
3,206 |
|
|
|
|
364 |
|
|
|
|
11 |
|
|
- Crude |
|
|
|
|
3,032 |
|
|
|
3,358 |
|
|
|
|
(326) |
|
|
|
|
(10) |
|
|
- Metals, minerals, and consumer
products |
|
|
|
|
2,283 |
|
|
|
2,713 |
|
|
|
|
(430) |
|
|
|
|
(16) |
|
|
- Automotive |
|
|
|
|
419 |
|
|
|
514 |
|
|
|
|
(95) |
|
|
|
|
(18) |
|
|
- Domestic intermodal |
|
|
|
|
3,024 |
|
|
|
2,634 |
|
|
|
|
390 |
|
|
|
|
15 |
|
|
- International intermodal |
|
|
|
|
2,873 |
|
|
|
2,837 |
|
|
|
|
36 |
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RTMs |
|
|
|
|
36,063 |
|
|
|
34,375 |
|
|
|
|
1,688 |
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue per RTM
(cents) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian Grain |
|
|
|
|
3.99 |
|
|
|
3.78 |
|
|
|
|
0.21 |
|
|
|
|
6 |
|
|
- U.S. Grain |
|
|
|
|
4.66 |
|
|
|
4.16 |
|
|
|
|
0.50 |
|
|
|
|
12 |
|
|
- Coal |
|
|
|
|
2.80 |
|
|
|
2.72 |
|
|
|
|
0.08 |
|
|
|
|
3 |
|
|
- Potash |
|
|
|
|
2.54 |
|
|
|
2.41 |
|
|
|
|
0.13 |
|
|
|
|
5 |
|
|
- Fertilizers and sulphur |
|
|
|
|
6.40 |
|
|
|
4.98 |
|
|
|
|
1.42 |
|
|
|
|
29 |
|
|
- Forest products |
|
|
|
|
5.64 |
|
|
|
5.18 |
|
|
|
|
0.46 |
|
|
|
|
9 |
|
|
- Chemicals and plastics |
|
|
|
|
4.99 |
|
|
|
4.57 |
|
|
|
|
0.42 |
|
|
|
|
9 |
|
|
- Crude |
|
|
|
|
3.24 |
|
|
|
3.10 |
|
|
|
|
0.14 |
|
|
|
|
5 |
|
|
- Metals, minerals, and consumer
products |
|
|
|
|
6.94 |
|
|
|
5.95 |
|
|
|
|
0.99 |
|
|
|
|
17 |
|
|
- Automotive |
|
|
|
|
19.49 |
|
|
|
17.23 |
|
|
|
|
2.26 |
|
|
|
|
13 |
|
|
- Domestic intermodal |
|
|
|
|
6.43 |
|
|
|
6.73 |
|
|
|
|
(0.30) |
|
|
|
|
(4) |
|
|
- International intermodal |
|
|
|
|
5.03 |
|
|
|
4.92 |
|
|
|
|
0.11 |
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue per RTM |
|
|
|
|
4.52 |
|
|
|
4.29 |
|
|
|
|
0.23 |
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Rail
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carloads (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian Grain |
|
|
|
|
|
61 |
|
|
|
|
62 |
|
|
|
|
(1) |
|
|
|
|
|
(2) |
|
- U.S. Grain |
|
|
|
|
|
40 |
|
|
|
|
39 |
|
|
|
|
1 |
|
|
|
|
|
3 |
|
- Coal |
|
|
|
|
|
82 |
|
|
|
|
78 |
|
|
|
|
4 |
|
|
|
|
|
5 |
|
- Potash |
|
|
|
|
|
31 |
|
|
|
|
28 |
|
|
|
|
3 |
|
|
|
|
|
11 |
|
- Fertilizers and sulphur |
|
|
|
|
|
17 |
|
|
|
|
15 |
|
|
|
|
2 |
|
|
|
|
|
13 |
|
- Forest products |
|
|
|
|
|
15 |
|
|
|
|
14 |
|
|
|
|
1 |
|
|
|
|
|
7 |
|
- Chemicals and plastics |
|
|
|
|
|
51 |
|
|
|
|
45 |
|
|
|
|
6 |
|
|
|
|
|
13 |
|
- Crude |
|
|
|
|
|
22 |
|
|
|
|
24 |
|
|
|
|
(2) |
|
|
|
|
|
(8) |
|
- Metals, minerals,
and consumer products |
|
|
|
|
|
55 |
|
|
|
|
56 |
|
|
|
|
(1) |
|
|
|
|
|
(2) |
|
- Automotive |
|
|
|
|
|
30 |
|
|
|
|
30 |
|
|
|
|
- |
|
|
|
|
|
- |
|
- Domestic intermodal |
|
|
|
|
|
103 |
|
|
|
|
97 |
|
|
|
|
6 |
|
|
|
|
|
6 |
|
- International intermodal |
|
|
|
|
|
135 |
|
|
|
|
130 |
|
|
|
|
5 |
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Carloads |
|
|
|
|
|
642 |
|
|
|
|
618 |
|
|
|
|
24 |
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue per
Carload |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian Grain |
|
|
|
$ |
|
4,214 |
|
|
$ |
|
3,570 |
|
|
$ |
|
644 |
|
|
|
|
|
18 |
|
- U.S. Grain |
|
|
|
|
|
3,408 |
|
|
|
|
2,710 |
|
|
|
|
698 |
|
|
|
|
|
26 |
|
- Coal |
|
|
|
|
|
1,939 |
|
|
|
|
1,897 |
|
|
|
|
42 |
|
|
|
|
|
2 |
|
- Potash |
|
|
|
|
|
3,028 |
|
|
|
|
2,902 |
|
|
|
|
126 |
|
|
|
|
|
4 |
|
- Fertilizers and sulphur |
|
|
|
|
|
4,268 |
|
|
|
|
3,533 |
|
|
|
|
735 |
|
|
|
|
|
21 |
|
- Forest products |
|
|
|
|
|
3,857 |
|
|
|
|
3,400 |
|
|
|
|
457 |
|
|
|
|
|
13 |
|
- Chemicals and plastics |
|
|
|
|
|
3,500 |
|
|
|
|
3,244 |
|
|
|
|
256 |
|
|
|
|
|
8 |
|
- Crude |
|
|
|
|
|
4,500 |
|
|
|
|
4,375 |
|
|
|
|
125 |
|
|
|
|
|
3 |
|
- Metals, minerals, and consumer
products |
|
|
|
|
|
2,878 |
|
|
|
|
2,869 |
|
|
|
|
9 |
|
|
|
|
|
- |
|
- Automotive |
|
|
|
|
|
2,692 |
|
|
|
|
2,913 |
|
|
|
|
(221) |
|
|
|
|
|
(8) |
|
- Domestic intermodal |
|
|
|
|
|
1,894 |
|
|
|
|
1,827 |
|
|
|
|
67 |
|
|
|
|
|
4 |
|
- International intermodal |
|
|
|
|
|
1,070 |
|
|
|
|
1,073 |
|
|
|
|
(3) |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue per Carload |
|
|
|
$ |
|
2,541 |
|
|
$ |
|
2,385 |
|
|
$ |
|
156 |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Rail Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter |
|
|
|
2015 |
|
|
|
2014 (1) |
|
|
Change |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight gross ton-miles (millions) |
|
|
65,185 |
|
|
|
62,097 |
|
|
3,088 |
|
|
|
|
5 |
Revenue ton-miles (millions) |
|
|
36,063 |
|
|
|
34,375 |
|
|
1,688 |
|
|
|
|
5 |
Train miles (thousands) |
|
|
8,484 |
|
|
|
8,770 |
|
|
(286) |
|
|
|
|
(3) |
Average train weight - excluding local traffic
(tons) |
|
|
8,193 |
|
|
|
7,625 |
|
|
568 |
|
|
|
|
7 |
Average train length - excluding local traffic
(feet) |
|
|
6,776 |
|
|
|
6,277 |
|
|
499 |
|
|
|
|
8 |
Average terminal dwell (hours) |
|
|
8.9 |
|
|
|
10.3 |
|
|
(1.4) |
|
|
|
|
(14) |
Average train speed (mph) |
|
|
19.7 |
|
|
|
16.1 |
|
|
3.6 |
|
|
|
|
22 |
Fuel efficiency(2) |
|
|
1.05 |
|
|
|
1.11 |
|
|
(0.06) |
|
|
|
|
(5) |
U.S. gallons of locomotive fuel consumed
(millions)(3) |
|
|
67.9 |
|
|
|
68.3 |
|
|
(0.4) |
|
|
|
|
(1) |
Average fuel price (U.S. dollars per U.S.
gallon) |
|
|
2.35 |
|
|
|
3.63 |
|
|
(1.28) |
|
|
|
|
(35) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employees (average)(4) |
|
|
14,088 |
|
|
|
14,246 |
|
|
(158) |
|
|
|
|
(1) |
Total employees (end of period)(4) |
|
|
14,096 |
|
|
|
14,446 |
|
|
(350) |
|
|
|
|
(2) |
Workforce (end of period)(5) |
|
|
14,342 |
|
|
|
14,774 |
|
|
(432) |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safety |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRA personal injuries per 200,000
employee-hours |
|
|
2.03 |
|
|
|
1.60 |
|
|
0.43 |
|
|
|
|
27 |
FRA train accidents per million train-miles |
|
|
1.48 |
|
|
|
1.12 |
|
|
0.36 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Certain prior period figures have been revised to conform with
current presentation or have been updated
to reflect new information. |
(2) |
Fuel efficiency is defined as U.S. gallons of locomotive fuel
consumed per 1,000 GTMs - freight and yard. |
(3) |
Includes gallons of fuel consumed in freight, yard and commuter
service but excludes fuel used in capital
projects and other non-freight activities. |
(4) |
An employee is defined as an individual, including trainees,
who has worked more than 40 hours in a
standard biweekly pay period. This excludes part time
employees, contractors, and consultants. |
(5) |
Workforce is defined as total employees plus part time
employees, contractors, and consultants. |
Non-GAAP Measures - Unaudited
The Company presents non-GAAP measures and cash flow information
to provide a basis for evaluating underlying earnings and liquidity
trends in its business that can be compared with the results of
operations in prior periods. In addition, these non-GAAP
measures facilitate a multi-period assessment of long-term
profitability allowing management and other external users of the
Company's consolidated financial statements to compare
profitability on a long-term basis with that of the Company's
peers.
These non-GAAP measures exclude significant items that are not
among the Company's normal ongoing revenues and operating
expenses. They have no standardized meaning and are not
defined by GAAP and, therefore, are unlikely to be comparable to
similar measures presented by other companies.
Adjusted Performance Measures
Income, excluding significant items, also referred to as Adjusted
earnings, provides management with a measure of income on an
ongoing basis.
Diluted earnings per share ("EPS"), excluding significant items,
also referred to as Adjusted EPS, provides the same information on
a per share basis.
Significant items
Significant items are material transactions that may include, but
are not limited to, restructuring and asset impairment charges,
gains and losses on non-routine sales of assets and other items
that are not normal course business activities.
Items that impacted reported first-quarter 2015 and 2014
earnings include:
2015:
- a $64 million charge
($55 million after-tax) due to
foreign exchange translation on U.S dollar-denominated debt issued
primarily to facilitate the share repurchase program which
unfavourably impacted Diluted EPS by 34
cent
2014:
- a $4 million recovery
($3 million after-tax) for experience
gains from the Company's 2012 labour restructuring initiative which
favourably impacted Diluted EPS by 2
cents
Reconciliation of Non-GAAP measures to GAAP
measures
The following tables reconcile Adjusted earnings and Adjusted EPS
to Net income and Diluted earnings per share,
respectively.
Income |
|
|
|
|
|
For the three months
ended March 31 |
(in millions of Canadian dollars) |
|
|
|
|
|
2015 |
|
|
2014 |
Income, excluding significant
items |
|
|
|
|
|
$ |
|
|
375 |
|
|
$ |
|
|
251 |
Add significant items, net of
tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour restructuring |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
3 |
|
Impact of foreign exchange translation on U.S.
dollar-denominated debt |
|
|
|
|
|
|
|
|
(55) |
|
|
|
|
|
- |
Net income as reported |
|
|
|
|
|
$ |
|
|
320 |
|
|
$ |
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share |
|
|
|
|
|
For the three
months
ended March 31 |
|
|
|
|
|
|
2015 |
|
|
|
|
|
2014 |
Diluted earnings per share,
excluding significant items |
|
|
|
|
|
$ |
|
|
2.26 |
|
|
$ |
|
|
1.42 |
Add significant items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labour restructuring |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
0.02 |
|
Impact of foreign exchange translation on U.S.
dollar-denominated debt |
|
|
|
|
|
|
|
|
(0.34) |
|
|
|
|
|
- |
Diluted earnings per share as
reported |
|
|
|
|
|
$ |
|
|
1.92 |
|
|
$ |
|
|
1.44 |
Free Cash
Free cash is a non-GAAP measure that management considers to be an
indicator of liquidity. The measure is used by management to
provide information with respect to the relationship between cash
provided by operating activities and investment decisions and
provides a comparable measure for period to period changes.
Free cash is calculated as cash provided by operating activities,
less cash used in investing activities, excluding changes in
restricted cash and cash equivalents and investment balances
used to collateralize letters of credit, and dividends paid,
adjusted for changes in cash and cash equivalents balances
resulting from foreign exchange ("FX") fluctuations.
Reconciliation of Free Cash
(Reconciliation of free cash to
GAAP cash position)(1) |
|
|
|
For the three
months
ended March 31 |
(in millions of Canadian dollars) |
|
|
|
2015 |
|
|
2014 |
Cash provided by operating
activities |
|
|
|
$ |
|
|
555 |
|
|
$ |
|
|
287 |
Cash used in investing activities |
|
|
|
|
|
|
(191) |
|
|
|
|
|
(217) |
Change in restricted cash and cash equivalents
used to collateralize letters of credit |
|
|
|
|
|
|
- |
|
|
|
|
|
(2) |
Dividends paid |
|
|
|
|
|
|
(58) |
|
|
|
|
|
(61) |
Effect of foreign exchange fluctuations on U.S
dollar-denominated |
|
|
|
|
|
|
|
|
|
|
|
|
|
cash and cash
equivalents |
|
|
|
|
|
|
6 |
|
|
|
|
|
8 |
Free cash (1) |
|
|
|
|
|
|
312 |
|
|
|
|
|
15 |
Cash used in financing activities, excluding
dividend payment (1) |
|
|
|
|
|
|
(354) |
|
|
|
|
|
(214) |
Change in restricted cash and cash
equivalents used to collateralize letters of credit |
|
|
|
|
|
|
- |
|
|
|
|
|
2 |
Decrease in cash and cash equivalents, as shown
on the |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim
Consolidated Statements of Cash Flows |
|
|
|
|
|
|
(42) |
|
|
|
|
|
(197) |
Cash and cash equivalents at beginning of
period |
|
|
|
|
|
|
226 |
|
|
|
|
|
476 |
Cash and cash equivalents at end of
period |
|
|
|
$ |
|
|
184 |
|
|
$ |
|
|
279 |
(1) |
Free cash and Cash provided by financing activities, excluding
dividend payment have no standardized meaning
prescribed by GAAP and, therefore, are unlikely to be comparable to
similar measures presented by other companies. |
Foreign Exchange Adjusted Variance
Foreign exchange adjusted variance ("FX adj. variance") allows
certain financial results to be viewed without the impact of
fluctuations in foreign currency exchange rates, thereby
facilitating period-to-period comparisons in the analysis of trends
in business performance. Financial results at a constant
currency are obtained by translating the previous period results in
U.S. dollars at the foreign exchange rate of the comparable period
of the current year. Measures at constant currency are
considered non-GAAP measures and do not have any standardized
meaning prescribed by GAAP and, therefore, are unlikely to be
comparable to similar measures presented by other companies.
|
|
|
|
|
|
For the three months ended March
31 |
(in millions of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance |
|
|
Adjusted |
|
|
FX Adj. |
Canadian dollars) |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
due to FX |
|
|
2014 (1) |
|
|
%(1) |
Freight revenues |
|
|
|
|
|
$ |
|
1,630 |
|
|
$ |
|
1,474 |
|
|
$ |
102 |
|
|
$ |
1,576 |
|
|
3% |
Non-freight revenues |
|
|
|
|
|
|
|
35 |
|
|
|
|
35 |
|
|
|
1 |
|
|
|
36 |
|
|
(3%) |
Total revenues |
|
|
|
|
|
|
|
1,665 |
|
|
|
|
1,509 |
|
|
|
103 |
|
|
|
1,612 |
|
|
3% |
Total operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses |
|
|
|
|
|
|
|
1,053 |
|
|
|
|
1,086 |
|
|
|
66 |
|
|
|
1,152 |
|
|
(9%) |
Operating income |
|
|
|
|
|
$ |
|
612 |
|
|
$ |
|
423 |
|
|
$ |
37 |
|
|
$ |
460 |
|
|
33% |
(1) |
These earnings measures have no standardized meaning prescribed
by GAAP and, therefore,
are unlikely to be comparable to similar measures presented by
other companies. |
|
|
SOURCE Canadian Pacific