OR falls to Q1 record 58.9 percent; double digit EPS
growth
CALGARY, April 20, 2016 /PRNewswire/ - Canadian
Pacific Railway Limited (TSX: CP) (NYSE: CP) today announced its
lowest-ever first-quarter operating ratio of 58.9 percent and
reported diluted earnings per share of $3.51 or $2.50 on
an adjusted diluted earnings per share basis.
CP's operating ratio improved by 430 basis points year-over-year
and for a third straight quarter was below 60 percent. At 58.9
percent the OR is the lowest-ever when compared to adjusted
operating ratios in previous quarters.1
Reported diluted earnings per share increased 83 percent to
$3.51 from $1.92 and adjusted diluted earnings per share
grew 11 percent to $2.50 from
$2.26.
"The precision railroading model works in all economic
environments," said E. Hunter
Harrison, CP's Chief Executive Officer. "Despite weakness in
the economy and volume headwinds, we focused on what we can control
– our costs and our commitment to providing reliable service – and
delivered a record performance."
FIRST-QUARTER HIGHLIGHTS
- Revenues were down 4 percent to $1.59
billion from $1.67
billion
- Operating income advanced 7 percent to $653 million from $612
million
- Net income rose 69 percent to $540
million from $320 million,
adjusted income was up 2 percent to $384
million from $375 million
"I am proud of what the team continues to produce quarter after
quarter in these difficult times and we remain optimistic in our
outlook given signs of stabilization within the Canadian economy
and in key global markets," said Harrison. "As market conditions
improve and volumes increase, our team of professional railroaders
will be ready. Furthermore, we are confident in our plan to deliver
shareholder value, which includes the announcement of a new share
repurchase program that demonstrates our continued confidence over
the long-term."
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 CP's intention to commence a normal course issuer bid
and potential future purchases of CP common shares under the normal
course issuer bid. 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.
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: 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
"Item 1A - Risk Factors" and "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Forward-Looking Information" in CP's annual and interim reports on
Form 10-K and 10- Q. 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 Railway Limited (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 www.cpr.ca to see the rail advantages of
CP.
_________________________
|
1 In Q3
2015, CP had a reported operating ratio of 55.9 percent as a result
of the sale of the D&H South, an item excluded from CP's Q3
2015 adjusted operating ratio of 59.9 percent.
|
ITEM 1. FINANCIAL
STATEMENTS
|
|
|
|
|
|
|
|
INTERIM
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three
months
ended March
31
|
(in millions of
Canadian dollars, except share and per share data)
|
|
|
2016
|
|
2015
|
Revenues
|
|
|
|
|
|
|
|
|
Freight
|
|
|
$
|
1,548
|
|
$
|
1,630
|
|
Non-freight
|
|
|
|
43
|
|
|
35
|
Total
revenues
|
|
|
|
1,591
|
|
|
1,665
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
|
329
|
|
|
378
|
|
Fuel
|
|
|
|
125
|
|
|
195
|
|
Materials
|
|
|
|
56
|
|
|
52
|
|
Equipment
rents
|
|
|
|
45
|
|
|
42
|
|
Depreciation and
amortization
|
|
|
|
162
|
|
|
146
|
|
Purchased services
and other (Note 4)
|
|
|
|
221
|
|
|
240
|
Total operating
expenses
|
|
|
|
938
|
|
|
1,053
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
|
653
|
|
|
612
|
Less:
|
|
|
|
|
|
|
|
|
Other income and
charges (Note 5)
|
|
|
|
(181)
|
|
|
73
|
|
Net interest
expense
|
|
|
|
124
|
|
|
85
|
Income before
income tax expense
|
|
|
|
710
|
|
|
454
|
|
Income tax expense
(Note 6)
|
|
|
|
170
|
|
|
134
|
Net
income
|
|
|
$
|
540
|
|
$
|
320
|
|
|
|
|
|
|
|
|
Earnings per
share (Note 7)
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
|
$
|
3.53
|
|
$
|
1.94
|
|
Diluted earnings per
share
|
|
|
$
|
3.51
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares (millions) (Note 7)
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
153.0
|
|
|
164.9
|
|
Diluted
|
|
|
|
153.8
|
|
|
166.3
|
|
|
|
|
|
|
|
|
Dividends declared
per share (Note 14)
|
|
|
$
|
0.3500
|
|
$
|
0.3500
|
See Notes to Interim
Consolidated Financial Statements.
|
INTERIM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three
months
ended March
31
|
(in millions of
Canadian dollars)
|
|
|
2016
|
|
2015
|
Net income
|
|
|
$
|
540
|
|
$
|
320
|
|
Net gain (loss) in
foreign currency translation adjustments, net of hedging
activities
|
|
|
|
37
|
|
|
(37)
|
|
Change in derivatives
designated as cash flow hedges
|
|
|
|
(47)
|
|
|
(69)
|
|
Change in pension and
post-retirement defined benefit plans
|
|
|
|
47
|
|
|
72
|
Other comprehensive
income (loss) before income taxes
|
|
|
|
37
|
|
|
(34)
|
Income tax (expense)
recovery on above items
|
|
|
|
(41)
|
|
|
46
|
Other comprehensive
(loss) income (Note 3)
|
|
|
|
(4)
|
|
|
12
|
Comprehensive
income
|
|
|
$
|
536
|
|
$
|
332
|
See Notes to Interim
Consolidated Financial Statements.
|
INTERIM
CONSOLIDATED BALANCE SHEETS AS AT
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31
|
|
December
31
|
(in millions of
Canadian dollars)
|
|
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
$
|
|
571
|
|
$
|
650
|
|
Accounts receivable,
net
|
|
|
|
|
|
629
|
|
|
645
|
|
Materials and
supplies
|
|
|
|
|
|
181
|
|
|
188
|
|
Other current
assets
|
|
|
|
|
|
69
|
|
|
54
|
|
|
|
|
|
|
1,450
|
|
|
1,537
|
Investments
|
|
|
|
|
|
148
|
|
|
152
|
Properties
|
|
|
|
|
|
16,013
|
|
|
16,273
|
Goodwill and
intangible assets
|
|
|
|
|
|
196
|
|
|
211
|
Pension
asset
|
|
|
|
|
|
1,489
|
|
|
1,401
|
Other
assets
|
|
|
|
|
|
53
|
|
|
63
|
Total
assets
|
|
|
|
$
|
|
19,349
|
|
$
|
19,637
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
$
|
|
1,143
|
|
$
|
1,417
|
|
Long-term debt
maturing within one year
|
|
|
|
|
|
23
|
|
|
30
|
|
|
|
|
|
|
1,166
|
|
|
1,447
|
Pension and other
benefit liabilities
|
|
|
|
|
|
750
|
|
|
758
|
Other long-term
liabilities
|
|
|
|
|
|
291
|
|
|
318
|
Long-term
debt
|
|
|
|
|
|
8,430
|
|
|
8,927
|
Deferred income
taxes
|
|
|
|
|
|
3,422
|
|
|
3,391
|
Total
liabilities
|
|
|
|
|
|
14,059
|
|
|
14,841
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
|
2,065
|
|
|
2,058
|
|
Additional paid-in
capital
|
|
|
|
|
|
48
|
|
|
43
|
|
Accumulated other
comprehensive loss (Note 3)
|
|
|
|
|
|
(1,481)
|
|
|
(1,477)
|
|
Retained
earnings
|
|
|
|
|
|
4,658
|
|
|
4,172
|
|
|
|
|
|
|
5,290
|
|
|
4,796
|
Total liabilities
and shareholders' equity
|
|
|
|
$
|
|
19,349
|
|
$
|
19,637
|
Contingencies (Note
12)
|
See Notes to Interim
Consolidated Financial Statements.
|
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three
months
ended March
31
|
(in millions of
Canadian dollars)
|
|
|
2016
|
|
2015
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
|
540
|
|
$
|
|
320
|
Reconciliation of net
income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
162
|
|
|
|
146
|
|
Deferred income taxes
(Note 6)
|
|
|
|
|
93
|
|
|
|
32
|
|
Pension funding in
excess of expense (Note 11)
|
|
|
|
|
(42)
|
|
|
|
(10)
|
Foreign exchange
(gain) loss on long-term debt (Note 5)
|
|
|
|
|
(181)
|
|
|
|
64
|
Other operating
activities, net
|
|
|
|
|
(66)
|
|
|
|
(41)
|
Change in non-cash
working capital balances related to operations
|
|
|
|
|
(288)
|
|
|
|
44
|
Cash provided by
operating activities
|
|
|
|
|
218
|
|
|
|
555
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Additions to
properties
|
|
|
|
|
(278)
|
|
|
|
(263)
|
Proceeds from sale of
properties and other assets (Note 4)
|
|
|
|
|
60
|
|
|
|
52
|
Other
|
|
|
|
|
—
|
|
|
|
20
|
Cash used in
investing activities
|
|
|
|
|
(218)
|
|
|
|
(191)
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
|
|
(54)
|
|
|
|
(58)
|
Issuance of CP Common
Shares
|
|
|
|
|
5
|
|
|
|
16
|
Purchase of CP Common
Shares (Note 8)
|
|
|
|
|
—
|
|
|
|
(529)
|
Issuance of long-term
debt, excluding commercial paper
|
|
|
|
|
—
|
|
|
|
810
|
Repayment of
long-term debt, excluding commercial paper
|
|
|
|
|
(11)
|
|
|
|
(58)
|
Net repayment of
commercial paper
|
|
|
|
|
—
|
|
|
|
(593)
|
Other
|
|
|
|
|
(2)
|
|
|
|
—
|
Cash used in
financing activities
|
|
|
|
|
(62)
|
|
|
|
(412)
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign
currency fluctuations on U.S. dollar-denominated
cash and cash
equivalents
|
|
|
|
|
(17)
|
|
|
|
6
|
Cash
position
|
|
|
|
|
|
|
|
|
|
Decrease in cash and
cash equivalents
|
|
|
|
|
(79)
|
|
|
|
(42)
|
Cash and cash
equivalents at beginning of period
|
|
|
|
|
650
|
|
|
|
226
|
Cash and cash
equivalents at end of period
|
|
|
$
|
|
571
|
|
$
|
|
184
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Income taxes paid
(refunded)
|
|
|
$
|
|
192
|
|
$
|
|
(3)
|
Interest
paid
|
|
|
$
|
|
155
|
|
$
|
|
67
|
See Notes to Interim
Consolidated Financial Statements.
|
INTERIM
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars except common
share amounts)
|
|
Common
shares
(in
millions)
|
|
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
loss
|
Retained
earnings
|
Total
shareholders'
equity
|
Balance at January
1, 2016
|
|
153.0
|
|
$
|
2,058
|
$
|
43
|
$
|
(1,477)
|
$
|
4,172
|
$
|
4,796
|
|
Net income
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
540
|
|
540
|
|
Other comprehensive
loss (Note 3)
|
|
—
|
|
|
—
|
|
—
|
|
(4)
|
|
—
|
|
(4)
|
|
Dividends
declared
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
(54)
|
|
(54)
|
|
Effect of stock-based
compensation expense
|
|
—
|
|
|
—
|
|
6
|
|
—
|
|
—
|
|
6
|
|
Shares issued under
stock option plan
|
|
—
|
|
|
7
|
|
(1)
|
|
—
|
|
—
|
|
6
|
Balance at March
31, 2016
|
|
153.0
|
|
$
|
2,065
|
$
|
48
|
$
|
(1,481)
|
$
|
4,658
|
$
|
5,290
|
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 plan
|
|
0.2
|
|
|
21
|
|
(4)
|
|
—
|
|
—
|
|
17
|
Balance at March
31, 2015
|
|
164.0
|
|
$
|
2,177
|
$
|
38
|
$
|
(2,207)
|
$
|
5,410
|
$
|
5,418
|
See Notes to Interim
Consolidated Financial Statements.
|
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2016
(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 2015 annual consolidated financial statements and notes
included in CP's 2015 Annual Report on Form 10-K. The accounting
policies used are consistent with the accounting policies used in
preparing the 2015 annual consolidated financial statements, except
for the newly adopted accounting policy discussed in Note 2.
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 Accounting Changes
Implemented in 2016
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
Consolidation. The amendments required 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, eliminated the presumption that a general
partner should consolidate a limited partnership and affected the
consolidation analysis of reporting entities involved with VIEs,
particularly those that have fee arrangements and related party
relationships. This ASU was effective for public entities for
fiscal years, and interim periods within those years, beginning on
or after December 15, 2015. Entities
had the option of using either a full retrospective or a modified
retrospective approach to adopt this ASU. The Company evaluated all
arrangements that might give rise to a VIE and all existing VIEs;
no changes to disclosure or financial statement presentation were
required as a result of this evaluation.
Future changes
Leases
In February 2016, the FASB issued
ASU 2016-02, Leases. The new FASB ASC Topic 842 Leases supersedes
the lease recognition and measurement requirements in Topic 840
Leases. This new standard requires recognition of right-of-use
assets and lease liabilities by lessees for those leases classified
as finance and operating leases with a maximum term exceeding 12
months. This ASU will be effective for public entities for fiscal
years, and interim periods within those years, beginning on or
after December 15, 2018. Entities are
required to use a modified retrospective approach to adopt this
ASU. The Company is currently evaluating the impact adoption of
this ASU will have on the consolidated financial statements.
Revenue from Contracts with Customers
In March 2016, the FASB issued ASU
2016-08, Revenue from Contracts with Customers: Principal versus
Agent Considerations under FASB ASC Topic 606. The amendments
clarify the principal versus agent guidance in determining whether
to recognize revenue on a gross or net basis. The amendments are
effective for public entities for annual reporting periods
beginning on or after December 15,
2017, including interim periods within that reporting
period. 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 adoption of
this ASU will have on the consolidated financial statements.
Compensation - Stock Compensation
In March 2016, the FASB issued ASU
2016-09, Compensation - Stock Compensation, under ASC Topic 718.
The amendments clarify the guidance relating to treatment of excess
tax benefits and deficiencies, acceptable forfeiture rate policies,
and treatment of cash paid by an employer when directly withholding
shares for tax-withholding purposes and the requirement to treat
such cash flows as a financing activity. This ASU will be effective
for public entities for fiscal years, and interim periods within
those years, beginning on or after December
15, 2016. Early adoption is permitted. The Company is
currently evaluating the impact adoption of this ASU will have on
the consolidated financial statements.
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)
|
Opening balance,
January 1, 2016
|
$
|
129
|
$
|
(102)
|
$
|
(1,504)
|
$
|
|
(1,477)
|
Other comprehensive
(loss) income before reclassifications
|
|
(4)
|
|
(36)
|
|
—
|
|
|
(40)
|
Amounts reclassified
from accumulated other comprehensive loss
|
|
—
|
|
2
|
|
34
|
|
|
36
|
Net current-period
other comprehensive (loss) income
|
|
(4)
|
|
(34)
|
|
34
|
|
|
(4)
|
Closing balance,
March 31, 2016
|
$
|
125
|
$
|
(136)
|
$
|
(1,470)
|
$
|
|
(1,481)
|
Opening balance,
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
|
Closing balance,
March 31, 2015
|
$
|
125
|
$
|
(103)
|
$
|
(2,229)
|
$
|
|
(2,207)
|
(1)
Amounts are presented net of tax.
|
Amounts in Pension and post-retirement defined benefit plans
reclassified from AOCL
|
|
|
|
|
|
For the three
months ended
March 31
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
2016
|
|
2015
|
Amortization of prior
service costs(a)
|
|
|
|
|
|
$
|
|
(2)
|
|
$
|
|
(1)
|
Recognition of net
actuarial loss(a)
|
|
|
|
|
|
|
|
49
|
|
|
|
67
|
Total before income
tax
|
|
|
|
|
|
|
|
47
|
|
|
|
66
|
Income tax
recovery
|
|
|
|
|
|
|
|
(13)
|
|
|
|
(18)
|
Net of income
tax
|
|
|
|
|
|
$
|
|
34
|
|
$
|
|
48
|
(a)
Impacts Compensation and benefits on the Interim Consolidated
Statements of Income.
|
4 Gain on sale of properties
Gain on sale of Arbutus Corridor
In March 2016, the Company
announced the sale of CP's Arbutus Corridor (the "Arbutus
Corridor") to the City of
Vancouver for gross proceeds of $55
million. The agreement allows the Company to share in future
proceeds on the eventual development and/or sale of certain parcels
of the Arbutus Corridor. The Company recorded a gain on sale of
$50 million before tax ($43 million after tax) from the transaction
during the first quarter of 2016.
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 and recorded a gain of $31 million ($27
million after tax).
5 Other income and charges
|
|
|
|
For the three
months ended
March 31
|
(in millions of
Canadian dollars)
|
|
|
|
2016
|
|
2015
|
Foreign exchange
(gain) loss on long-term debt
|
|
|
|
$
|
|
(181)
|
|
$
|
|
|
64
|
Other foreign
exchange (gains) losses
|
|
|
|
|
|
(7)
|
|
|
|
|
6
|
Other
|
|
|
|
|
|
7
|
|
|
|
|
3
|
Total other income
and charges
|
|
|
|
$
|
|
(181)
|
|
$
|
|
|
73
|
6 Income taxes
|
|
|
|
|
|
For the three
months ended
March 31
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
2016
|
|
2015
|
Current income tax
expense
|
|
|
|
|
|
$
|
|
77
|
|
$
|
|
102
|
Deferred income tax
expense
|
|
|
|
|
|
|
|
93
|
|
|
|
32
|
Income tax
expense
|
|
|
|
|
|
$
|
|
170
|
|
$
|
|
134
|
The estimated 2016 annual effective tax rate for the first
quarter, excluding the discrete item related to the foreign
exchange gain of $181 million on the
Company's U.S. dollar-denominated debt, is 27.5%, similar to the
estimate of 27.5% for the same period in 2015.
The effective tax rate in the first quarter, including discrete
item, is 23.9%, compared to 29.5% for the same period in
2015.
7 Earnings per share
At March 31, 2016, the number of
shares outstanding was 153.0 million (March
31, 2015 - 164.0 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)
|
|
|
|
2016
|
|
|
2015
|
Weighted-average
basic shares outstanding
|
|
|
|
153.0
|
|
|
164.9
|
Dilutive effect of
stock options
|
|
|
|
0.8
|
|
|
1.4
|
Weighted-average
diluted shares outstanding
|
|
|
|
153.8
|
|
|
166.3
|
For the three months ended March 31,
2016, 445,991 options were excluded from the computation of
diluted earnings per share because their effects were not dilutive
(three months ended March 31, 2015 -
883 options).
8 Shareholders' equity
On March 11, 2014, the Company
announced a new share repurchase program to implement a normal
course issuer bid ("NCIB") to purchase, for cancellation, up to 5.3
million Common Shares before March 16,
2015. On September 29, 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. The
Company completed the purchase of 10.5 million Common Shares in
2014. An additional 2.2 million Common Shares were purchased for
$490 million in the first quarter of
2015 prior to the March 16, 2015
expiry date of the program.
On March 16, 2015, the Company
announced the renewal of its NCIB, commencing March 18, 2015, to purchase up to 9.14 million of
its outstanding Common Shares for cancellation before March 17, 2016. On August 31, 2015, the Company amended the NCIB to
increase the maximum number of its Common Shares that may be
purchased from 9.14 million to 11.9 million of its outstanding
Common Shares. As at December 31,
2015, the Company had purchased 11.3 million Common Shares
for $2,258 million under this current
NCIB program. There were no additional purchases in the three
months ended March 31, 2016.
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 ("TSX"), 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 activities under the share repurchase
program:
|
|
|
|
For the three
months ended
March 31
|
|
|
|
|
2016
|
|
2015
|
Number of Common
Shares repurchased(1)
|
|
|
|
|
|
|
—
|
|
|
2,174,788
|
Weighted-average
price per share(2)
|
|
|
|
$
|
|
|
—
|
|
$
|
225.12
|
Amount of repurchase
(in millions)(2)
|
|
|
|
$
|
|
|
—
|
|
$
|
490
|
(1)
Excludes shares repurchased but not yet cancelled in the prior
quarter.
|
(2)
Includes brokerage fees.
|
On April 20, 2016, the Company
announced it intends to implement a new NCIB to repurchase, for
cancellation, up to 6.91 million of its Common Shares, subject to
TSX acceptance.
9 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 $9,491 million at March
31, 2016 (December 31, 2015 -
$9,750 million) and a carrying value
of $8,453 (December 31, 2015 - $8,957
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.
FX 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 (loss) income" for the three months ended
March 31, 2016 was an unrealized FX
gain of $308 million (three months
ended March 31, 2015 - unrealized FX
loss of $356 million). There
was no ineffectiveness during the three months ended March 31, 2016 and March
31, 2015.
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 floating-to-fixed interest rate swap agreements
("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. The effective portion of changes in fair value on
the forward starting swaps is recorded in "Accumulated other
comprehensive loss", net of tax, as cash flow hedges until the
probable forecasted notes are issued. Subsequent to the notes
issuance, amounts in "Accumulated other comprehensive loss" are
reclassified to "Net interest expense".
During the first quarter of 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 the same period. The
fair value of these derivative instruments was a loss of U.S.
$50 million ($63 million) at the time of settlement. The
effective portion of changes in fair value on the forward starting
swaps of U.S. $48 million
($60 million), was recorded in
"Accumulated other comprehensive loss", and is amortized to "Net
interest expense" over the term of the underlying hedged notes.
During the three months ended March 31,
2016, a loss of $1 million
related to these previously settled derivatives has been amortized
to "Net interest expense" (three months ended March 31, 2015 - loss of $1 million). The Company expects that during the
next 12 months $6 million of losses
will be amortized to "Net interest expense". The ineffective
portion of U.S. $2 million
($2 million) was recorded immediately
in income as "Net interest expense" during the first quarter of
2015.
During the third quarter of 2015, the Company de-designated the
hedging relationship for U.S. $700
million of forward starting swaps related to a portion of
the U.S. $900 million 6.125% 100-year
notes issued. The Company did not cash settle these swaps and
therefore recorded a non-cash loss of U.S. $36 million ($47
million) at the time of de-designation. The effective
portion of changes in fair value of the de-designated forward
starting swaps of U.S. $36 million
($47 million) was recorded in
"Accumulated other comprehensive loss" and is amortized to "Net
interest expense" over the first 10 years as the underlying
interest expense payments, which are hedged, of the U.S.
$900 million notes are
made. During the three months ended March 31, 2016, a loss of $1 million related to these previously
de-designated derivatives has been amortized to "Net interest
expense". The Company expects that during the next 12 months
$5 million of losses will be
amortized to "Net interest expense". There was no ineffectiveness
to record upon de-designation.
During the third quarter of 2015, the Company re-designated the
forward starting swaps totalling U.S. $700
million to fix the benchmark rate on cash flows associated
with a highly probable forecasted issuance of long-term notes. The
effective portion of changes in fair value from the re-designation
date on the forward starting swaps is recorded in "Accumulated
other comprehensive loss", net of tax, as cash flow hedges until
the probable forecasted notes are issued. Subsequent to the notes
being issued, amounts in "Accumulated other comprehensive loss"
will be amortized to "Net interest expense".
As at March 31, 2016, the total
fair value loss of $112 million
derived from the remaining forward starting swaps was included in
"Accounts payable and accrued liabilities" of which $65 million relates to the re-designated existing
forward starting swaps. The effective portion of $63 million on the re-designated existing forward
starting swaps is reflected in "Other comprehensive (loss) income"
and the ineffective portion of $2
million is recorded to "Net interest expense" on the
Consolidated Statements of Comprehensive Income and the
Consolidated Statements of Income, respectively.
As at December 31, 2015, the total
fair value loss of $60 million
derived from the remaining forward starting swaps was included in
"Accounts payable and accrued liabilities" of which $13 million related to the re-designated existing
forward starting swaps. The effective portion of $13 million on the re-designated existing forward
starting swaps was reflected in "Other comprehensive income" and
the negligible ineffective portion was recorded to "Net interest
expense" on the Consolidated Statements of Comprehensive Income and
the Consolidated Statements of Income, respectively.
10 Stock-based compensation
At March 31, 2016, 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, 2016 of
$14 million (three months ended
March 31, 2015 - $29 million).
Regular options
In the three months ended March 31,
2016, under CP's stock option plans, the Company issued
400,590 regular options at the weighted average price of
$165.47 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 $16 million. The weighted average fair value
assumptions were approximately:
|
|
For the three
months ended
March 31, 2016
|
Grant
price
|
|
$165.47
|
Expected option life
(years)(1)
|
|
5.25
|
Risk-free interest
rate(2)
|
|
1.21%
|
Expected stock price
volatility(3)
|
|
26.58%
|
Expected annual
dividends per share(4)
|
|
$1.4
|
Expected forfeiture
rate(5)
|
|
2.0%
|
Weighted-average
grant date fair value per regular options granted during the
period
|
|
$38.96
|
(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,
2016, the Company issued 146,520 PSUs with a grant date fair
value of approximately $24 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 periodically until settlement, using a latticed-based
valuation model. In addition, on grant date a Monte Carlo
simulation model, which utilizes multiple input variables, is
utilized to determine the probability of satisfying the performance
and market conditions stipulated in the grant.
The performance period for PSUs issued in the three months ended
March 31, 2016 is January 1, 2016 to December 31, 2018. The performance factors for
these PSUs are Operating Ratio, Return on Invested Capital, Total
Shareholder Return ("TSR") compared to the S&P/TSX 60 Index,
and TSR compared to Class 1 railways.
The performance period for the PSUs issued in the fourth quarter
of 2012 and in 2013 was January 1,
2013 to December 31, 2015. The
performance factors for these PSUs were Operating Ratio, Free cash
flow, TSR compared to the S&P/TSX 60 index, TSR compared to
Class 1 railways. All performance factors met the 200% payout
thresholds, in effect resulting in a target payout of 200% on
300,095 total outstanding awards as at December 31, 2015. A payout of $79 million on 217,179 outstanding awards
occurred on December 31, 2015 and was
calculated using the Company's average share price using the last
30 trading days preceding December 31,
2015. In the three months ended March
31, 2016, final payouts occurred on the total outstanding
awards, including dividends reinvested, totaling $31 million on 83,563 outstanding awards.
Deferred share unit ("DSU") plan
In the three months ended March 31,
2016, the Company granted 20,739 DSUs with a grant date fair
value of approximately $4 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.
11 Pension and other benefits
In the three months ended March 31,
2016, the Company made contributions of $20 million (three months ended March 31, 2015 - $21
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)
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Current service cost
(benefits earned by
employees in the period)
|
|
|
$
|
27
|
|
$
|
32
|
|
$
|
|
3
|
|
$
|
|
3
|
Interest cost on
benefit obligation
|
|
|
|
117
|
|
|
115
|
|
|
|
5
|
|
|
|
5
|
Expected return on
fund assets
|
|
|
|
(212)
|
|
|
(201)
|
|
|
|
—
|
|
|
|
—
|
Recognized net
actuarial loss
|
|
|
|
48
|
|
|
66
|
|
|
|
1
|
|
|
|
1
|
Amortization of prior
service costs
|
|
|
|
(2)
|
|
|
(1)
|
|
|
|
—
|
|
|
|
—
|
Net periodic benefit
(recovery) cost
|
|
|
$
|
(22)
|
|
$
|
11
|
|
$
|
|
9
|
|
$
|
|
9
|
12 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, 2016 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 ("MMA")
and/or its subsidiary, Montreal Maine and Atlantic Canada Co.
("MMAC", and collectively with MMA, the "MMA Group") derailed and
exploded in Lac-Mégantic, Quebec
on a section of railway line owned by the MMA Group. The previous
day CP had interchanged the train to the MMA Group, and after that
interchange MMA Group 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 (the "Amended Cleanup
Order"). CP is a party to an administrative appeal with respect to
the Amended Cleanup Order. The proceedings before the
Administrative tribunal have been stayed until September 2016. Directly related to this matter,
the Province of Quebec filed a
lawsuit against CP before the Quebec Superior Court on July 6, 2015 in which it claims $409 million for the damages sustained by the
province as a result of the expenses incurred following the
derailment, including costs incurred for the work carried out
pursuant to the Amended Cleanup Order. The province alleges that CP
had custody or control of the contaminants that were discharged in
Lac-Mégantic on July 6, 2013, and
that CP was otherwise negligent and therefore is solidarily (joint
and severally) liable with the other third parties responsible for
the accident. The province's lawsuit has been stayed
until September 12, 2016.
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
"Class Action"). 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. On May 8,
2015, the Superior Court of Quebec authorized the institution of the Class
Action as against CP and as against the shipper, Western Petroleum,
and the shipper's parent, World Fuel Services (collectively, the
"World Fuel Defendants"). The World Fuel Defendants have since
settled. No timetable governing the conduct of this lawsuit has
been ordered by the Superior Court of Quebec.
In the wake of the derailment and ensuing litigation, MMAC filed
for bankruptcy in Canada (the
"Canadian Proceeding") and MMA filed for bankruptcy in the United States (the "U.S. Proceeding"). An
Adversary Proceeding filed by the MMA U.S. bankruptcy trustee
against CP, Irving Oil and the World Fuel Defendants accuses CP of
failing to ensure that World Fuel Defendants or Irving Oil properly
classified the oil lading and of not refusing to ship the oil in
DOT-111 tank cars. The trustee has since settled with the World
Fuel Defendants and Irving Oil and now maintains that CP
misfeasance is based upon the railroad's failure to abide by a
Canadian regulation in North
Dakota that supposedly would have caused the originating
railroad to refuse to carry the crude oil based upon reason to
suspect inaccurate classification. Private party litigation in
Texas, Illinois, and Maine charges CP with the misclassification
and mis-packaging (i.e., DOT-111 tank car) negligence. Those cases
include a class action and a mass action in Texas and wrongful death actions in
Illinois and Maine. CP removed all cases to U.S. federal
court, and motions have been filed with respect to jurisdiction and
venue.
In response to CP's motion to withdraw the adversary proceedings
from the U.S. Proceeding, the trustee maintained that Canadian law
rather than U.S. law controlled, and the court found that if the
federal regulations governed, the case was not complex enough to
warrant withdrawal. CP moved to dismiss for want of personal
jurisdiction, but that motion, which was heard on August 18, 2015, has been denied. Motions to
dismiss on procedural grounds are pending in the private
litigation. The parties recently stipulated that the bankruptcy
adversary proceedings would be tried in district court before a
jury.
Plans of arrangement have been approved both in the Canadian
Proceeding and the U.S. Proceeding. These Plans provide for the
distribution of a fund of approximately $440
million amongst those who claimed loss or damage as a result
of the derailment and will release those parties which contributed
to the fund from any further liability. The Plans also provide for
broadly worded third-party releases and injunctions that prevent
actions against settling parties. CP has not participated in the
settlement and hence will not benefit from any third-party releases
or injunctions. In addition, both Plans contain judgment reduction
provisions. Pursuant to these provisions, in the event of a
judgment against CP in a case arising from the Lac-Mégantic
derailment, CP should receive a credit for the greater of (i) the
settlement monies received by the plaintiff(s) for the claim, or
(ii) the amount which, but for the third-party non-debtor
injunctions, CP would have been entitled to obtain from third
parties other than MMA and MMAC through contribution or
indemnification. CP may also have rights to judgment reduction, as
part of the contribution/indemnification credit, for the fault of
MMA and/or MMAC. The provisions of the Plans also provide for a
potential re-allocation of some aspects of the MMA Group's
liability among plaintiffs and non-settling parties.
Besides litigation that has now been commenced by wrongful
death, personal injury, and property damage plaintiffs against CP
in Maine, Texas, and Illinois, CP has received two damage to cargo
notices of claims from the shipper of the oil on the derailed
train, Western Petroleum. Western Petroleum 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.
Western Petroleum is part of the World Fuel Services group, and
those entities recently settled with the trustee. In connection
with that settlement, Western Petroleum assigned to the bankruptcy
trustee the right to delegate those cargo-related claims. To date
the trustee has not so delegated, but he has indicated that the
cargo claims will be assigned to the Trust to be formed to handle
distributions of funds to wrongful death plaintiffs. Before the
settlement, both the World Fuel Services group and the trustee
maintained that Carmack liability extends beyond lading losses to
cover all damages incurred by the World Fuel Services group or
Irving Oil associated with the derailment. CP disputes this
interpretation of the law. CP disputes this interpretation of
damages to lading law and CP's tariffs, if applicable, preclude
such a result.
At this early stage of the legal proceedings, any potential
liability and the quantum of potential loss cannot be determined.
Nevertheless, CP denies liability for the MMA derailment and
intends to vigorously defend itself in the proceedings described
above and in any proceeding that may be commenced in the
future.
Legal proceedings initiated by Canadian National Railway
Company
On August 13, 2015, Canadian
National Railway Company ("CN") issued a statement of claim against
the Company and an employee. The statement of claim was
amended on January 7, 2016 to include
an additional employee and an officer of the Company. The principal
allegations against the Company are that the Company obtained and
benefited from certain confidential CN customer data. CN is seeking
damages but has not yet provided evidence to substantiate its
damages claim. The Company plans to defend this claim and the
amount of loss, if any, to the Company as a result of the claim
cannot be reasonably estimated.
Environmental liabilities
Environmental remediation accruals, recorded on an undiscounted
basis unless a reliable, 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,
and as 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, 2016 was
$1 million (three months ended
March 31, 2015 - $3 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, 2016 was $88 million (December 31,
2015 - $93 million). Payments
are expected to be made over 10 years through 2026.
13 Condensed consolidating financial
information
Canadian Pacific Railway Company, a 100%-owned subsidiary
of Canadian Pacific Railway Limited ("CPRL"), is the issuer of
certain debt securities, which are fully and unconditionally
guaranteed by CPRL. The following tables present condensed
consolidating financial information ("CCFI") in accordance with
Rule 3-10(c) of Regulation S-X.
Investments in subsidiaries are accounted for under the equity
method when presenting the CCFI.
The tables include all adjustments necessary to reconcile the
CCFI on a consolidated basis to CPRL's consolidated financial
statements for the periods presented.
Interim Condensed
Consolidating Statements of Income
|
For the three
months ended March 31, 2016
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight
|
|
$
|
—
|
$
|
1,097
|
$
|
451
|
$
|
—
|
$
|
1,548
|
|
Non-freight
|
|
|
—
|
|
33
|
|
96
|
|
(86)
|
|
43
|
Total
revenues
|
|
|
—
|
|
1,130
|
|
547
|
|
(86)
|
|
1,591
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
—
|
|
201
|
|
126
|
|
2
|
|
329
|
|
Fuel
|
|
|
—
|
|
103
|
|
22
|
|
—
|
|
125
|
|
Materials
|
|
|
—
|
|
38
|
|
10
|
|
8
|
|
56
|
|
Equipment
rents
|
|
|
—
|
|
54
|
|
(9)
|
|
—
|
|
45
|
|
Depreciation and
amortization
|
|
|
—
|
|
107
|
|
55
|
|
—
|
|
162
|
|
Purchased services
and other
|
|
|
—
|
|
136
|
|
181
|
|
(96)
|
|
221
|
Total operating
expenses
|
|
|
—
|
|
639
|
|
385
|
|
(86)
|
|
938
|
Operating
income
|
|
|
—
|
|
491
|
|
162
|
|
—
|
|
653
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and
charges
|
|
|
(69)
|
|
(138)
|
|
26
|
|
—
|
|
(181)
|
|
Net interest (income)
expense
|
|
|
(1)
|
|
131
|
|
(6)
|
|
—
|
|
124
|
Income before
income tax expense and
equity in net earnings of
subsidiaries
|
|
|
70
|
|
498
|
|
142
|
|
—
|
|
710
|
|
Less: Income tax
expense
|
|
|
9
|
|
111
|
|
50
|
|
—
|
|
170
|
|
Add: Equity in net
earnings of subsidiaries
|
|
|
479
|
|
92
|
|
—
|
|
(571)
|
|
—
|
Net
income
|
|
$
|
540
|
$
|
479
|
$
|
92
|
$
|
(571)
|
$
|
540
|
Interim Condensed
Consolidating Statements of Income
|
For the three
months ended March 31, 2015
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight
|
|
$
|
—
|
$
|
1,119
|
$
|
511
|
$
|
—
|
$
|
1,630
|
|
Non-freight
|
|
|
—
|
|
29
|
|
89
|
|
(83)
|
|
35
|
Total
revenues
|
|
|
—
|
|
1,148
|
|
600
|
|
(83)
|
|
1,665
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
—
|
|
262
|
|
116
|
|
—
|
|
378
|
|
Fuel
|
|
|
—
|
|
161
|
|
34
|
|
—
|
|
195
|
|
Materials
|
|
|
—
|
|
43
|
|
9
|
|
—
|
|
52
|
|
Equipment
rents
|
|
|
—
|
|
36
|
|
6
|
|
—
|
|
42
|
|
Depreciation and
amortization
|
|
|
—
|
|
102
|
|
44
|
|
—
|
|
146
|
|
Purchased services
and other
|
|
|
—
|
|
142
|
|
181
|
|
(83)
|
|
240
|
Total operating
expenses
|
|
|
—
|
|
746
|
|
390
|
|
(83)
|
|
1,053
|
Operating
income
|
|
|
—
|
|
402
|
|
210
|
|
—
|
|
612
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and
charges
|
|
|
18
|
|
86
|
|
(31)
|
|
—
|
|
73
|
|
Net interest expense
(income)
|
|
|
—
|
|
96
|
|
(11)
|
|
—
|
|
85
|
(Loss) income
before income tax expense
and equity in net earnings of
subsidiaries
|
|
|
(18)
|
|
220
|
|
252
|
|
—
|
|
454
|
|
Less: Income tax
(recovery) expense
|
|
|
(4)
|
|
67
|
|
71
|
|
—
|
|
134
|
|
Add: Equity in net
earnings of subsidiaries
|
|
|
334
|
|
181
|
|
—
|
|
(515)
|
|
—
|
Net
income
|
|
$
|
320
|
$
|
334
|
$
|
181
|
$
|
(515)
|
$
|
320
|
Interim Condensed
Consolidating Statements of Comprehensive Income
|
For the three
months ended March 31, 2016
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
|
Net income
|
|
$
|
540
|
$
|
479
|
$
|
92
|
$
|
(571)
|
$
|
540
|
|
Net gain (loss) in
foreign currency translation
adjustments, net of hedging
activities
|
|
|
—
|
|
310
|
|
(273)
|
|
—
|
|
37
|
|
Change in derivatives
designated as cash
flow hedges
|
|
|
—
|
|
(47)
|
|
—
|
|
—
|
|
(47)
|
|
Change in pension and
post-retirement
defined benefit plans
|
|
|
—
|
|
45
|
|
2
|
|
—
|
|
47
|
Other
comprehensive income (loss) before
income taxes
|
|
|
—
|
|
308
|
|
(271)
|
|
—
|
|
37
|
|
Income tax expense on
above items
|
|
|
—
|
|
(41)
|
|
—
|
|
—
|
|
(41)
|
|
Equity accounted
investments
|
|
|
(4)
|
|
(271)
|
|
—
|
|
275
|
|
—
|
Other
comprehensive loss
|
|
|
(4)
|
|
(4)
|
|
(271)
|
|
275
|
|
(4)
|
Comprehensive
income (loss)
|
|
$
|
536
|
$
|
475
|
$
|
(179)
|
$
|
(296)
|
$
|
536
|
Interim Condensed
Consolidating Statements of Comprehensive Income
|
For the three
months ended March 31, 2015
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
|
Net income
|
|
$
|
320
|
$
|
334
|
$
|
181
|
$
|
(515)
|
$
|
320
|
|
Net (loss) gain in
foreign currency translation
adjustments, net of
hedging activities
|
|
|
—
|
|
(357)
|
|
320
|
|
—
|
|
(37)
|
|
Change in derivatives
designated as cash
flow hedges
|
|
|
—
|
|
(69)
|
|
—
|
|
—
|
|
(69)
|
|
Change in pension and
post-retirement
defined benefit plans
|
|
|
—
|
|
70
|
|
2
|
|
—
|
|
72
|
Other
comprehensive (loss) income before
income
taxes
|
|
|
—
|
|
(356)
|
|
322
|
|
—
|
|
(34)
|
|
Income tax recovery
(expense) on above items
|
|
|
—
|
|
68
|
|
(22)
|
|
—
|
|
46
|
|
Equity accounted
investments
|
|
|
12
|
|
300
|
|
—
|
|
(312)
|
|
—
|
Other
comprehensive income
|
|
|
12
|
|
12
|
|
300
|
|
(312)
|
|
12
|
Comprehensive
income
|
|
$
|
332
|
$
|
346
|
$
|
481
|
$
|
(827)
|
$
|
332
|
Interim Condensed
Consolidating Balance Sheets
|
As at March 31,
2016
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
—
|
$
|
376
|
$
|
195
|
$
|
—
|
$
|
571
|
|
Accounts receivable,
net
|
|
|
—
|
|
470
|
|
159
|
|
—
|
|
629
|
|
Accounts receivable,
inter-company
|
|
|
61
|
|
101
|
|
179
|
|
(341)
|
|
—
|
|
Short-term advances
to affiliates
|
|
|
45
|
|
19
|
|
3,475
|
|
(3,539)
|
|
—
|
|
Materials and
supplies
|
|
|
—
|
|
150
|
|
31
|
|
—
|
|
181
|
|
Other current
assets
|
|
|
—
|
|
50
|
|
19
|
|
—
|
|
69
|
|
|
|
106
|
|
1,166
|
|
4,058
|
|
(3,880)
|
|
1,450
|
Long-term advances to
affiliates
|
|
|
501
|
|
208
|
|
352
|
|
(1,061)
|
|
—
|
Investments
|
|
|
—
|
|
23
|
|
125
|
|
—
|
|
148
|
Investments in
subsidiaries
|
|
|
7,948
|
|
9,657
|
|
—
|
|
(17,605)
|
|
—
|
Properties
|
|
|
—
|
|
8,456
|
|
7,557
|
|
—
|
|
16,013
|
Goodwill and
intangible assets
|
|
|
—
|
|
—
|
|
196
|
|
—
|
|
196
|
Pension
asset
|
|
|
—
|
|
1,489
|
|
—
|
|
—
|
|
1,489
|
Other
assets
|
|
|
—
|
|
46
|
|
7
|
|
—
|
|
53
|
Deferred income
taxes
|
|
|
16
|
|
—
|
|
—
|
|
(16)
|
|
—
|
Total
assets
|
|
$
|
8,571
|
$
|
21,045
|
$
|
12,295
|
$
|
(22,562)
|
$
|
19,349
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
53
|
$
|
853
|
$
|
237
|
$
|
—
|
$
|
1,143
|
|
Accounts payable,
inter-company
|
|
|
2
|
|
239
|
|
100
|
|
(341)
|
|
—
|
|
Short-term advances
from affiliates
|
|
|
3,226
|
|
294
|
|
19
|
|
(3,539)
|
|
—
|
|
Long-term debt
maturing within one year
|
|
|
—
|
|
23
|
|
—
|
|
—
|
|
23
|
|
|
|
3,281
|
|
1,409
|
|
356
|
|
(3,880)
|
|
1,166
|
Pension and other
benefit liabilities
|
|
|
—
|
|
673
|
|
77
|
|
—
|
|
750
|
Long-term advances
from affiliates
|
|
|
—
|
|
854
|
|
207
|
|
(1,061)
|
|
—
|
Other long-term
liabilities
|
|
|
—
|
|
165
|
|
126
|
|
—
|
|
291
|
Long-term
debt
|
|
|
—
|
|
8,369
|
|
61
|
|
—
|
|
8,430
|
Deferred income
taxes
|
|
|
—
|
|
1,627
|
|
1,811
|
|
(16)
|
|
3,422
|
Total
liabilities
|
|
|
3,281
|
|
13,097
|
|
2,638
|
|
(4,957)
|
|
14,059
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
2,065
|
|
1,037
|
|
5,459
|
|
(6,496)
|
|
2,065
|
|
Additional paid-in
capital
|
|
|
48
|
|
1,573
|
|
623
|
|
(2,196)
|
|
48
|
|
Accumulated other
comprehensive (loss)
income
|
|
|
(1,481)
|
|
(1,481)
|
|
569
|
|
912
|
|
(1,481)
|
|
Retained
earnings
|
|
|
4,658
|
|
6,819
|
|
3,006
|
|
(9,825)
|
|
4,658
|
|
|
|
5,290
|
|
7,948
|
|
9,657
|
|
(17,605)
|
|
5,290
|
Total liabilities
and shareholders' equity
|
|
$
|
8,571
|
$
|
21,045
|
$
|
12,295
|
$
|
(22,562)
|
$
|
19,349
|
Condensed
Consolidating Balance Sheets
|
As at December 31,
2015
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
—
|
$
|
502
|
$
|
148
|
$
|
—
|
$
|
650
|
|
Accounts receivable,
net
|
|
|
—
|
|
452
|
|
193
|
|
—
|
|
645
|
|
Accounts receivable,
inter-company
|
|
|
59
|
|
105
|
|
265
|
|
(429)
|
|
—
|
|
Short-term advances
to affiliates
|
|
|
—
|
|
75
|
|
3,483
|
|
(3,558)
|
|
—
|
|
Materials and
supplies
|
|
|
—
|
|
154
|
|
34
|
|
—
|
|
188
|
|
Other current
assets
|
|
|
—
|
|
37
|
|
17
|
|
—
|
|
54
|
|
|
|
59
|
|
1,325
|
|
4,140
|
|
(3,987)
|
|
1,537
|
Long-term advances to
affiliates
|
|
|
501
|
|
207
|
|
376
|
|
(1,084)
|
|
—
|
Investments
|
|
|
—
|
|
22
|
|
130
|
|
—
|
|
152
|
Investments in
subsidiaries
|
|
|
7,518
|
|
9,832
|
|
—
|
|
(17,350)
|
|
—
|
Properties
|
|
|
—
|
|
8,481
|
|
7,792
|
|
—
|
|
16,273
|
Goodwill and
intangible assets
|
|
|
—
|
|
3
|
|
208
|
|
—
|
|
211
|
Pension
asset
|
|
|
—
|
|
1,401
|
|
—
|
|
—
|
|
1,401
|
Other
assets
|
|
|
—
|
|
55
|
|
8
|
|
—
|
|
63
|
Deferred income
taxes
|
|
|
25
|
|
—
|
|
—
|
|
(25)
|
|
—
|
Total
assets
|
|
$
|
8,103
|
$
|
21,326
|
$
|
12,654
|
$
|
(22,446)
|
$
|
19,637
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
|
54
|
$
|
1,122
|
$
|
241
|
$
|
—
|
$
|
1,417
|
|
Accounts payable,
inter-company
|
|
|
—
|
|
325
|
|
104
|
|
(429)
|
|
—
|
|
Short-term advances
from affiliates
|
|
|
3,253
|
|
230
|
|
75
|
|
(3,558)
|
|
—
|
|
Long-term debt
maturing within one year
|
|
|
—
|
|
24
|
|
6
|
|
—
|
|
30
|
|
|
|
3,307
|
|
1,701
|
|
426
|
|
(3,987)
|
|
1,447
|
Pension and other
benefit liabilities
|
|
|
—
|
|
676
|
|
82
|
|
—
|
|
758
|
Long-term advances
from affiliates
|
|
|
—
|
|
877
|
|
207
|
|
(1,084)
|
|
—
|
Other long-term
liabilities
|
|
|
—
|
|
186
|
|
132
|
|
—
|
|
318
|
Long-term
debt
|
|
|
—
|
|
8,863
|
|
64
|
|
—
|
|
8,927
|
Deferred income
taxes
|
|
|
—
|
|
1,505
|
|
1,911
|
|
(25)
|
|
3,391
|
Total
liabilities
|
|
|
3,307
|
|
13,808
|
|
2,822
|
|
(5,096)
|
|
14,841
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
2,058
|
|
1,037
|
|
5,465
|
|
(6,502)
|
|
2,058
|
|
Additional paid-in
capital
|
|
|
43
|
|
1,568
|
|
613
|
|
(2,181)
|
|
43
|
|
Accumulated other
comprehensive (loss)
income
|
|
|
(1,477)
|
|
(1,477)
|
|
840
|
|
637
|
|
(1,477)
|
|
Retained
earnings
|
|
|
4,172
|
|
6,390
|
|
2,914
|
|
(9,304)
|
|
4,172
|
|
|
|
4,796
|
|
7,518
|
|
9,832
|
|
(17,350)
|
|
4,796
|
Total liabilities
and shareholders' equity
|
|
$
|
8,103
|
$
|
21,326
|
$
|
12,654
|
$
|
(22,446)
|
$
|
19,637
|
Interim Condensed
Consolidating Statements of Cash Flows
|
For the three
months ended March 31, 2016
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Cash provided by
operating activities
|
|
$
|
23
|
$
|
51
|
$
|
198
|
$
|
(54)
|
$
|
218
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to
properties
|
|
|
—
|
|
(132)
|
|
(146)
|
|
—
|
|
(278)
|
|
Proceeds from sale of
properties and other assets
|
|
|
—
|
|
57
|
|
3
|
|
—
|
|
60
|
|
Advances to
affiliates
|
|
|
—
|
|
(35)
|
|
—
|
|
35
|
|
—
|
|
Capital contributions
to affiliates
|
|
|
—
|
|
(9)
|
|
—
|
|
9
|
|
—
|
|
Repurchase of share
capital from affiliates
|
|
|
—
|
|
6
|
|
—
|
|
(6)
|
|
—
|
Cash used in
investing activities
|
|
|
—
|
|
(113)
|
|
(143)
|
|
38
|
|
(218)
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(54)
|
|
(54)
|
|
—
|
|
54
|
|
(54)
|
|
Issuance of share
capital
|
|
|
—
|
|
—
|
|
9
|
|
(9)
|
|
—
|
|
Return of share
capital to affiliates
|
|
|
—
|
|
—
|
|
(6)
|
|
6
|
|
—
|
|
Issuance of CP Common
Shares
|
|
|
5
|
|
—
|
|
—
|
|
—
|
|
5
|
|
Repayment of
long-term debt, excluding
commercial paper
|
|
|
—
|
|
(4)
|
|
(7)
|
|
—
|
|
(11)
|
|
Advances from
affiliates
|
|
|
26
|
|
—
|
|
9
|
|
(35)
|
|
—
|
|
Other
|
|
|
—
|
|
(2)
|
|
—
|
|
—
|
|
(2)
|
Cash (used in)
provided by financing activities
|
|
|
(23)
|
|
(60)
|
|
5
|
|
16
|
|
(62)
|
Effect of foreign
currency fluctuations on U.S. dollar-
denominated cash and cash
equivalents
|
|
|
—
|
|
(4)
|
|
(13)
|
|
—
|
|
(17)
|
Cash
position
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase
in cash and cash equivalents
|
|
|
—
|
|
(126)
|
|
47
|
|
—
|
|
(79)
|
|
Cash and cash
equivalents at beginning of period
|
|
|
—
|
|
502
|
|
148
|
|
—
|
|
650
|
Cash and cash
equivalents at end of period
|
|
$
|
—
|
$
|
376
|
$
|
195
|
$
|
—
|
$
|
571
|
Interim Condensed
Consolidating Statements of Cash Flows
|
For the three
months ended March 31, 2015
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
CPRL
(Parent
Guarantor)
|
|
CPRC
(Subsidiary
Issuer)
|
Non-Guarantor
Subsidiaries
|
Consolidating
Adjustments and
Eliminations
|
CPRL
Consolidated
|
Cash provided by
operating activities
|
|
$
|
56
|
$
|
299
|
$
|
273
|
$
|
(73)
|
$
|
555
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to
properties
|
|
|
—
|
|
(93)
|
|
(170)
|
|
—
|
|
(263)
|
|
Proceeds from sale of
properties and other assets
|
|
|
—
|
|
50
|
|
2
|
|
—
|
|
52
|
|
Advances to
affiliates
|
|
|
—
|
|
(303)
|
|
(229)
|
|
532
|
|
—
|
|
Capital contributions
to affiliates
|
|
|
—
|
|
(117)
|
|
—
|
|
117
|
|
—
|
|
Other
|
|
|
—
|
|
20
|
|
—
|
|
—
|
|
20
|
Cash used in
investing activities
|
|
|
—
|
|
(443)
|
|
(397)
|
|
649
|
|
(191)
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(58)
|
|
(58)
|
|
(15)
|
|
73
|
|
(58)
|
|
Issuance of share
capital
|
|
|
—
|
|
—
|
|
117
|
|
(117)
|
|
—
|
|
Issuance of CP Common
Shares
|
|
|
16
|
|
—
|
|
—
|
|
—
|
|
16
|
|
Purchase of CP Common
Shares
|
|
|
(529)
|
|
—
|
|
—
|
|
—
|
|
(529)
|
|
Issuance of long-term
debt, excluding
commercial paper
|
|
|
—
|
|
810
|
|
—
|
|
—
|
|
810
|
|
Repayment of
long-term debt, excluding
commercial paper
|
|
|
—
|
|
(14)
|
|
(44)
|
|
—
|
|
(58)
|
|
Net repayment of
commercial paper
|
|
|
—
|
|
(593)
|
|
—
|
|
—
|
|
(593)
|
|
Advances from
affiliates
|
|
|
515
|
|
—
|
|
17
|
|
(532)
|
|
—
|
Cash (used in)
provided by financing activities
|
|
|
(56)
|
|
145
|
|
75
|
|
(576)
|
|
(412)
|
Effect of foreign
currency fluctuations on U.S. dollar-
denominated cash and cash
equivalents
|
|
|
—
|
|
—
|
|
6
|
|
—
|
|
6
|
Cash
position
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
|
|
—
|
|
1
|
|
(43)
|
|
—
|
|
(42)
|
|
Cash and cash
equivalents at beginning of period
|
|
|
—
|
|
152
|
|
74
|
|
—
|
|
226
|
Cash and cash
equivalents at end of period
|
|
$
|
—
|
$
|
153
|
$
|
31
|
$
|
—
|
$
|
184
|
14 Subsequent event
On April 19, 2016, the Company
declared a quarterly dividend of $0.5000 per share payable on July 25, 2016 to shareholders of record on
June 24, 2016.
Summary of Rail
Data
|
|
|
|
First
Quarter
|
Financial
(millions, except per share data)
|
2016
|
|
2015
|
|
Change
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Freight
revenue
|
$
|
1,548
|
|
$
|
1,630
|
|
$
|
(82)
|
|
(5)
|
|
Other
revenue
|
|
43
|
|
|
35
|
|
|
8
|
|
23
|
Total
revenues
|
|
1,591
|
|
|
1,665
|
|
|
(74)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
329
|
|
|
378
|
|
|
(49)
|
|
(13)
|
|
Fuel
|
|
125
|
|
|
195
|
|
|
(70)
|
|
(36)
|
|
Materials
|
|
56
|
|
|
52
|
|
|
4
|
|
8
|
|
Equipment
rents
|
|
45
|
|
|
42
|
|
|
3
|
|
7
|
|
Depreciation and
amortization
|
|
162
|
|
|
146
|
|
|
16
|
|
11
|
|
Purchased services
and other
|
|
221
|
|
|
240
|
|
|
(19)
|
|
(8)
|
Total operating
expenses
|
|
938
|
|
|
1,053
|
|
|
(115)
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
653
|
|
|
612
|
|
|
41
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and
charges
|
|
(181)
|
|
|
73
|
|
|
(254)
|
|
(348)
|
|
Net interest
expense
|
|
124
|
|
|
85
|
|
|
39
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
tax expense
|
|
710
|
|
|
454
|
|
|
256
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
170
|
|
|
134
|
|
|
36
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
540
|
|
$
|
320
|
|
$
|
220
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
Operating ratio
(%)
|
|
58.9
|
|
|
63.2
|
|
|
(4.3)
|
|
(430)
bps
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
3.53
|
|
$
|
1.94
|
|
$
|
1.59
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
3.51
|
|
$
|
1.92
|
|
$
|
1.59
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding (millions)
|
|
153.0
|
|
|
164.9
|
|
|
(11.9)
|
|
(7)
|
|
Weighted average
number of diluted shares outstanding (millions)
|
|
153.8
|
|
|
166.3
|
|
|
(12.5)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
|
|
|
|
|
Average foreign
exchange rate (US$/Canadian$)
|
|
0.73
|
|
|
0.81
|
|
|
(0.08)
|
|
(10)
|
|
Average foreign
exchange rate (Canadian$/US$)
|
|
1.37
|
|
|
1.24
|
|
|
0.13
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Rail
Data
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
2016
|
|
2015
|
|
Change
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenues
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian
Grain
|
$
|
254
|
|
$
|
256
|
|
$
|
(2)
|
|
(1)
|
|
- U.S.
Grain
|
|
113
|
|
|
137
|
|
|
(24)
|
|
(18)
|
|
- Coal
|
|
145
|
|
|
160
|
|
|
(15)
|
|
(9)
|
|
- Potash
|
|
82
|
|
|
93
|
|
|
(11)
|
|
(12)
|
|
- Fertilizers and
sulphur
|
|
81
|
|
|
71
|
|
|
10
|
|
14
|
|
- Forest
products
|
|
71
|
|
|
57
|
|
|
14
|
|
25
|
|
- Chemicals and
plastics
|
|
194
|
|
|
178
|
|
|
16
|
|
9
|
|
- Crude
|
|
71
|
|
|
98
|
|
|
(27)
|
|
(28)
|
|
- Metals, minerals,
and consumer products
|
|
133
|
|
|
159
|
|
|
(26)
|
|
(16)
|
|
-
Automotive
|
|
91
|
|
|
82
|
|
|
9
|
|
11
|
|
- Domestic
intermodal
|
|
171
|
|
|
194
|
|
|
(23)
|
|
(12)
|
|
- International
intermodal
|
|
142
|
|
|
145
|
|
|
(3)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight
Revenues
|
$
|
1,548
|
|
$
|
1,630
|
|
$
|
(82)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
Millions of
Revenue Ton-Miles (RTM)
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian
Grain
|
|
6,941
|
|
|
6,405
|
|
|
536
|
|
8
|
|
- U.S.
Grain
|
|
2,314
|
|
|
2,944
|
|
|
(630)
|
|
(21)
|
|
- Coal
|
|
5,348
|
|
|
5,704
|
|
|
(356)
|
|
(6)
|
|
- Potash
|
|
3,185
|
|
|
3,675
|
|
|
(490)
|
|
(13)
|
|
- Fertilizers and
sulphur
|
|
1,167
|
|
|
1,115
|
|
|
52
|
|
5
|
|
- Forest
products
|
|
1,157
|
|
|
1,019
|
|
|
138
|
|
14
|
|
- Chemicals and
plastics
|
|
3,662
|
|
|
3,570
|
|
|
92
|
|
3
|
|
- Crude
|
|
2,460
|
|
|
3,032
|
|
|
(572)
|
|
(19)
|
|
- Metals, minerals,
and consumer products
|
|
1,807
|
|
|
2,283
|
|
|
(476)
|
|
(21)
|
|
-
Automotive
|
|
417
|
|
|
419
|
|
|
(2)
|
|
—
|
|
- Domestic
intermodal
|
|
2,847
|
|
|
3,024
|
|
|
(177)
|
|
(6)
|
|
- International
intermodal
|
|
3,030
|
|
|
2,873
|
|
|
157
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
Total RTMs
|
|
34,335
|
|
|
36,063
|
|
|
(1,728)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue
per RTM (cents)
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian
Grain
|
|
3.66
|
|
|
3.99
|
|
|
(0.33)
|
|
(8)
|
|
- U.S.
Grain
|
|
4.89
|
|
|
4.66
|
|
|
0.23
|
|
5
|
|
- Coal
|
|
2.70
|
|
|
2.80
|
|
|
(0.10)
|
|
(4)
|
|
- Potash
|
|
2.58
|
|
|
2.54
|
|
|
0.04
|
|
2
|
|
- Fertilizers and
sulphur
|
|
6.93
|
|
|
6.40
|
|
|
0.53
|
|
8
|
|
- Forest
products
|
|
6.17
|
|
|
5.64
|
|
|
0.53
|
|
9
|
|
- Chemicals and
plastics
|
|
5.30
|
|
|
4.99
|
|
|
0.31
|
|
6
|
|
- Crude
|
|
2.89
|
|
|
3.24
|
|
|
(0.35)
|
|
(11)
|
|
- Metals, minerals,
and consumer products
|
|
7.38
|
|
|
6.94
|
|
|
0.44
|
|
6
|
|
-
Automotive
|
|
21.75
|
|
|
19.49
|
|
|
2.26
|
|
12
|
|
- Domestic
intermodal
|
|
5.99
|
|
|
6.43
|
|
|
(0.44)
|
|
(7)
|
|
- International
intermodal
|
|
4.68
|
|
|
5.03
|
|
|
(0.35)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue
per RTM
|
|
4.51
|
|
|
4.52
|
|
|
(0.01)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Rail
Data
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
2016
|
|
2015
|
|
Change
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Carloads
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian
Grain
|
|
66
|
|
|
61
|
|
|
5
|
|
8
|
|
- U.S.
Grain
|
|
34
|
|
|
40
|
|
|
(6)
|
|
(15)
|
|
- Coal
|
|
72
|
|
|
82
|
|
|
(10)
|
|
(12)
|
|
- Potash
|
|
27
|
|
|
31
|
|
|
(4)
|
|
(13)
|
|
- Fertilizers and
sulphur
|
|
16
|
|
|
17
|
|
|
(1)
|
|
(6)
|
|
- Forest
products
|
|
17
|
|
|
15
|
|
|
2
|
|
13
|
|
- Chemicals and
plastics
|
|
54
|
|
|
51
|
|
|
3
|
|
6
|
|
- Crude
|
|
17
|
|
|
22
|
|
|
(5)
|
|
(23)
|
|
- Metals, minerals,
and consumer products
|
|
45
|
|
|
55
|
|
|
(10)
|
|
(18)
|
|
-
Automotive
|
|
33
|
|
|
30
|
|
|
3
|
|
10
|
|
- Domestic
intermodal
|
|
98
|
|
|
103
|
|
|
(5)
|
|
(5)
|
|
- International
intermodal
|
|
135
|
|
|
135
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total
Carloads
|
|
614
|
|
|
642
|
|
|
(28)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue
per Carload
|
|
|
|
|
|
|
|
|
|
|
|
- Canadian
Grain
|
$
|
3,861
|
|
$
|
4,214
|
|
$
|
(353)
|
|
(8)
|
|
- U.S.
Grain
|
|
3,272
|
|
|
3,408
|
|
|
(136)
|
|
(4)
|
|
- Coal
|
|
2,001
|
|
|
1,939
|
|
|
62
|
|
3
|
|
- Potash
|
|
3,064
|
|
|
3,028
|
|
|
36
|
|
1
|
|
- Fertilizers and
sulphur
|
|
4,993
|
|
|
4,268
|
|
|
725
|
|
17
|
|
- Forest
products
|
|
4,216
|
|
|
3,857
|
|
|
359
|
|
9
|
|
- Chemicals and
plastics
|
|
3,605
|
|
|
3,500
|
|
|
105
|
|
3
|
|
- Crude
|
|
4,227
|
|
|
4,500
|
|
|
(273)
|
|
(6)
|
|
- Metals, minerals,
and consumer products
|
|
2,977
|
|
|
2,878
|
|
|
99
|
|
3
|
|
-
Automotive
|
|
2,754
|
|
|
2,692
|
|
|
62
|
|
2
|
|
- Domestic
intermodal
|
|
1,736
|
|
|
1,894
|
|
|
(158)
|
|
(8)
|
|
- International
intermodal
|
|
1,049
|
|
|
1,070
|
|
|
(21)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue
per Carload
|
$
|
2,520
|
|
$
|
2,541
|
|
$
|
(21)
|
|
(1)
|
|
|
|
|
Summary of Rail
Data
|
|
|
|
First
Quarter
|
|
2016
|
|
2015 (1)
|
|
Change
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operations
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight gross
ton-miles (millions)
|
|
61,913
|
|
|
65,355
|
|
|
(3,442)
|
|
(5)
|
Revenue ton-miles
(millions)
|
|
34,335
|
|
|
36,063
|
|
|
(1,728)
|
|
(5)
|
Train miles
(thousands)
|
|
8
|
|
|
9
|
|
|
(1)
|
|
(8)
|
Average train
weight - excluding local traffic (tons)
|
|
8,498
|
|
|
8,183
|
|
|
315
|
|
4
|
Average train
length - excluding local traffic (feet)
|
|
7,108
|
|
|
6,773
|
|
|
335
|
|
5
|
Average terminal
dwell (hours)
|
|
6.9
|
|
|
8.9
|
|
|
(2.0)
|
|
(22)
|
Average train speed
(mph)(2)
|
|
23.5
|
|
|
19.5
|
|
|
4.0
|
|
21
|
Fuel efficiency
(3)
|
|
0.998
|
|
|
1.048
|
|
|
(0.050)
|
|
(5)
|
U.S. gallons of
locomotive fuel consumed (millions)(4)
|
|
61.5
|
|
|
67.9
|
|
|
(6.4)
|
|
(9)
|
Average fuel price
(U.S. dollars per U.S. gallon)
|
|
1.48
|
|
|
2.32
|
|
|
(0.84)
|
|
(36)
|
|
|
|
|
|
|
|
|
|
|
|
Total employees
(average)(5)
|
|
12,434
|
|
|
14,364
|
|
|
(1,930)
|
|
(13)
|
Total employees (end
of period)(5)
|
|
12,443
|
|
|
14,259
|
|
|
(1,816)
|
|
(13)
|
Workforce (end of
period)(6)
|
|
12,508
|
|
|
14,342
|
|
|
(1,834)
|
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
Safety
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRA personal injuries
per 200,000 employee-hours
|
|
1.45
|
|
|
2.09
|
|
|
(0.64)
|
|
(31)
|
FRA train accidents
per million train-miles
|
|
0.81
|
|
|
1.48
|
|
|
(0.67)
|
|
(45)
|
(1)
|
Certain figures have
been revised to conform with current presentation or have been
updated to reflect new information.
|
(2)
|
Incorporates a new
reporting definition where average train speed measures the
line-haul movement from origin to destination including terminal
dwell hours, and excluding foreign railroad and customer
delays.
|
(3)
|
Fuel efficiency is
defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs
– freight and yard.
|
(4)
|
Includes gallons of
fuel consumed from freight, yard and commuter service but excludes
fuel used in capital projects and other non-freight
activities.
|
(5)
|
An employee is
defined as an individual currently engaged in full-time or
part-time employment with CP.
|
(6)
|
Workforce is defined
as employees plus 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 the Company's 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 information to compare
profitability on a long-term basis, including assessing future
profitability, with that of the Company's peers.
These non-GAAP measures have no standardized meaning and are not
defined by GAAP and, therefore, may not be comparable to similar
measures presented by other companies. The presentation of these
non-GAAP measures is not intended to be considered in isolation
from, or as a substitute for, or as superior to, the financial
information presented in accordance with GAAP.
Adjusted Performance Measures
The Company uses Adjusted income and Adjusted diluted earnings per
share to evaluate the Company's operating performance and for
planning and forecasting future business operations and future
profitability. These non-GAAP measures provide meaningful
supplemental information regarding operating results because they
exclude certain significant items that are not considered
indicative of future financial trends either by nature or amount.
As a result, these items are excluded for management assessment of
operational performance, allocation of resources and preparation of
annual budgets. These significant items may include, but are not
limited to, restructuring and asset impairment charges,
individually significant gains and losses from sales of assets and
certain items outside the control of management. These items may
not be non-recurring. However, excluding these significant items
from GAAP results allows for a consistent understanding of the
Company's consolidated financial performance when performing a
multi-period assessment including assessing the likelihood of
future results. Accordingly, these non-GAAP financial measures may
provide insight to investors and other external users of the
Company's consolidated financial information.
Significant items that impacted reported 2016 and 2015 earnings
include:
2016:
- in the first quarter, a non-cash gain of $181 million ($156
million after tax) due to FX translation of the Company's
U.S. dollar-denominated debt which favourably impacted Diluted EPS
by $1.01.
2015:
- in the first quarter, a non-cash loss of $64 million ($55
million after-tax) due to FX translation of the Company's
U.S. dollar-denominated debt which unfavourably impacted Diluted
EPS by 34 cents; and
- in the third quarter, a gain of $68
million ($42 million
after-tax) related to the sale of Delaware and Hudson Railway south of
Schenectady ("D&H South") which favourably impacted Diluted
earnings per share by 26 cents.
Reconciliation of Non-GAAP performance measures to GAAP
performance measures
The following tables reconcile Adjusted income, Adjusted diluted
earnings per share and Adjusted operating ratio to Net income,
Diluted earnings per share and Operating ratio, respectively.
|
|
|
For the three
months
|
Net
income
|
|
|
ended March
31
|
(in millions of
Canadian dollars)
|
|
|
2016
|
|
2015
|
Adjusted
income
|
|
|
$
|
|
384
|
|
$
|
|
375
|
Add significant
items, net of tax:
|
|
|
|
|
|
|
|
|
|
|
Impact of FX
translation on U.S. dollar-denominated debt
|
|
|
|
|
156
|
|
|
|
(55)
|
Net income as
reported
|
|
|
$
|
|
540
|
|
$
|
|
320
|
|
|
|
For the three
months
|
Diluted earnings
per share
|
|
|
ended March
31
|
|
|
|
2016
|
|
2015
|
Adjusted diluted
earnings per share
|
|
|
$
|
|
2.50
|
|
$
|
|
2.26
|
Add significant
items:
|
|
|
|
|
|
|
|
|
|
|
Impact of FX
translation on U.S. dollar-denominated debt
|
|
|
|
|
1.01
|
|
|
|
(0.34)
|
Diluted earnings
per share as reported
|
|
|
$
|
|
3.51
|
|
$
|
|
1.92
|
|
|
|
|
|
|
For the three
months
|
Operating
ratio
|
|
|
|
|
|
ended March
31
|
|
ended September
30
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2015
|
Adjusted operating
ratio
|
|
|
|
|
|
58.9
|
%
|
|
63.2
|
%
|
|
59.9
|
%
|
Add significant
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of
D&H South
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(4.0)
|
%
|
Operating ratio as
reported
|
|
|
|
|
|
58.9
|
%
|
|
63.2
|
%
|
|
55.9
|
%
|
Free Cash
Free cash is calculated as Cash provided by operating activities,
less Cash used in investing activities and Dividends paid, adjusted
for changes in cash and cash equivalents balances resulting from FX
fluctuations. Free cash is a measure that management considers to
be an indicator of liquidity. Free cash is useful to investors and
other external users of the consolidated financial information as
it assists with the evaluation of the Company's ability to generate
cash from its operations without incurring additional external
financing. Positive Free cash indicates the amount of cash
available for reinvestment in the business, or cash that can be
returned to investors through increased dividends, stock repurchase
programs, debt retirements or a combination of these. Conversely,
negative Free cash indicates the amount of cash that must be raised
from investors through new debt or equity issues, reduction in
available cash balances or a combination of these. Free cash should
be considered in addition to, rather than as a substitute for, Cash
provided by operating activities.
Reconciliation
of cash provided by operating activities to free
cash
|
|
For the three
months
|
|
|
ended March
31
|
(in millions of
Canadian dollars)
|
|
2016
|
|
2015
|
Cash provided by
operating activities
|
|
$
|
|
218
|
|
$
|
|
555
|
Cash used in
investing activities
|
|
|
|
(218)
|
|
|
|
(191)
|
Dividends
paid
|
|
|
|
(54)
|
|
|
|
(58)
|
Effect of foreign
currency fluctuations on U.S. dollar- denominated
cash and cash equivalents
|
|
|
|
(17)
|
|
|
|
6
|
Free cash
|
|
$
|
|
(71)
|
|
$
|
|
312
|
Foreign Exchange Adjusted Variance
Foreign exchange adjusted 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 constant currency are obtained by translating the
comparable period of the prior year results denominated in U.S.
dollars at the foreign exchange rates of the current period.
Measures at constant currency are considered non-GAAP measures and
do not have any standardized meanings 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
Canadian dollars)
|
|
Reported
2016
|
Reported
2015
|
Variance
due to FX
|
Adjusted
2015(1)
|
FX Adj. %(1)
|
Freight
revenues
|
|
$
|
1,548
|
$
|
1,630
|
$
|
107
|
$
|
1,737
|
(11)
|
%
|
Non-freight
revenues
|
|
|
43
|
|
35
|
|
1
|
|
36
|
19
|
%
|
Total
revenues
|
|
|
1,591
|
|
1,665
|
|
108
|
|
1,773
|
(10)
|
%
|
Total operating
expenses
|
|
|
938
|
|
1,053
|
|
54
|
|
1,107
|
15
|
%
|
Operating
income
|
|
$
|
653
|
$
|
612
|
$
|
54
|
$
|
666
|
(2)
|
%
|
(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