CPR boosts earnings per share 45 per cent in 2nd quarter 2005
Railway handles record workload while expanding western corridor
for future demand CALGARY, July 26 /PRNewswire-FirstCall/ --
Canadian Pacific Railway (TSX/NYSE: CP) increased net income to
$123 million in the second quarter of 2005, compared with net
income of $84 million in second-quarter 2004. Diluted earnings per
share increased 45 per cent to $0.77 in the three-month period
ended June 30, 2005, compared with $0.53 in the same period of
2004. SUMMARY OF 2nd QUARTER 2005 COMPARED WITH 2nd QUARTER 2004 -
Operating ratio of 75.5 per cent, an improvement of 2.5 percentage
points - Excluding foreign exchange losses on long-term debt,
diluted earnings per share up 34% to $0.87 - Revenue up 10 per cent
to $1,106 million - Operating expenses up less than 2 per cent,
excluding significantly higher fuel costs Rob Ritchie, President
and Chief Executive Officer of CPR, said: "CPR employees know what
our company has committed to deliver and they are bringing it home.
They grew our business with a focus on quality revenue. They
demonstrated the power of our integrated operating plan,
maintaining fluidity from coast to coast while handling more
workload in the second quarter than in any other quarter ever. They
worked more safely, making substantial improvements in both train
operations and personal safety. "Even more remarkable is that these
achievements were accomplished with major track capacity expansion
work in full force between the Canadian Prairies and the Vancouver
gateway, our busiest corridor. "The fluidity across our network is
generating greater operating efficiency, which is driving more of
our growth to the bottom line," Mr. Ritchie said. CPR's quality
revenue strategy continued to deliver results as resources were
focused on growing higher-yield traffic. Revenue per carload
increased 14 per cent, driven by success in upgrading CPR's book of
business, strong pricing and contract renewal programs supported by
an environment of improving service. Revenue in the second quarter
of 2005 grew in five of CPR's seven business lines, led by
increases of 48 per cent in coal, 10 per cent in intermodal freight
and 7 per cent in grain. Most of the expense increase was due to
high fuel prices. CPR's fuel expense increased by 35 per cent in
the second quarter of 2005, compared with the same period of 2004.
More than three-quarters of the increase in fuel prices was
recovered through CPR's revenue fuel surcharge mechanism, as well
as hedging and fuel efficiency measures. SUMMARY OF 1st HALF 2005
COMPARED WITH 1st HALF 2004 - Net income up $97 million to $204
million and diluted earnings per share up 90 per cent to $1.27 -
Operating ratio improved by 3.4 percentage points to 78.8 per cent
- Excluding foreign exchange losses on long-term debt, income up
$83 million to $225 million and diluted earnings per share up 57
per cent to $1.40 - Revenue up 12 per cent, with double-digit
increases in coal, grain and industrial products - Operating
expenses up 7 per cent, with most of the increase due to higher
fuel costs 2005 OUTLOOK CPR expects to grow revenue in the range of
12 per cent to 14 per cent in 2005. Diluted earnings per share,
excluding foreign exchange gains and losses on long-term debt and
other specified items, are expected to be in the range of $3.15 to
$3.25, assuming oil prices averaging US$55 per barrel and an
average exchange rate of $1.23 per U.S. dollar (US$0.81) for the
full year. A $160-million program to expand capacity by four trains
a day, or more than 400 freight cars daily, between the Canadian
Prairies and the Vancouver gateway is on schedule to be completed
in the fourth quarter of 2005. FOREIGN EXCHANGE LOSSES ON LONG-TERM
DEBT CPR had a foreign exchange loss on long-term debt of $17
million ($17 million after tax) in the second quarter of 2005,
compared with a loss of $20 million ($20 million after tax) in the
same period of 2004. In the first half of 2005, CPR had a foreign
exchange loss on long-term debt of $20 million ($21 million after
tax), compared with a loss of $33 million ($34 million after tax)
in the same period of 2004. PRESENTATION OF NON-GAAP EARNINGS CPR
presents non-GAAP earnings in this news release to provide a basis
for evaluating underlying earnings trends that can be compared with
prior periods' results. These non-GAAP earnings exclude foreign
currency translation effects on long-term debt, which can be
volatile and short term, and/or other specified items, which are
not among CPR's normal ongoing revenues and operating expenses. The
impact of volatile short-term rate fluctuations on
foreign-denominated debt is only realized when long-term debt
matures or is settled. A reconciliation of income, excluding
foreign exchange losses on long-term debt, to net income as
presented in the financial statements is detailed in the attached
Summary of Rail Data. In the first half of 2005, there were foreign
exchange losses on long-term debt but there were no other specified
items. It should be noted that CPR earnings that exclude foreign
exchange currency translation effects on long-term debt and/or
other specified items, as described in this news release, have no
standardized meanings and are not defined by Canadian generally
accepted accounting principles and, therefore, are unlikely to be
comparable to similar measures presented by other companies. NOTE
ON FORWARD-LOOKING STATEMENTS This news release contains
forward-looking information. Actual future results may differ
materially. The risks, uncertainties and other factors that could
influence actual results are described in CPR's annual report and
annual information form, and may be updated in CPR's consolidated
interim financial statements and interim Management's Discussion
and Analysis, which are filed with securities regulators from time
to time. However, CPR undertakes no obligation to update publicly
or otherwise revise any forward-looking information, whether as a
result of new information, future events, or otherwise. Financial
results in this news release are reported in Canadian dollars.
Canadian Pacific Railway is a transcontinental carrier operating in
Canada and the U.S. Its 14,000-mile rail network serves the
principal centres of Canada, from Montreal to Vancouver, and the
U.S. Northeast and Midwest regions. CPR feeds directly into
America's heartland from the East and West coasts. Alliances with
other carriers extend its market reach throughout the U.S. and into
Mexico. Canadian Pacific Logistics Solutions provides logistics and
supply chain expertise worldwide. For more information, visit CPR's
website at http://www.cpr.ca/. STATEMENT OF CONSOLIDATED INCOME (in
millions, except per share data) For the three months ended June 30
2005 2004 (unaudited) (unaudited) ------------------------ Revenues
Freight $ 1,056.5 $ 959.0 Other 49.4 45.7 ------------------------
1,105.9 1,004.7 Operating expenses Compensation and benefits 322.2
318.1 Fuel 145.2 107.9 Materials 46.0 45.5 Equipment rents 54.7
60.9 Depreciation and amortization 110.7 102.7 Purchased services
and other 156.0 149.0 ------------------------ 834.8 784.1
------------------------ Operating income 271.1 220.6 Other charges
(Note 3) 5.7 10.1 Foreign exchange losses on long-term debt 17.0
20.0 Interest expense (Note 4) 53.2 57.1 Income tax expense 72.0
49.7 ------------------------ Net income $ 123.2 $ 83.7
------------------------ ------------------------ Basic earnings
per share (Note 5) $ 0.78 $ 0.53 ------------------------
------------------------ Diluted earnings per share (Note 5) $ 0.77
$ 0.53 ------------------------ ------------------------ See notes
to interim consolidated financial statements. STATEMENT OF
CONSOLIDATED INCOME (in millions, except per share data) For the
six months ended June 30 2005 2004 (unaudited) (unaudited)
------------------------ Revenues Freight $ 2,036.4 $ 1,812.7 Other
83.6 78.6 ------------------------ 2,120.0 1,891.3 Operating
expenses Compensation and benefits 653.3 627.1 Fuel 279.7 207.6
Materials 104.8 99.3 Equipment rents 103.2 119.5 Depreciation and
amortization 220.2 202.3 Purchased services and other 309.0 298.9
------------------------ 1,670.2 1,554.7 ------------------------
Operating income 449.8 336.6 Other charges (Note 3) 4.7 14.7
Foreign exchange losses on long-term debt 20.1 33.3 Interest
expense (Note 4) 104.8 111.1 Income tax expense 116.3 70.3
------------------------ Net income $ 203.9 $ 107.2
------------------------ ------------------------ Basic earnings
per share (Note 5) $ 1.28 $ 0.67 ------------------------
------------------------ Diluted earnings per share (Note 5) $ 1.27
$ 0.67 ------------------------ ------------------------ See notes
to interim consolidated financial statements. CONSOLIDATED BALANCE
SHEET (in millions) June 30 December 31 2005 2004 (unaudited)
(audited) ------------------------ Assets Current assets Cash and
short-term investments $ 131.7 $ 353.0 Accounts receivable 482.8
434.7 Materials and supplies 163.9 134.1 Future income taxes 66.7
70.2 ------------------------ 845.1 992.0 Investments 61.5 96.0 Net
properties 8,606.3 8,393.5 Other assets and deferred charges
1,018.6 1,018.3 ------------------------ Total assets $10,531.5
$10,499.8 ------------------------ ------------------------
Liabilities and shareholders' equity Current liabilities Accounts
payable and accrued liabilities $ 990.1 $ 975.3 Income and other
taxes payable 9.6 16.2 Dividends payable 23.8 21.0 Long-term debt
maturing within one year 29.4 275.7 ------------------------
1,052.9 1,288.2 Deferred liabilities 753.6 767.8 Long-term debt
3,103.0 3,075.3 Future income taxes 1,491.9 1,386.1 Shareholders'
equity Share capital (Note 7) 1,123.6 1,120.6 Contributed surplus
(Note 7) 288.9 300.4 Foreign currency translation adjustments 74.1
77.0 Retained income 2,643.5 2,484.4 ------------------------
4,130.1 3,982.4 ------------------------ Total liabilities and
shareholders' equity $10,531.5 $10,499.8 ------------------------
------------------------ Commitments and contingencies (Note 11).
See notes to interim consolidated financial statements. STATEMENT
OF CONSOLIDATED CASH FLOWS (in millions) For the three months ended
June 30 2005 2004 (unaudited) (unaudited) ------------------------
Operating activities Net income $ 123.2 $ 83.7 Add (deduct) items
not affecting cash: Depreciation and amortization 110.7 102.7
Future income taxes 68.8 49.6 Foreign exchange losses on long-term
debt 17.0 20.0 Amortization of deferred charges 5.0 6.6
Restructuring payments (13.3) (19.5) Other operating activities,
net (0.2) (0.8) Change in non-cash working capital balances related
to operations 48.1 7.1 ------------------------ Cash provided by
operating activities 359.3 249.4 ------------------------ Investing
activities Additions to properties (209.3) (188.9) Other
investments 0.6 (0.9) Net proceeds from disposal of transportation
properties 3.8 5.8 ------------------------ Cash used in investing
activities (204.9) (184.0) ------------------------ Financing
activities Dividends paid (21.0) (20.3) Issuance of shares (Note 7)
1.6 0.3 Purchase of shares (Note 7) (12.6) - Net decrease in
short-term borrowing (8.6) - Repayment of long-term debt (256.6)
(0.8) ------------------------ Cash used in financing activities
(297.2) (20.8) ------------------------ Cash position (Decrease)
increase in net cash (142.8) 44.6 Net cash at beginning of period
274.5 260.8 ------------------------ Net cash at end of period $
131.7 $ 305.4 ------------------------ ------------------------ Net
cash is defined as: Cash and short-term investments $ 131.7 $ 305.4
------------------------ ------------------------ See notes to
interim consolidated financial statements. STATEMENT OF
CONSOLIDATED CASH FLOWS (in millions) For the six months ended June
30 2005 2004 (unaudited) (unaudited) ------------------------
Operating activities Net income $ 203.9 $ 107.2 Add (deduct) items
not affecting cash: Depreciation and amortization 220.2 202.3
Future income taxes 108.9 65.6 Foreign exchange losses on long-term
debt 20.1 33.3 Amortization of deferred charges 10.0 12.9
Restructuring payments (26.3) (38.0) Other operating activities,
net (21.1) (23.2) Change in non-cash working capital balances
related to operations (78.2) (8.1) ------------------------ Cash
provided by operating activities 437.5 352.0
------------------------ Investing activities Additions to
properties (352.7) (329.0) Other investments 1.4 (2.4) Net proceeds
from disposal of transportation properties 5.5 8.6
------------------------ Cash used in investing activities (345.8)
(322.8) ------------------------ Financing activities Dividends
paid (42.0) (40.5) Issuance of shares (Note 7) 5.7 0.7 Purchase of
shares (Note 7) (12.6) - Issuance of long-term debt - 193.7
Repayment of long-term debt (264.1) (12.4) ------------------------
Cash (used in) provided by financing activities (313.0) 141.5
------------------------ Cash position (Decrease) increase in net
cash (221.3) 170.7 Net cash at beginning of period 353.0 134.7
------------------------ Net cash at end of period $ 131.7 $ 305.4
------------------------ ------------------------ Net cash is
defined as: Cash and short-term investments $ 131.7 $ 305.4
------------------------ ------------------------ See notes to
interim consolidated financial statements. STATEMENT OF
CONSOLIDATED RETAINED INCOME (in millions) For the six months ended
June 30 2005 2004 (unaudited) (unaudited) ------------------------
Balance, January 1 $ 2,484.4 $ 2,153.9 Net income for the period
203.9 107.2 Dividends (44.8) (40.5) ------------------------
Balance, June 30 $ 2,643.5 $ 2,220.6 ------------------------
------------------------ See notes to interim consolidated
financial statements. NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS JUNE 30, 2005 (unaudited) 1 Basis of presentation These
unaudited interim consolidated financial statements and notes have
been prepared using accounting policies that are consistent with
the policies used in preparing Canadian Pacific Railway Limited's
("CPR", "the Company" or "Canadian Pacific Railway") 2004 annual
consolidated financial statements. They do not include all
disclosures required under Generally Accepted Accounting Principles
for annual financial statements and should be read in conjunction
with the annual consolidated financial statements. 2 Change in
accounting estimate The Company recorded a $6.8-million adjustment
for the quarter and a total adjustment of $23.4 million year to
date to increase revenues related to the April 1-to-December 31
period of 2004. This adjustment reflects a change in estimate as a
result of a contract settlement with a customer. 3 Other charges
For the For the three months six months ended June 30 ended June 30
(in millions) 2005 2004 2005 2004
------------------------------------ Amortization of discount on
accruals recorded at present value $ 4.2 $ 4.9 $ 8.4 $ 9.7 Other
exchange gains (1.3) (2.9) (3.3) (0.4) Loss on sale of accounts
receivable 0.9 0.8 1.8 1.6 (Gains) losses on non-hedging derivative
instruments (0.4) 5.2 (6.6) 0.8 Other 2.3 2.1 4.4 3.0
------------------------------------ Total other charges $ 5.7 $
10.1 $ 4.7 $ 14.7 ------------------------------------
------------------------------------ 4 Interest expense For the For
the three months six months ended June 30 ended June 30 (in
millions) 2005 2004 2005 2004 ------------------------------------
Interest expense $ 55.8 $ 58.5 $ 110.4 $ 113.7 Interest income
(2.6) (1.4) (5.6) (2.6) ------------------------------------ Total
interest expense $ 53.2 $ 57.1 $ 104.8 $ 111.1
------------------------------------
------------------------------------ 5 Earnings per share At June
30, 2005, the number of shares outstanding was 158.6 million. Basic
earnings per share have been calculated using net income for the
period divided by the weighted average number of CPR shares
outstanding during the period. Diluted earnings per share have been
calculated using the treasury stock method, which gives effect to
the dilutive value of outstanding options. The number of shares
used in earnings per share calculations is reconciled as follows:
For the For the three months six months ended June 30 ended June 30
(in millions) 2005 2004 2005 2004
------------------------------------ Weighted average shares
outstanding 158.9 158.7 158.8 158.7 Dilutive effect of stock
options 1.7 0.2 1.6 0.3 ------------------------------------
Weighted average diluted shares outstanding 160.6 158.9 160.4 159.0
------------------------------------
------------------------------------ (in dollars) Basic earnings
per share $ 0.78 $ 0.53 $ 1.28 $ 0.67 Diluted earnings per share $
0.77 $ 0.53 $ 1.27 $ 0.67 ------------------------------------
------------------------------------ For the quarter ended June 30,
2005, no options (quarter ended June 30, 2004 - 5,642,847 options)
were excluded from the computation of diluted earnings per share
because their effects were not dilutive. For the six months ended
June 30, 2005, no options (six months ended June 30, 2004 -
1,305,600 options) were excluded from the computation of diluted
earnings per share because their effects were not dilutive. 6
Restructuring and environmental remediation At June 30, 2005, the
provision for restructuring and environmental remediation was
$429.9 million (December 31, 2004 - $448.7 million). The
restructuring provision primarily includes labour liabilities for
restructuring plans. Payments are expected to continue in
diminishing amounts until 2025. The environmental remediation
liability includes the cost of a multi-year soil remediation
program for various sites. Set out below is a reconciliation of
CPR's liabilities associated with restructuring and environmental
remediation programs: Three months ended June 30, 2005 Opening
Closing Balance Amortiz- Foreign Balance (in April 1 ation of
Exchange June 30 millions) 2005 Accrued Payments Discount Impact
2005 ----------------------------------------------------------
Labour liability for termination plans $ 261.2 (1.8) (11.1) 3.2 0.5
$ 252.0 Other non-labour liabilities for exit plans 6.0 - (0.1) 0.1
0.1 6.1 ----------------------------------------------------------
Total restructuring liability 267.2 (1.8) (11.2) 3.3 0.6 258.1
----------------------------------------------------------
Environmental remediation program 172.4 - (2.1) - 1.5 171.8
---------------------------------------------------------- Total
restructuring and environ- mental remediation liability $ 439.6
(1.8) (13.3) 3.3 2.1 $ 429.9
----------------------------------------------------------
---------------------------------------------------------- Three
months ended June 30, 2004 Opening Closing Balance Amortiz- Foreign
Balance (in April 1 ation of Exchange June 30 millions) 2004
Accrued Payments Discount Impact 2004
---------------------------------------------------------- Labour
liability for termination plans $ 346.8 (1.4) (14.1) 4.4 1.2 $
336.9 Other non-labour liabilities for exit plans 8.9 (0.1) (0.8)
0.1 0.2 8.3
---------------------------------------------------------- Total
restructuring liability 355.7 (1.5) (14.9) 4.5 1.4 345.2
----------------------------------------------------------
Environmental remediation program 93.8 0.1 (4.6) - 0.5 89.8
---------------------------------------------------------- Total
restructuring and environ- mental remediation liability $ 449.5
(1.4) (19.5) 4.5 1.9 $ 435.0
----------------------------------------------------------
---------------------------------------------------------- Six
months ended June 30, 2005 Opening Closing Balance Amortiz- Foreign
Balance (in Jan. 1 ation of Exchange June 30 millions) 2005 Accrued
Payments Discount Impact 2005
---------------------------------------------------------- Labour
liability for termination plans $ 269.7 (2.0) (22.9) 6.3 0.9 $
252.0 Other non-labour liabilities for exit plans 6.1 (0.1) (0.1)
0.1 0.1 6.1
----------------------------------------------------------- Total
restructuring liability 275.8 (2.1) (23.0) 6.4 1.0 258.1
-----------------------------------------------------------
Environmental remediation program 172.9 - (3.3) - 2.2 171.8
----------------------------------------------------------- Total
restructuring and environ- mental remediation liability $ 448.7
(2.1) (26.3) 6.4 3.2 $ 429.9
-----------------------------------------------------------
----------------------------------------------------------- Six
months ended June 30, 2004 Opening Closing Balance Amortiz- Foreign
Balance (in Jan. 1 ation of Exchange June 30 millions) 2004 Accrued
Payments Discount Impact 2004
---------------------------------------------------------- Labour
liability for termination plans $ 358.2 (1.4) (30.8) 8.8 2.1 $
336.9 Other non-labour liabilities for exit plans 9.2 (0.1) (1.1)
0.1 0.2 8.3
----------------------------------------------------------- Total
restructuring liability 367.4 (1.5) (31.9) 8.9 2.3 345.2
-----------------------------------------------------------
Environmental remediation program 94.8 0.1 (6.1) - 1.0 89.8
----------------------------------------------------------- Total
restructuring and environ- mental remediation liability $ 462.2
(1.4) (38.0) 8.9 3.3 $ 435.0
-----------------------------------------------------------
-----------------------------------------------------------
Amortization of Discount is charged to income as "Other Charges"
and "Purchased Services and Other". 7 Shareholders' equity An
analysis of Common Share balances is as follows: For the three
months ended June 30 (in millions) 2005 2004 Number Amount Number
Amount -------------------------------------- Balance, April 1
158.9 $1,124.7 158.7 $1,118.5 Shares issued under stock option
plans 0.1 1.6 - 0.3 Stock compensation expense related to shares
issued under stock option plans - 0.4 - - Shares repurchased (0.4)
(3.1) - - -------------------------------------- Balance, June 30
158.6 $1,123.6 158.7 $1,118.8
--------------------------------------
-------------------------------------- For the six months ended
June 30 (in millions) 2005 2004 Number Amount Number Amount
-------------------------------------- Balance, January 1 158.8
$1,120.6 158.7 $1,118.1 Shares issued under stock option plans 0.2
5.7 - 0.7 Stock compensation expense related to shares issued under
stock option plans - 0.4 - - Shares repurchased (0.4) (3.1) - -
-------------------------------------- Balance, June 30 158.6
$1,123.6 158.7 $1,118.8 --------------------------------------
-------------------------------------- An analysis of contributed
surplus balances is as follows: For the three months ended June 30
(in millions) 2005 2004 -------------------- Balance, April 1 $
302.7 $ 296.0 Stock compensation expense 2.4 0.9 Stock compensation
expense related to shares issued under stock option plans (0.4) -
Shares repurchased (15.8) - -------------------- Balance, June 30 $
288.9 $ 296.9 -------------------- -------------------- For the six
months ended June 30 (in millions) 2005 2004 --------------------
Balance, January 1 $ 300.4 $ 294.6 Stock compensation expense 4.7
2.3 Stock compensation expense related to shares issued under stock
option plans (0.4) - Shares repurchased (15.8) -
-------------------- Balance, June 30 $ 288.9 $ 296.9
-------------------- -------------------- In May 2005, the Company
completed the necessary filings for a normal course issuer bid to
purchase, for cancellation, up to 2.5 million of its outstanding
Common Shares, representing 1.6% of the approximately 159.0 million
Common Shares outstanding just prior to the filing date. Share
purchases may be made during the 12-month period beginning June 6,
2005, and ending June 5, 2006. The purchases are made at the market
price on the day of purchase, with consideration allocated to share
capital, up to the average carrying amount of the shares, and any
excess allocated to contributed surplus. When shares are
repurchased, it takes three days before the transaction is settled
and the shares are cancelled. The cost of shares purchased in a
given month and settled in the following month is accrued in the
month of purchase. During the second quarter, 432,000 shares were
purchased at an average price of $43.58. 8 Stock-based compensation
In 2005, under CPR's stock option plans, the Company issued
1,548,400 options to purchase Common Shares at the weighted average
price of $42.05 per share, based on the closing price on the day
prior to the grant date. In tandem with these options, 508,200
stock appreciation rights were issued at the weighted average
exercise price of $42.05. Pursuant to the employee plan, options
may be exercised upon vesting, which is between 24 months and 36
months after the grant date, and will expire after 10 years. Some
options vest after 48 months, unless certain performance targets
are achieved, in which case vesting is accelerated. These options
expire five years after the grant date. The following is a summary
of the Company's fixed stock option plans as of June 30 (including
options granted under the Directors' Stock Option Plan, which was
suspended in 2003): 2005 2004 -----------------------
----------------------- Weighted Weighted average average Number of
exercise Number of exercise options price options price
----------------------- ----------------------- Outstanding,
January 1 7,752,080 $ 29.32 6,226,674 $ 28.20 New options granted
1,548,400 42.05 1,741,400 32.50 Exercised (212,943) 26.62 (56,255)
13.40 Forfeited/cancelled (92,751) 27.74 (55,818) 20.48
------------ ------------ Outstanding, June 30 8,994,786 $ 31.59
7,856,001 $ 29.32 ----------------------- -----------------------
----------------------- ----------------------- Options exercisable
at June 30 2,126,256 $ 27.31 1,285,419 $ 24.14
----------------------- -----------------------
----------------------- ----------------------- Compensation
expense is recognized over the vesting period for stock options
issued since January 1, 2003, based on their estimated fair values
on the date of grants, as determined by the Black-Scholes option
pricing model. Had CPR used the fair value method for options
granted between January 1, 2002, and December 31, 2002, CPR's pro
forma basis net income and earnings per share would have been as
follows: For the For the three months six months ended June 30
ended June 30 2005 2004 2005 2004
------------------------------------ Net income (in millions) As
reported $ 123.2 $ 83.7 $ 203.9 $ 107.2 Pro forma $ 123.0 $ 83.4 $
203.6 $ 106.3 ------------------------------------
------------------------------------ (in dollars) Basic earnings
per share As reported $ 0.78 $ 0.53 $ 1.28 $ 0.67 Pro forma $ 0.77
$ 0.53 $ 1.28 $ 0.67 ------------------------------------
------------------------------------ Diluted earnings per share As
reported $ 0.77 $ 0.53 $ 1.27 $ 0.67 Pro forma $ 0.77 $ 0.52 $ 1.27
$ 0.67 ------------------------------------
------------------------------------ Under the fair value method,
the fair value of options at the grant date is $10.0 million for
options issued in the first six months of 2005 (first six months of
2004 - $9.5 million). The weighted average fair value assumptions
were approximately: For the six months ended June 30 2005 2004
-------------------- Expected option life (years) 4.50 4.50
Risk-free interest rate 3.49% 3.36% Expected stock price volatility
24% 28% Expected annual dividends per share $ 0.53 $ 0.50 Weighted
average fair value of options granted during the year $ 9.65 $ 8.04
-------------------- -------------------- 9 Pensions and other
benefits The total benefit cost for the Company's defined benefit
pension plans, defined contribution pension plans and
post-retirement benefits for the quarter ended June 30, 2005, was
$21.0 million (quarter ended June 30, 2004 - $19.8 million) and for
the six months ended June 30, 2005, was $41.4 million (six months
ended June 30, 2004 - $39.1 million). 10 Significant customers
During the first six months of 2005, one customer comprised 14.7%
of total revenue (first six months of 2004 - 11.4%). At June 30,
2005, one customer represented 9.2% of total accounts receivable
(June 30, 2004 - 5.1%). 11 Commitments and contingencies In the
normal course of its operations, the Company becomes involved in
various legal actions, including claims relating to injuries and
damages 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 June 30, 2005, 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. During the
fourth quarter of 2004, CPR recorded a charge for environmental
remediation for a specific property. The estimated cost of
remediation may change as new information becomes available or new
developments occur. However, no significant changes to the charge
had occurred as of June 30, 2005. Capital commitments At June 30,
2005, CPR had multi-year capital commitments of $606.5 million,
mainly for locomotive overhaul agreements, in the form of signed
contracts. Payments for these commitments are due in 2005 through
2016. Operating lease commitments At June 30, 2005, minimum
payments under operating leases were estimated at $599.1 million in
aggregate, with annual payments in each of the next five years of:
remainder of 2005 - $76.6 million; 2006 - $132.0 million; 2007 -
$92.8 million; 2008 - $65.8 million; 2009 - $41.6 million.
Guarantees The Company had residual value guarantees on operating
lease commitments of $235.3 million at June 30, 2005. The maximum
amount that could be payable under these and all of the Company's
other guarantees cannot be reasonably estimated due to the nature
of certain of the guarantees. All or a portion of amounts paid
under certain guarantees could be recoverable from other parties or
through insurance. The Company has accrued for all guarantees that
it expects to pay. At June 30, 2005, these accruals, which do not
include any amounts for residual value guarantees, amounted to $7.5
million. Summary of Rail Data -------------------- Second Quarter
---------------------------------------------- 2005 2004 Variance %
---------- ---------- ---------- ---------- Financial (millions,
-------------------- except per share data) ----------------------
Revenues -------- Freight revenue $ 1,056.5 $ 959.0 $ 97.5 10.2
Other revenue Other Intermodal revenues 13.7 14.5 (0.8) (5.5)
Non-freight and switching revenues 35.7 31.2 4.5 14.4 ----------
---------- ---------- Total other revenue 49.4 45.7 3.7 8.1
---------- ---------- ---------- 1,105.9 1,004.7 101.2 10.1
---------- ---------- ---------- Expenses -------- Compensation and
benefits 322.2 318.1 4.1 1.3 Fuel 145.2 107.9 37.3 34.6 Materials
46.0 45.5 0.5 1.1 Equipment rents 54.7 60.9 (6.2) (10.2)
Depreciation and amortization 110.7 102.7 8.0 7.8 Purchased
services and other 156.0 149.0 7.0 4.7 ---------- ----------
---------- 834.8 784.1 50.7 6.5 ---------- ---------- ----------
Operating income(1) 271.1 220.6 50.5 22.9 Other charges 5.7 10.1
(4.4) (43.6) Interest expense 53.2 57.1 (3.9) (6.8) Income tax
expense before foreign exchange losses on long-term debt(1) 72.2
49.9 22.3 44.7 ---------- ---------- ---------- Income before
foreign exchange losses on long-term debt(1) 140.0 103.5 36.5 35.3
---------- ---------- ---------- Foreign exchange losses on
-------------------------- long-term debt (FX on LTD)
-------------------------- FX on LTD (17.0) (20.0) 3.0 - Income tax
on FX on LTD 0.2 0.2 - - ---------- ---------- ---------- FX on LTD
(net of tax) (16.8) (19.8) 3.0 - ---------- ---------- ----------
Net income $ 123.2 $ 83.7 $ 39.5 47.2 ---------- ----------
---------- ---------- ---------- ---------- Earnings per share
(EPS) ------------------------ Basic earnings per share $ 0.78 $
0.53 $ 0.25 47.2 Diluted earnings per share $ 0.77 $ 0.53 $ 0.24
45.3 EPS before FX on LTD(1) ----------------------- Basic earnings
per share $ 0.88 $ 0.65 $ 0.23 35.4 Diluted earnings per share $
0.87 $ 0.65 $ 0.22 33.8 Weighted average number of shares
outstanding (millions) 158.9 158.7 0.2 0.1 Operating ratio(1)(2)
(%) 75.5 78.0 (2.5) - ROCE before FX on LTD (after tax)(1)(2) (%)
8.3 7.4 0.9 - Net debt to net debt plus equity (%) 42.1 47.0 (4.9)
- EBIT before FX on LTD(1)(2) (millions) $ 265.4 $ 210.5 $ 54.9
26.1 EBITDA before FX on LTD(1)(2) (millions) $ 376.1 $ 313.2 $
62.9 20.1 Year-to-Date
---------------------------------------------- 2005 2004 Variance %
---------- ---------- ---------- ---------- Financial (millions,
-------------------- except per share data) ----------------------
Revenues -------- Freight revenue $ 2,036.4 $ 1,812.7 $ 223.7 12.3
Other revenue Other Intermodal revenues 26.4 26.2 0.2 0.8
Non-freight and switching revenues 57.2 52.4 4.8 9.2 ----------
---------- ---------- Total other revenue 83.6 78.6 5.0 6.4
---------- ---------- ---------- 2,120.0 1,891.3 228.7 12.1
---------- ---------- ---------- Expenses -------- Compensation and
benefits 653.3 627.1 26.2 4.2 Fuel 279.7 207.6 72.1 34.7 Materials
104.8 99.3 5.5 5.5 Equipment rents 103.2 119.5 (16.3) (13.6)
Depreciation and amortization 220.2 202.3 17.9 8.8 Purchased
services and other 309.0 298.9 10.1 3.4 ---------- ----------
---------- 1,670.2 1,554.7 115.5 7.4 ---------- ----------
---------- Operating income(1) 449.8 336.6 113.2 33.6 Other charges
4.7 14.7 (10.0) (68.0) Interest expense 104.8 111.1 (6.3) (5.7)
Income tax expense before foreign exchange losses on long-term
debt(1) 115.7 69.5 46.2 66.5 ---------- ---------- ----------
Income before foreign exchange losses on long-term debt(1) 224.6
141.3 83.3 59.0 ---------- ---------- ---------- Foreign exchange
losses on -------------------------- long-term debt (FX on LTD)
-------------------------- FX on LTD (20.1) (33.3) 13.2 - Income
tax on FX on LTD (0.6) (0.8) 0.2 - ---------- ---------- ----------
FX on LTD (net of tax) (20.7) (34.1) 13.4 - ---------- ----------
---------- Net income $ 203.9 $ 107.2 $ 96.7 90.2 ----------
---------- ---------- ---------- ---------- ---------- Earnings per
share (EPS) ------------------------ Basic earnings per share $
1.28 $ 0.67 $ 0.61 91.0 Diluted earnings per share $ 1.27 $ 0.67 $
0.60 89.6 EPS before FX on LTD(1) ----------------------- Basic
earnings per share $ 1.41 $ 0.89 $ 0.52 58.4 Diluted earnings per
share $ 1.40 $ 0.89 $ 0.51 57.3 Weighted average number of shares
outstanding (millions) 158.8 158.7 0.1 0.1 Operating ratio(1)(2)
(%) 78.8 82.2 (3.4) - ROCE before FX on LTD (after tax)(1)(2) (%)
8.3 7.4 0.9 - Net debt to net debt plus equity (%) 42.1 47.0 (4.9)
- EBIT before FX on LTD(1)(2) (millions) $ 445.1 $ 321.9 $ 123.2
38.3 EBITDA before FX on LTD(1)(2) (millions) $ 665.3 $ 524.2 $
141.1 26.9 (1) These are earnings measures that are not in
accordance with GAAP and may not be comparable to similar measures
of other companies. See note on non-GAAP earnings measures attached
to commentary. (2) EBIT: Earnings before interest and taxes.
EBITDA: Earnings before interest, taxes, and depreciation and
amortization. ROCE (after tax): Return on capital employed (after
tax) (equal sign) earnings before interest (last 12 months) divided
by average net debt plus equity. Operating ratio: Operating
expenses divided by revenues.
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Second Quarter ---------------------------------------------- 2005
2004 Variance % ---------- ---------- ---------- ----------
Commodity Data -------------- Freight Revenues (millions) - Grain $
173.5 $ 162.1 $ 11.4 7.0 - Coal 198.7 134.2 64.5 48.1 - Sulphur and
fertilizers 116.9 130.6 (13.7) (10.5) - Forest products 86.1 83.0
3.1 3.7 - Industrial products 114.3 107.3 7.0 6.5 - Automotive 81.7
82.8 (1.1) (1.3) - Intermodal (including food and consumer) 285.3
259.0 26.3 10.2 ---------- ---------- ---------- Total Freight
Revenues $ 1,056.5 $ 959.0 $ 97.5 10.2 ---------- ----------
---------- Intermodal (including food and consumer) - Intermodal
272.4 246.6 25.8 10.5 - Food and consumer 12.9 12.4 0.5 4.0
Millions of Revenue Ton-Miles (RTM) - Grain 6,160 5,702 458 8.0 -
Coal 6,210 6,613 (403) (6.1) - Sulphur and fertilizers 5,382 5,854
(472) (8.1) - Forest products 2,665 2,723 (58) (2.1) - Industrial
products 3,436 3,590 (154) (4.3) - Automotive 658 665 (7) (1.1) -
Intermodal (including food and consumer) 7,271 6,826 445 6.5
---------- ---------- ---------- Total RTMs 31,782 31,973 (191)
(0.6) ---------- ---------- ---------- Intermodal (including food
and consumer) - Intermodal 6,888 6,530 358 5.5 - Food and consumer
383 296 87 29.4 Freight Revenue per RTM (cents) - Grain 2.82 2.84
(0.02) (0.7) - Coal 3.20 2.03 1.17 57.6 - Sulphur and fertilizers
2.17 2.23 (0.06) (2.7) - Forest products 3.23 3.05 0.18 5.9 -
Industrial products 3.33 2.99 0.34 11.4 - Automotive 12.42 12.45
(0.03) (0.2) - Intermodal 3.92 3.79 0.13 3.4 Freight Revenue per
RTM 3.32 3.00 0.32 10.7 Carloads (thousands) - Grain 79.6 78.4 1.2
1.5 - Coal 91.0 101.7 (10.7) (10.5) - Sulphur and fertilizers 54.0
60.1 (6.1) (10.1) - Forest products 40.4 41.0 (0.6) (1.5) -
Industrial products 71.8 71.3 0.5 0.7 - Automotive 44.6 47.0 (2.4)
(5.1) - Intermodal (including food and consumer) 293.1 295.4 (2.3)
(0.8) ---------- ---------- ---------- Total Carloads 674.5 694.9
(20.4) (2.9) ---------- ---------- ---------- Intermodal (including
food and consumer) - Intermodal 285.0 286.9 (1.9) (0.7) - Food and
consumer 8.1 8.5 (0.4) (4.7) Freight Revenue per Carload - Grain $
2,180 $ 2,068 $ 112 5.4 - Coal 2,184 1,320 864 65.5 - Sulphur and
fertilizers 2,165 2,173 (8) (0.4) - Forest products 2,131 2,024 107
5.3 - Industrial products 1,592 1,505 87 5.8 - Automotive 1,832
1,762 70 4.0 - Intermodal 973 877 96 10.9 Freight Revenue per
Carload $ 1,566 $ 1,380 $ 186 13.5 Year-to-Date
---------------------------------------------- 2005 2004 Variance %
---------- ---------- ---------- ---------- Commodity Data
-------------- Freight Revenues (millions) - Grain $ 339.1 $ 297.1
$ 42.0 14.1 - Coal 364.3 249.5 114.8 46.0 - Sulphur and fertilizers
236.2 241.8 (5.6) (2.3) - Forest products 167.2 156.4 10.8 6.9 -
Industrial products 232.9 208.9 24.0 11.5 - Automotive 151.6 154.1
(2.5) (1.6) - Intermodal (including food and consumer) 545.1 504.9
40.2 8.0 ---------- ---------- ---------- Total Freight Revenues $
2,036.4 $ 1,812.7 $ 223.7 12.3 ---------- ---------- ----------
Intermodal (including food and consumer) - Intermodal 519.9 479.5
40.4 8.4 - Food and consumer 25.2 25.4 (0.2) (0.8) Millions of
Revenue Ton-Miles (RTM) - Grain 12,297 11,264 1,033 9.2 - Coal
11,938 12,345 (407) (3.3) - Sulphur and fertilizers 10,879 10,805
74 0.7 - Forest products 5,186 5,218 (32) (0.6) - Industrial
products 7,016 7,057 (41) (0.6) - Automotive 1,228 1,217 11 0.9 -
Intermodal (including food and consumer) 13,958 13,539 419 3.1
---------- ---------- ---------- Total RTMs 62,502 61,445 1,057 1.7
---------- ---------- ---------- Intermodal (including food and
consumer) - Intermodal 13,227 12,857 370 2.9 - Food and consumer
731 682 49 7.2 Freight Revenue per RTM (cents) - Grain 2.76 2.64
0.12 4.5 - Coal 3.05 2.02 1.03 51.0 - Sulphur and fertilizers 2.17
2.24 (0.07) (3.1) - Forest products 3.22 3.00 0.22 7.3 - Industrial
products 3.32 2.96 0.36 12.2 - Automotive 12.35 12.66 (0.31) (2.4)
- Intermodal 3.91 3.73 0.18 4.8 Freight Revenue per RTM 3.26 2.95
0.31 10.5 Carloads (thousands) - Grain 155.5 150.2 5.3 3.5 - Coal
176.9 197.4 (20.5) (10.4) - Sulphur and fertilizers 109.5 110.7
(1.2) (1.1) - Forest products 79.7 80.5 (0.8) (1.0) - Industrial
products 145.0 141.8 3.2 2.3 - Automotive 86.6 90.3 (3.7) (4.1) -
Intermodal (including food and consumer) 568.8 580.7 (11.9) (2.0)
---------- ---------- ---------- Total Carloads 1,322.0 1,351.6
(29.6) (2.2) ---------- ---------- ---------- Intermodal (including
food and consumer) - Intermodal 552.3 564.1 (11.8) (2.1) - Food and
consumer 16.5 16.6 (0.1) (0.6) Freight Revenue per Carload - Grain
$ 2,181 $ 1,978 $ 203 10.3 - Coal 2,059 1,264 795 62.9 - Sulphur
and fertilizers 2,157 2,184 (27) (1.2) - Forest products 2,098
1,943 155 8.0 - Industrial products 1,606 1,473 133 9.0 -
Automotive 1,751 1,707 44 2.6 - Intermodal 958 869 89 10.2 Freight
Revenue per Carload $ 1,540 $ 1,341 $ 199 14.8
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Second Quarter ---------------------------------------------- 2005
2004(1) Variance % ---------- ---------- ---------- ----------
Operations and Productivity --------------------------- Freight
gross ton-miles (GTM) (millions) 62,284 60,813 1,471 2.4 Revenue
ton-miles (RTM) (millions) 31,782 31,973 (191) (0.6) Train-miles
(thousands) 10,963 10,418 545 5.2 FRA personal injuries per 200,000
employee-hours 1.8 2.6 (0.8) (30.8) FRA train accidents per million
train-miles 1.3 2.1 (0.8) (38.1) Freight revenue per RTM (cents)
3.32 3.00 0.32 10.7 Total operating expenses per RTM (cents) 2.63
2.45 0.18 7.3 Total operating expenses per GTM (cents) 1.34 1.29
0.05 3.9 Total operating expenses per train-mile (dollars) 76.15
75.26 0.89 1.2 Average train weights (tons) 5,681 5,837 (156) (2.7)
Average train length (feet) 4,091 4,114 (23) (0.6) Average train
speed (mph) 24.1 24.3 (0.2) (0.8) Number of active employees at end
of period 16,973 16,535 438 2.6 Average number of active employees
16,680 16,393 287 1.8 Miles of road operated at end of period(2)
13,848 13,848 - - GTMs per average active employee (000) 3,734
3,710 24 0.6 GTMs per mile of road operated(2) (000) 4,498 4,391
107 2.4 GTMs per active locomotive per day (000) 666 681 (15) (2.2)
U.S. gallons of fuel per 1,000 GTMs 1.16 1.18 (0.02) (1.7) Average
fuel price excluding provincial fuel taxes (U.S. dollar per U.S.
gallon) 1.49 1.01 0.48 47.5 Diesel fuel consumed - freight &
yard (million U.S. gallons) 72.2 71.8 0.4 0.6 WTI (US$/bbl -
average lagged 1 month, unhedged) 52.57 37.87 14.70 38.8 Average
foreign exchange rate (Canadian$/US$) 1.241 1.349 (0.108) - Average
foreign exchange rate (US$/Canadian$) 0.806 0.741 0.065 -
Year-to-Date ---------------------------------------------- 2005
2004(1) Variance % ---------- ---------- ---------- ----------
Operations and Productivity --------------------------- Freight
gross ton-miles (GTM) (millions) 120,700 116,764 3,936 3.4 Revenue
ton-miles (RTM) (millions) 62,502 61,445 1,057 1.7 Train-miles
(thousands) 21,628 20,362 1,266 6.2 FRA personal injuries per
200,000 employee-hours 2.2 2.9 (0.7) (24.1) FRA train accidents per
million train-miles 2.1 2.2 (0.1) (4.5) Freight revenue per RTM
(cents) 3.26 2.95 0.31 10.5 Total operating expenses per RTM
(cents) 2.67 2.53 0.14 5.5 Total operating expenses per GTM (cents)
1.38 1.33 0.05 3.8 Total operating expenses per train-mile
(dollars) 77.22 76.35 0.87 1.1 Average train weights (tons) 5,581
5,734 (153) (2.7) Average train length (feet) 3,954 4,085 (131)
(3.2) Average train speed (mph) 24.0 23.8 0.2 0.8 Number of active
employees at end of period 16,973 16,535 438 2.6 Average number of
active employees 16,074 15,830 244 1.5 Miles of road operated at
end of period(2) 13,848 13,848 - - GTMs per average active employee
(000) 7,509 7,376 133 1.8 GTMs per mile of road operated(2) (000)
8,716 8,432 284 3.4 GTMs per active locomotive per day (000) 655
666 (11) (1.7) U.S. gallons of fuel per 1,000 GTMs 1.21 1.23 (0.02)
(1.6) Average fuel price excluding provincial fuel taxes (U.S.
dollar per U.S. gallon) 1.43 1.00 0.43 43.0 Diesel fuel consumed -
freight & yard (million U.S. gallons) 145.6 143.8 1.8 1.3 WTI
(US$/bbl - average lagged 1 month, unhedged) 49.31 35.75 13.56 37.9
Average foreign exchange rate (Canadian$/US$) 1.234 1.334 (0.100) -
Average foreign exchange rate (US$/Canadian$) 0.810 0.750 0.060 -
(1) Certain prior period figures have been revised to conform with
current presentation or have been updated to reflect new
information. (2) Excludes track on which CPR has haulage rights.
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DATASOURCE: Canadian Pacific Railway CONTACT: Media: Len
Cocolicchio, Tel.: (403) 319-7591, ; Investment Community: Paul
Bell, Vice-President, Investor Relations, Tel.: (403) 319-3591,
Copyright