Operating Income sets record at $1.13 billion CALGARY, Jan. 30
/PRNewswire-FirstCall/ -- Canadian Pacific (TSX/NYSE: CP) announced
its fourth-quarter and full year 2006 results today. For the full
year, net income for 2006 was $796 million, which included a tax
benefit of $176 million as a result of a decrease in Canadian
federal and provincial income tax rates. This was an increase in
net income of 47 per cent over 2005. Diluted earnings per share was
$5.02 for the full year 2006, an increase of 48 per cent over 2005.
SUMMARY OF FULL-YEAR 2006 COMPARED WITH FULL-YEAR 2005 Excluding
foreign exchange gains and losses on long-term debt and other
specified items: - Diluted earnings per share was $3.95, an
increase of 20 per cent. - Operating income was $ 1.129 billion, a
full year record, and an increase of 13 per cent. - Operating ratio
was 75.4 per cent, which was an improvement of 180 basis points. -
Revenue grew 4 per cent to $4.583 billion, with operating expenses
increasing by only 2 per cent. "I'm pleased with the financial
results," said Fred Green, President and CEO, "We focused on cost
containment and improving the fluidity of our operations, and, with
our diversified customer portfolio, we delivered strong results
while overcoming a drop in coal revenues of $137 million. As well,
I am particularly delighted with our team's improvement on the
safety front. We reduced personal injuries by 17 per cent and train
accidents by 39 per cent over 2005, again making CP one of the
safest railroads in North America." SUMMARY OF 4TH QUARTER 2006
COMPARED WITH 4TH QUARTER 2005 Net income for the fourth-quarter
was $146 million, an increase of 6 per cent. Excluding foreign
exchange losses on long-term debt and other specified items: -
Diluted earnings per share was $1.15, an increase of 7.5 per cent.
- Operating ratio improved by 80 basis points to 73.1 per cent. -
Income increased 6 per cent to $181 million. - Total revenue grew 2
per cent and operating expenses were up less than 1 per cent. "We
are well positioned to continue to deliver on our commitments in
2007," said Mr. Green. "Our Integrated Operating Plan has
significantly improved fluidity, allowing us to respond quickly and
adjust our operations to changes in traffic volumes. Through our
continued focus on execution excellence, we are improving the
efficiency of our business, keeping CP on track to be the safest,
most fluid railway in North America." Freight revenues in the
fourth-quarter were $1.152 billion, with grain increasing 16.5 per
cent over fourth-quarter 2005 and sulphur and fertilizers growing
19 per cent. Industrial and consumer products and intermodal showed
modest growth. This was offset in part, primarily by a 16 per cent
decrease in coal. Operating expenses, excluding other specified
items, for the quarter were up less than 1 per cent. Increases due
to inflation and volumes were largely offset by improved operating
efficiencies and reductions in management staff. 2007 OUTLOOK "It
is early in the year and there are many factors in play," said Mr.
Green. "Rail fundamentals remain strong, although our Operating
team has been tested with very tough winter operating conditions
and there is softening in some sectors of the North American
economy. At the same time, we are seeing fluctuating fuel prices
and a weakening Canadian dollar. I am confident we will hit our
stride in 2007 and CP's outlook for diluted earnings per share in
2007 remains in the range of $4.30 to $4.45, an increase of 9 to 13
per cent respectively, over the 2006 diluted EPS which was $3.95,
(excluding foreign exchange gains and losses on long-term debt and
other specified items)." CP expects to grow revenue in the range of
4 per cent to 6 per cent in 2007. Capital investment is anticipated
to be between $885 million and $895 million and free cash, after
dividends, is now expected to exceed $250 million in 2007. This
outlook assumes oil prices averaging US$58 per barrel and an
average currency exchange rate of $1.15 per U.S. dollar (US$0.87).
RESTATEMENT OF COMPARATIVE FIGURES FOR 2005 Prior period
comparative figures have been restated for retroactively applied
accounting changes. The CICA issued Emerging Issues Committee
Abstract "Stock-Based Compensation for Employees Eligible to Retire
Before the Vesting Date" ("EIC 162") which became effective for the
year ended December 31, 2006 and has been applied retroactively
with restatement of prior periods. The compensation cost
attributable to stock-based awards is recognized over the period
from the grant date to the date the employees become eligible to
retire when this is shorter than the vesting period. The adoption
of EIC 162 resulted in a decrease in reported "Compensation and
benefits" expense for the three months ended December 31, 2006 by
$0.6 million (three months ended December 31, 2005 - $2.0 million)
and for the year ended December 31, 2006 by $1.2 million (year
ended December 31, 2005 - $0.2 million). Note 2 to the financial
statements describes adoption of EIC 162. FOREIGN EXCHANGE GAINS
AND LOSSES ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS Results for
full-year 2006 included a foreign exchange loss of $0.1 million ($7
million after tax) on long-term debt, compared with a gain of $45
million ($22 million after tax) on long-term debt in 2005. Results
for the fourth quarter of 2006 included a foreign exchange loss of
$45 million ($35 million after tax), compared with a loss of $1
million ($5 million after tax) in the same period of 2005. Other
specified items in 2006 were related to a future income tax benefit
of $176 million as a result of a decrease in Canadian federal and
provincial income tax rates that occurred in the second quarter of
2006. Other specified items in 2005 were related to a special
charge and a partial reduction of a special charge originally taken
in 2004, which had a net impact of $10 million ($8 million after
tax) in 2005. CP began in 2005 a program to reduce management and
administrative staff by approximately 400. These reductions, which
were completed during the third quarter of 2006, resulted in a
special charge of $44 million ($28 million after tax) in the fourth
quarter of 2005. This special charge was partially offset by a
reduction, booked in the third quarter of 2005, of $34 million ($21
million after tax) to a special charge of $91 million ($55 million
after tax) taken in 2004 for environmental remediation of a
property in the United States. The reduction reflected a settlement
of litigation related to remediation of the environmental
contamination. Presentation of non-GAAP earnings CP presents
non-GAAP earnings in this news release to provide a basis for
evaluating underlying earnings and liquidity trends in its business
that can be compared with prior periods' results of operations.
These non-GAAP earnings exclude foreign currency translation
effects on long-term debt, which can be volatile and short term,
and other specified items, which are not among CP'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 gains and losses on long-term debt and
other specified items, to net income as presented in the financial
statements is detailed in the attached Summary of Rail Data. Free
cash after dividends is calculated as cash provided by operating
activities, less cash used in investing activities and dividends.
Earnings that exclude foreign exchange currency translation effect
on long-term debt and other specified items, and free cash after
dividends, 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. Other specified
items are material transactions that may include, but are not
limited to, restructuring and asset impairment charges, gains and
losses on non-routine sales of assets, unusual income tax
adjustments, and other items that do not typify normal business
activities. In 2006, the only other specified item was an income
tax benefit of $176 million, or $1.09 per share, as a result of tax
rate reductions. Note on forward looking-information This news
release contains certain forward-looking statements relating but
not limited to our operations, anticipated financial performance
and business prospects. Undue reliance should not be placed on
forward-looking information as actual results may differ
materially. By its nature, CP's forward-looking information
involves numerous assumptions, inherent risks and uncertainties,
including but not limited to the following factors: changes in
business strategies; general global economic and business
conditions; risks in agricultural production such as weather
conditions and insect populations; fluctuations in the value of the
Canadian dollar relative to the U.S. dollar; the availability and
price of energy commodities; the effects of competition and pricing
pressures; industry capacity; shifts in market demand; changes in
laws and regulations; changes in taxes and tax rates; potential
increases in maintenance and operating costs; uncertainties of
litigation; labour disputes; timing of completion of capital and
maintenance projects; interest rate fluctuations; effects of
changes in market conditions on the financial position of pension
plans; and various events that could disrupt operations, including
severe weather conditions, security threats and governmental
response to them, and technological changes. There are factors that
could cause actual results to differ from those described in the
forward-looking statements contained in this news release. These
more specific factors are identified and discussed in the Outlook
section and elsewhere in this news release with the particular
forward-looking statement in question. 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. Canadian Pacific, through the ingenuity of its
employees located across Canada and in the United States, intends
to be the safest, and most fluid railway in North America. Our
people are the key to delivering innovative transportation
solutions to our customers and to ensuring the safe operation of
our trains through the more than 900 communities where we operate.
Our combined ingenuity makes Canadian Pacific a better place to
work, rail a better way to ship, and North America a better place
to live. Come and visit us at http://www.cpr.ca/ to see how we can
put our ingenuity to work for you. Canadian Pacific is proud to be
the official rail freight services provider for the Vancouver 2010
Olympic and Paralympic Winter Games. STATEMENT OF CONSOLIDATED
INCOME (in millions, except per share data) For the three months
ended December 31 2006 2005 Restated (See Note 2)
-------------------------- (unaudited) Revenues Freight $ 1,151.5 $
1,124.4 Other 38.9 42.5 -------------------------- 1,190.4 1,166.9
Operating expenses Compensation and benefits 322.2 322.0 Fuel 171.2
166.4 Materials 53.7 53.1 Equipment rents 47.8 53.0 Depreciation
and amortization 115.9 113.6 Purchased services and other 159.5
154.6 -------------------------- 870.3 862.7
-------------------------- Operating income before the following:
320.1 304.2 Special charge for labour restructuring (Note 5) - 44.2
-------------------------- Operating income 320.1 260.0 Other
charges (Note 7) 6.4 6.8 Foreign exchange loss on long-term debt
44.9 0.6 Interest expense (Note 8) 49.8 49.1 Income tax expense
(Note 9) 73.4 66.4 -------------------------- Net income $ 145.6 $
137.1 -------------------------- -------------------------- Basic
earnings per share (Note 10) $ 0.93 $ 0.87
-------------------------- -------------------------- Diluted
earnings per share (Note 10) $ 0.92 $ 0.86
-------------------------- -------------------------- See notes to
interim consolidated financial statements. STATEMENT OF
CONSOLIDATED INCOME (in millions, except per share data) For the
year ended December 31 2006 2005 Restated (See Note 2)
-------------------------- (unaudited) Revenues Freight $ 4,427.3 $
4,266.3 Other 155.9 125.3 -------------------------- 4,583.2
4,391.6 Operating expenses Compensation and benefits 1,327.6
1,322.1 Fuel 650.5 588.0 Materials 212.9 203.3 Equipment rents
181.2 210.0 Depreciation and amortization 464.1 445.1 Purchased
services and other 618.3 621.6 -------------------------- 3,454.6
3,390.1 -------------------------- Operating income before the
following: 1,128.6 1,001.5 Special credit for environmental
remediation (Note 4) - (33.9) Special charge for labour
restructuring (Note 5) - 44.2 -------------------------- Operating
income 1,128.6 991.2 Other charges (Note 7) 27.8 18.1 Foreign
exchange loss (gain) on long-term debt 0.1 (44.7) Interest expense
(Note 8) 194.5 204.2 Income tax expense (Note 9) 109.9 270.6
-------------------------- Net income $ 796.3 $ 543.0
-------------------------- -------------------------- Basic
earnings per share (Note 10) $ 5.06 $ 3.43
-------------------------- -------------------------- Diluted
earnings per share (Note 10) $ 5.02 $ 3.39
-------------------------- -------------------------- See notes to
interim consolidated financial statements. CONSOLIDATED BALANCE
SHEET (in millions) December 31 December 31 2006 2005 Restated (See
Note 2) -------------------------- (unaudited) Assets Current
assets Cash and cash equivalents $ 124.3 $ 121.8 Accounts
receivable and other current assets 615.7 524.0 Materials and
supplies 158.6 140.1 Future income taxes 106.3 108.0
-------------------------- 1,004.9 893.9 Investments 64.9 67.3 Net
properties 9,122.9 8,790.9 Other assets and deferred charges (Note
11) 1,223.2 1,139.0 -------------------------- Total assets $
11,415.9 $ 10,891.1 --------------------------
-------------------------- Liabilities and shareholders' equity
Current liabilities Accounts payable and accrued liabilities $
1,002.6 $ 1,032.8 Income and other taxes payable 16.0 30.2
Dividends payable 29.1 23.7 Long-term debt maturing within one year
191.3 30.0 -------------------------- 1,239.0 1,116.7 Deferred
liabilities 725.7 745.9 Long-term debt 2,813.5 2,970.8 Future
income taxes 1,781.2 1,673.6 Shareholders' equity Share capital
(Note 12) 1,175.7 1,141.5 Contributed surplus (Note 12) 32.3 245.1
Foreign currency translation adjustments 66.4 67.5 Retained income
3,582.1 2,930.0 -------------------------- 4,856.5 4,384.1
-------------------------- Total liabilities and shareholders'
equity $ 11,415.9 $ 10,891.1 --------------------------
-------------------------- Commitments and contingencies (Note 17).
See notes to interim consolidated financial statements. STATEMENT
OF CONSOLIDATED CASH FLOWS (in millions) For the three months ended
December 31 2006 2005 Restated (See Note 2)
-------------------------- (unaudited) Operating activities Net
income $ 145.6 $ 137.1 Add (deduct) items not affecting cash:
Depreciation and amortization 115.9 113.6 Future income taxes 73.0
62.7 Special charge for labour restructuring - 44.2 Foreign
exchange loss on long-term debt 44.9 0.6 Amortization of deferred
charges 3.4 4.3 Restructuring payments (Note 13) (27.1) (26.4)
Other operating activities, net (73.4) (52.4) Change in non-cash
working capital balances related to operations 33.7 55.6
-------------------------- Cash provided by operating activities
316.0 339.3 -------------------------- Investing activities
Additions to properties (204.5) (299.6) Decrease in investments and
other assets (Note 11) 23.3 0.1 Net proceeds from disposal of
transportation properties 18.7 3.4 -------------------------- Cash
used in investing activities (162.5) (296.1)
-------------------------- Financing activities Dividends paid
(29.4) (23.7) Issuance of CPR common shares 14.3 24.1 Purchase of
CPR common shares (59.5) (2.3) Issuance of long-term debt 2.8 -
Repayment of long-term debt (3.8) (6.1) --------------------------
Cash used in financing activities (75.6) (8.0)
-------------------------- Cash position Increase in cash and cash
equivalents 77.9 35.2 Net cash and cash equivalents at beginning of
period 46.4 86.6 -------------------------- Net cash and cash
equivalents at end of period $ 124.3 $ 121.8
-------------------------- -------------------------- See notes to
interim consolidated financial statements. STATEMENT OF
CONSOLIDATED CASH FLOWS (in millions) For the year ended December
31 2006 2005 Restated (See Note 2) --------------------------
(unaudited) Operating activities Net income $ 796.3 $ 543.0 Add
(deduct) items not affecting cash: Depreciation and amortization
464.1 445.1 Future income taxes 75.3 258.0 Special credit for
environmental remediation - (30.9) Special charge for labour
restructuring - 44.2 Foreign exchange loss (gain) on long-term debt
0.1 (44.7) Amortization of deferred charges 16.5 19.5 Restructuring
payments (Note 13) (96.3) (69.0) Other operating activities, net
(103.4) (91.2) Change in non-cash working capital balances related
to operations (101.6) (23.3) -------------------------- Cash
provided by operating activities 1,051.0 1,050.7
-------------------------- Investing activities Additions to
properties (793.7) (884.4) Decrease in investments and other assets
(Note 11) 2.2 2.0 Net proceeds from disposal of transportation
properties 97.8 13.2 -------------------------- Cash used in
investing activities (693.7) (869.2) --------------------------
Financing activities Dividends paid (112.4) (89.5) Issuance of CPR
common shares 66.6 31.8 Purchase of CPR common shares (286.4)
(80.6) Issuance of long-term debt 2.8 - Repayment of long-term debt
(25.4) (274.4) -------------------------- Cash used in financing
activities (354.8) (412.7) -------------------------- Cash position
Increase (decrease) in net cash and cash equivalents 2.5 (231.2)
Net cash and cash equivalents at beginning of period 121.8 353.0
-------------------------- Net cash and cash equivalents at end of
period $ 124.3 $ 121.8 --------------------------
-------------------------- See notes to interim consolidated
financial statements. STATEMENT OF CONSOLIDATED RETAINED INCOME (in
millions) For the year ended December 31 2006 2005
-------------------------- (unaudited) Balance, January 1 $ 2,930.0
$ 2,484.4 Adjustment for change in accounting policy (Note 2) -
(5.2) -------------------------- 2,930.0 2,479.2 Net income for the
period 796.3 543.0 Dividends (117.7) (92.2) Shares repurchased
(Note 12) (26.5) - -------------------------- Balance, December 31
$ 3,582.1 $ 2,930.0 --------------------------
-------------------------- See notes to interim consolidated
financial statements. NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS DECEMBER 31, 2006 (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") 2005
annual consolidated financial statements except for new accounting
policies adopted in 2006 (see Note 2). 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. CPR'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. 2 New accounting policies
Stock-Based Compensation for Employees Eligible to Retire Before
the
--------------------------------------------------------------------
Vesting Date ------------ The CICA issued Emerging Issues Committee
Abstract "Stock-Based Compensation for Employees Eligible to Retire
Before the Vesting Date" ("EIC 162") which became effective for the
year ended December 31, 2006 and has been applied retroactively
with restatement of prior periods. Under EIC 162, compensation cost
attributable to stock-based awards is recognized over the period
from the grant date to the date employees become eligible to retire
when this is shorter than the vesting period. The adoption of EIC
162 resulted in a $5.2 million reduction to opening retained
earnings at January 1, 2005, and decreased reported "Compensation
and benefits" expense for the three months ended December 31, 2006
by $0.6 million (three months ended December 31, 2005 - $2.0
million) and for the year ended December 31, 2006 by $1.2 million
(year ended December 31, 2005 - $0.1 million). Non-monetary
transactions ------------------------- In June 2005, the CICA
issued Accounting Standard Section 3831 "Non-Monetary Transactions"
which became effective on January 1, 2006. It has been applied
prospectively to non-monetary transactions occurring on or after
that date. The standard requires that assets or liabilities
exchanged or transferred in a non-monetary transaction that has
commercial substance be valued at fair value with any gain or loss
recorded in income. Commercial substance exists when, as a result
of the transaction, there is a significant change to future cash
flows of the item transferred or the company as a whole.
Transactions that lack commercial substance or for which the fair
value of the exchanged assets cannot be reliably measured will
continue to be accounted for at carrying value. Previously,
non-monetary transactions that did not constitute the culmination
of the earnings process were recorded at carrying value. The impact
to CPR on adoption of this new standard was not significant. 3
Future accounting changes Financial instruments, hedging and
comprehensive income
------------------------------------------------------- The CICA
issued the following accounting standards effective for fiscal
years beginning on or after October 1, 2006: Accounting Standard
Section 3855 "Financial Instruments, Recognition and Measurement",
Accounting Standard Section 3861 "Financial Instruments,
Presentation and Disclosure", Accounting Standard Section 3865
"Hedging" and Accounting Standard Section 1530 "Comprehensive
Income". These sections require certain financial instruments and
hedge positions to be recorded at their fair value. They also
introduce the concept of comprehensive income and accumulated other
comprehensive income. Adoption of these standards will be effective
from January 1, 2007 on a prospective basis without retroactive
restatement of prior periods, except for the reclassification of
equity balances to reflect "Accumulated Other Comprehensive Income"
which will include foreign currency translation adjustments. Under
the new standard, financial instruments designated as
"held-for-trading" and "available-for-sale" will be carried at
their fair value while financial instruments such as "loans and
receivables", "financial liabilities" and those classified as
"held-to-maturity" will be carried at their amortized cost. All
derivatives will be carried on the Consolidated Balance Sheet at
their fair value, including derivatives designated as hedges. The
effective portion of unrealized gains and losses on cash flow
hedges will be carried in "Accumulated Other Comprehensive Income",
a component of "Shareholders' Equity" (on the Consolidated Balance
Sheet), with any ineffective portions of gains and losses on hedges
taken into income immediately. Accounting Changes
------------------ Effective from January 1, 2007, the CICA has
amended Accounting Standard Section 1506 "Accounting Changes" to
prescribe the criteria for changing accounting policies and related
accounting treatment and disclosures of accounting changes. Changes
in accounting policies will be permitted when required by a primary
source of GAAP, for example when a new accounting section is first
adopted, or when the change in accounting policy results in more
reliable and relevant financial information being reflected in the
financial statements. A change in accounting policy as a result of
the initial application of a new accounting section should be
applied in accordance with the transitional provisions of the
accounting section being adopted. A voluntary change in accounting
policy for which specific transitional provisions do not exist
should be applied retrospectively with restatement of prior period
financial statements. The adoption of this amended accounting
standard will not impact the financial statements of the Company. 4
Reduction to environmental remediation During the three months
ended September 30, 2005, a settlement was reached with a
responsible party in relation to portions of past environmental
contamination at a CPR-owned property in the U.S. As a result, CPR
was able to reduce accrued liabilities related to the property, and
recognized a total reduction of $33.9 million to a special charge
for environmental remediation recorded in 2004. 5 Special charge
for labour restructuring In the fourth quarter of 2005, CPR
recorded a special charge of $44.2 million for a labour
restructuring initiative. This initiative, mostly job reductions in
management and administrative positions, was completed in 2006. 6
Change in accounting estimate During 2005, the Company
prospectively recorded a $23.4-million adjustment to increase
revenues in 2005 related to services provided in 2004. The
adjustment reflected a change in estimate primarily as a result of
a contract settlement with a customer. 7 Other charges For the
three For the year months ended ended December 31 December 31 (in
millions) 2006 2005 2006 2005 -------------------
------------------- Amortization of discount on accruals recorded
at present value $ 1.9 $ 3.0 $ 10.0 $ 15.4 Other exchange losses
(gains) 2.0 1.1 6.5 (2.2) Loss on sale of accounts receivable 1.3
0.9 5.0 3.5 Gains on non-hedging derivative instruments (0.8) (0.1)
(1.2) (6.6) Other 2.0 1.9 7.5 8.0 -------------------
------------------- Total other charges $ 6.4 $ 6.8 $ 27.8 $ 18.1
------------------- ------------------- -------------------
------------------- 8 Interest expense For the three For the year
months ended ended December 31 December 31 (in millions) 2006 2005
2006 2005 ------------------- ------------------- Interest expense
$ 51.4 $ 50.2 $ 200.5 $ 211.8 Interest income (1.6) (1.1) (6.0)
(7.6) ------------------- ------------------- Total interest
expense $ 49.8 $ 49.1 $ 194.5 $ 204.2 -------------------
------------------- 9 Income tax expense In the three months ended
June 30, 2006, federal and provincial legislation was introduced to
reduce corporate income tax rates over a period of several years.
As a result of these changes, the Company recorded a $176.0 million
benefit in future tax liability and income tax expense in the three
months ended June 30, 2006. Cash taxes paid for the three months
ended December 31, 2006 were $24.3 million (three months ended
December 31, 2005 - $0.9 million) and for the year ended December
31, 2006 were $50.9 million (year ended December 31, 2005 - $7.6
million). 10 Earnings per share At December 31, 2006, the number of
shares outstanding was 155.5 million (December 31, 2005 - 158.2
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 three For the year months ended ended December 31
December 31 (in millions) 2006 2005 2006 2005 -------------------
------------------- Weighted average shares outstanding 155.8 157.6
157.3 158.4 Dilutive effect of stock options 1.6 2.1 1.5 1.7
------------------- ------------------- Weighted average diluted
shares outstanding 157.4 159.7 158.8 160.1 -------------------
------------------- ------------------- ------------------- (in
dollars) Basic earnings per share $ 0.93 $ 0.87(1) $ 5.06 $ 3.43(1)
Diluted earnings per share $ 0.92 $ 0.86(1) $ 5.02 $ 3.39(1)
------------------- ------------------- -------------------
------------------- (1) Restated (see Note 2). For the three months
ended December 31, 2006, 14,483 options (three months ended
December 31, 2005 - 4,000 options) were excluded from the
computation of diluted earnings per share because their effects
were not dilutive. For the year ended December 31, 2006, 379,908
options (year ended December 31, 2005 - 1,000 options) were
excluded from the computation of diluted earnings per share because
their effects were not dilutive. 11 Decrease in investments and
other assets Other assets and deferred charges on the Consolidated
Balance Sheet include, from time to time, assets held for sale
which are purchased in anticipation of sale and leaseback
arrangements with various financial institutions. For the three
months ended December 31, 2006, assets of $4.6 million were
acquired and $26.7 million were sold; and for the year ended
December 31, 2006, assets of $137.1 million were acquired and
$136.1 million were sold. No gains or losses were incurred in these
sale and leaseback arrangements. These investing activities are
reflected in the Statement of Consolidated Cash Flows as part of
"Decrease in investments and other assets". 12 Shareholders' equity
An analysis of Common Share balances is as follows: For the three
months ended December 31 (in millions) 2006 2005 Number Amount
Number Amount ----------------------------------------- Share
capital, October 1 155.9 $1,166.6 157.3 $1,116.3 Shares issued
under stock option plans 0.5 15.1 0.9 25.2 Shares repurchased (0.9)
(6.0) - - ----------------------------------------- Share capital,
December 31 155.5 $1,175.7 158.2 $1,141.5
-----------------------------------------
----------------------------------------- For the year ended
December 31 (in millions) 2006 2005 Number Amount Number Amount
----------------------------------------- Share capital, January 1
158.2 $1,141.5 158.8 $1,120.6 Shares issued under stock option
plans 2.3 71.0 1.2 33.4 Shares repurchased (5.0) (36.8) (1.8)
(12.5) ----------------------------------------- Share capital,
December 31 155.5 $1,175.7 158.2 $1,141.5
-----------------------------------------
----------------------------------------- An analysis of
contributed surplus balances is as follows: For the three months
ended December 31 (in millions) 2006 2005 Restated (see Note 2)
---------------------- Contributed surplus, October 1 $ 51.9 $
243.6 Stock-based compensation expense related to stock option
plans 2.3 1.5 Shares repurchased (21.9) - ----------------------
Contributed surplus, December 31 $ 32.3 $ 245.1
---------------------- ---------------------- For the year ended
December 31 (in millions) 2006 2005 Restated (see Note 2)
---------------------- Contributed surplus, January 1 $ 245.1 $
304.1 Stock-based compensation expense related to stock option
plans 10.3 9.1 Shares repurchased (223.1) (68.1)
---------------------- Contributed surplus, December 31 $ 32.3 $
245.1 ---------------------- ---------------------- The balance
remaining in contributed surplus of $32.3 million relates to
stock-based compensation recognized to date on unexercised options
and will be attributed to share capital as options are exercised.
In June 2006, the Company completed the acquisition of Common
Shares under the previous normal course issuer bid and filed a new
normal course issuer bid to purchase, for cancellation, up to 3.9
million of its outstanding Common Shares. Under the new filing,
share purchases may be made during the 12-month period beginning
June 6, 2006, and ending June 5, 2007. 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 and
retained earnings. 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
three months ended December 31, 2006, 0.9 million shares were
repurchased at an average price of $63.85 (three months ended
December 31, 2005 - no shares were repurchased) and for the year
ended December 31, 2006, 5.0 million shares were repurchased at an
average price of $57.28 (year ended December 31, 2005 - 1.8 million
shares were repurchased at an average price of $45.77). The table
below summarizes the allocation of shares repurchased between share
capital, contributed surplus and retained earnings. For the three
For the year months ended ended December 31 December 31 (in
millions) 2006 2005 2006 2005 -------------------
------------------- Share capital $ 6.0 $ - $ 36.8 $ 12.5
Contributed surplus 21.9 - 223.1 68.1 Retained earnings 26.5 - 26.5
- ------------------- ------------------- $ 54.4 $ - $ 286.4 $ 80.6
------------------- ------------------- -------------------
------------------- 13 Restructuring and environmental remediation
At December 31, 2006, the provision for restructuring and
environmental remediation was $309.0 million (December 31, 2005 -
$398.8 million). The restructuring provision primarily includes
labour liabilities for workforce 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. Set out below is a
reconciliation of CPR's liabilities associated with restructuring
and environmental remediation programs: Amorti- Opening zation
Foreign Closing Balance Accrued of Exchange Balance (in millions)
Oct. 1 (Reduced) Payments Discount Impact Dec. 31
------------------------------------------------------ Three months
ended December 31, 2006 Labour liability for terminations and
severances $ 204.6 (4.5) (15.9) 1.7 1.5 $ 187.4 Other non-labour
liabilities for exit plans 2.0 - (0.6) - - 1.4
------------------------------------------------------ Total
restructuring liability 206.6 (4.5) (16.5) 1.7 1.5 188.8
------------------------------------------------------
Environmental remediation program 125.0 3.1 (10.6) - 2.7 120.2
------------------------------------------------------ Total
restructuring and environmental remediation liability $ 331.6 (1.4)
(27.1) 1.7 4.2 $ 309.0
------------------------------------------------------
------------------------------------------------------ Three months
ended December 31, 2005 Labour liability for terminations and
severances $ 241.5 35.4 (15.9) 2.4 0.2 $ 263.6 Other non-labour
liabilities for exit plans 5.8 - - - - 5.8
------------------------------------------------------ Total
restructuring liability 247.3 35.4 (15.9) 2.4 0.2 269.4
------------------------------------------------------
Environmental remediation program 132.1 7.7 (10.5) - 0.1 129.4
------------------------------------------------------ Total
restructuring and environmental remediation liability $ 379.4 43.1
(26.4) 2.4 0.3 $ 398.8
------------------------------------------------------
------------------------------------------------------ Amorti-
Opening zation Foreign Closing Balance Accrued of Exchange Balance
(in millions) Jan. 1 (Reduced) Payments Discount Impact Dec. 31
------------------------------------------------------ Year ended
December 31, 2006 Labour liability for terminations and severances
$ 263.6 (14.1) (71.8) 9.8 (0.1) $ 187.4 Other non-labour
liabilities for exit plans 5.8 0.7 (5.0) 0.1 (0.2) 1.4
------------------------------------------------------ Total
restructuring liability 269.4 (13.4) (76.8) 9.9 (0.3) 188.8
------------------------------------------------------
Environmental remediation program 129.4 10.5 (19.5) - (0.2) 120.2
------------------------------------------------------ Total
restructuring and environmental remediation liability $ 398.8 (2.9)
(96.3) 9.9 (0.5) $ 309.0
------------------------------------------------------
------------------------------------------------------ Year ended
December 31, 2005 Labour liability for terminations and severances
$ 269.7 33.6 (50.5) 12.0 (1.2) $ 263.6 Other non-labour liabilities
for exit plans 6.1 (0.1) (0.1) 0.1 (0.2) 5.8
------------------------------------------------------ Total
restructuring liability 275.8 33.5 (50.6) 12.1 (1.4) 269.4
------------------------------------------------------
Environmental remediation program 172.9 (22.4) (18.4) - (2.7) 129.4
------------------------------------------------------ Total
restructuring and environmental remediation liability $ 448.7 11.1
(69.0) 12.1 (4.1) $ 398.8
------------------------------------------------------
------------------------------------------------------ In the three
months and year ended December 31, 2006, CPR recorded net
reductions in the restructuring liability of $4.5 million and $13.4
million, respectively, mainly due to experience gains on
termination costs for previously accrued labour initiatives. These
reductions were partially offset by increases in the environmental
remediation liability of $3.1 million and $10.5 million,
respectively. In the three months and year ended December 31, 2005,
CPR recorded net increases in the restructuring liability of $35.4
million and $33.5 million, respectively. These increases were
mostly due to a new labour restructuring provision totalling $44.2
million (see Note 5), partially offset by experience gains on
termination costs for previously accrued labour initiatives. In the
fourth quarter of 2005, CPR also recorded an increase in the
environmental remediation liability of $7.7 million. In the year
ended December 31, 2005, the increase in the restructuring
liability was partially offset by a reduction in the environmental
liability (see Note 4). Amortization of Discount is charged to
income in "Other Charges", "Compensation and Benefits" and
"Purchased Services and Other". New accruals and adjustments to
previous accruals are reflected in "Compensation and Benefits" and
"Purchased Services and Other". 14 Stock-based compensation In
2006, under CPR's stock option plans, the Company issued 1,467,900
options to purchase Common Shares at the weighted average price of
$57.80 per share, based on the closing price on the day prior to
the grant date. In tandem with these options, 509,850 stock
appreciation rights were issued at the weighted average exercise
price of $57.80. Also, all 30,000 unvested Restricted Share Units
which had been issued in 2005, were cancelled in 2006. Pursuant to
the employee plan, options may be exercised upon vesting, which for
most employees 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 December 31: 2006 2005
-------------------------- ------------------------- Weighted
Weighted average average Number of exercise Number of exercise
options price options price --------------------------
------------------------- Outstanding, January 1 7,971,917 $ 32.07
7,752,080 $ 29.32 New options granted 1,467,900 57.80 1,556,400
42.09 Exercised (2,330,664) 28.59 (1,157,752) 27.48 Forfeited/
cancelled (301,509) 39.07 (178,811) 29.80 ------------ ------------
Outstanding, December 31 6,807,644 $ 38.50 7,971,917 $ 32.07
-------------------------- -------------------------
-------------------------- ------------------------- Options
exercisable at December 31 2,918,294 $ 29.64 3,162,807 $ 27.37
-------------------------- -------------------------
-------------------------- ------------------------- Compensation
expense is recognized over the shorter of the vesting period or
employee service 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 three months
For the year ended December 31 ended December 31 2006 2005 2006
2005 Restated Restated (see Note 2) (see Note 2)
-------------------------- ------------------------- Net income (in
millions) As reported $ 145.6 $ 137.1 $ 796.3 $ 543.0 Pro forma $
145.5 $ 137.3 $ 796.1 $ 542.7 --------------------------
------------------------- (in dollars) Basic earnings per share As
reported $ 0.93 $ 0.87 $ 5.06 $ 3.43 Pro forma $ 0.93 $ 0.87 $ 5.06
$ 3.43 -------------------------- ------------------------- Diluted
earnings per share As reported $ 0.92 $ 0.86 $ 5.02 $ 3.39 Pro
forma $ 0.92 $ 0.86 $ 5.01 $ 3.39 --------------------------
------------------------- Under the fair value method, the fair
value of options at the grant date was $12.4 million for options
issued during the year ended December 31, 2006 (year ended December
31, 2005 - $10.1 million). The weighted average fair value
assumptions were approximately: For the year ended December 31 2006
2005 ---------------------- Expected option life (years) 4.50 4.50
Risk-free interest rate 4.07% 3.49% Expected stock price volatility
22% 24% Expected annual dividends per share $0.75 $0.53 Weighted
average fair value of options granted during the year $12.99 $9.66
---------------------- Total Return Swap The Company entered into a
Total Return Swap ("TRS"), effective in May 2006, in order to
reduce the volatility and total cost to the Company over time of
two stock-based compensation programs, share appreciation rights
("SAR") and deferred share units ("DSU"). The value of the TRS
derivative is linked to the market value of the Company's stock and
is intended to mitigate the impact on expenses of share value
movements on SARs and DSUs. "Compensation and Benefits" expense
decreased by $10.8 million and increased by $1.2 million during the
three months and year ended December 31, 2006, respectively, due to
unrealized gains and losses for these swaps recognized in "Deferred
liabilities". These gains and losses substantially offset the costs
and benefits recognized in the SAR and DSU stock-based compensation
programs due to fluctuations in share price during the period the
TRS was in place. 15 Pensions and other benefits The total current
charges for pension and other benefits for the Company's defined
benefit pension plans, defined contribution pension plans and
post-retirement benefits for the three months ended December 31,
2006, was $31.0 million (three months ended December 31, 2005 -
$20.2 million) and for the year ended December 31, 2006, was $122.1
million (year ended December 31, 2005 - $82.6 million). 16
Significant customers During the year ended December 31, 2006, one
customer comprised 11.5% of total revenue (year ended December 31,
2005 - 14.5%). At December 31, 2006, one customer represented 5.6%
of total accounts receivable (December 31, 2005 - 8.0%). 17
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 December 31, 2006, 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. Capital commitments At
December 31, 2006, CPR had multi-year capital commitments of $480.1
million, mainly for locomotive overhaul agreements, in the form of
signed contracts. Payments for these commitments are due in 2007
through 2016. Operating lease commitments At December 31, 2006,
minimum payments under operating leases were estimated at $634.2
million in aggregate, with annual payments in each of the next five
years of: 2007 - $133.2 million; 2008 - $99.2 million; 2009 - $71.4
million; 2010 - $55.8 million; 2011 - $50.4 million. Guarantees The
Company had residual value guarantees on operating lease
commitments of $442.5 million at December 31, 2006. 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. The Company has accrued for all
guarantees that it expects will require payment. At December 31,
2006, these accruals amounted to $6.2 million. All or a portion of
amounts paid under certain guarantees could be recoverable from
other parties or through insurance. Summary of Rail Data
-------------------- Fourth Quarter
---------------------------------------------- 2006 2005(1)
Variance % ---------------------------------------------- Financial
(millions, except --------------------------- per share data)
--------------- Revenues -------- Freight revenue $ 1,151.5 $
1,124.4 $ 27.1 2.4 Other revenue 38.9 42.5 (3.6) (8.5)
---------------------------------- 1,190.4 1,166.9 23.5 2.0
---------------------------------- Operating Expenses, before
-------------------------- other specified items
--------------------- Compensation and benefits 322.2 322.0 0.2 0.1
Fuel 171.2 166.4 4.8 2.9 Materials 53.7 53.1 0.6 1.1 Equipment
rents 47.8 53.0 (5.2) (9.8) Depreciation and amortization 115.9
113.6 2.3 2.0 Purchased services and other 159.5 154.6 4.9 3.2
---------------------------------- 870.3 862.7 7.6 0.9
---------------------------------- Operating income, before other
specified items 320.1 304.2 15.9 5.2 Other charges 6.4 6.8 (0.4)
(5.9) Interest expense 49.8 49.1 0.7 1.4 Income tax expense before
foreign exchange (gains) losses on long-term debt and other
specified items(2) 82.9 77.8 5.1 6.6
---------------------------------- Income before foreign exchange
(gains) losses on long-term debt and other specified items(2) 181.0
170.5 10.5 6.2 ---------------------------------- Foreign exchange
(gains) ------------------------ losses on long-term debt
------------------------ (FX on LTD) ----------- FX on LTD 44.9 0.6
44.3 - Income tax on FX on LTD(3) (9.5) 4.5 (14.0) -
---------------------------------- FX on LTD (net of tax) 35.4 5.1
30.3 - Other specified items --------------------- Special credit
for environmental remediation - - - - Special charge for labour
restructuring - 44.2 (44.2) - Income tax on other specified items -
(15.9) 15.9 - ---------------------------------- Other specified
items (net of tax) - 28.3 (28.3) - Income tax benefits due to
Federal and Provincial income tax rate reductions - - - -
---------------------------------- Net income $ 145.6 $ 137.1 $ 8.5
6.2 ----------------------------------
---------------------------------- Earnings per share (EPS)
------------------------ Basic earnings per share $ 0.93 $ 0.87 $
0.06 6.9 Diluted earnings per share $ 0.92 $ 0.86 $ 0.06 7.0 EPS
before FX on LTD and ------------------------ other specified
items(2) ------------------------ Basic earnings per share $ 1.16 $
1.08 $ 0.08 7.4 Diluted earnings per share $ 1.15 $ 1.07 $ 0.08 7.5
Weighted average number of shares outstanding (millions) 155.8
157.6 (1.8) (1.1) Operating ratio(2)(4)(%) 73.1 73.9 (0.8) - ROCE
before FX on LTD and other specified items (after tax) (2)(4)(%)
10.2 9.4 0.8 - Net debt to net debt plus equity (%) 37.2 39.6 (2.4)
- EBIT before FX on LTD and other specified items(2)(4)(millions) $
313.7 $ 297.4 $ 16.3 5.5 EBITDA before FX on LTD and other
specified items (2)(4)(millions) $ 429.6 $ 411.0 $ 18.6 4.5 Year
---------------------------------------------- 2006 2005(1)
Variance % ---------------------------------------------- Financial
(millions, except --------------------------- per share data)
--------------- Revenues -------- Freight revenue $ 4,427.3 $
4,266.3 $ 161.0 3.8 Other revenue 155.9 125.3 30.6 24.4
---------------------------------- 4,583.2 4,391.6 191.6 4.4
---------------------------------- Operating Expenses, before
-------------------------- other specified items
--------------------- Compensation and benefits 1,327.6 1,322.1 5.5
0.4 Fuel 650.5 588.0 62.5 10.6 Materials 212.9 203.3 9.6 4.7
Equipment rents 181.2 210.0 (28.8) (13.7) Depreciation and
amortization 464.1 445.1 19.0 4.3 Purchased services and other
618.3 621.6 (3.3) (0.5) ---------------------------------- 3,454.6
3,390.1 64.5 1.9 ---------------------------------- Operating
income, before other specified items 1,128.6 1,001.5 127.1 12.7
Other charges 27.8 18.1 9.7 53.6 Interest expense 194.5 204.2 (9.7)
(4.8) Income tax expense before foreign exchange (gains) losses on
long-term debt and other specified items(2) 278.8 250.8 28.0 11.2
---------------------------------- Income before foreign exchange
(gains) losses on long-term debt and other specified items(2) 627.5
528.4 99.1 18.8 ---------------------------------- Foreign exchange
(gains) ------------------------ losses on long-term debt
------------------------ (FX on LTD) ----------- FX on LTD 0.1
(44.7) 44.8 - Income tax on FX on LTD(3) 7.1 22.4 (15.3) -
---------------------------------- FX on LTD (net of tax) 7.2
(22.3) 29.5 - Other specified items --------------------- Special
credit for environmental remediation - (33.9) 33.9 - Special charge
for labour restructuring - 44.2 (44.2) - Income tax on other
specified items - (2.6) 2.6 - ----------------------------------
Other specified items (net of tax) - 7.7 (7.7) - Income tax
benefits due to Federal and Provincial income tax rate reductions
(176.0) - (176.0) - ---------------------------------- Net income $
796.3 $ 543.0 $ 253.3 46.6 ----------------------------------
---------------------------------- Earnings per share (EPS)
------------------------ Basic earnings per share $ 5.06 $ 3.43 $
1.63 47.5 Diluted earnings per share $ 5.02 $ 3.39 $ 1.63 48.1 EPS
before FX on LTD and ------------------------ other specified
items(2) ------------------------ Basic earnings per share $ 3.99 $
3.34 $ 0.65 19.5 Diluted earnings per share $ 3.95 $ 3.30 $ 0.65
19.7 Weighted average number of shares outstanding (millions) 157.3
158.4 (1.1) (0.7) Operating ratio(2)(4)(%) 75.4 77.2 (1.8) - ROCE
before FX on LTD and other specified items (after tax) (2)(4)(%)
10.2 9.4 0.8 - Net debt to net debt plus equity (%) 37.2 39.6 (2.4)
- EBIT before FX on LTD and other specified items(2)(4)(millions) $
1,100.8 $ 983.4 $ 117.4 11.9 EBITDA before FX on LTD and other
specified items (2)(4)(millions) $ 1,564.9 $ 1,428.5 $ 136.4 9.5
(1) Certain comparative period figures have been restated for
retroactive application of a new accounting pronouncement on
stock-based compensation for employees eligible to retire before
vesting date. (2) 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 in the press release. (3) Income tax on FX on LTD is
discussed in the MD&A in the "Other Income Statement Items"
section - "Income Taxes". (4) EBIT: Earnings before interest and
taxes. EBITDA: Earnings before interest, taxes, and depreciation
and amortization. ROCE (after tax): Return on capital employed
(after tax) = earnings before interest (last 12 months) divided by
average net debt plus equity. Operating ratio: Operating expenses,
before other specified items divided by revenues. Fourth Quarter
---------------------------------------------- 2006 2005 Variance %
---------------------------------------------- Commodity Data
-------------- Freight Revenues (millions) - Grain $ 261.6 $ 224.6
$ 37.0 16.5 - Coal 149.3 178.6 (29.3) (16.4) - Sulphur and
fertilizers 122.0 102.6 19.4 18.9 - Forest products 71.2 80.8 (9.6)
(11.9) - Industrial and consumer products 148.5 146.4 2.1 1.4 -
Automotive 74.9 78.8 (3.9) (4.9) - Intermodal 324.0 312.6 11.4 3.6
---------------------------------- Total Freight Revenues $ 1,151.5
$ 1,124.4 $ 27.1 2.4 ---------------------------------- Millions of
Revenue Ton-Miles (RTM) - Grain 8,463 7,427 1,036 13.9 - Coal 4,986
5,657 (671) (11.9) - Sulphur and fertilizers 5,065 4,600 465 10.1 -
Forest products 1,930 2,347 (417) (17.8) - Industrial and consumer
products 4,030 4,249 (219) (5.2) - Automotive 572 602 (30) (5.0) -
Intermodal 7,009 7,094 (85) (1.2)
---------------------------------- Total RTMs 32,055 31,976 79 0.2
---------------------------------- Freight Revenue per RTM (cents)
- Grain 3.09 3.02 0.07 2.3 - Coal 2.99 3.16 (0.17) (5.4) - Sulphur
and fertilizers 2.41 2.23 0.18 8.1 - Forest products 3.69 3.44 0.25
7.3 - Industrial and consumer products 3.68 3.45 0.23 6.7 -
Automotive 13.09 13.09 - - - Intermodal 4.62 4.41 0.21 4.8 Freight
Revenue per RTM 3.59 3.52 0.07 2.0 Carloads (thousands) - Grain
105.0 96.8 8.2 8.5 - Coal 68.6 84.4 (15.8) (18.7) - Sulphur and
fertilizers 48.7 46.1 2.6 5.6 - Forest products 30.7 36.2 (5.5)
(15.2) - Industrial and consumer products 77.1 82.1 (5.0) (6.1) -
Automotive 39.8 43.8 (4.0) (9.1) - Intermodal 292.9 294.2 (1.3)
(0.4) ---------------------------------- Total Carloads 662.8 683.6
(20.8) (3.0) ---------------------------------- Freight Revenue per
Carload - Grain $ 2,491 $ 2,320 $ 171 7.4 - Coal 2,176 2,116 60 2.8
- Sulphur and fertilizers 2,505 2,226 279 12.5 - Forest products
2,319 2,232 87 3.9 - Industrial and consumer products 1,926 1,783
143 8.0 - Automotive 1,882 1,799 83 4.6 - Intermodal 1,106 1,063 43
4.0 Freight Revenue per Carload $ 1,737 $ 1,645 $ 92 5.6 Year
---------------------------------------------- 2006 2005 Variance %
---------------------------------------------- Commodity Data
-------------- Freight Revenues (millions) - Grain $ 904.6 $ 754.5
$ 150.1 19.9 - Coal 592.0 728.8 (136.8) (18.8) - Sulphur and
fertilizers 439.3 447.1 (7.8) (1.7) - Forest products 316.4 333.9
(17.5) (5.2) - Industrial and consumer products 603.8 542.9 60.9
11.2 - Automotive 314.4 298.0 16.4 5.5 - Intermodal 1,256.8 1,161.1
95.7 8.2 ---------------------------------- Total Freight Revenues
$ 4,427.3 $ 4,266.3 $ 161.0 3.8 ----------------------------------
Millions of Revenue Ton-Miles (RTM) - Grain 30,127 26,081 4,046
15.5 - Coal 19,650 23,833 (4,183) (17.6) - Sulphur and fertilizers
17,401 20,080 (2,679) (13.3) - Forest products 8,841 9,953 (1,112)
(11.2) - Industrial and consumer products 16,844 15,936 908 5.7 -
Automotive 2,450 2,361 89 3.8 - Intermodal 27,561 27,059 502 1.9
---------------------------------- Total RTMs 122,874 125,303
(2,429) (1.9) ---------------------------------- Freight Revenue
per RTM (cents) - Grain 3.00 2.89 0.11 3.8 - Coal 3.01 3.06 (0.05)
(1.6) - Sulphur and fertilizers 2.52 2.23 0.29 13.0 - Forest
products 3.58 3.35 0.23 6.9 - Industrial and consumer products 3.58
3.41 0.17 5.0 - Automotive 12.83 12.62 0.21 1.7 - Intermodal 4.56
4.29 0.27 6.3 Freight Revenue per RTM 3.60 3.40 0.20 5.9 Carloads
(thousands) - Grain 382.8 338.7 44.1 13.0 - Coal 281.7 352.3 (70.6)
(20.0) - Sulphur and fertilizers 178.3 201.8 (23.5) (11.6) - Forest
products 135.0 153.7 (18.7) (12.2) - Industrial and consumer
products 316.0 322.2 (6.2) (1.9) - Automotive 165.3 168.1 (2.8)
(1.7) - Intermodal 1,159.0 1,139.4 19.6 1.7
---------------------------------- Total Carloads 2,618.1 2,676.2
(58.1) (2.2) ---------------------------------- Freight Revenue per
Carload - Grain $ 2,363 $ 2,228 $ 135 6.1 - Coal 2,102 2,069 33 1.6
- Sulphur and fertilizers 2,464 2,216 248 11.2 - Forest products
2,344 2,172 172 7.9 - Industrial and consumer products 1,911 1,685
226 13.4 - Automotive 1,902 1,773 129 7.3 - Intermodal 1,084 1,019
65 6.4 Freight Revenue per Carload $ 1,691 $ 1,594 $ 97 6.1 Fourth
Quarter -------------------------------------------- 2006 2005(1)
Variance % -------------------------------------------- Operations
and Productivity --------------------------- Freight gross
ton-miles (GTM) (millions) 62,190 61,769 421 0.7 Revenue ton-miles
(RTM) (millions) 32,055 31,976 79 0.2 Average number of active
employees 15,821 16,684 (863) (5.2) Number of employees at end of
period 15,327 16,295 (968) (5.9) FRA personal injuries per 200,000
employee-hours 2.2 2.3 (0.1) (4.3) FRA train accidents per million
train-miles 1.4 2.0 (0.6) (30.0) Total operating expenses per RTM
(cents) 2.72 2.70 0.02 0.7 Total operating expenses per GTM (cents)
1.40 1.40 - - Compensation and benefits expense per GTM (cents)
0.52 0.52 - - GTMs per average active employee (000) 3,931 3,702
229 6.2 Average train speed - AAR definition (mph) 24.1 22.7 1.4
6.2 Terminal dwell time - AAR definition (hours) 21.7 22.5 (0.8)
(3.6) Car miles per car day 141.7 132.3 9.4 7.1 Average daily total
cars on-line - AAR definition (000) 80.6 82.9 (2.3) (2.8) U.S.
gallons of locomotive fuel per 1,000 GTMs - freight & yard 1.20
1.18 0.02 1.7 U.S. gallons of locomotive fuel consumed - total
(millions)(2) 74.3 72.8 1.5 2.1 Average foreign exchange rate
(US$/Canadian$) 0.887 0.855 0.032 3.7 Average foreign exchange rate
(Canadian$/US$) 1.128 1.170 (0.042) (3.6) Year
-------------------------------------------- 2006 2005(1) Variance
% -------------------------------------------- Operations and
Productivity --------------------------- Freight gross ton-miles
(GTM) (millions) 236,405 242,100 (5,695) (2.4) Revenue ton-miles
(RTM) (millions) 122,874 125,303 (2,429) (1.9) Average number of
active employees 15,947 16,448 (501) (3.0) Number of employees at
end of period 15,327 16,295 (968) (5.9) FRA personal injuries per
200,000 employee-hours 2.0 2.4 (0.4) (16.7) FRA train accidents per
million train-miles 1.4 2.3 (0.9) (39.1) Total operating expenses
per RTM (cents) 2.81 2.71 0.10 3.7 Total operating expenses per GTM
(cents) 1.46 1.40 0.06 4.3 Compensation and benefits expense per
GTM (cents) 0.56 0.55 0.01 1.8 GTMs per average active employee
(000) 14,824 14,719 105 0.7 Average train speed - AAR definition
(mph) 24.8 22.0 2.8 12.7 Terminal dwell time - AAR definition
(hours) 20.8 25.8 (5.0) (19.4) Car miles per car day 137.3 124.0
13.3 10.7 Average daily total cars on-line - AAR definition (000)
80.9 86.1 (5.2) (6.0) U.S. gallons of locomotive fuel per 1,000
GTMs - freight & yard 1.20 1.18 0.02 1.7 U.S. gallons of
locomotive fuel consumed - total (millions)(2) 283.4 285.4 (2.0)
(0.7) Average foreign exchange rate (US$/Canadian$) 0.885 0.825
0.060 7.3 Average foreign exchange rate (Canadian$/US$) 1.130 1.212
(0.082) (6.8) (1) Certain comparative period figures have been
restated for retroactive application of a new accounting
pronouncement on stock-based compensation for employees eligible to
retire before vesting date or have been updated to reflect new
information. (2) Includes gallons of fuel consumed from freight,
yard and commuter service but excludes fuel used in capital
projects and other non-freight activities. DATASOURCE: Canadian
Pacific Railway CONTACT: Media: Leslie Pidcock, Tel.: (403)
319-6878, e-mail: ; Investment Community: Janet Weiss, Assistant
Vice-President Investor Relations, Tel.: (403) 319-3591, e-mail:
Copyright