Canadian Pacific announces 2008 results



    CALGARY, Jan. 27 /CNW/ - Canadian Pacific Railway Limited (TSX/NYSE:   CP)
announced its fourth-quarter and full-year 2008 results today. Net income was
$201 million down from $342 million in fourth-quarter 2007 and diluted
earnings per share were $1.29, down from $2.21 in fourth-quarter 2007. This
decrease is primarily due to a future tax benefit that was recorded in
fourth-quarter 2007. Excluding the impact of foreign exchange on long-term
debt and other specified items, diluted earnings per share were $1.15, down
$0.05 or four per cent. Fourth-quarter operating income (a non-GAAP measure)
was $305 million, essentially flat despite a charge of $23 million in 2008 as
a result of a federal court decision regarding the retroactive adjustment to
the grain revenue entitlement related to the 2007/2008 crop year.

    
    SUMMARY OF FOURTH-QUARTER 2008 COMPARED WITH FOURTH-QUARTER 2007

    -   Total revenues increased nine per cent to $1.3 billion from
        $1.2 billion
    -   Operating expenses were $995 million an increase of 13 per cent from
        $883 million
    -   Excluding foreign exchange gains and losses on long-term debt and
        other specified items: - Diluted earnings per share decreased to
        $1.15 from $1.20; and - Income decreased four per cent to $178
        million from $185 million
    

    At the end of October, following the US Surface Transportation Board's
approval, CP assumed control of the Dakota, Minnesota & Eastern Railroad
(DM&E). For the first ten months of 2008, the DM&E was accounted for on an
equity basis. The results for the final two months are consolidated on a
line-by-line basis.
    The impact of a stronger US dollar in the fourth quarter increased both
freight revenues and operating expenses that were denominated in US currency.
Relative to the US dollar, the Canadian dollar weakened from $0.98 per US
dollar in the fourth quarter of 2007 to $1.17 per US dollar on average during
the fourth quarter of 2008.
    Freight revenues were up 10 per cent in the fourth quarter on foreign
exchange, continued pricing strength inclusive of fuel recoveries, and DM&E
revenues for the last two months of the quarter and partially offset by the
retroactive grain adjustment and lower volumes. Revenues from industrial and
consumer products increased 37 per cent, with grain revenues increasing 19 per
cent and coal and automotive both improving six per cent. Intermodal was flat
year-over-year. These gains were offset somewhat by decreases in forest
products and sulphur and fertilizers of seven and three per cent respectively.
    Operating expenses increased 13 per cent in the fourth quarter driven
mainly by foreign exchange and the inclusion of two months of DM&E expenses,
partially offset by declining volumes and the results of CP's cost management
actions.

    SUMMARY OF FULL YEAR 2008 COMPARED WITH FULL YEAR 2007

    Net income for full year 2008 was $619 million compared with $946 million
in 2007. Diluted earnings per share were $3.98, down from $6.08. This decrease
was mostly the result of a large foreign exchange gain on long-term debt and a
large future income tax benefit, both recorded in 2007, and lower operating
income in 2008.

    
    -   Total revenues increased five per cent to $4.9 billion from
        $4.7 billion
    -   Operating expenses increased nine per cent to $3.9 billion from
        $3.5 billion
    -   Free cash flow (a non-GAAP measure) was $231 million
    -   Excluding foreign exchange gains and losses on long-term debt and
        other specified items: - Diluted earnings per share were $4.06, down
        six per cent from $4.32; and - Income decreased six per cent to $632
        million from $673 million
    

    2009 OUTLOOK

    Capital investment in 2009 is expected to be in the range of $800 million
to $820 million which is a reduction of approximately $200 million when
compared with the combined CP and DM&E cash capital investment for the full
year 2008. This 2009 outlook assumes an average currency exchange rate of $1.
25 per U.S. dollar (US$0.80).
    CP is updating its current outlook for upcoming pension contributions.
Based on preliminary calculations and subject to filing a January 1, 2009
valuation of the main Canadian pension plan with the applicable regulatory
agency, CP expects that aggregate contributions to all of its defined benefit
pension plans will increase from C$95 million in 2008 to a range of C$150
million to C$195 million for 2009. CP estimates its minimum required
contributions for 2010 to be in the range of C$295 million to C$345 million.
The lower end of the ranges are based on the passing into law of the temporary
funding relief proposed by the Canadian federal government in November 2008
and the upper ends do not include any funding relief. The estimated
contributions for 2010 assume the plans' investments in public equities, real
estate and infrastructure funds achieve, in aggregate, a 10 per cent return in
2009, and long Canada bond yields as at December 31, 2009 are 4.0 per cent
(versus 3.45 per cent at December 31, 2008).

    
    FOREIGN EXCHANGE GAINS AND LOSSES ON LONG-TERM DEBT AND OTHER SPECIFIED
    ITEMS
    

    CP had a net foreign exchange loss of $4 million on long-term debt (a
gain of $22 million after tax) in the fourth quarter of 2008, compared with a
net foreign exchange gain on long-term debt of $8 million ($11 million after
tax) in the fourth quarter of 2007.
    For the full year 2008, CP had a net foreign exchange loss on long-term
debt of $16 million (a gain of $22 million after tax) compared with a net
foreign exchange gain of $170 million ($126 million after tax) for the full
year 2007.
    As part of a consolidated financing strategy, CP structures its U.S.
dollar long-term debt in different taxing jurisdictions. As well, a portion of
this debt is designated as a net investment hedge against net investment in
U.S. subsidiaries. As a result, the tax on foreign exchange gains and losses
on long-term debt in different taxing jurisdictions can vary significantly.
    At December 31, 2008 CP held investments in Canadian Non-Bank Asset
Backed Commercial Paper (ABCP) with an original cost of approximately $144
million. In 2007, CP adjusted the estimated fair value of the investments and
took a charge of $22 million ($15 million after tax) and classified the
investments as long-term investments. In 2008, in recognition of changing
market conditions impacting these investments, CP further adjusted the
estimated fair value of the investments and took an additional charge of $49
million ($35 million after tax).
    Continuing uncertainties regarding the value of the assets which underlie
the ABCP, the amount and timing of cash flows and the outcome of the
restructuring process could give rise to a material change in the value of the
Company's investments in ABCP which would impact the Company's near-term
earnings.
    In fourth-quarter 2007, CP recorded a future income tax benefit of $146
million as an other specified item. For the full year 2007, a future income
tax benefit of $163 million was recorded as an other specified item.

    Presentation of non-GAAP earnings

    CP presents non-GAAP earnings measures in this news release to provide an
additional basis for evaluating underlying earnings and liquidity trends in
its business that can be compared with prior periods' results of operations.
When foreign exchange gains and losses on long-term debt and other specified
items are excluded from diluted earnings per share, income and income tax
expense, these are non-GAAP measures. Additional non-GAAP measures are free
cash and operating income.
    These non-GAAP earnings measures exclude foreign currency translation
effects on long-term debt, which can be volatile and short term. 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. In addition, these non-GAAP
measures exclude other specified items (as described in this news release)
that are not among CP's normal ongoing revenues and operating expenses.
    Revenues less operating expenses are referred to as "Operating Income".
    Free cash, as referred to in this news release, is calculated as cash
provided by operating activities, less cash used in investing activities and
dividends paid, adjusted for the acquisition of DM&E, and changes in cash and
cash equivalent balances resulting from foreign exchange fluctuations, and
excluding changes in the accounts receivable securitization program of $120
million, which was terminated in the second quarter of 2008, and the
investment in ABCP. Free cash is adjusted for the DM&E acquisition and the
investment in ABCP, as these are not indicative of normal day-to-day
investments in CP's asset base. The securitization of accounts receivable is a
financing transaction, which is excluded to clarify the nature of the use of
free cash. As each of these amounts are presented in the Statement of
Consolidated Cash Flows, with the exception of the accounts receivable
securitization program noted above, no reconciliation of free cash to changes
in Cash and Cash Equivalents has been provided.
    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.
    The non-GAAP earnings measures 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 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 North American
and global economic and business conditions, including the potential adverse
impact of the current global credit crisis; risks in agricultural production
such as weather conditions and insect populations; the availability and price
of energy commodities; the effects of competition and pricing pressures;
industry capacity; shifts in market demand; changes in laws and regulations,
including regulation of rates; changes in taxes and tax rates; potential
increases in maintenance and operating costs; uncertainties of litigation;
labour disputes; risks and liabilities arising from derailments;
transportation of dangerous goods, timing of completion of capital and
maintenance projects; currency and interest rate fluctuations; effects of
changes in market conditions and discount rates on the financial position of
pension plans and investments; and various events that could disrupt
operations, including severe weather 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.
    Except as required by law, CP undertakes no obligation to update publicly
or otherwise revise any forward-looking information, whether as a result of
new information, future events or otherwise.

    Canadian Pacific, through the ingenuity of its employees located across
Canada and in the United States, remains committed to being the safest, 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. 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 of Canadian dollars, except per share data)

                                                        For the three months
                                                          ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Revenues
      Freight                                        $  1,257.8   $  1,142.6
      Other                                                41.9         45.7
                                                     ------------------------
                                                        1,299.7      1,188.3
    Operating expenses
      Compensation and benefits                           349.4        308.4
      Fuel                                                239.5        196.3
      Materials                                            45.9         47.9
      Equipment rents                                      45.8         45.1
      Depreciation and amortization                       125.9        116.3
      Purchased services and other                        188.3        168.8
                                                     ------------------------
                                                          994.8        882.8
                                                     ------------------------
    Revenues less operating expenses                      304.9        305.5

    Equity income in Dakota, Minnesota
     & Eastern Railroad Corporation (Note 2)               10.4         12.3
    Other charges                                           8.3          8.5
    Foreign exchange losses (gains) on
     long-term debt                                         3.9         (8.3)
    Interest expense                                       73.8         63.4
    Income tax expense (recovery)                          28.7        (88.1)
                                                     ------------------------

    Net income                                       $    200.6   $    342.3
                                                     ------------------------
                                                     ------------------------

    Basic earnings per share                         $     1.30   $     2.23
                                                     ------------------------
                                                     ------------------------

    Diluted earnings per share                       $     1.29   $     2.21
                                                     ------------------------
                                                     ------------------------

    See notes to interim consolidated financial information.



    STATEMENT OF CONSOLIDATED INCOME
    (in millions of Canadian dollars, except per share data)

                                                             For the year
                                                           ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Revenues
      Freight                                        $  4,814.8   $  4,555.2
      Other                                               116.8        152.4
                                                     ------------------------
                                                        4,931.6      4,707.6
    Operating expenses
      Compensation and benefits                         1,305.5      1,284.2
      Fuel                                              1,005.8        746.8
      Materials                                           217.2        215.5
      Equipment rents                                     182.2        207.5
      Depreciation and amortization                       491.3        472.0
      Purchased services and other                        672.2        617.4
                                                     ------------------------
                                                        3,874.2      3,543.4
                                                     ------------------------
    Revenues less operating expenses                    1,057.4      1,164.2

    Equity income in Dakota, Minnesota
     & Eastern Railroad Corporation (Note 2)               51.3         12.3
    Other charges                                          22.7         29.6
    Change in estimated fair value of Canadian
     third party asset-backed commercial paper             49.4         21.5
    Foreign exchange losses (gains) on
     long-term debt                                        16.3       (169.8)
    Interest expense                                      261.1        204.3
    Income tax expense                                    140.2        144.7
                                                     ------------------------

    Net income                                       $    619.0   $    946.2
                                                     ------------------------
                                                     ------------------------

    Basic earnings per share                         $     4.03   $     6.14
                                                     ------------------------
                                                     ------------------------

    Diluted earnings per share                       $     3.98   $     6.08
                                                     ------------------------
                                                     ------------------------

    See notes to interim consolidated financial information.



    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    (in millions of Canadian dollars)

                                                        For the three months
                                                          ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Comprehensive income

    Net income                                       $    200.6   $    342.3

    Other comprehensive income

      Unrealized foreign exchange gain (loss) on:
        Translation of the net investment in
         U.S. subsidiaries                                210.3         (7.0)
        Translation of U.S. dollar-denominated
         long-term debt designated as a hedge of
         the net investment in U.S. subsidiaries         (204.7)         3.5

      Net change in losses on derivatives
       designated as cash flow hedges                     (12.7)       (17.9)
                                                     ------------------------

      Other comprehensive loss before income taxes         (7.1)       (21.4)

      Income tax recovery                                  31.9          7.2
                                                     ------------------------

    Other comprehensive income (loss)                      24.8        (14.2)
                                                     ------------------------

    Comprehensive income                             $    225.4   $    328.1
                                                     ------------------------
                                                     ------------------------



                                                             For the year
                                                           ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Comprehensive income

    Net income                                       $    619.0   $    946.2

    Other comprehensive income

      Unrealized foreign exchange gain (loss) on:
        Translation of the net investment in
         U.S. subsidiaries                                307.5        (78.4)
        Translation of U.S. dollar-denominated
         long-term debt designated as a hedge of
         the net investment in U.S. subsidiaries         (297.5)        71.0

      Net change in losses on derivatives
       designated as cash flow hedges                     (16.1)       (36.8)
                                                     ------------------------

      Other comprehensive loss before income taxes         (6.1)       (44.2)

      Income tax recovery                                  44.8          3.4
                                                     ------------------------

    Other comprehensive income (loss)                      38.7        (40.8)
                                                     ------------------------

    Comprehensive income                             $    657.7   $    905.4
                                                     ------------------------
                                                     ------------------------

    See notes to interim consolidated financial information.



    CONSOLIDATED BALANCE SHEET
    (in millions of Canadian dollars)

                                                    December 31  December 31
                                                        2008         2007
                                                   --------------------------
                                                           (unaudited)
    Assets
    Current assets
      Cash and cash equivalents                      $    117.6   $    378.1
      Accounts receivable and other current assets        713.1        542.8
      Materials and supplies                              215.8        179.5
      Future income taxes                                  76.5         67.3
                                                   --------------------------
                                                        1,123.0      1,167.7

    Investments (Note 2)                                  151.1      1,668.6
    Net properties                                     12,576.9      9,293.1
    Assets held for sale                                   39.6         17.0
    Other assets and deferred charges                   1,342.0      1,218.6
    Goodwill and intangible assets (Note 2)               237.2            -
                                                   --------------------------
    Total assets                                     $ 15,469.8   $ 13,365.0
                                                   --------------------------
                                                   --------------------------
    Liabilities and shareholders' equity
    Current liabilities
      Short-term borrowing                           $    150.1   $    229.7
      Accounts payable and accrued
       liabilities (Note 5)                             1,034.9        980.8
      Income and other taxes payable                       42.2         68.8
      Dividends payable                                    38.1         34.5
      Long-term debt maturing within one year
       (Note 3)                                            44.0         31.0
                                                   --------------------------
                                                        1,309.3      1,344.8

    Deferred liabilities                                  865.2        714.6
    Long-term debt (Note 3)                             4,685.8      4,146.2
    Future income taxes                                 2,616.1      1,701.5

    Shareholders' equity
      Share capital                                     1,220.8      1,188.6
      Contributed surplus                                  40.2         42.4
      Accumulated other comprehensive income               78.3         39.6
      Retained income                                   4,654.1      4,187.3
                                                   --------------------------
                                                        5,993.4      5,457.9
                                                   --------------------------
    Total liabilities and shareholders' equity       $ 15,469.8   $ 13,365.0
                                                   --------------------------
                                                   --------------------------

    Certain of the 2007 comparative figures have been reclassified in order
    to be consistent with the 2008 presentation.

    See notes to interim consolidated financial information.



    STATEMENT OF CONSOLIDATED CASH FLOWS
    (in millions of Canadian dollars)

                                                        For the three months
                                                          ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Operating activities
      Net income                                     $    200.6   $    342.3
      Add (deduct) items not affecting cash:
        Depreciation and amortization                     125.9        116.3
        Future income taxes                               102.8       (129.6)
        Foreign exchange losses (gains)
         on long-term debt                                  3.9         (8.3)
        Amortization of deferred charges                    2.7          2.9
        Equity income, net of cash received               (11.6)       (10.1)
      Restructuring and environmental
       remediation payments                               (17.0)       (22.0)
      Other operating activities, net                      12.5         30.2
      Change in non-cash working capital balances
       related to operations                               38.2         58.8
                                                     ------------------------
      Cash provided by operating activities               458.0        380.5
                                                     ------------------------
    Investing activities
      Additions to properties                            (285.5)      (324.6)
      Additions to investments and other assets
       (Note 4)                                            (9.5)        (4.7)
      Reductions in investments and other assets
       (Note 4)                                           257.6         21.5
      Additions to investment in Dakota, Minnesota
       & Eastern Railroad Corporation (Note 2)             (0.3)    (1,492.6)
      Net (costs)proceeds from disposal of
       transportation properties                           (4.7)         5.6
                                                     ------------------------
      Cash used in investing activities                   (42.4)    (1,794.8)
                                                     ------------------------
    Financing activities
      Dividends paid                                      (38.1)       (34.5)
      Issuance of CP Common Shares                          1.4          1.2
      Net (decrease) increase in short-term
       borrowing                                         (129.9)       229.7
      Issuance of long-term debt                              -      1,260.2
      Repayment of long-term debt (Note 3)               (252.6)        (3.9)
                                                     ------------------------
      Cash (used in) provided by financing
       activities                                        (419.2)     1,452.7
                                                     ------------------------

    Effect of foreign exchange fluctuations on U.S.
     dollar-denominated cash and cash equivalents          23.3          0.5
                                                     ------------------------
    Cash position
      Increase in cash and cash equivalents                19.7         38.9
      Cash and cash equivalents at
       beginning of period                                 97.9        339.2
                                                     ------------------------
      Cash and cash equivalents at end of period     $    117.6   $    378.1
                                                     ------------------------
                                                     ------------------------

    Certain of the 2007 comparative figures have been reclassified in order
    to be consistent with the 2008 presentation.

    See notes to interim consolidated financial information.



    STATEMENT OF CONSOLIDATED CASH FLOWS
    (in millions of Canadian dollars)

                                                             For the year
                                                           ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Operating activities
      Net income                                     $    619.0   $    946.2
      Add (deduct) items not affecting cash:
        Depreciation and amortization                     491.3        472.0
        Future income taxes                               160.6         38.7
        Change in estimated fair value of Canadian
         third party asset-backed commercial paper         49.4         21.5
        Foreign exchange losses (gains) on
         long-term debt                                    16.3       (169.8)
        Amortization of deferred charges                   10.1         12.1
        Equity income, net of cash received               (46.6)       (10.1)
      Restructuring and environmental
       remediation payments                               (53.4)       (61.0)
      Other operating activities, net                     (35.4)        33.6
      Change in non-cash working capital balances
       related to operations                             (132.2)        50.3
                                                     ------------------------
      Cash provided by operating activities             1,079.1      1,333.5
                                                     ------------------------
    Investing activities
      Additions to properties                            (892.3)      (893.2)
      Additions to investments and other assets
       (Note 4)                                          (222.5)       (19.2)
      Reductions in investments and other assets
       (Note 4)                                           257.6         19.4
      Additions to investment in Dakota, Minnesota
       & Eastern Railroad Corporation (Note 2)             (8.6)    (1,492.6)
      Net proceeds from disposal of transportation
       properties                                           9.7         14.9
      Investment in Canadian third party
       asset-backed commercial paper                          -       (143.6)
                                                     ------------------------
      Cash used in investing activities                  (856.1)    (2,514.3)
                                                     ------------------------
    Financing activities
      Dividends paid                                     (148.7)      (133.1)
      Issuance of CP Common Shares                         19.7         30.4
      Purchase of CP Common Shares                            -       (231.1)
      Net (decrease) increase in short-term
       borrowing                                          (79.6)       229.7
      Issuance of long-term debt                        1,068.7      1,745.3
      Repayment of long-term debt (Note 3)             (1,340.7)      (187.7)
      Settlement of treasury rate lock                    (30.9)           -
                                                     ------------------------
      Cash (used in) provided by financing
       activities                                        (511.5)     1,453.5
                                                     ------------------------

    Effect of foreign exchange fluctuations on U.S.
     dollar-denominated cash and cash equivalents          28.0        (18.9)
                                                     ------------------------
    Cash position
      (Decrease) increase in cash and
       cash equivalents                                  (260.5)       253.8
      Cash and cash equivalents at
       beginning of period                                378.1        124.3
                                                     ------------------------
      Cash and cash equivalents at end of period     $    117.6   $    378.1
                                                     ------------------------
                                                     ------------------------

    Certain of the 2007 comparative figures have been reclassified in order
    to be consistent with the 2008 presentation.

    See notes to interim consolidated financial information.



    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
    (in millions of Canadian dollars)

                                                        For the three months
                                                          ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Share capital
    Balance, beginning of period                     $  1,218.9   $  1,187.2

    Shares issued under stock option plans                  1.9          1.4
                                                     ------------------------
    Balance, end of period                              1,220.8      1,188.6
                                                     ------------------------
    Contributed surplus
    Balance, beginning of period                           41.3         40.6

    Stock compensation expense                             (0.5)         1.1

    Stock compensation related to shares
     issued under stock option plans                       (0.6)         0.7
                                                     ------------------------
    Balance, end of period                                 40.2         42.4
                                                     ------------------------
    Accumulated other comprehensive income
    Balance, beginning of period                           53.5         53.8

    Other comprehensive income (loss)                      24.8        (14.2)
                                                     ------------------------
    Balance, end of period                                 78.3         39.6
                                                     ------------------------
    Retained income
    Balance, beginning of period                        4,491.6      3,879.5

    Net income for the period                             200.6        342.3

    Dividends                                             (38.1)       (34.5)
                                                     ------------------------
    Balance, end of period                              4,654.1      4,187.3
                                                     ------------------------

    Total accumulated other comprehensive income
     and retained income                                4,732.4      4,226.9
                                                     ------------------------
                                                     ------------------------

    Shareholders' equity, end of period              $  5,993.4   $  5,457.9
                                                     ------------------------
                                                     ------------------------

    See notes to interim consolidated financial information.



    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
    (in millions of Canadian dollars)

                                                             For the year
                                                           ended December 31
                                                           2008         2007
                                                     ------------------------
                                                             (unaudited)
    Share capital
    Balance, beginning of period                     $  1,188.6   $  1,175.7

    Shares issued under stock option plans                 32.2         37.4

    Shares purchased                                          -        (24.5)
                                                     ------------------------
    Balance, end of period                              1,220.8      1,188.6
                                                     ------------------------
    Contributed surplus
    Balance, beginning of period                           42.4         32.3

    Stock compensation expense                              7.8         10.1

    Stock compensation related to shares
     issued under stock option plans                      (10.0)           -
                                                     ------------------------
    Balance, end of period                                 40.2         42.4
                                                     ------------------------
    Accumulated other comprehensive income
    Balance, beginning of period                           39.6         66.4

    Adjustment for change in accounting policy                -         14.0
                                                     ------------------------
    Adjusted balance, beginning of period                  39.6         80.4

    Other comprehensive income (loss)                      38.7        (40.8)
                                                     ------------------------
    Balance, end of period                                 78.3         39.6
                                                     ------------------------
    Retained income
    Balance, beginning of period                        4,187.3      3,582.1

    Adjustment for change in accounting policy                -          4.0
                                                     ------------------------
    Adjusted balance, beginning of period               4,187.3      3,586.1

    Net income for the period                             619.0        946.2

    Shares purchased                                          -       (206.6)

    Dividends                                            (152.2)      (138.4)
                                                     ------------------------
    Balance, end of period                              4,654.1      4,187.3
                                                     ------------------------

    Total accumulated other comprehensive income
     and retained income                                4,732.4      4,226.9
                                                     ------------------------
                                                     ------------------------

    Shareholders' equity, end of period              $  5,993.4   $  5,457.9
                                                     ------------------------
                                                     ------------------------

    See notes to interim consolidated financial information.



    NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
    DECEMBER 31, 2008
    (unaudited)

    1   Basis of presentation

        This unaudited interim consolidated financial information and notes
        has been prepared using accounting policies that are consistent with
        the policies used in preparing Canadian Pacific Railway Limited's
        ("CP", "the Company" or "Canadian Pacific Railway") 2007 annual
        consolidated financial statements, except for disclosures. They do
        not include all disclosures required under Generally Accepted
        Accounting Principles ("GAAP") for annual financial statements and
        should be read in conjunction with the annual consolidated financial
        statements.

        CP's operations can be affected by seasonal fluctuations such as
        changes in customer demand and weather-related issues. This
        seasonality could impact quarter-over-quarter comparisons.

    2   Investments

        Dakota, Minnesota & Eastern Railroad Corporation

        Dakota, Minnesota and Eastern Railroad Corporation ("DM&E") was
        acquired on October 4, 2007 and is wholly owned by the Company. The
        purchase was subject to review and approval by the U.S. Surface
        Transportation Board ("STB"), during which time the shares of DM&E
        were placed in a voting trust. The STB approved the purchase
        effective on October 30, 2008, at which time the Company assumed
        control of the DM&E.

        The Company accounted for its investment in DM&E using the equity
        method until the acquisition was approved by the STB and the Company
        assumed control. Equity income in DM&E for the period of October 4,
        2007 to December 31, 2007 of $12.3 million and equity income in 2008
        earned prior to STB approval effective October 30, 2008 of
        $51.3 million, are recorded in "Equity income in Dakota, Minnesota
        and Eastern Railroad Corporation" on the Statement of Consolidated
        Income. Subsequent to October 30, 2008 the results of DM&E are
        consolidated on a line-by-line basis.

        The DM&E was purchased for $1.5 billion including goodwill of
        $180 million as at December 31, 2008. Future contingent payments of
        up to approximately US$1.05 billion plus certain interest and
        inflationary adjustments may become payable up to December 31, 2025
        upon achievement of certain milestones. The contingent payments would
        be accounted for as an increase in the purchase price.

        Intangible assets recognized as part of the purchase price allocation
        have amortization periods for the various categories of intangible
        assets that range from 4 to 100 years. Net of amortization of
        $2 million recognized since the date of acquisition, intangible
        assets total $57 million as at December 31, 2008. Goodwill and
        intangible assets are included on the Consolidated Balance Sheet as
        at December 31, 2008 in "Goodwill and intangible assets".

    3   Long-term debt

        During the fourth quarter of 2008, the Company repaid the remaining
        US$203.0 million of bridge financing obtained in 2007 for the
        purchase of the DM&E with cash of $248.0 million.

    4   Additions to/Reductions in investments and other assets

        Additions to/Reductions in investments and other assets includes the
        acquisition of locomotive and freight car assets which were purchased
        in anticipation of a sale and lease back arrangement with a financial
        institution. For the three months ended December 31, 2008,
        $9.5 million in assets were acquired and $257.6 million were sold;
        and for the year ended December 31, 2008, $222.5 million in assets
        were acquired and $257.6 million were sold. For the three months
        ended December 31, 2007, $4.7 million in assets were acquired and
        $19.2 million were sold; and for the year ended December 31, 2007,
        $19.2 million in assets were acquired and $20.2 million were sold.
        For the three months and year ended December 31, 2008, a gain of
        $26.9 million was realized in these sale and leaseback arrangements
        which will be deferred and amortized over the term of the related
        leases which range from 18 to 20 years.

    5   Grain Revenues

        During the three months ended March 31, 2008, the Canadian
        Transportation Agency announced a decision directing a downward
        adjustment of the railway maximum revenue entitlement for movement of
        regulated grain under the Canada Transportation Act, for the period
        from August 1, 2007 to July 31, 2008. The Company appealed the
        decision to the Federal Court of Appeal. In late November 2008, the
        Federal Court of Appeal released its ruling dismissing the Company's
        appeal. As a result of the downward adjustment to the maximum revenue
        entitlement, the Company exceeded its revenue entitlement in the
        2007-2008 crop year by approximately $33.8 million and must pay this
        amount plus a 15% penalty of approximately $5.1 million by
        January 30, 2009. As a result, the Company increased its provision in
        the fourth quarter for this liability by $23.0 million to
        $38.9 million.



                           Summary of Rail Data(1)
                           -----------------------
       (Including Reconciliation of non-GAAP earnings to GAAP earnings)

                                                Fourth Quarter(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Financial (millions, except
    ---------------------------
     per share data and ratios)(1)
     -----------------------------

    Revenues
    --------
      Freight revenue             $ 1,257.8  $ 1,142.6  $   115.2       10.1
      Other revenue                    41.9       45.7       (3.8)      (8.3)
                                 ---------------------------------
                                    1,299.7    1,188.3      111.4        9.4
                                 ---------------------------------
    Operating expenses
    ------------------
      Compensation and benefits       349.4      308.4       41.0       13.3
      Fuel                            239.5      196.3       43.2       22.0
      Materials                        45.9       47.9       (2.0)      (4.2)
      Equipment rents                  45.8       45.1        0.7        1.6
      Depreciation and
       amortization                   125.9      116.3        9.6        8.3
      Purchased services
       and other                      188.3      168.8       19.5       11.6
                                 ---------------------------------
                                      994.8      882.8      112.0       12.7
                                 ---------------------------------
    Operating income(2)(4)            304.9      305.5       (0.6)      (0.2)

      Equity income (net of tax)
       in Dakota, Minnesota &
       Eastern Railroad
       Corporation (DM&E)              10.4       12.3       (1.9)     (15.4)
      Other charges                     8.3        8.5       (0.2)      (2.4)
      Interest expense                 73.8       63.4       10.4       16.4
      Income tax expense
       before foreign exchange
       (gains) losses on
       long-term debt and other
       specified items(2)              54.9       60.8       (5.9)      (9.7)
                                 ---------------------------------
      Income before foreign
       exchange (gains) losses
       on long-term debt and
       other specified items(2)       178.3      185.1       (6.8)      (3.7)
                                 ---------------------------------

    Foreign exchange (gains)
    ------------------------
     losses on long-term debt
     ------------------------
     (FX on LTD)
     -----------
      FX on LTD                         3.9       (8.3)      12.2          -
      Income tax on FX on LTD(3)      (26.2)      (3.1)     (23.1)         -
                                 ---------------------------------
      FX on LTD (net of tax)          (22.3)     (11.4)     (10.9)         -

    Other specified items
    ---------------------
      Change in estimated fair
       value of Canadian third
       party asset-backed
       commercial paper (ABCP)            -          -          -          -
      Income tax on special
       charges                            -          -          -          -
                                 ---------------------------------
      Change in estimated fair
       value of ABCP (net of tax)         -          -          -          -
      Income tax benefits due
       to rate reductions on
       opening future income
       tax balances                       -     (145.8)     145.8          -
                                 ---------------------------------
    Net income                    $   200.6  $   342.3  $  (141.7)     (41.4)
                                 ---------------------------------
                                 ---------------------------------
    Earnings per share (EPS)
    ------------------------
      Basic earnings per share
       as determined by GAAP      $    1.30  $    2.23  $   (0.93)     (41.7)
      Diluted earnings per share
       as determined by GAAP      $    1.29  $    2.21  $   (0.92)     (41.6)
      Diluted EPS, related to FX
       on LTD, net of tax             (0.14)     (0.07)     (0.07)         -
      Diluted EPS, related to
       other specified items,
       net of tax                         -      (0.94)      0.94          -
                                 ---------------------------------
      Diluted earnings per share,
       before FX on LTD and
       other specified items(2)   $    1.15  $    1.20  $   (0.05)      (4.2)
    Weighted average (avg)
     number of shares
     outstanding (millions)           153.8      153.2        0.6        0.4
    Weighted avg number of
     diluted shares
     outstanding (millions)           155.0      154.6        0.4        0.3
    Operating ratio(4) (%)             76.5       74.3        2.2          -



                                                    Year(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Financial (millions, except
    ---------------------------
     per share data and ratios)(1)
     -----------------------------

    Revenues
    --------
      Freight revenue             $ 4,814.8  $ 4,555.2  $   259.6        5.7
      Other revenue                   116.8      152.4      (35.6)     (23.4)
                                 ---------------------------------
                                    4,931.6    4,707.6      224.0        4.8
                                 ---------------------------------
    Operating expenses
    ------------------
      Compensation and benefits     1,305.5    1,284.2       21.3        1.7
      Fuel                          1,005.8      746.8      259.0       34.7
      Materials                       217.2      215.5        1.7        0.8
      Equipment rents                 182.2      207.5      (25.3)     (12.2)
      Depreciation and
       amortization                   491.3      472.0       19.3        4.1
      Purchased services
       and other                      672.2      617.4       54.8        8.9
                                 ---------------------------------
                                    3,874.2    3,543.4      330.8        9.3
                                 ---------------------------------
    Operating income(2)(4)          1,057.4    1,164.2     (106.8)      (9.2)

      Equity income (net of tax)
       in Dakota, Minnesota &
       Eastern Railroad
       Corporation (DM&E)              51.3       12.3       39.0      317.1
      Other charges                    22.7       29.6       (6.9)     (23.3)
      Interest expense                261.1      204.3       56.8       27.8
      Income tax expense
       before foreign exchange
       (gains) losses on
       long-term debt and other
       specified items(2)             193.4      269.8      (76.4)     (28.3)
                                 ---------------------------------
      Income before foreign
       exchange (gains) losses
       on long-term debt and
       other specified items(2)       631.5      672.8      (41.3)      (6.1)
                                 ---------------------------------

    Foreign exchange (gains)
    ------------------------
     losses on long-term debt
     ------------------------
     (FX on LTD)
     -----------
      FX on LTD                        16.3     (169.8)     186.1          -
      Income tax on FX on LTD(3)      (38.6)      44.3      (82.9)         -
                                 ---------------------------------
      FX on LTD (net of tax)          (22.3)    (125.5)     103.2          -

    Other specified items
    ---------------------
      Change in estimated fair
       value of Canadian third
       party asset-backed
       commercial paper (ABCP)         49.4       21.5       27.9          -
      Income tax on special
       charges                        (14.6)      (6.5)      (8.1)         -
                                 ---------------------------------
      Change in estimated fair
       value of ABCP (net of tax)      34.8       15.0       19.8          -
      Income tax benefits due
       to rate reductions on
       opening future income
       tax balances                       -     (162.9)     162.9          -
                                 ---------------------------------
    Net income                    $   619.0  $   946.2  $  (327.2)     (34.6)
                                 ---------------------------------
                                 ---------------------------------
    Earnings per share (EPS)
    ------------------------
      Basic earnings per share
       as determined by GAAP      $    4.03  $    6.14  $   (2.11)     (34.4)
      Diluted earnings per share
       as determined by GAAP      $    3.98  $    6.08  $   (2.10)     (34.5)
      Diluted EPS, related to FX
       on LTD, net of tax             (0.14)     (0.81)      0.67          -
      Diluted EPS, related to
       other specified items,
       net of tax                      0.22      (0.95)      1.17          -
                                 ---------------------------------
      Diluted earnings per share,
       before FX on LTD and
     other specified items(2)     $    4.06  $    4.32  $   (0.26)      (6.0)
    Weighted average (avg)
     number of shares
     outstanding (millions)           153.7      154.0       (0.3)      (0.2)
    Weighted avg number of
     diluted shares
     outstanding (millions)           155.5      155.6       (0.1)      (0.1)
    Operating ratio(4) (%)             78.6       75.3        3.3          -


    (1) The 2008 figures include the results of the DM&E on an equity pickup
        basis through October 29, 2008 and on a fully consolidated basis for
        the period from October 30 through December 31, 2008.
    (2) These earnings measures have no standardized meanings prescribed by
        GAAP and are unlikely to  be comparable to similar measures of other
        companies.
        See note on non-GAAP earnings measures attached to commentary.
    (3) Income tax on FX on LTD is discussed in the Third Quarter 2008 MD&A
        in the "Other Income Statement Items" section - "Income Taxes".
    (4) Operating income  is a non-GAAP term which represents "Revenue less
        operating expenses".
        Operating ratio is the percentage derived by dividing operating
        expenses by total revenues.




                                                Fourth Quarter(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Commodity Data
    --------------
    Freight Revenues
     (millions)
    - Grain                       $   307.1  $   257.5  $    49.6       19.3
    - Coal                            139.5      131.2        8.3        6.3
    - Sulphur and fertilizers         117.5      121.2       (3.7)      (3.1)
    - Forest products                  57.2       61.5       (4.3)      (7.0)
    - Industrial and consumer
       products                       216.0      157.9       58.1       36.8
    - Automotive                       81.6       77.0        4.6        6.0
    - Intermodal                      338.9      336.3        2.6        0.8
                                 ---------------------------------
    Total Freight Revenues        $ 1,257.8  $ 1,142.6  $   115.2       10.1
                                 ---------------------------------

    Millions of Revenue
     Ton-Miles (RTM)
    - Grain                           8,612      8,283        329        4.0
    - Coal                            4,588      4,812       (224)      (4.7)
    - Sulphur and fertilizers         4,053      5,202     (1,149)     (22.1)
    - Forest products                 1,256      1,673       (417)     (24.9)
    - Industrial and consumer
       products                       4,505      4,449         56        1.3
    - Automotive                        490        621       (131)     (21.1)
    - Intermodal                      6,321      7,500     (1,179)     (15.7)
                                 ---------------------------------
    Total RTMs                       29,825     32,540     (2,715)      (8.3)
                                 ---------------------------------

    Freight Revenue per
     RTM (cents)
    - Grain                            3.57       3.11       0.46       14.8
    - Coal                             3.04       2.73       0.31       11.4
    - Sulphur and fertilizers          2.90       2.33       0.57       24.5
    - Forest products                  4.55       3.68       0.87       23.6
    - Industrial and consumer
       products                        4.79       3.55       1.24       34.9
    - Automotive                      16.65      12.40       4.25       34.3
    - Intermodal                       5.36       4.48       0.88       19.6

    Freight Revenue per RTM            4.22       3.51       0.71       20.2

    Carloads (thousands)
    - Grain                           114.7      103.6       11.1       10.7
    - Coal                             68.7       64.9        3.8        5.9
    - Sulphur and fertilizers          40.2       50.7      (10.5)     (20.7)
    - Forest products                  20.3       26.0       (5.7)     (21.9)
    - Industrial and consumer
       products                        89.3       80.4        8.9       11.1
    - Automotive                       30.4       41.8      (11.4)     (27.3)
    - Intermodal                      279.6      315.1      (35.5)     (11.3)
                                 ---------------------------------
    Total Carloads                    643.2      682.5      (39.3)      (5.8)
                                 ---------------------------------

     Freight Revenue
     per Carload
    - Grain                       $   2,677  $   2,486  $     191        7.7
    - Coal                            2,031      2,022          9        0.4
    - Sulphur and fertilizers         2,923      2,391        532       22.3
    - Forest products                 2,818      2,365        453       19.2
    - Industrial and consumer
       products                       2,419      1,964        455       23.2
    - Automotive                      2,684      1,842        842       45.7
    - Intermodal                      1,212      1,067        145       13.6

    Freight Revenue per Carload   $   1,956  $   1,674  $     282       16.8


                                                    Year(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Commodity Data
    --------------
    Freight Revenues (millions)
    - Grain                       $   970.0  $   938.9  $    31.1        3.3
    - Coal                            607.5      573.6       33.9        5.9
    - Sulphur and fertilizers         508.6      502.0        6.6        1.3
    - Forest products                 239.3      275.8      (36.5)     (13.2)
    - Industrial and consumer
       products                       766.1      627.9      138.2       22.0
    - Automotive                      323.5      319.0        4.5        1.4
    - Intermodal                    1,399.8    1,318.0       81.8        6.2
                                 ---------------------------------
    Total Freight Revenues        $ 4,814.8  $ 4,555.2  $   259.6        5.7
                                 ---------------------------------

    Millions of Revenue
     Ton-Miles (RTM)
    - Grain                          29,376     30,690     (1,314)      (4.3)
    - Coal                           21,247     20,629        618        3.0
    - Sulphur and fertilizers        19,757     21,259     (1,502)      (7.1)
    - Forest products                 5,677      7,559     (1,882)     (24.9)
    - Industrial and consumer
       products                      18,296     16,987      1,309        7.7
    - Automotive                      2,213      2,471       (258)     (10.4)
    - Intermodal                     27,966     29,757     (1,791)      (6.0)
                                 ---------------------------------
    Total RTMs                      124,532    129,352     (4,820)      (3.7)
                                 ---------------------------------

    Freight Revenue per
     RTM (cents)
    - Grain                            3.30       3.06       0.24        7.8
    - Coal                             2.86       2.78       0.08        2.9
    - Sulphur and fertilizers          2.57       2.36       0.21        8.9
    - Forest products                  4.22       3.65       0.57       15.6
    - Industrial and consumer
       products                        4.19       3.70       0.49       13.2
    - Automotive                      14.62      12.91       1.71       13.2
    - Intermodal                       5.01       4.43       0.58       13.1

    Freight Revenue per RTM            3.87       3.52       0.35        9.9

    Carloads (thousands)
    - Grain                           382.4      385.0       (2.6)      (0.7)
    - Coal                            281.0      269.1       11.9        4.4
    - Sulphur and fertilizers         191.3      209.8      (18.5)      (8.8)
    - Forest products                  91.8      114.1      (22.3)     (19.5)
    - Industrial and consumer
       products                       340.9      313.3       27.6        8.8
    - Automotive                      141.3      168.5      (27.2)     (16.1)
    - Intermodal                    1,216.0    1,238.1      (22.1)      (1.8)
                                 ---------------------------------
    Total Carloads                  2,644.7    2,697.9      (53.2)      (2.0)
                                 ---------------------------------

     Freight Revenue
     per Carload
    - Grain                       $   2,537  $   2,439  $      98        4.0
    - Coal                            2,162      2,132         30        1.4
    - Sulphur and fertilizers         2,659      2,393        266       11.1
    - Forest products                 2,607      2,417        190        7.9
    - Industrial and consumer
       products                       2,247      2,004        243       12.1
    - Automotive                      2,289      1,893        396       20.9
    - Intermodal                      1,151      1,065         86        8.1

    Freight Revenue per Carload   $   1,821  $   1,688  $     133        7.9

    (1) The 2008 figures include the results of the DM&E on an equity pickup
        basis through October 29, 2008 and on a fully consolidated basis for
        the period from October 30 through December 31, 2008.

                                                Fourth Quarter(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Operations and Productivity
    ---------------------------
    Consolidated Data including
    ---------------------------
     DM&E(1)
     -------
    Freight gross ton-miles
     (GTM) (millions)                57,495     62,104     (4,609)      (7.4)
    Revenue ton-miles (RTM)
     (millions)                      29,825     32,540     (2,715)      (8.3)
    Average number of active
     employees                       16,113     15,801        312        2.0
    Number of employees at
     end of period                   15,783     15,382        401        2.6

    Total operating expenses
     per RTM (cents)                   3.34       2.71       0.63       23.2
    Total operating expenses
     per GTM (cents)                   1.73       1.42       0.31       21.8
    Compensation and benefits
     expense per GTM (cents)           0.61       0.50       0.11       22.0
    GTMs per average active
     employee (000)                   3,568      3,930       (362)      (9.2)

    Miles of road operated
     at end of period(2)             15,533     13,199      2,334       17.7
    U.S. gallons of locomotive
     fuel per 1,000 GTMs
     - freight & yard                  1.26       1.23       0.03        2.4
    U.S. gallons of locomotive
     fuel consumed - total
     (millions)(3)                     72.0       75.7       (3.7)      (4.9)

    Terminal dwell time - AAR
     definition (hours)                22.2       23.3       (1.1)      (4.7)

    Average foreign exchange
     rate (US$/Canadian$)             0.855      1.020     (0.165)     (16.2)
    Average foreign exchange
     rate (Canadian$/US$)             1.169      0.980      0.189       19.3

    CP Data excluding DM&E
    ----------------------
    Number of employees at
     end of period                   14,715     15,382       (667)      (4.3)
    FRA personal injuries per
     200,000 employee-hours(4)         1.63       2.38      (0.75)     (31.5)
    FRA train accidents per
     million train-miles               1.91       1.69       0.22       13.0
    Average train speed
     - AAR definition (mph)            24.7       22.6        2.1        9.3
    Car miles per car day             143.9      140.0        3.9        2.8
    Average daily total
     cars on-line - AAR
     definition (000)                  85.4       83.9        1.5        1.8
    Average daily active
     car on-line (000)                 52.3       58.7       (6.4)     (10.9)

    DM&E Data only
    --------------
    FRA personal injuries per
     200,000 employee-hours            3.53          -          -          -
    FRA train accidents per
     million train-miles               7.81          -          -          -


                                                    Year(1)
                                 --------------------------------------------
                                     2008       2007     Variance       %
                                 --------------------------------------------

    Operations and Productivity
    ---------------------------
    Consolidated Data including
    ---------------------------
     DM&E(1)
     -------
    Freight gross ton-miles
     (GTM) (millions)               239,619    246,322     (6,703)      (2.7)
    Revenue ton-miles (RTM)
     (millions)                     124,532    129,352     (4,820)      (3.7)
    Average number of active
     employees                       15,935     15,675        260        1.7
    Number of employees at
     end of period                   15,783     15,382        401        2.6

    Total operating expenses
     per RTM (cents)                   3.11       2.74       0.37       13.5
    Total operating expenses
     per GTM (cents)                   1.62       1.44       0.18       12.5
    Compensation and benefits
     expense per GTM (cents)           0.54       0.52       0.02        3.8
    GTMs per average active
     employee (000)                  15,037     15,714       (677)      (4.3)

    Miles of road operated
     at end of period(2)             15,533     13,199      2,334       17.7
    U.S. gallons of locomotive
     fuel per 1,000 GTMs
     - freight & yard                  1.22       1.21       0.01        0.8
    U.S. gallons of locomotive
     fuel consumed - total
     (millions)(3)                    289.0      296.7       (7.7)      (2.6)

    Terminal dwell time - AAR
     definition (hours)                22.3       22.2        0.1        0.5

    Average foreign exchange
     rate (US$/Canadian$)             0.951      0.925      0.026        2.8
    Average foreign exchange
     rate (Canadian$/US$)             1.051      1.081     (0.030)      (2.8)

    CP Data excluding DM&E
    ----------------------
    Number of employees at
     end of period                   14,715     15,382       (667)      (4.3)
    FRA personal injuries per
     200,000 employee-hours(4)         1.47       2.09      (0.62)     (29.7)
    FRA train accidents per
     million train-miles               1.87       2.05      (0.18)      (8.8)
    Average train speed
     - AAR definition (mph)            24.0       23.2        0.8        3.4
    Car miles per car day             143.6      142.3        1.3        0.9
    Average daily total
     cars on-line - AAR
     definition (000)                  84.5       82.0        2.5        3.0
    Average daily active
     car on-line (000)                 54.6       58.1       (3.5)      (6.0)


    DM&E Data only
    --------------
    FRA personal injuries per
     200,000 employee-hours            3.53          -          -          -
    FRA train accidents per
     million train-miles               7.81          -          -          -


    (1) The 2008 figures include the results of the DM&E on an equity pickup
        basis through October 29, 2008 and on a fully consolidated basis for
        the period from October 30 through December 31, 2008.
    (2) Excludes track on which CP has haulage rights.
    (3) Includes gallons of fuel consumed from freight, yard and commuter
        service but excludes fuel used in capital projects and other non-
        freight activities.
    (4) Certain prior period figures have been revised to conform with
        current presentation or have been updated to reflect new information.



        Summary of Select Rail Data - CP Consolidated Including DM&E
        ------------------------------------------------------------
              Proforma Basis for Comparative Purposes only (1)
              ------------------------------------------------

                                                2008
                       ------------------------------------------------------
                           Q1         Q2         Q3         Q4        Year
                       ---------- ---------- ---------- ---------- ----------

    Financial (millions,
    -------------------
     except ratios)
     --------------

    Revenues
    --------
      Freight revenue  $ 1,202.2  $ 1,274.3  $ 1,340.0  $ 1,291.9  $ 5,108.4
      Other revenue         23.0       27.8       25.8       42.2      118.8
                       ------------------------------------------------------
        Total revenues   1,225.2    1,302.1    1,365.8    1,334.1    5,227.2

    Operating expenses
    ------------------
      Compensation
       and benefits        348.1      333.3      331.0      356.2    1,368.6
      Fuel                 244.4      276.0      292.8      244.1    1,057.3
      Materials             69.6       60.6       54.1       47.3      231.6
      Equipment rents       49.5       49.9       48.6       47.1      195.1
      Depreciation and
       amortization        130.2      135.2      131.8      130.2      527.4
      Purchased services
       and other           167.3      174.6      173.9      187.2      703.0
                       ------------------------------------------------------
        Total
         operating
         expenses        1,009.1    1,029.6    1,032.2    1,012.1    4,083.0
                       ------------------------------------------------------

    Operating
     income(2)(3)      $   216.1  $   272.5  $   333.6  $   322.0  $ 1,144.2
                       ------------------------------------------------------
                       ------------------------------------------------------

    Operating ratio
     (percentage)(3)        82.4       79.1       75.6       75.9       78.1

    Freight Data
    ------------
      Total Freight
       Revenues
       (millions)      $ 1,202.2  $ 1,274.3  $ 1,340.0  $ 1,291.9  $ 5,108.4
      Total Revenue
       Ton-Miles (RTM)
       (millions)         33,414     34,344     32,786     30,509    131,053
      Total Carloads
       (thousands)         707.7      745.0      736.8      665.1    2,854.6
      Freight Revenue
       per RTM (cents)      3.60       3.71       4.09       4.23       3.90
      Freight Revenue
       per Carload     $   1,699  $   1,710  $   1,819  $   1,942  $   1,790

    Operations and
    --------------
     Productivity
     ------------
      Freight gross-
       ton-miles (GTM)
       (millions)         63,239     65,562     63,592     58,701    251,094
      Average number
       of active
       employees          16,050     17,275     17,385     16,460     16,793
      Number of
       employees at
       end of period      16,305     17,462     17,249     15,783     15,783


    (1) Fully consolidated view of CP including DM&E operations had
        consolidation occurred on January 1, 2008.
    (2) These earnings measures have no standardized meanings prescribed by
        GAAP and are unlikely to be comparable to similar measures of other
        companies. See note on non-GAAP earnings measures attached to
        commentary.
    (3) Operating income is a non-GAAP term which represents "Revenues less
        operating expenses".
        Operating ratio is the percentage derived by dividing operating
        expenses by total revenues.


        Summary of Select Rail Data - CP Consolidated Including DM&E
        ------------------------------------------------------------
               Proforma Basis for Comparative Purposes only(1)
               -----------------------------------------------


                                                2008
                       ------------------------------------------------------
                           Q1         Q2         Q3         Q4        Year
                       ------------------------------------------------------

    Commodity Data
    --------------
    Freight Revenues
     (millions)
    - Grain            $   260.3  $   228.0  $   262.4  $   319.9  $ 1,070.6
    - Coal                 143.9      176.7      161.0      141.3      622.9
    - Sulphur and
       fertilizers         133.1      140.7      126.1      119.0      518.9
    - Forest products       60.8       61.3       68.9       58.0      249.0
    - Industrial and
       consumer products   207.2      230.3      249.3      233.0      919.8
    - Automotive            73.2       87.9       84.5       81.8      327.4
    - Intermodal           323.7      349.4      387.8      338.9    1,399.8
                       ------------------------------------------------------
    Total Freight
     Revenues          $ 1,202.2  $ 1,274.3  $ 1,340.0  $ 1,291.9  $ 5,108.4
                       ------------------------------------------------------

    Millions of Revenue
     Ton-Miles (RTM)
    - Grain                8,338      7,457      7,321      8,903     32,019
    - Coal                 5,182      6,213      5,580      4,625     21,600
    - Sulphur and
       fertilizers         5,474      5,620      4,785      4,077     19,956
    - Forest products      1,601      1,514      1,535      1,277      5,927
    - Industrial and
       consumer products   5,300      5,597      5,651      4,816     21,364
    - Automotive             551        647        533        490      2,221
    - Intermodal           6,968      7,296      7,381      6,321     27,966
                       ------------------------------------------------------
    Total RTMs            33,414     34,344     32,786     30,509    131,053
                       ------------------------------------------------------

    Freight Revenue
     per RTM (cents)
    - Grain                 3.12       3.06       3.58       3.59       3.34
    - Coal                  2.78       2.84       2.89       3.06       2.88
    - Sulphur and
       fertilizers          2.43       2.50       2.64       2.92       2.60
    - Forest products       3.80       4.05       4.49       4.54       4.20
    - Industrial and
       consumer products    3.91       4.11       4.41       4.84       4.31
    - Automotive           13.28      13.59      15.85      16.69      14.74
    - Intermodal            4.65       4.79       5.25       5.36       5.01

    Freight Revenue
     per RTM                3.60       3.71       4.09       4.23       3.90

    Carloads (thousands)
    - Grain                114.8      110.2      112.0      123.4      460.4
    - Coal                  75.5       87.4       82.3       72.5      317.7
    - Sulphur and
       fertilizers          53.2       54.8       46.7       40.7      195.4
    - Forest products       26.2       24.9       25.7       20.8       97.6
    - Industrial and
       consumer products   104.7      112.4      110.8       97.6      425.5
    - Automotive            36.6       40.2       34.7       30.5      142.0
    - Intermodal           296.7      315.1      324.6      279.6    1,216.0
                       ------------------------------------------------------
    Total Carloads         707.7      745.0      736.8      665.1    2,854.6
                       ------------------------------------------------------

    Freight Revenue
     per Carload
    - Grain            $   2,267  $   2,069  $   2,343  $   2,592  $   2,325
    - Coal                 1,906      2,022      1,956      1,949      1,961
    - Sulphur and
       fertilizers         2,502      2,568      2,700      2,924      2,656
    - Forest products      2,321      2,462      2,681      2,788      2,551
    - Industrial and
       consumer products   1,979      2,049      2,250      2,387      2,162
    - Automotive           2,000      2,187      2,435      2,682      2,306
    - Intermodal           1,091      1,109      1,195      1,212      1,151

    Freight Revenue
     per Carload       $   1,699  $   1,710  $   1,819  $   1,942  $   1,790


    (1) Fully consolidated view of CP including DM&E operations had
        consolidation occurred on January 1, 2008.
    





For further information:

For further information: Media: Mike LoVecchio, Tel.: (778) 772-9636,
email: mike_lovecchio@cpr.ca; Investment Community: Janet Weiss, Assistant
Vice-President, Investor Relations, Tel.: (403) 319-3591, email:
investor@cpr.ca


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