Canadian Pacific announces 2009 results

CALGARY, Jan. 28 /CNW/ - Canadian Pacific Railway Limited (TSX/NYSE: CP) announced its fourth-quarter and full-year 2009 results today. Net income in the fourth-quarter was $194 million, an increase of three per cent from $188 million in fourth-quarter 2008 and diluted earnings per share were $1.15, down from $1.21 in fourth-quarter 2008. Foreign exchange gain and loss on long-term debt and other specified items, including a charge on the termination of a shortline railway lease, and two favourable income tax items had a net positive impact on earnings per share of $0.21. Excluding these items, adjusted diluted earnings per share were $0.94 down 12 per cent from $1.07 in fourth-quarter 2008.

"We have come through an extraordinary year of economic challenges and we met these with focused productivity initiatives that have delivered sustainable improvements," said Fred Green, President and CEO. "Markets remain uncertain and we will continue to drive efficiency while delivering a reliable service. We are positioned with assets and resources to respond to changes in our customers' demand."

For the fourth-quarter and full year 2009, the results of the Dakota, Minnesota & Eastern Railroad (DM&E) are fully consolidated with CP's results. For the first ten months of 2008, however, DM&E earnings were reported as equity income on one line of the income statement. In order to aid in the evaluation of the underlying earnings trends, 2008 results have also been presented on a pro forma basis, by redistributing DM&E's operating results from an equity income basis of accounting to a line-by-line consolidation of DM&E revenues and expenses. This pro forma financial data presentation is a non-GAAP measure.

FOURTH-QUARTER 2009 COMPARED WITH FOURTH-QUARTER 2008 EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:

    
    -   Total revenues were $1.1 billion, down 16 per cent from $1.3 billion
    -   Operating expenses were $853 million, down 17 per cent from
        $1.0 billion
    -   Operating income decreased to $269 million from $304 million, or
        12 per cent
    -   Operating ratio improved 120 basis points to 76.0 per cent
    -   Diluted earnings per share decreased to $0.94 from $1.07, or
        12 per cent
    

For the full year, 2009 net income increased slightly to $612 million from $607 million in 2008 and diluted earnings per share were $3.67, down six per cent from $3.91.

FULL YEAR 2009 COMPARED WITH FULL YEAR 2008 EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:

    
    -   Total revenues were $4.3 billion down 18 per cent from $5.2 billion
    -   Operating expenses were $3.4 billion a decrease of 17 per cent from
        $4.1 billion
    -   Operating income was $900 million a decrease of 20 per cent from
        $1.1 billion
    -   Operating ratio increased 70 basis points to 79.1 per cent from
        78.4 per cent
    -   Diluted earnings per share were $2.76 down from $3.99, or 31 per cent
    

2010 ASSUMPTIONS

CP plans to spend in the range of $680 million to $730 million on capital programs in 2010. These planned capital investments include approximately $585 million for the renewal of track infrastructure.

In December of 2009, CP made a voluntary prepayment of approximately $500 million into its defined benefit pension plans to reduce volatility in future pension funding requirements. The 2010 pension contributions are currently estimated to be between $150 and $200 million. Pension expenses in 2010 are expected to increase by approximately $50 million from 2009 primarily due to a decrease in the discount rate used to value the pension benefit obligation and the phasing in of 2008 equity losses.

CP expects its tax rate to be in the 25 per cent to 27 per cent range.

FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS

CP had a net foreign exchange loss after tax of $1.4 million on long-term debt in the fourth quarter of 2009, compared with a gain of $22 million after tax in fourth-quarter 2008.

For the full year 2009, CP had a net foreign exchange loss on long-term debt of $26 million, compared with a net foreign exchange gain of $22 million after tax for the full year 2008.

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. Although the taxes on foreign exchange gains and losses on long-term debt generally offset one another, because they may be in different tax jurisdictions, the resulting net tax can vary significantly.

In fourth-quarter 2009, CP recorded a $38 million after tax charge on the early termination of a shortline railway contract. As well, a tax rate change resulted in a $48 million gain, and an income tax settlement related to a prior year resulted in a benefit of $26 million. There were no other specified items recorded in fourth-quarter 2008.

For the full year 2009, in addition to the other specified items noted above, there was a $69 million after tax gain on the sale of a partnership interest, a $68 million after tax gain on the sale of Windsor Station in Montreal, Quebec and a land sale in Western Canada. A redemption and adjustment for an improvement in fair market value of long-term floating rate notes was received in replacement of the investment in Asset-Backed Commercial Paper (ABCP) of $5 million after tax, compared to an impairment in ABCP of $35 million after tax, recorded for full year 2008.

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 become non-GAAP measures. Additional non-GAAP measures include Operating income, Capital program and Financial data on a pro forma basis.

These non-GAAP earnings measures exclude foreign currency translation effects on long-term debt and the tax thereon, 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. In addition, these non-GAAP measures exclude other specified items (described below) that are not a part of CP's normal ongoing revenues and operating expenses. 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.

Diluted earnings per share, excluding foreign exchange gains and losses on long-term debt and other specified items, is also referred to in this news release as "Adjusted diluted earnings per share". Revenues less operating expenses are referred to as "Operating income" and Additions to property is referred to as "Capital program".

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.

Pro forma data provides comparable measures for periods in 2008 that preceded the Surface Transportation Board's approval of the change of control of the DM&E on October 30, 2008. Following that approval, the DM&E results are fully consolidated with CP's operations.

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, pension obligations and tax rates. 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, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in 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, including ABCP; 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 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.

About Canadian Pacific:

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 1,100 communities where we operate. Come and visit us at 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.

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

                             For the three months              For the year
                                ended December 31         ended December 31
                                2009         2008         2009         2008
                                         Restated                  Restated
                                      (see Note 2)              (see Note 2)
                         -------------------------- -------------------------
                                  (unaudited)               (unaudited)

    Revenues
      Freight              $  1,091.0   $  1,257.8   $  4,175.2   $  4,814.8
      Other                      30.9         41.9        128.0        116.8
                         -------------------------- -------------------------
                              1,121.9      1,299.7      4,303.2      4,931.6
    Operating expenses
      Compensation and
       benefits                 311.8        350.2      1,275.2      1,306.1
      Fuel                      157.5        239.5        580.2      1,005.8
      Materials                  41.1         63.8        215.1        252.3
      Equipment rents            45.0         45.8        184.8        182.2
      Depreciation and
       amortization             121.3        113.7        488.9        442.5
      Purchased services
       and other                176.2        199.5        658.9        701.0
                         -------------------------- -------------------------
                                852.9      1,012.5      3,403.1      3,889.9
                         -------------------------- -------------------------
    Revenues less
     operating expenses         269.0        287.2        900.1      1,041.7
    Gain on sales of
     partnership interest
     and significant
     properties                     -            -        160.3            -
    Equity income in Dakota,
     Minnesota & Eastern
     Railroad Corporation           -         10.4            -         50.9
    Less:
      Loss on termination
       of lease with
       shortline railway
       (Note 3)                  54.5            -         54.5            -
      Other income and
       charges (Note 4)          (0.4)        12.2         18.9         88.4
      Net interest expense       62.8         73.8        273.1        261.1
                         -------------------------- -------------------------

    Income before income
     tax expense                152.1        211.6        713.9        743.1

    Income tax (recovery)
     expense (Note 5)           (42.0)        23.5        101.5        135.9
                         -------------------------- -------------------------
    Net income             $    194.1   $    188.1   $    612.4   $    607.2
                         -------------------------- -------------------------
                         -------------------------- -------------------------
    Basic earnings
     per share             $     1.15   $     1.22   $     3.68   $     3.95
                         -------------------------- -------------------------
                         -------------------------- -------------------------
    Diluted earnings
     per share             $     1.15   $     1.21   $     3.67   $     3.91
                         -------------------------- -------------------------
                         -------------------------- -------------------------

    See notes to interim consolidated financial information.



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

                             For the three months              For the year
                                ended December 31         ended December 31
                                2009         2008         2009         2008
                                         Restated                  Restated
                                      (see Note 2)              (see Note 2)
                         -------------------------- -------------------------
                                  (unaudited)               (unaudited)
    Comprehensive income
    Net Income             $    194.1   $    188.1   $    612.4   $    607.2

    Other comprehensive
     income

      Unrealized foreign
       exchange (loss)
       gain on:
        Translation of the
         net investment in
         U.S. subsidiaries      (26.7)       208.5       (246.4)       305.1
        Translation of the
         U.S. dollar-
         denominated long-
         term debt
         designated as a
         hedge of the net
         investment in U.S.
         subsidiaries            28.1       (204.7)       244.5       (297.5)

      Change in derivatives
       designated as cash
       flow hedges:
        Realized (gain) loss
         on cash flow hedges
         recognized in
         income                  (0.1)        (0.1)         5.0        (11.0)
        Unrealized gain
         (loss) on cash flow
         hedges                   2.1        (12.6)         2.3         (5.1)
                         -------------------------- -------------------------

      Other comprehensive
       income (loss) before
       income taxes               3.4         (8.9)         5.4         (8.5)

      Income tax (expense)
       recovery                  (2.7)        31.9        (33.6)        44.8
                         -------------------------- -------------------------

    Other comprehensive
     income (loss)                0.7         23.0        (28.2)        36.3
                         -------------------------- -------------------------


    Comprehensive income   $    194.8   $    211.1   $    584.2   $    643.5
                         -------------------------- -------------------------
                         -------------------------- -------------------------

    See notes to interim consolidated financial information.



    CONSOLIDATED BALANCE SHEET
    (in millions of Canadian dollars)

                                                     December 31  December 31
                                                         2009        2008
                                                                   Restated
                                                                 (see Note 2)
                                                    -------------------------
                                                             (unaudited)
    Assets
    Current assets
      Cash and cash equivalents                      $    679.1   $    117.6
      Accounts receivable                                 441.0        647.4
      Materials and supplies                              132.7        215.8
      Future income taxes                                 128.1         76.5
      Other                                                46.5         65.7
                                                    -------------------------

                                                        1,427.4      1,123.0

    Investments                                           156.7        151.1
    Net properties                                     11,967.8     12,384.6
    Assets held for sale                                      -         39.6
    Goodwill and intangible assets                        202.3        237.2
    Prepaid pension costs and other assets (Note 6)     1,777.2      1,221.8

                                                    -------------------------
    Total assets                                     $ 15,531.4   $ 15,157.3
                                                    -------------------------
                                                    -------------------------

    Liabilities and shareholders' equity
    Current liabilities
      Short-term borrowing                           $        -   $    150.1
      Accounts payable and accrued liabilities            917.3      1,034.9
      Income and other taxes payable                       31.9         42.2
      Dividends payable                                    41.7         38.1
      Long-term debt maturing within one year             392.1         44.0
                                                    -------------------------
                                                        1,383.0      1,309.3

    Other long-term liabilities                           790.2        865.2
    Long-term debt (Note 7)                             4,102.7      4,685.8
    Future income taxes                                 2,549.5      2,527.6

    Shareholders' equity
      Share capital                                     1,746.4      1,220.8
      Contributed surplus                                  33.5         40.2
      Accumulated other comprehensive income               49.5         77.7
      Retained income                                   4,876.6      4,430.7
                                                    -------------------------
                                                        6,706.0      5,769.4
                                                    -------------------------

                                                    -------------------------
    Total liabilities and shareholders' equity       $ 15,531.4   $ 15,157.3
                                                    -------------------------
                                                    -------------------------

    See notes to interim consolidated financial information.



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

                             For the three months              For the year
                                ended December 31         ended December 31
                                2009         2008         2009         2008
                                         Restated                  Restated
                                      (see Note 2)              (see Note 2)
                         -------------------------- -------------------------
                                  (unaudited)               (unaudited)

    Operating activities
      Net income           $    194.1   $    188.1   $    612.4   $    607.2
      Reconciliation of net
       income to cash
       provided by operating
       activities:
        Depreciation and
         amortization           121.3        113.7        488.9        442.5
        Future income taxes
         (Note 5)               (27.4)        97.6        153.2        156.3
        (Gain) loss in fair
         value of long-term
         floating rate
         notes/asset-backed
         commercial paper           -            -         (6.3)        49.4
        Foreign exchange
         (gain) loss on
         long-term debt          (3.1)         3.9         (5.8)        16.3
        Amortization and
         accretion charges        1.5          2.7          9.5         10.1
        Equity income, net
         of cash received        (0.4)       (12.3)         0.5        (50.8)
        Gain on sales of
         partnership interest
         and significant
         properties                 -            -       (160.3)           -
        Net loss on
         repurchase of debt         -            -         16.6            -
        Restructuring and
         environmental
         remediation payments   (15.2)       (17.0)       (45.1)       (53.4)
        Pension funding in
         excess of expense
         (Note 6)              (528.7)       (10.5)      (589.0)       (53.2)
        Other operating
         activities, net        (29.2)        25.1        (25.8)        27.5
        Change in non-cash
         working capital
         balances related to
         operations             106.2         38.2        102.7       (132.2)
                         -------------------------- -------------------------
      Cash (used in)
       provided by
       operating
       activities              (180.9)       429.5        551.5      1,019.7
                         -------------------------- -------------------------
    Investing activities
      Additions to
       properties              (153.6)      (257.0)      (722.4)      (832.9)
      Additions to assets
       held for sale and
       other                        -         (9.5)           -       (222.5)
      Additions to
       investment in Dakota,
       Minnesota & Eastern
       Railroad Corporation         -         (0.3)           -         (8.6)
      Proceeds from
       sale of properties
       and other assets          17.4        257.6        243.8        257.6
      Other, net                 15.1         (4.7)        19.9          9.7
                         -------------------------- -------------------------
      Cash used in
       investing activities    (121.1)       (13.9)      (458.7)      (796.7)
                         -------------------------- -------------------------
    Financing activities
      Dividends paid            (41.6)       (38.1)      (162.9)      (148.7)
      Issuance of CP
       Common Shares              9.0          1.4        513.5         19.7
      Net decrease
       in short-term
       borrowing                (57.7)      (129.9)      (150.1)       (79.6)
      Issuance of long-term
       debt (Note 7)            463.2            -        872.7      1,068.7
      Repayment of
       long-term debt            (4.8)      (252.6)      (618.6)    (1,340.7)
      Settlement of treasury
       rate lock                    -            -            -        (30.9)
      Settlement of foreign
       exchange forward on
       long-term debt               -            -         34.1            -
                         -------------------------- -------------------------
      Cash provided by
       (used in) financing
       activities               368.1       (419.2)       488.7       (511.5)
                         -------------------------- -------------------------
    Effect of foreign exchange
     fluctuations on U.S.
     dollar-denominated cash
     and cash equivalents        (2.9)        23.3        (20.0)        28.0
                         -------------------------- -------------------------
    Cash position
      Increase (decrease) in
       cash and cash
       equivalents               63.2         19.7        561.5       (260.5)
      Cash and cash
       equivalents at
       beginning of period      615.9         97.9        117.6        378.1
                         -------------------------- -------------------------
      Cash and cash
       equivalents at end
       of period           $    679.1   $    117.6   $    679.1   $    117.6
                         -------------------------- -------------------------
                         -------------------------- -------------------------

    Certain of the comparative figures have been reclassified in order to be
    consistent with the 2009 presentation.

    See notes to interim consolidated financial information.



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

                                            (in millions of dollars)
                            -------------------------------------------------
                                                Accumulated
                                                   Other               Total
                                                  compre-             Share-
                              Share  Contributed  hensive  Retained  holders
                             capital   surplus     income   income    Equity
                            -------------------------------------------------
    Balance at December 31,
     2007, as previously
     reported                1,188.6      42.4      39.6   4,187.3   5,457.9
    Adjustment for change
     in accounting policy
     (see Note 2)                                    1.8    (211.6)   (209.8)
                            -------------------------------------------------
    Balance at December 31,
     2007, as restated       1,188.6      42.4      41.4   3,975.7   5,248.1
    Net Income                                               607.2     607.2
    Other comprehensive
     income                                         36.3                36.3
    Dividends                                               (152.2)   (152.2)
    Stock compensation
     expense                               7.8                           7.8
    Shares issued under
     stock option plans         32.2     (10.0)                         22.2
                            -------------------------------------------------
    Balance at December 31,
     2008, as restated       1,220.8      40.2      77.7   4,430.7   5,769.4
    Net Income                                               612.4     612.4
    Other comprehensive
     loss                                          (28.2)              (28.2)
    Dividends                                               (166.5)   (166.5)
    Shares issued              495.2                                   495.2
    Stock compensation
     (recovery) expense                   (1.6)                         (1.6)
    Shares issued under
     stock option plans         30.4      (5.1)                         25.3
                            -------------------------------------------------
    Balance at
     December 31, 2009       1,746.4      33.5      49.5   4,876.6   6,706.0
                            -------------------------------------------------
                            -------------------------------------------------

    See notes to interim consolidated financial information.



    NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
    DECEMBER 31, 2009
    (unaudited)

    1   Basis of presentation

        This unaudited interim consolidated financial information 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") 2008 annual consolidated
        financial statements, except as discussed below and in Note 2 for the
        adoption of new accounting standards. They do not include all
        disclosures required under Canadian Generally accepted accounting
        principles ("GAAP") for interim and 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   Accounting changes

        Pension prior service costs

        During 2009, CP changed its accounting policy for the treatment of
        prior service pension costs for unionized employees. In previous
        periods CP had amortized these costs over the expected average
        remaining service period for employees. CP now amortizes these
        costs over the remaining contract term. The change in policy was made
        to provide more relevant information by amortizing the costs based on
        the contract term as CP generally renegotiates union contracts on a
        routine and consistent basis that is substantially shorter than the
        expected average remaining service period. The change has been
        accounted for on a retrospective basis. As a result of the change the
        following increases (decreases) to financial statement line items
        occurred:

        (in millions of Canadian dollars, except per share data)

                              For the           For the
                            three months          year
                               ended             ended             As at
                            December 31       December 31       December 31
                           2009     2008     2009     2008     2009     2008
                       ------------------------------------------------------
        Compensation
         and benefits   $   0.2  $   0.3  $   0.9  $   0.1
        Income tax
         expense            1.1     (0.1)     1.2      0.3
                       ------------------------------------
        Net income         (1.3)    (0.2)    (2.1)    (0.4)

        Basic
         earnings
         per share      $ (0.01) $     -  $ (0.01) $     -
        Diluted
         earnings
         per share      $ (0.01) $     -  $ (0.01) $     -

        Prepaid pension
         costs and other
         assets                                             $(105.1) $(104.2)
        Future income
         tax liability                                        (27.0)   (28.2)
        Retained income                                       (78.1)   (76.0)


        Locomotive overhauls

        During 2009, CP changed its accounting policy for the treatment of
        locomotive overhaul costs. In prior periods CP had capitalized such
        costs and depreciated them over the expected economic life of the
        overhaul. These costs are now expensed. Management has judged
        that the new policy is preferable because it better represents the
        evolving nature of locomotive overhauls. This policy aligns the
        treatment of locomotive costs with CP's current operational
        practices, which has changed over recent years and gradually shifted
        to be more in the nature of a repair. The change has been accounted
        for on a retrospective basis. As a result of the change, the
        following increases (decreases) to financial statement line items
        occurred:

        (in millions of Canadian dollars, except per share data)

                              For the           For the
                            three months          year
                               ended             ended             As at
                            December 31       December 31       December 31
                           2009     2008     2009     2008     2009     2008
                       ------------------------------------------------------
        Depreciation
         and
         amortization
         decrease       $ (10.9) $ (12.3) $ (43.5) $ (48.8)

        Compensation
         and benefits       0.1      0.5      0.1      0.5
        Materials           4.1     17.9     13.8     35.0
        Purchased
         services
         and other         11.7     10.1     29.3     23.8
                       ------------------------------------
        Total increases    15.9     28.5     43.2     59.3
                       ------------------------------------

        Total operating
         expenses           5.0     16.2     (0.3)    10.5

        Equity income in
         Dakota, Minnesota
         & Eastern
         Railroad
         Corporation          -        -        -     (0.4)
        Income tax
         expense           (0.3)    (4.6)     1.3     (2.6)
                       ------------------------------------
        Net income      $  (4.7) $ (11.6) $  (1.0) $  (8.3)
                       ------------------------------------

        Basic earnings
         per share      $ (0.03) $ (0.08) $ (0.01) $ (0.05)
        Diluted
         earnings per
         share          $ (0.03) $ (0.07) $ (0.01) $ (0.05)

        Other
         comprehensive
         income             0.4     (1.8)     2.1     (2.4)
                       ------------------------------------
        Comprehensive
         income            (4.3)   (13.4)     1.1    (10.7)
                       ------------------------------------

        Cash provided by
         operating
         activities       (15.9)   (28.5)   (43.2)   (59.3)
        Cash used in
         investing
         activities        15.9     28.5     43.2     59.3

        Net properties                                      $(187.9) $(191.8)
        Future income
         taxes liability                                      (51.5)   (54.3)
        Accumulated other
         comprehensive
         income                                                 1.5     (0.6)
        Retained income                                      (137.9)  (136.9)


        Goodwill and intangible assets

        In February 2008, the Canadian Institute of Chartered Accountants
        ("CICA") issued accounting standard Section 3064 "Goodwill, and
        intangible assets", replacing accounting standard Section 3062
        "Goodwill and other intangible assets" and accounting standard
        Section 3450 "Research and development costs". Section 3064
        establishes standards for the recognition, measurement, presentation
        and disclosure of intangible assets and goodwill subsequent to its
        initial recognition. The new Section was applicable to financial
        statements relating to fiscal years beginning on or after October 1,
        2008. Accordingly, the Company adopted the new standards for its
        fiscal year beginning January 1, 2009. The provisions of Section 3064
        were adopted retrospectively, with restatement of prior periods.

        As a result of this adoption, the Company has retroactively expensed
        certain expenditures related to pre-operating periods of a facility,
        rather than recording them as assets in "Prepaid pension costs and
        other assets" and "Net properties". The adoption of Section 3064
        resulted in a reduction to opening retained income of $7.4 million at
        January 1, 2008 and $10.4 million at January 1, 2009. For the three
        months ended December 31, 2008, the adoption of this section resulted
        in an increase to "Purchased services and other" expense of
        $1.2 million and a decrease to "Income tax expense" of $0.5 million.
        This change did not impact previously reported basic and diluted
        earnings per share for the fourth quarter of 2008. For the year ended
        December 31, 2008, the adoption of this section resulted in an
        increase to "Purchased services and other" expense of $5.0 million
        and a decrease to "Income tax expense" of $2.0 million. This change
        also resulted in a $0.02 decrease to previously reported basic
        earnings per share and $0.02 decrease to previously reported diluted
        earnings per share for the year ended December 31, 2008.

        Credit risk and the fair value of financial assets and financial
        liabilities

        On January 20, 2009 the Emerging Issues Committee ("EIC") issued a
        new abstract EIC 173 "Credit risk and the fair value of financial
        assets and financial liabilities". This abstract concludes that an
        entity's own credit risk and the credit risk of the counterparty
        should be taken into account when determining the fair value of
        financial assets and financial liabilities, including derivative
        instruments.

        This abstract applies to all financial assets and liabilities
        measured at fair value in interim and annual financial statements for
        periods ending on or after January 20, 2009. The adoption of this
        abstract did not impact the Company's financial statements.

    3   Loss on termination of lease with shortline railway

        During the fourth quarter of 2009 the Company made a payment of
        approximately $73 million to terminate a contract with a lessee in
        order to cease through-train operations over the CP owned rail
        branchline between Smiths Falls and Sudbury. The contract with the
        lessee included the operation of a minimum number of CP freight
        trains over the leased branchline. The loss on the transaction
        recognized in the fourth quarter was $54.5 million ($37.6 million
        after tax).

    4   Other income and charges

                                                For the           For the
                                              three months          year
                                                 ended             ended
                                              December 31       December 31
        (in millions of Canadian dollars)    2009     2008     2009     2008
                                         ------------------------------------
        Accretion charges on accruals
         recorded at present value        $   2.1  $   1.8  $   8.7  $   6.4
        Accretion income on long-term
         floating rate notes                 (1.5)       -     (2.9)       -
        Net loss on repurchase of debt          -        -     16.6        -
        Other exchange losses (gains)         0.7      4.9     (0.4)     6.1
        (Gain) loss in fair value of
         long-term floating rate notes/
         asset-backed commercial paper          -        -     (6.3)    49.4
        Foreign exchange (gain) loss on
         long-term debt                      (3.1)     3.9     (5.8)    16.3
        Other                                 1.4      1.6      9.0     10.2
                                         ------------------------------------

        Total other income and charges    $  (0.4) $  12.2  $  18.9  $  88.4
                                         ------------------------------------
                                         ------------------------------------

    5   Income tax expense

        In the fourth quarter of 2009, legislation was enacted to reduce
        Ontario provincial income tax rates. Income tax expense for the
        fourth quarter reflects the impact of a $47.6 million benefit related
        to the revaluation of its future income tax balances as at
        December 31, 2008, as well as an income tax settlement related to a
        prior year.

    6   Pensions and other benefits

        During the fourth quarter of 2009, the Company chose to accelerate
        funding of future pension obligations through a voluntary prepayment
        of approximately $500 million to the Company's defined benefit
        pension plans.

    7   Long-term debt

        During the fourth quarter of 2009, the Company issued $400 million of
        6.45% Notes due November 17, 2039. Net proceeds from this offering
        were $397.8 million. The notes are unsecured.

        The Company also issued $67.7 million of 5.57% Secured Notes due
        December 24, 2024. Net proceeds from this offering were
        $66.7 million. The notes are secured by certain equipment.



                            Summary of Rail Data
                            --------------------
      (Reconciliation of GAAP earnings to non-GAAP earnings on page 2)
      ----------------------------------------------------------------

                                               Fourth Quarter(1)
                                  -------------------------------------------
                                     2009    2008(2)(3)  Fav/(Unfav)     %
                                  -------------------------------------------
    Financial (millions, except
    ---------------------------
     per share data)
     ---------------

    Revenues
    --------
      Freight revenue             $ 1,091.0  $ 1,257.8  $  (166.8)     (13.3)
      Other revenue                    30.9       41.9      (11.0)     (26.3)
                                  --------------------------------
                                    1,121.9    1,299.7     (177.8)     (13.7)
                                  --------------------------------
    Operating expenses
    ------------------
      Compensation and benefits       311.8      350.2       38.4       11.0
      Fuel                            157.5      239.5       82.0       34.2
      Materials                        41.1       63.8       22.7       35.6
      Equipment rents                  45.0       45.8        0.8        1.7
      Depreciation and
       amortization                   121.3      113.7       (7.6)      (6.7)
      Purchased services and other    176.2      199.5       23.3       11.7
                                  --------------------------------
                                      852.9    1,012.5      159.6       15.8
                                  --------------------------------
    Revenues less operating
     expenses                         269.0      287.2      (18.2)      (6.3)

    Gain on sales of partnership
     interest and significant
     properties                           -          -          -          -

    Equity income in Dakota,
     Minnesota & Eastern Railroad
     Corporation (DM&E)                   -       10.4      (10.4)    (100.0)

    Less:
      Loss on termination of lease
       with shortline railway          54.5          -      (54.5)         -
      Other income and charges         (0.4)      12.2       12.6      103.3
      Net interest expense             62.8       73.8       11.0       14.9
                                  --------------------------------

    Income before income tax
     expense                          152.1      211.6      (59.5)     (28.1)
      Income tax (recovery)
       expense                        (42.0)      23.5       65.5      278.7
                                  --------------------------------
    Net income                    $   194.1  $   188.1  $     6.0        3.2
                                  --------------------------------
                                  --------------------------------

    Basic earnings per share      $    1.15  $    1.22  $   (0.07)      (5.7)
                                  --------------------------------
                                  --------------------------------

    Diluted earnings per share    $    1.15  $    1.21  $   (0.06)      (5.0)
                                  --------------------------------
                                  --------------------------------


                                                     Year(1)
                                  -------------------------------------------
                                     2009    2008(2)(3)  Fav/(Unfav)     %
                                  -------------------------------------------
    Financial (millions, except
    ---------------------------
     per share data)
     ---------------

    Revenues
    --------
      Freight revenue             $ 4,175.2  $ 4,814.8  $  (639.6)     (13.3)
      Other revenue                   128.0      116.8       11.2        9.6
                                  --------------------------------
                                    4,303.2    4,931.6     (628.4)     (12.7)
                                  --------------------------------
    Operating expenses
    ------------------
      Compensation and benefits     1,275.2    1,306.1       30.9        2.4
      Fuel                            580.2    1,005.8      425.6       42.3
      Materials                       215.1      252.3       37.2       14.7
      Equipment rents                 184.8      182.2       (2.6)      (1.4)
      Depreciation and
       amortization                   488.9      442.5      (46.4)     (10.5)
      Purchased services and other    658.9      701.0       42.1        6.0
                                  --------------------------------
                                    3,403.1    3,889.9      486.8       12.5
                                  --------------------------------
    Revenues less operating
     expenses                         900.1    1,041.7     (141.6)     (13.6)

    Gain on sales of partnership
     interest and significant
     properties                       160.3          -      160.3          -

    Equity income in Dakota,
     Minnesota & Eastern Railroad
     Corporation (DM&E)                   -       50.9      (50.9)    (100.0)

    Less:
      Loss on termination of lease
       with shortline railway          54.5          -      (54.5)         -
      Other income and charges         18.9       88.4       69.5       78.6
      Net interest expense            273.1      261.1      (12.0)      (4.6)
                                  --------------------------------

    Income before income tax
     expense                          713.9      743.1      (29.2)      (3.9)
      Income tax (recovery)
       expense                        101.5      135.9       34.4       25.3
                                  --------------------------------
    Net income                    $   612.4  $   607.2  $     5.2        0.9
                                  --------------------------------
                                  --------------------------------

    Basic earnings per share      $    3.68  $    3.95  $   (0.27)      (6.8)
                                  --------------------------------
                                  --------------------------------

    Diluted earnings per share    $    3.67  $    3.91  $   (0.24)      (6.1)
                                  --------------------------------
                                  --------------------------------

    (1) Certain 2008 figures have been restated to conform with the change of
        accounting policies for the amortization of prior service pension
        costs for unionized employees and expensing of locomotive overhaul
        costs as adopted in the fourth quarter of 2009 on a retrospective
        basis.

    (2) The 2008 figures include the results of the DM&E on an equity
        accounting basis through October 29, 2008 and on a fully consolidated
        basis after that date including 2009.

    (3) Certain 2008 figures have been restated for the adoption of CICA
        accounting standard 3064, which requires the expensing of certain
        expenditures related to pre-operating periods of a facility rather
        than recording them as assets as adopted in the first quarter of 2009
        on a retrospective basis.



                        Summary of Rail Data (Page 2)
                        -----------------------------
            Reconciliation of GAAP earnings to non-GAAP earnings
            ----------------------------------------------------

                                               Fourth Quarter(1)
                                  -------------------------------------------
                                     2009    2008(2)(3)  Fav/(Unfav)     %
                                  -------------------------------------------
    Financial (millions)
    --------------------

    Net income                    $   194.1  $   188.1  $     6.0        3.2
    Exclude:

    Foreign exchange gain (loss)
    ----------------------------
     on long-term debt (FX on LTD)
     -----------------------------
      FX on LTD                         3.1       (3.9)       7.0          -
      Income tax (expense)
       recovery on FX on LTD(4)        (4.5)      26.2      (30.7)         -
                                  --------------------------------
      FX on LTD (net of tax)           (1.4)      22.3      (23.7)         -

    Other specified items
    ---------------------
    Loss on termination of lease
     with shortline railway           (54.5)         -      (54.5)         -
    Income tax on termination of
     lease with shortline railway      16.9          -       16.9          -
                                  --------------------------------
    Loss on termination of lease
     with shortline railway
     (net of tax)                     (37.6)         -      (37.6)         -
                                  --------------------------------
    Gain on sales of partnership
     interest and significant
     properties                           -          -          -          -
    Income tax expense on sales
     of partnership interest
     and significant properties           -          -          -          -
                                  --------------------------------
    Gain on sales of partnership
     interest and significant
     properties (net of tax)              -          -          -          -
                                  --------------------------------
    Gain (loss) in fair value
     of long-term floating rate
     notes/asset-backed
     commercial paper (ABCP)              -          -          -          -
    Income tax recovery (expense)
     on gain (loss) in fair value
     of long-term floating rate
     notes/ABCP                           -          -          -          -
                                  --------------------------------
    Gain (loss) in fair value
     of long-term floating rate
     notes/(ABCP) (net of tax)            -          -          -          -
                                  --------------------------------
    Income tax benefits due to
     rate reduction and settlement
     related to a prior year           74.2          -       74.2          -
                                  --------------------------------
    Income before foreign
     exchange gain (loss) on
     long-term debt and other
     specified items(5)           $   158.9  $   165.8  $    (6.9)      (4.2)
                                  --------------------------------
                                  --------------------------------
    Earnings per share (EPS)
    ------------------------
    Diluted EPS, as determined
     by GAAP                      $    1.15  $    1.21  $   (0.06)      (5.0)
    Exclude:
      Diluted EPS, related to
       FX on LTD, net of tax(5)       (0.01)      0.14      (0.15)         -
      Diluted EPS, related to
       other specified items,
       net of tax(5)                   0.22          -       0.22          -
                                  --------------------------------
    Diluted EPS, before FX on LTD
     and other specified items(5) $    0.94  $    1.07  $   (0.13)     (12.1)
                                  --------------------------------
                                  --------------------------------

    Operating ratio(5)(6) (%)          76.0       77.9        1.9          -

    Shares Outstanding
    ------------------
    Weighted average (avg)
     number of shares
     outstanding (millions)           168.3      153.8       14.5        9.4
    Weighted avg number of
     diluted shares outstanding
     (millions)                       168.9      155.0       13.9        9.0

    Foreign Exchange
    ----------------
    Average foreign exchange
     rate (US$/Canadian$)             0.935      0.855      0.080        9.4
    Average foreign exchange
     rate (Canadian$/US$)             1.069      1.169     (0.100)      (8.6)


                                                     Year(1)
                                  -------------------------------------------
                                     2009    2008(2)(3)  Fav/(Unfav)     %
                                  -------------------------------------------
    Financial (millions)
    --------------------

    Net income                    $   612.4  $   607.2  $     5.2        0.9
    Exclude:

    Foreign exchange gain (loss)
    ----------------------------
     on long-term debt (FX on LTD)
     -----------------------------
      FX on LTD                         5.8      (16.3)      22.1          -
      Income tax (expense)
       recovery on FX on LTD(4)       (31.6)      38.6      (70.2)         -
                                  --------------------------------
      FX on LTD (net of tax)          (25.8)      22.3      (48.1)         -

    Other specified items
    ---------------------
    Loss on termination of lease
     with shortline railway           (54.5)         -      (54.5)         -
    Income tax on termination of
     lease with shortline railway      16.9          -       16.9          -
                                  --------------------------------
    Loss on termination of lease
     with shortline railway
     (net of tax)                     (37.6)         -      (37.6)         -
                                  --------------------------------
    Gain on sales of partnership
     interest and significant
     properties                       160.3          -      160.3          -
    Income tax expense on sales
     of partnership interest
     and significant properties       (23.5)         -      (23.5)         -
                                  --------------------------------
    Gain on sales of partnership
     interest and significant
     properties (net of tax)          136.8          -      136.8          -
                                  --------------------------------
    Gain (loss) in fair value
     of long-term floating rate
     notes/asset-backed
     commercial paper (ABCP)            6.3      (49.4)      55.7          -
    Income tax recovery (expense)
     on gain (loss) in fair value
     of long-term floating rate
     notes/ABCP                        (1.8)      14.6      (16.4)         -
                                  --------------------------------
    Gain (loss) in fair value
     of long-term floating rate
     notes/(ABCP) (net of tax)          4.5      (34.8)      39.3          -
                                  --------------------------------
    Income tax benefits due to
     rate reduction and settlement
     related to a prior year           74.2          -       74.2          -
                                  --------------------------------
    Income before foreign
     exchange gain (loss) on
     long-term debt and other
     specified items(5)           $   460.3  $   619.7  $  (159.4)     (25.7)
                                  --------------------------------
                                  --------------------------------

    Earnings per share (EPS)
    ------------------------
    Diluted EPS, as determined
     by GAAP                      $    3.67  $    3.91  $   (0.24)      (6.1)
    Exclude:
      Diluted EPS, related to
       FX on LTD, net of tax(5)       (0.15)      0.14      (0.29)         -
      Diluted EPS, related to
       other specified items,
       net of tax(5)                   1.06      (0.22)      1.28          -
                                  --------------------------------
    Diluted EPS, before FX on LTD
     and other specified items(5) $    2.76  $    3.99  $   (1.23)     (30.8)
                                  --------------------------------
                                  --------------------------------

    Operating ratio(5)(6) (%)          79.1       78.9       (0.2)         -

    Shares Outstanding
    ------------------
    Weighted average (avg)
     number of shares
     outstanding (millions)           166.3      153.7       12.6        8.2
    Weighted avg number of
     diluted shares outstanding
     (millions)                       166.8      155.5       11.3        7.3

    Foreign Exchange
    ----------------
    Average foreign exchange
     rate (US$/Canadian$)             0.869      0.951     (0.082)      (8.6)
    Average foreign exchange
     rate (Canadian$/US$)             1.151      1.052      0.099        9.4

    (1) Certain 2008 figures have been restated to conform with the change of
        accounting policies for the amortization of prior service pension
        costs for unionized employees and expensing of locomotive overhaul
        costs as adopted in the fourth quarter of 2009 on a retrospective
        basis.

    (2) The 2008 figures include the results of the DM&E on an equity
        accounting basis through October 29, 2008 and on a fully consolidated
        basis after that date.

    (3) Certain 2008 figures have been restated for the adoption of CICA
        accounting standard 3064, which requires the expensing of certain
        expenditures related to pre-operating periods of a facility rather
        than recording them as assets as adopted in the first quarter of 2009
        on a retrospective basis.

    (4) Income tax on FX on LTD is discussed in the press release in the
        section "Foreign Exchange Gain and Loss on Long-Term Debt and Other
        Specified Items".

    (5) These earnings measures have no standardized meanings prescribed by
        GAAP and may not be comparable to similar measures of other
        companies. See note on non-GAAP earnings measures included in this
        press release.

    (6) Operating ratio is the percentage derived by dividing operating
        expenses by total revenues.



                        Summary of Rail Data (Page 3)
                        -----------------------------
                   Pro forma Basis Including DM&E in 2008
                   --------------------------------------

                                               Fourth Quarter(1)
                                  -------------------------------------------
                                    2009  2008(2)(3)(4)  Fav/(Unfav)     %
                                            Pro forma
                                  -------------------------------------------
    Financial (millions, except
    ---------------------------
     per share data)
     ---------------

    Revenues
    --------
      Freight revenue             $ 1,091.0  $ 1,291.9  $  (200.9)     (15.6)
      Other revenue                    30.9       42.2      (11.3)     (26.8)
                                  --------------------------------
                                    1,121.9    1,334.1     (212.2)     (15.9)
                                  --------------------------------
    Operating expenses
    ------------------
      Compensation and benefits       311.8      357.0       45.2       12.7
      Fuel                            157.5      244.1       86.6       35.5
      Materials                        41.1       65.2       24.1       37.0
      Equipment rents                  45.0       47.1        2.1        4.5
      Depreciation and
       amortization                   121.3      117.9       (3.4)      (2.9)
      Purchased services and other    176.2      198.5       22.3       11.2
                                  --------------------------------
                                      852.9    1,029.8      176.9       17.2
                                  --------------------------------
    Operating income(4)(5)            269.0      304.3      (35.3)     (11.6)

      Other income and charges          2.7        8.3        5.6       67.5
      Net interest expense             62.8       73.9       11.1       15.0
      Income tax expense before
       foreign exchange gain
       (loss) on long-term debt
       and other specified items(4)    44.6       56.3       11.7       20.8
                                  --------------------------------
    Income before foreign exchange
     gain (loss) on long-term debt
     and other specified items(4) $   158.9  $   165.8  $    (6.9)      (4.2)
                                  --------------------------------
                                  --------------------------------

    Operating ratio(4)(6) (%)          76.0       77.2        1.2          -

    Diluted EPS, before FX on LTD
     and other specified items(4) $    0.94  $    1.07  $   (0.13)     (12.1)


                                                     Year(1)
                                  -------------------------------------------
                                    2009  2008(2)(3)(4)  Fav/(Unfav)     %
                                            Pro forma
                                  -------------------------------------------
    Financial (millions, except
    ---------------------------
     per share data)
     ---------------

    Revenues
    --------
      Freight revenue             $ 4,175.2  $ 5,108.4  $  (933.2)     (18.3)
      Other revenue                   128.0      118.8        9.2        7.7
                                  --------------------------------
                                    4,303.2    5,227.2     (924.0)     (17.7)
                                  --------------------------------
    Operating expenses
    ------------------
      Compensation and benefits     1,275.2    1,369.2       94.0        6.9
      Fuel                            580.2    1,057.3      477.1       45.1
      Materials                       215.1      267.2       52.1       19.5
      Equipment rents                 184.8      195.1       10.3        5.3
      Depreciation and
       amortization                   488.9      478.3      (10.6)      (2.2)
      Purchased services and other    658.9      732.2       73.3       10.0
                                  --------------------------------
                                    3,403.1    4,099.3      696.2       17.0
                                  --------------------------------
    Operating income(4)(5)            900.1    1,127.9     (227.8)     (20.2)

      Other income and charges         30.9       22.3       (8.6)     (38.6)
      Net interest expense            273.1      263.0      (10.1)      (3.8)
      Income tax expense before
       foreign exchange gain
       (loss) on long-term debt
       and other specified items(4)   135.8      222.9       87.1       39.1
                                  --------------------------------
    Income before foreign exchange
     gain (loss) on long-term debt
     and other specified items(4) $   460.3  $   619.7  $  (159.4)     (25.7)
                                  --------------------------------
                                  --------------------------------

    Operating ratio(4)(6) (%)          79.1       78.4       (0.7)         -

    Diluted EPS, before FX on LTD
     and other specified items(4) $    2.76  $    3.99  $   (1.23)     (30.8)

    (1) Certain 2008 figures have been restated to conform with the change of
        accounting policies for the amortization of prior service pension
        costs for unionized employees and expensing of locomotive overhaul
        costs as adopted in the fourth quarter of 2009 on a retrospective
        basis.

    (2) Pro forma basis redistributes DM&E equity income to a line-by-line
        consolidation of DM&E results for 2008. See note on non-GAAP earnings
        measures included in this press release.

    (3) Certain 2008 figures have been restated for the adoption of CICA
        accounting standard 3064, which requires the expensing of certain
        expenditures related to pre-operating periods of a facility rather
        than recording them as assets as adopted in the first quarter of 2009
        on a retrospective basis.

    (4) These earnings measures have no standardized meanings prescribed by
        GAAP and may not be comparable to similar measures of other
        companies. See note on non-GAAP earnings measures included in this
        press release.

    (5) Operating income is a non-GAAP term, which represents "revenue less
        operating expenses".

    (6) Operating ratio is the percentage derived by dividing operating
        expenses by total revenues.



                        Summary of Rail Data (Page 4)
                        -----------------------------
                Pro forma Basis for Comparative Purposes only
                ---------------------------------------------

                                                 Fourth Quarter
                                  -------------------------------------------
                                     2009    2008(1)(2)  Fav/(Unfav)      %
                                             Pro forma
                                  -------------------------------------------
    Commodity Data
    --------------

    Freight Revenues (millions)
    - Grain                       $   291.9  $   319.9  $   (28.0)      (8.8)
    - Coal                            112.1      141.3      (29.2)     (20.7)
    - Sulphur and fertilizers          83.7      119.0      (35.3)     (29.7)
    - Forest products                  42.0       58.0      (16.0)     (27.6)
    - Industrial and consumer
       products                       201.3      233.0      (31.7)     (13.6)
    - Automotive                       67.7       81.8      (14.1)     (17.2)
    - Intermodal                      292.3      338.9      (46.6)     (13.8)
                                  --------------------------------
    Total Freight Revenues        $ 1,091.0  $ 1,291.9  $  (200.9)     (15.6)
                                  --------------------------------

    Millions of Revenue Ton-Miles
     (RTM)
    - Grain                           9,156      8,903        253        2.8
    - Coal                            4,493      4,625       (132)      (2.9)
    - Sulphur and fertilizers         2,716      4,077     (1,361)     (33.4)
    - Forest products                 1,098      1,277       (179)     (14.0)
    - Industrial and consumer
       products                       4,762      4,816        (54)      (1.1)
    - Automotive                        480        490        (10)      (2.0)
    - Intermodal                      6,169      6,321       (152)      (2.4)
                                  --------------------------------
    Total RTMs                       28,874     30,509     (1,635)      (5.4)
                                  --------------------------------

    Freight Revenue per RTM (cents)
    - Grain                            3.19       3.59      (0.40)     (11.1)
    - Coal                             2.49       3.06      (0.57)     (18.6)
    - Sulphur and fertilizers          3.08       2.92       0.16        5.5
    - Forest products                  3.83       4.54      (0.71)     (15.6)
    - Industrial and consumer
       products                        4.23       4.84      (0.61)     (12.6)
    - Automotive                      14.10      16.69      (2.59)     (15.5)
    - Intermodal                       4.74       5.36      (0.62)     (11.6)

    Freight Revenue per RTM            3.78       4.23      (0.45)     (10.6)

    Carloads (thousands)
    - Grain                           121.1      123.4       (2.3)      (1.9)
    - Coal                             83.9       72.5       11.4       15.7
    - Sulphur and fertilizers          31.9       40.7       (8.8)     (21.6)
    - Forest products                  16.4       20.8       (4.4)     (21.2)
    - Industrial and consumer
       products                        92.6       97.6       (5.0)      (5.1)
    - Automotive                       32.9       30.5        2.4        7.9
    - Intermodal                      241.0      279.6      (38.6)     (13.8)
                                  --------------------------------
    Total Carloads                    619.8      665.1      (45.3)      (6.8)
                                  --------------------------------

    Freight Revenue per Carload
    - Grain                       $   2,410  $   2,592  $    (182)      (7.0)
    - Coal                            1,336      1,949       (613)     (31.5)
    - Sulphur and fertilizers         2,624      2,924       (300)     (10.3)
    - Forest products                 2,561      2,788       (227)      (8.1)
    - Industrial and consumer
       products                       2,174      2,387       (213)      (8.9)
    - Automotive                      2,058      2,682       (624)     (23.3)
    - Intermodal                      1,213      1,212          1        0.1

    Freight Revenue per Carload   $   1,760  $   1,942  $    (182)      (9.4)


                                                      Year
                                  -------------------------------------------
                                     2009    2008(1)(2)  Fav/(Unfav)      %
                                             Pro forma
                                  -------------------------------------------
    Commodity Data
    --------------

    Freight Revenues (millions)
    - Grain                       $ 1,129.9  $ 1,070.6  $    59.3        5.5
    - Coal                            443.3      622.9     (179.6)     (28.8)
    - Sulphur and fertilizers         303.5      518.9     (215.4)     (41.5)
    - Forest products                 173.2      249.0      (75.8)     (30.4)
    - Industrial and consumer
       products                       766.6      919.8     (153.2)     (16.7)
    - Automotive                      228.8      327.4      (98.6)     (30.1)
    - Intermodal                    1,129.9    1,399.8     (269.9)     (19.3)
                                  --------------------------------
    Total Freight Revenues        $ 4,175.2  $ 5,108.4  $  (933.2)     (18.3)
                                  --------------------------------

    Millions of Revenue Ton-Miles
     (RTM)
    - Grain                          34,838     32,019      2,819        8.8
    - Coal                           16,997     21,600     (4,603)     (21.3)
    - Sulphur and fertilizers         9,362     19,956    (10,594)     (53.1)
    - Forest products                 4,470      5,927     (1,457)     (24.6)
    - Industrial and consumer
       products                      17,653     21,364     (3,711)     (17.4)
    - Automotive                      1,607      2,221       (614)     (27.6)
    - Intermodal                     23,425     27,966     (4,541)     (16.2)
                                  --------------------------------
    Total RTMs                      108,352    131,053    (22,701)     (17.3)
                                  --------------------------------

    Freight Revenue per RTM (cents)
    - Grain                            3.24       3.34      (0.10)      (3.0)
    - Coal                             2.61       2.88      (0.27)      (9.4)
    - Sulphur and fertilizers          3.24       2.60       0.64       24.6
    - Forest products                  3.87       4.20      (0.33)      (7.9)
    - Industrial and consumer
       products                        4.34       4.31       0.03        0.7
    - Automotive                      14.24      14.74      (0.50)      (3.4)
    - Intermodal                       4.82       5.01      (0.19)      (3.8)

    Freight Revenue per RTM            3.85       3.90      (0.05)      (1.3)

    Carloads (thousands)
    - Grain                           469.5      460.4        9.1        2.0
    - Coal                            305.1      317.7      (12.6)      (4.0)
    - Sulphur and fertilizers         108.8      195.4      (86.6)     (44.3)
    - Forest products                  66.8       97.6      (30.8)     (31.6)
    - Industrial and consumer
       products                       345.9      425.5      (79.6)     (18.7)
    - Automotive                      103.7      142.0      (38.3)     (27.0)
    - Intermodal                      962.9    1,216.0     (253.1)     (20.8)
                                  --------------------------------
    Total Carloads                  2,362.7    2,854.6     (491.9)     (17.2)
                                  --------------------------------

    Freight Revenue per Carload
    - Grain                       $   2,407  $   2,325  $      82        3.5
    - Coal                            1,453      1,961       (508)     (25.9)
    - Sulphur and fertilizers         2,790      2,656        134        5.0
    - Forest products                 2,593      2,551         42        1.6
    - Industrial and consumer
       products                       2,216      2,162         54        2.5
    - Automotive                      2,206      2,306       (100)      (4.3)
    - Intermodal                      1,173      1,151         22        1.9

    Freight Revenue per Carload   $   1,767  $   1,790  $     (23)      (1.3)

    (1) Pro forma basis redistributes DM&E equity income to a line-by-line
        consolidation of DM&E results for 2008. See note on non-GAAP earnings
        measures included in this press release.

    (2) These earnings measures have no standardized meanings prescribed by
        GAAP and may not be comparable to similar measures of other
        companies. See note on non-GAAP earnings measures included in this
        press release.



                        Summary of Rail Data (Page 5)
                        -----------------------------

                                               Fourth Quarter(1)
                                  -------------------------------------------
                                    2009  2008(2)(3)(4)  Fav/(Unfav)     %
                                  -------------------------------------------
    Operations Performance
    ----------------------
    Pro forma Consolidated Data
    ---------------------------
     including DM&E(2)
     -----------------
    Total operating expenses
     per GTM (cents)(5)                1.55       1.75       0.20       11.4

    Freight gross ton-miles
     (GTM) (millions)                55,198     58,774     (3,576)      (6.1)
    Train miles (000)(7)              8,897      9,978     (1,081)     (10.8)

    Average number of active
     employees - Total               15,073     16,460      1,387        8.4
    Average number of active
     employees - Expense             13,471     14,877      1,406        9.5

    Number of employees at end
     of period - Total               14,665     15,783      1,118        7.1
    Number of employees at end
     of period - Expense             13,614     14,880      1,266        8.5

    U.S. gallons of locomotive
     fuel per 1,000 GTMs -
     freight & yard                    1.18       1.26       0.08        6.3
    U.S. gallons of locomotive
     fuel consumed - total
     (millions)(6)                     64.7       73.6        8.9       12.1
    Average fuel price (U.S.
     dollars per U.S. gallon)          2.28       2.84       0.56       19.7

    Fluidity Data (excluding DM&E)
    ------------------------------
    Average terminal dwell - AAR
     definition (hours)                23.1       22.2       (0.9)      (4.1)
    Average train speed - AAR
     definition (mph)                  24.7       24.7          -          -
    Car miles per car day             139.2      143.9       (4.7)      (3.3)
    Average daily active cars
     on-line (000)                     50.3       52.4        2.1        4.0
    Average daily active road
     locomotives on-line                792        929        137       14.7

    Safety
    ------
    FRA personal injuries per
     200,000 employee-hours
     (CP only)                         1.98       1.63      (0.35)     (21.5)
    FRA train accidents per
     million train-miles (CP only)     1.66       2.18       0.52       23.9
    FRA personal injuries per
     200,000 employee-hours
     (DM&E only)                       2.07       2.94       0.87       29.6
    FRA train accidents per
     million train-miles
     (DM&E only)                       1.46       9.99       8.53       85.4


                                                    Year(1)
                                  -------------------------------------------
                                    2009  2008(2)(3)(4)  Fav/(Unfav)     %
                                  -------------------------------------------
    Operations Performance
    ----------------------
    Pro forma Consolidated Data
    ---------------------------
     including DM&E(2)
     -----------------
    Total operating expenses
     per GTM (cents)(5)                1.62       1.63       0.01        0.6

    Freight gross ton-miles
     (GTM) (millions)               209,475    250,991    (41,516)     (16.5)
    Train miles (000)(7)             34,757     43,243     (8,486)     (19.6)

    Average number of active
     employees - Total               15,175     16,793      1,618        9.6
    Average number of active
     employees - Expense             13,619     15,107      1,488        9.8

    Number of employees at end
     of period - Total               14,665     15,783      1,118        7.1
    Number of employees at end
     of period - Expense             13,614     14,880      1,266        8.5

    U.S. gallons of locomotive
     fuel per 1,000 GTMs -
     freight & yard                    1.19       1.22       0.03        2.5
    U.S. gallons of locomotive
     fuel consumed - total
     (millions)(6)                    246.7      305.0       58.3       19.1
    Average fuel price (U.S.
     dollars per U.S. gallon)          2.04       3.30       1.26       38.2

    Fluidity Data (excluding DM&E)
    ------------------------------
    Average terminal dwell - AAR
     definition (hours)                21.9       22.3        0.4        1.8
    Average train speed - AAR
     definition (mph)                  25.5       24.0        1.5        6.3
    Car miles per car day             142.6      143.6       (1.0)      (0.7)
    Average daily active cars
     on-line (000)                     46.6       54.7        8.1       14.8
    Average daily active road
     locomotives on-line                760        985        225       22.8

    Safety
    ------
    FRA personal injuries per
     200,000 employee-hours
     (CP only)                         1.85       1.51      (0.34)     (22.5)
    FRA train accidents per
     million train-miles (CP only)     1.49       1.93       0.44       22.8
    FRA personal injuries per
     200,000 employee-hours
     (DM&E only)                       2.17       3.50       1.33       38.0
    FRA train accidents per
     million train-miles
     (DM&E only)                       6.78      11.39       4.61       40.5

    (1) Certain 2008 figures have been restated to conform with the change of
        accounting policies for the amortization of prior service pension
        costs for unionized employees and expensing of locomotive overhaul
        costs as adopted in the fourth quarter of 2009 on a retrospective
        basis.

    (2) Pro forma basis redistributes DM&E equity income to a line-by-line
        consolidation of DM&E results for 2008. See note on non-GAAP earnings
        measures included in this press release.

    (3) Certain 2008 figures have been restated for the adoption of CICA
        accounting standard 3064, which requires the expensing of certain
        expenditures related to pre-operating periods of a facility rather
        than recording them as assets as adopted in the first quarter of 2009
        on a retrospective basis.

    (4) Certain prior period figures have been revised to conform with
        current presentation.

    (5) The pro forma total operating expenses per GTM for 2008 is a non-GAAP
        measure. See note on non-GAAP earnings measures included in this
        press release.

    (6) Includes gallons of fuel consumed from freight, yard and commuter
        service but excludes fuel used in capital projects and other
        non-freight activities.

    (7) Train miles decreased in response to the reduced volumes. Management
        reduced train starts by consolidating trains and running longer
        heavier trains which also decreased overall train miles.
    

SOURCE Canadian Pacific

For further information: For further information: Media: Mike LoVecchio, Senior Manager, Media Relations, 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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