Canadian Pacific's first-quarter results solid despite tough winter conditions



    CALGARY, April 24 /CNW/ - Canadian Pacific Railway Limited (TSX/NYSE:   CP)
reported net income growth of 18 per cent to $129 million in the first-quarter
of 2007 when compared with the same quarter 2006. Diluted earnings per share
improved 21 per cent to $0.82.

    
    SUMMARY OF FIRST-QUARTER 2007 COMPARED WITH FIRST-QUARTER 2006

    -   Excluding foreign exchange gains and losses on long-term debt,
        diluted earnings per share increased 8 per cent to $0.78 from $0.72.
    -   Operating ratio improved to 79.5 per cent from 79.6 per cent.
    -   Freight revenue of $1.09 billion increased 2.2 per cent from
        $1.07 billion.
    -   Operating expenses at $887 million, up just 0.3 per cent from
        $884 million.
    

    "CP's team delivered adjusted diluted EPS growth of 8 per cent in the
face of extremely difficult, weather-related operating conditions that
challenged the entire transportation chain," said Fred Green, CP's President
and CEO. "Our disciplined execution of the integrated operating plan, in
addition to the investments in network capacity we've made in our Western
corridor, paid major dividends for us this quarter. We were able to recover
from each event as it occurred and keep our customers' shipments moving."
    Mr. Green added, "Our operational focus on network fluidity has increased
our resilience and allowed our operations to rebound effectively. With the
recent return to more normal operating conditions, we expect to move freight
volumes with increasing efficiency and improved service levels through the
balance of the year."
    Revenues in sulphur and fertilizers increased 31 per cent over
first-quarter 2006 and intermodal and automotive were also up, with growth of
6 per cent and 5 per cent respectively. Softness in forest products offset
some of the revenue growth, decreasing $11 million from the same period in
2006. Winter disruptions and the CN strike increased network congestion which
resulted in reduced shipments in coal and other commodities. Other revenue
declined $18 million in 2007 reflecting a significant land sale that took
place in first-quarter 2006.
    Operating expenses were essentially flat at $887 million, up 0.3 per cent
from 2006, despite the challenging winter operating conditions. Fuel,
inflation and winter related expense increases were partially offset by a drop
in compensation and benefits expense.

    2007 OUTLOOK

    "CP is on track to deliver solid performance in 2007," said Mike Lambert,
Chief Financial Officer. "A reduction in our cash pension funding requirement
to approximately $100 million, down from our original $150 million estimate
given in the Fall of 2006, has improved our free cash outlook to more than
$300 million in 2007, up from $250 million estimated previously. Our diverse
commodity portfolio, a strong yield program and continued vigilance around
cost containment will drive our projected EPS growth of 9 to 13 per cent."
    CP's outlook for diluted earnings per share excluding foreign exchange
gains and losses on long-term debt and other specified items remains in the
range of $4.30 to $4.45 for 2007, compared with 2006 diluted EPS which was
$3.95.
    CP expects to grow revenue in the range of 4 per cent to 6 per cent in
2007. Capital investment is anticipated to be between $885 million and
$895 million and free cash, after dividends, is now expected to exceed
$300 million in 2007. This outlook assumes oil prices averaging US$58 per
barrel and an average currency exchange rate of $1.15 per U.S. dollar
(US$0.87).

    NORMAL COURSE ISSUER BID ANNOUNCEMENT

    CP also announces that its Board of Directors has authorized the
acquisition of up to 15.5 million Common shares of CP for cancellation in
2007, and if not completed in 2007, in 2008. This represents approximately
10 per cent of the public float of its Common Shares outstanding at March 15,
2007. CP currently has in place a normal course issuer bid under which it is
permitted to purchase up to 4.975 million Common Shares during the 12 month
period ending March 27, 2008. CP has purchased 674,990 shares in 2007. Subject
to regulatory approval, CP intends to amend the existing bid to enable it to
purchase up to 15.5 million shares during 2007.
    "We can increase the share repurchase plan because of our increasing
generation of free cash flow and our strong balance sheet. This reflects our
confidence not only in the short term outlook for CP, but also in the longer
term prospects of our Franchise," said Mr. Lambert.

    FOREIGN EXCHANGE GAINS AND LOSSES ON LONG-TERM DEBT

    CP had a foreign exchange gain on long-term debt of $9 million
($6 million after tax) in the first quarter of 2007, compared with a foreign
exchange loss on long-term debt of $6 million ($7 million after tax) in the
first quarter of 2006.

    RESTATEMENT OF FIRST-QUARTER 2006 FINANCIAL STATEMENTS

    As a result of the adoption of EIC162 "Stock-based Compensation for
Employees Eligible to Retire Before the Vesting Date" in December 2006, the
comparative financial statements for the three months ended March 31, 2006
have been restated with an increase in "Compensation and benefit" expense of
$2.3 million, a reduction in "Net income" of $2.2 million and a reduction in
basic and diluted earnings per share of $0.01. Basic and diluted earnings per
share excluding foreign exchange gains and losses on long-term debt was
reduced by $0.02.

    Presentation of non-GAAP earnings

    CP presents non-GAAP earnings in this news release to provide a basis for
evaluating underlying earnings and liquidity trends in its business that can
be compared with prior periods' results of operations. These non-GAAP earnings
exclude foreign currency translation impacts on long-term debt, which can be
volatile and short term, and other specified items, which are not among CP's
normal ongoing revenues and operating expenses. The impact of volatile
short-term rate fluctuations on foreign-denominated debt is only realized when
long-term debt matures or is settled. A reconciliation of income, excluding
foreign exchange gains and losses on long-term debt and other specified items,
to net income as presented in the financial statements is detailed in the
attached Summary of Rail Data. Diluted EPS, 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 EPS").
    Free cash after dividends is calculated as cash provided by operating
activities, less cash used in investing activities and dividends.
    Earnings that exclude foreign exchange currency translation impact on
long-term debt and other specified items, and free cash after dividends, as
described in this news release, have no standardized meanings and are not
defined by Canadian generally accepted accounting principles and, therefore,
are unlikely to be comparable to similar measures presented by other
companies.
    Other specified items are material transactions that may include, but are
not limited to, restructuring and asset impairment charges, gains and losses
on non-routine sales of assets, unusual income tax adjustments, and other
items that do not typify normal business activities. There were no other
specified items in the first quarters of 2007 and 2006.

    Note on forward looking-information

    This news release contains certain forward-looking statements relating
but not limited to our operations, anticipated financial performance and
business prospects. Undue reliance should not be placed on forward-looking
information as actual results may differ materially.
    By its nature, CP's forward-looking information involves numerous
assumptions, inherent risks and uncertainties, including but not limited to
the following factors: changes in business strategies; general global economic
and business conditions; risks in agricultural production such as weather
conditions and insect populations; fluctuations in the value of the Canadian
dollar relative to the U.S. dollar; the availability and price of energy
commodities; the effects of competition and pricing pressures; industry
capacity; shifts in market demand; changes in laws and regulations; changes in
taxes and tax rates; potential increases in maintenance and operating costs;
uncertainties of litigation; labour disputes; timing of completion of capital
and maintenance projects; interest rate fluctuations; effects of changes in
market conditions on the financial position of pension plans; and various
events that could disrupt operations, including severe weather conditions,
security threats and governmental response to them, and technological changes.
    There are factors that could cause actual results to differ from those
described in the forward-looking statements contained in this news release.
These more specific factors are identified and discussed in the Outlook
section and elsewhere in this news release with the particular forward-looking
statement in question.
    CP undertakes no obligation to update publicly or otherwise revise any
forward-looking information, whether as a result of new information, future
events or otherwise.

    Canadian Pacific, through the ingenuity of its employees located across
Canada and in the United States, intends to be the safest, and most fluid
railway in North America. Our people are the key to delivering innovative
transportation solutions to our customers and to ensuring the safe operation
of our trains through the more than 900 communities where we operate. Our
combined ingenuity makes Canadian Pacific a better place to work, rail a
better way to ship, and North America a better place to live. Come and visit
us at www.cpr.ca to see how we can put our ingenuity to work for you. Canadian
Pacific is proud to be the official rail freight services provider for the
Vancouver 2010 Olympic and Paralympic Winter Games.



    
    STATEMENT OF CONSOLIDATED INCOME
    (in millions, except per share data)
                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                                    Restated
                                                                 (see Note 2)
                                                   --------------------------
                                                           (unaudited)
    Revenues
      Freight                                       $  1,090.9    $  1,067.2
      Other                                               25.0          43.3
                                                   --------------------------
                                                       1,115.9       1,110.5
    Operating expenses
      Compensation and benefits                          332.5         352.2
      Fuel                                               171.2         157.9
      Materials                                           62.4          57.6
      Equipment rents                                     55.5          44.6
      Depreciation and amortization                      118.6         114.8
      Purchased services and other                       146.4         156.6
                                                   --------------------------
                                                         886.6         883.7
                                                   --------------------------
    Operating income                                     229.3         226.8

    Other charges (Note 4)                                 4.8           6.8
    Foreign exchange (gains) losses on
     long-term debt                                       (8.6)          6.4
    Interest expense (Note 5)                             46.8          47.3
    Income tax expense                                    57.7          57.5
                                                   --------------------------

    Net income                                      $    128.6    $    108.8
                                                   --------------------------
                                                   --------------------------

    Basic earnings per share (Note 8)               $     0.83    $     0.69
                                                   --------------------------
                                                   --------------------------

    Diluted earnings per share (Note 8)             $     0.82    $     0.68
                                                   --------------------------
                                                   --------------------------

    See notes to interim consolidated financial statements.



    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
    (in millions)
                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                                    Restated
                                                                 (see Note 2)
                                                   --------------------------
                                                           (unaudited)
    Comprehensive income

    Net income                                      $    128.6    $    108.8

    Other comprehensive income

      Net change in foreign currency translation
       adjustments, net of hedging activities             (0.3)          1.5

      Net change in gains on derivatives
       designated as cash flow hedges                     (3.2)            -
                                                   --------------------------

      Other comprehensive (loss) income before
       income taxes                                       (3.5)          1.5

      Income tax recovery                                  0.7           0.2
                                                   --------------------------

    Other comprehensive (loss) income (Note 10)           (2.8)          1.7
                                                   --------------------------

    Comprehensive income                            $    125.8    $    110.5
                                                   --------------------------
                                                   --------------------------

    See notes to interim consolidated financial statements.



    CONSOLIDATED BALANCE SHEET
    (in millions)
                                                      March 31   December 31
                                                          2007          2006
                                                                    Restated
                                                                 (see Note 2)
                                                   --------------------------
                                                           (unaudited)
    Assets
    Current assets
      Cash and cash equivalents                     $     25.6    $    124.3
      Accounts receivable and other current
       assets                                            608.0         615.7
      Materials and supplies                             162.2         158.6
      Future income taxes                                109.7         106.3
                                                   --------------------------
                                                         905.5       1,004.9

    Investments                                           65.8          64.9
    Net properties                                     9,195.9       9,122.9
    Other assets and deferred charges                  1,208.0       1,223.2
                                                   --------------------------

    Total assets                                    $ 11,375.2    $ 11,415.9
                                                   --------------------------
                                                   --------------------------

    Liabilities and shareholders' equity
    Current liabilities
      Short-term borrowing                          $     77.7    $        -
      Accounts payable and accrued liabilities           999.8       1,002.6
      Income and other taxes payable                      15.2          16.0
      Dividends payable                                   35.0          29.1
      Long-term debt maturing within one year             31.5         191.3
                                                   --------------------------
                                                       1,159.2       1,239.0

    Deferred liabilities                                 697.6         725.7
    Long-term debt                                     2,747.8       2,813.5
    Future income taxes                                1,831.3       1,781.2

    Shareholders' equity
      Share capital (Note 9)                           1,182.9       1,175.7
      Contributed surplus                                 37.1          32.3
      Accumulated other comprehensive income              77.6          66.4
      Retained income                                  3,641.7       3,582.1
                                                   --------------------------
                                                       4,939.3       4,856.5
                                                   --------------------------

    Total liabilities and shareholders' equity      $ 11,375.2    $ 11,415.9
                                                   --------------------------
                                                   --------------------------

    Commitments and contingencies (Note 15).
    See notes to interim consolidated financial statements.



    STATEMENT OF CONSOLIDATED CASH FLOWS
    (in millions)
                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                                    Restated
                                                                 (see Note 2)
                                                   --------------------------
                                                           (unaudited)
    Operating activities
      Net income                                    $    128.6    $    108.8
      Add items not affecting cash:
        Depreciation and amortization                    118.6         114.8
        Future income taxes                               38.5          44.2
        Foreign exchange (gains) losses on
         long-term debt                                   (8.6)          6.4
        Amortization of deferred charges                   3.1           4.3
      Restructuring payments                             (13.2)        (27.8)
      Other operating activities, net                     (2.7)          4.1
      Change in non-cash working capital balances
       related to operations                             (36.6)        (80.5)
                                                   --------------------------
      Cash provided by operating activities              227.7         174.3
                                                   --------------------------
    Investing activities
      Additions to properties                           (204.2)       (191.7)
      Decrease in investments and other assets            (0.3)        (19.7)
      Net proceeds from disposal of transportation
       properties                                          8.9           4.3
                                                   --------------------------
      Cash used in investing activities                 (195.6)       (207.1)
                                                   --------------------------
    Financing activities
      Dividends paid                                     (29.1)        (23.7)
      Issuance of CP Common Shares                        10.1          38.5
      Purchase of CP Common Shares                       (16.1)        (45.6)
      Increase in short-term borrowing                    77.7             -
      Repayment of long-term debt                       (173.4)        (10.7)
                                                   --------------------------
      Cash used in financing activities                 (130.8)        (41.5)
                                                   --------------------------
    Cash position
      Decrease in net cash and cash equivalents          (98.7)        (74.3)
      Net cash and cash equivalents at beginning
       of period                                         124.3         121.8
                                                   --------------------------
      Net cash and cash equivalents at end
       of period                                    $     25.6    $     47.5
                                                   --------------------------
                                                   --------------------------

    See notes to interim consolidated financial statements.



    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
    (in millions)
                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                                    Restated
                                                                 (see Note 2)
                                                   --------------------------
                                                           (unaudited)
    Share capital
    Balance, beginning of period                    $  1,175.7    $  1,141.5

    Shares issued under stock option plans                12.3          40.2

    Shares repurchased                                    (5.1)         (6.6)
                                                   --------------------------
    Balance, end of period                             1,182.9       1,175.1
                                                   --------------------------

    Contributed surplus
    Balance, beginning of period                          32.3         245.1

    Stock-based compensation expense related to
     stock option plans                                    4.8           4.1

    Shares repurchased                                       -         (45.0)
                                                   --------------------------
    Balance, end of period                                37.1         204.2
                                                   --------------------------

    Accumulated other comprehensive income
    Balance, beginning of period                          66.4          67.5

    Adjustment for change in accounting policy            14.0             -
                                                   --------------------------
    Adjusted balance, beginning of period                 80.4          67.5

    Other comprehensive (loss) income (Note 10)           (2.8)          1.7
                                                   --------------------------
    Balance, end of period                                77.6          69.2
                                                   --------------------------

    Retained earnings
    Balance, beginning of period                       3,582.1       2,930.0

    Adjustment for change in accounting policy             4.0             -
                                                   --------------------------
    Adjusted balance, beginning of period              3,586.1       2,930.0

    Net income for the period                            128.6         108.8

    Shares repurchased                                   (38.0)            -

    Dividends                                            (35.0)        (29.9)
                                                   --------------------------
    Balance, end of period                             3,641.7       3,008.9
                                                   --------------------------

    Total accumulated other comprehensive income
     and retained earnings                             3,719.3       3,078.1
                                                   --------------------------
                                                   --------------------------

    Shareholders' equity, end of period             $  4,939.3    $  4,457.4
                                                   --------------------------
                                                   --------------------------

    See notes to interim consolidated financial statements.



    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    MARCH 31, 2007
    (unaudited)

    1   Basis of presentation

        These unaudited interim consolidated financial statements and notes
        have been prepared using accounting policies that are consistent with
        the policies used in preparing Canadian Pacific Railway Limited's
        ("CP", "the Company" or "Canadian Pacific Railway") 2006 annual
        consolidated financial statements, except as discussed below and in
        Note 2 for the adoption of new accounting standards for financial
        instruments, hedges and comprehensive income. They do not include all
        disclosures required under Generally Accepted Accounting Principles
        for annual financial statements and should be read in conjunction
        with the annual consolidated financial statements.

        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.

        Financial Instruments
        ---------------------

        From January 1, 2007, certain financial instruments, including those
        classified as loans and receivables, available for sale, held for
        trading and financial liabilities, are initially measured at fair
        value and subsequently measured at fair value or amortized cost.
        Amortization is calculated using the effective interest rate for the
        instrument. Financial instruments that will be realized within the
        normal operating cycle are measured at their carrying amount as this
        approximates fair value.

        Transaction costs related to the issuance of long-term debt are added
        to the fair value of the related instrument on issue and are
        amortized to income in conjunction with the amortization of the
        instrument using the effective interest rate method.

        Derivative financial and commodity instruments
        ----------------------------------------------

        Derivative financial and commodity instruments may be used from time
        to time by the Company to manage its exposure to price risks relating
        to foreign currency exchange rates, stock-based compensation,
        interest rates and fuel prices. Since January 1, 2004, when CP
        utilizes derivative instruments in hedging relationships, CP
        identifies, designates and documents those hedging transactions and
        regularly tests the transactions to demonstrate effectiveness in
        order to continue hedge accounting.

        Commencing from January 1, 2007 all derivative instruments are
        recorded at their fair value. They are classified on the Consolidated
        Balance Sheet in "Other assets and deferred charges", "Deferred
        liabilities", "Accounts receivable and other current assets" or
        "Accounts payable and accrued liabilities" as applicable. Prior to
        2007, only derivative instruments that did not qualify as hedges or
        were not designated as hedges were carried at fair value on the
        Consolidated Balance Sheet in "Other assets and deferred charges" or
        "Deferred liabilities". In the Statement of Consolidated Cash Flows,
        cash flows relating to derivative instruments designated as hedges
        are included in the same line as the related item. Gains and losses
        arising from derivative instruments will affect the following income
        statements lines: "Revenues", "Compensation and benefits", "Fuel",
        "Other charges", "Foreign exchange (gains) losses on long-term debt"
        and "Interest expense".

        For fair value hedges, the periodic change in value is recognized in
        income, where the changes in values of the hedged items are also
        recorded. For a cash flow hedge, the change in value of the effective
        portion is recognized in "Other comprehensive income". Any
        ineffectiveness within an effective cash flow hedge is recognized in
        income as it arises in the same income account as the hedged item
        when realized. Should the hedging of a cash flow hedge relationship
        become ineffective, previously unrealized gains and losses remain
        within "Accumulated other comprehensive income" until the hedged item
        is settled and, prospectively, future changes in value of the
        derivative are recognized in income. The change in value of the
        effective portion of a cash flow hedge remains in "Accumulated other
        comprehensive income" until the related hedged item settles, at which
        time amounts recognized in "Accumulated other comprehensive income"
        are reclassified to the same income or balance sheet account that
        records the hedged item. Prior to January 1, 2007, the periodic
        change in the fair value of an effective hedging instrument was not
        recognized in the financial statements.

        The transitional date for the assessment of embedded derivatives was
        January 1, 2001.

    2   New accounting policies

        Financial instruments, hedging and comprehensive income
        -------------------------------------------------------

        On January 1, 2007 the Company adopted the following accounting
        standards: Section 3855 "Financial Instruments - Recognition and
        Measurement", Section 3861 "Financial Instruments - Disclosure and
        Presentation", Section 3865 "Hedges" and Section 1530 "Comprehensive
        Income". These sections require certain financial instruments and
        hedge positions to be recorded at their fair value. They also
        introduce the concept of comprehensive income and accumulated other
        comprehensive income. Adoption of these standards was on a
        prospective basis without retroactive restatement of prior periods,
        except for the restatement of equity balances to reflect the
        reclassification of "Foreign currency translation adjustments" to
        "Accumulated other comprehensive income".

        The impact of the adoption of these standards on January 1, 2007 was
        an increase in net assets of $18.0 million, a reduction in "Foreign
        currency translation adjustments" of $66.4 million, an increase in
        "Retained earnings" of $4.0 million, and the recognition of
        "Accumulated other comprehensive income" of $80.4 million.

        The fair value of hedging instruments at January 1, 2007 was
        $31.7 million reflected in "Other assets and deferred charges" and
        "Accounts receivable and other current assets" and $4.8 million
        reflected in "Deferred liabilities" and "Accounts payable and accrued
        liabilities". The inclusion of transaction costs within "Long-term
        debt" at amortized cost reduced "Long-term debt" by $33.4 million
        with an associated reduction in "Other assets and deferred charges"
        of $26.9 million. Deferred gains and losses on previously settled
        hedges were reclassified to "Accumulated other comprehensive income"
        and "Retained earnings" with a resultant decrease in "Other assets
        and deferred charges" of $4.8 million. The recognition of certain
        other financial instruments at fair value or amortized cost resulted
        in reductions in "Long-term debt" of $2.8 million, "Investments" of
        $1.5 million and "Other assets and deferred charges" of $0.4 million.
        The adoption of these standards increased the liability for "Future
        income taxes" by $11.6 million. Accumulated other comprehensive
        income is comprised of foreign currency gains and losses on the net
        investment in self-sustaining foreign subsidiaries, foreign currency
        gains and losses related to long-term debt designated as a hedge of
        the net investment in self- sustaining foreign subsidiaries',
        effective portions of gains and losses resulting from changes in the
        fair value of cash flow hedging instruments, and the reclassification
        of cumulative foreign currency translation adjustments. The
        adjustment to opening retained earnings reflects the change in
        measurement basis, from original cost to fair value or amortized
        cost, of certain financial assets, financial liabilities, transaction
        costs associated with the Company's long term debt and previously
        deferred gains and losses on derivative instruments that were settled
        in prior years and which, had they currently existed, did not meet
        the criteria for hedge accounting under Accounting Standard Section
        3865. The amounts recorded on the adoption of these standards
        differed from the estimated amounts disclosed in Note 3 to the 2006
        annual financial statement as a result of the refinement of certain
        estimates used at the year end.

        Stock-based compensation for employees eligible to retire before the
        --------------------------------------------------------------------
        vesting date
        ------------

        As a result of the adoption of EIC 162 "Stock-based Compensation for
        Employees Eligible to Retire Before the Vesting Date" in December
        2006, the comparative financial statements for the three months ended
        March 31, 2006 have been restated with an increase in "Compensation
        and benefits" expense of $2.3 million, a reduction of "Net income" of
        $2.2 million and a reduction in basic and diluted earnings per share
        of $0.01.

    3   Future accounting changes

        The CICA has issued the following accounting standards which will be
        effective for the Company from January 1, 2008: Section 3862
        "Financial Instruments - Disclosures", Section 3863 "Financial
        Instruments - Presentation" and Section 1535 "Capital Disclosures".

        These new accounting standards will require the Company to provide
        additional disclosures relating to its financial instruments,
        including hedging instruments, and about the Company's capital. In
        addition, Section 3863 does not change the presentation guidance
        provided in Section 3861 "Financial Instruments - Disclosure and
        Presentation" which it replaces. It is not anticipated that the
        adoption of these new accounting standards will impact the amounts
        reported in the Company's financial statements as they primarily
        relate to disclosure.

    4   Other charges
                                                      For the three months
                                                         ended March 31
        (in millions)                                     2007          2006
                                                   --------------------------

        Amortization of discount on accruals
         recorded at present value                  $      2.0    $      2.5
        Other exchange (gains) losses                     (0.5)          0.1
        Loss on sale of accounts receivable                1.3           1.1
        (Gain) loss on non-hedging derivative
         instruments                                      (0.3)          0.8
        Other                                              2.3           2.3
                                                   --------------------------
        Total other charges                         $      4.8    $      6.8
                                                   --------------------------
                                                   --------------------------

    5   Interest expense
                                                      For the three months
                                                         ended March 31
        (in millions)                                     2007          2006
                                                   --------------------------

        Interest expense                            $     48.8    $     49.0
        Interest income                                   (2.0)         (1.7)
                                                   --------------------------
        Net interest expense                        $     46.8    $     47.3
                                                   --------------------------
                                                   --------------------------

    6   Income taxes

        Cash taxes paid for the three months ended March 31, 2007 were
        $9.2 million (2006 - $5.8 million).

    7   Restructuring and environmental remediation

        At March 31, 2007, the provision for restructuring and environmental
        remediation was $296.6 million (December 31, 2006 - $309.0 million).
        This provision primarily includes labour liabilities for
        restructuring plans. Payments are expected to continue in diminishing
        amounts until 2025. The environmental remediation liability includes
        the cost of a multi-year soil remediation program.

        Set out below is a reconciliation of CP's liabilities associated with
        restructuring and environmental remediation programs:

        Three months ended March 31, 2007

                        Opening                     Amorti-          Closing
                        Balance                     zation  Foreign  Balance
                         Jan. 1                         of Exchange  Mar. 31
        (in millions)      2007  Accrued Payments Discount   Impact     2007
                       ------------------------------------------------------
        Labour
         liability for
         terminations
         and
         severances     $ 187.4        -    (12.5)     1.5     (0.3)   176.1
        Other
         non-labour
         liabilities
         for exit
         plans              1.4        -     (0.1)       -        -      1.3
                       ------------------------------------------------------
        Total
         restructuring
         liability        188.8        -    (12.6)     1.5     (0.3)   177.4
                       ------------------------------------------------------
        Environmental
         remediation
         program          120.2      0.2     (0.6)       -     (0.6)   119.2
                       ------------------------------------------------------
        Total
         restructuring
         and
         environmental
         remediation
         liability      $ 309.0      0.2    (13.2)     1.5     (0.9)   296.6
                       ------------------------------------------------------
                       ------------------------------------------------------


        Three months ended March 31, 2006

                       Opening                      Amorti-          Closing
                       Balance                      zation  Foreign  Balance
                        Jan. 1  Accrued                 of Exchange  Mar. 31
        (in millions)     2006 (Reduced) Payments Discount   Impact     2006
                       ------------------------------------------------------
        Labour
         liability for
         terminations
         and
         severances     $ 263.6     (1.1)   (24.8)     2.6      0.2  $ 240.5
        Other
         non-labour
         liabilities
         for exit
         plans              5.8        -     (1.1)       -        -      4.7
                       ------------------------------------------------------
        Total
         restructuring
         liability        269.4     (1.1)   (25.9)     2.6      0.2    245.2
                       ------------------------------------------------------
        Environmental
         remediation
         program          129.4      1.1     (1.9)       -      0.3    128.9
                       ------------------------------------------------------
        Total
         restructuring
         and
         environmental
         remediation
         liability      $ 398.8        -    (27.8)     2.6      0.5  $ 374.1
                       ------------------------------------------------------
                       ------------------------------------------------------

        Amortization of Discount is charged to income as "Other Charges",
        "Compensation and Benefits" and "Purchased Services and Other", as
        applicable.

    8   Earnings per share

        At March 31, 2007, the number of shares outstanding was 155.2 million
        (March 31, 2006 158.6 million).

        Basic earnings per share have been calculated using net income for
        the period divided by the weighted average number of CP shares
        outstanding during the period.

        Diluted earnings per share have been calculated using the treasury
        stock method, which gives effect to the dilutive value of outstanding
        options.

        The number of shares used in earnings per share calculations is
        reconciled as follows:

                                                      For the three months
                                                         ended March 31
        (in millions)                                     2007          2006
                                                   --------------------------

        Weighted average shares outstanding              155.5         158.5
        Dilutive effect of stock options                   1.9           1.7
                                                   --------------------------

        Weighted average diluted shares
         outstanding                                     157.4         160.2
                                                   --------------------------
                                                   --------------------------

        (in dollars)

        Basic earnings per share                          0.83        0.69(1)
        Diluted earnings per share                        0.82        0.68(1)
                                                   --------------------------
                                                   --------------------------
        (1) Restated


    9   Shareholders' equity

        An analysis of shares outstanding is as follows:

                                                      For the three months
                                                         ended March 31
        (in millions)                                     2007          2006
                                                   --------------------------

        Shares outstanding, January 1                    155.5         158.2
        Shares issued under stock option plans             0.4           1.3
        Shares repurchased                                (0.7)         (0.9)
                                                   --------------------------

        Shares outstanding, March 31                     155.2         158.6
                                                   --------------------------
                                                   --------------------------

        In June 2006, the Company completed the acquisition of Common Shares
        under the previous normal course issuer bid and filed a new normal
        course issuer bid to purchase, for cancellation, up to 3.9 million of
        its outstanding Common Shares. Under this filing, share purchases may
        be made during the 12-month period beginning June 6, 2006, and ending
        June 5, 2007. Of the 3.9 million shares authorized for repurchase
        under this filing, 3.4 million were repurchased in 2006 at an average
        price per share of $56.66 and 0.2 million shares were purchased in
        the first quarter of 2007 at an average price per share of $64.11.

        In March 2007, the Company completed the filing for a new normal
        course issuer bid ("2007 NCIB") to cover the period of March 28, 2007
        to March 27, 2008 to purchase, for cancellation, up to 5.0 million of
        its outstanding Common Shares. Of the 5.0 million shares authorized
        under the 2007 NCIB, 0.2 million shares were purchased in the first
        quarter of 2007 at an average price per share of $64.76.

        In addition to the 0.2 million shares purchased through the 2007
        NCIB, pursuant to a notice of intention to make an exempt issuer bid
        filed on March 23, 2007, the Company purchased, for cancellation,
        0.3 million shares through a private agreement with an arm's length
        third party on March 29, 2007 at an average price of $63.12.

        In April 2007, the Company received approval from its Board of
        Directors to amend its 2007 NCIB to purchase, for cancellation, up to
        15.5 million of its outstanding Common Shares during 2007, and if not
        completed in 2007, in 2008. This amendment is subject to regulatory
        approval.

        The purchases are made at the market price on the day of purchase,
        with consideration allocated to share capital up to the average
        carrying amount of the shares, and any excess allocated to
        contributed surplus and retained earnings. When shares are
        repurchased, it takes three days before the transaction is settled
        and the shares are cancelled. The cost of shares purchased in a given
        month and settled in the following month is accrued in the month of
        purchase. During the three months ended March 31, 2007, 0.7 million
        shares were repurchased at an average price of $63.85 (three months
        ended March 31, 2006, 0.9 million shares were repurchased at an
        average price of $57.81).

    10  Other comprehensive income

        Components of other comprehensive income and the related tax
        effects are as follows:

                                        For the three months ended March 31
        (in millions)                                  2007
                                                    Income tax
                                      Before tax    (expense)     Net of tax
                                        amount       recovery       amount
                                     ----------------------------------------
        Unrealized foreign exchange
         gain on translation of U.S.
         dollar-denominated long-term
         debt designated as a hedge
         of the net investment in
         U.S. subsidiaries            $      3.9    $     (0.6)   $      3.3

        Unrealized foreign exchange
         loss on translation of the
         net investment in U.S.
         subsidiaries                       (4.2)            -          (4.2)

        Realized gain on settled
         cash flow hedges                   (3.3)          1.3          (2.0)

        Increase in unrealized holding
         gains on cash flow hedges           0.1             -           0.1
                                     ----------------------------------------

        Other comprehensive loss      $     (3.5)   $      0.7    $     (2.8)
                                     ----------------------------------------
                                     ----------------------------------------


                                        For the three months ended March 31
        (in millions)                                  2006
                                                    Income tax
                                      Before tax    (expense)     Net of tax
                                        amount       recovery       amount
                                     ----------------------------------------
        Unrealized foreign exchange
         loss on translation of U.S.
         dollar-denominated long-term
         debt designated as a hedge
         of the net investment in
         U.S. subsidiaries            $     (0.9)   $      0.2    $     (0.7)

        Unrealized foreign exchange
         gain on translation of the
         net investment in U.S.
         subsidiaries                        2.4             -           2.4
                                     ----------------------------------------

        Other comprehensive income    $      1.5    $      0.2    $      1.7
                                     ----------------------------------------
                                     ----------------------------------------


        Changes in the balances of each classification within Accumulated
        other comprehensive income are as follows:

        Three months ended March 31, 2007

                                    Adjustment
                                           for  Adjusted
                             Opening change in   Opening             Closing
                             Balance,  account-  Balance,            Balance,
                              Jan. 1,      ing    Jan. 1,   Period   Mar. 31,
        (in millions)           2007    policy      2007    change      2007
                            -------------------------------------------------
        Foreign exchange on
         U.S. dollar debt
         designated as a
         hedge of the net
         investment in U.S.
         subsidiaries        $ 234.9   $   0.4   $ 235.3   $   3.3   $ 238.6

        Foreign exchange on
         net investment in
         U.S. subsidiaries    (168.5)        -    (168.5)     (4.2)   (172.7)

        Increase (decrease)
         in unrealized
         effective gains
         of cash flow hedges       -      18.9      18.9      (1.9)     17.0

        Unrealized loss on
         settled hedge
         instruments               -      (5.3)     (5.3)        -      (5.3)
                            -------------------------------------------------
        Accumulated other
         comprehensive
         income              $  66.4   $  14.0   $  80.4   $  (2.8)  $  77.6
                            -------------------------------------------------
                            -------------------------------------------------


        Three months ended March 31, 2006

                                                 Opening             Closing
                                                 Balance,            Balance,
                                                  Jan. 1,   Period   Mar. 31,
        (in millions)                               2006    change      2006
                                                -----------------------------
        Foreign exchange on U.S. dollar debt
         designated as a hedge of the net
         investment in U.S. subsidiaries         $ 238.1   $  (0.7)  $ 237.4

        Foreign exchange on net investment
         in U.S. subsidiaries                     (170.6)      2.4    (168.2)
                                                -----------------------------

        Accumulated other comprehensive income   $  67.5   $   1.7   $  69.2
                                                -----------------------------
                                                -----------------------------


        During the next twelve months, the Company expects $12.3 million of
        unrealized holding gains on derivative instruments to be realized and
        recognized in the Statement of Consolidated Income. Derivative
        instruments designated as cash flow hedges will mature during the
        period ending December 2009.

    11  Fair value of financial instruments

        The fair value of a financial instrument is the amount of
        consideration that would be agreed upon in an arm's length
        transaction between willing parties. The Company uses the following
        methods and assumptions to estimate fair value of each class of
        financial instruments for which carrying amounts are included in the
        Consolidated Balance Sheet as follows:

        Loans and receivables
        ---------------------
        Accounts receivable and other current assets - The carrying amounts
        included in the Consolidated Balance Sheet approximate fair value
        because of the short maturity of these instruments.

        Investments - Long-term receivable balances are carried at amortized
        cost based on an initial fair value determined using discounted cash
        flow analysis using observable market based inputs.

        Financial liabilities
        ---------------------
        Accounts payable and accrued liabilities and short-term borrowings -
        The carrying amounts included in the Consolidated Balance Sheet
        approximate fair value because of the short maturity of these
        instruments.

        Long-term debt - The carrying amount of long-term debt is at
        amortized cost based on an initial fair value determined using the
        quoted market prices for the same or similar debt instruments.

        Available for sale
        ------------------
        Investments - The Company's equity investments recorded on a cost
        basis have a carrying value that equals cost as fair value cannot be
        reliably established. These investments are not traded on a liquid
        market.

        Held for trading
        ----------------
        Other assets and deferred charges and Deferred liabilities -
        Derivative instruments that are designated as hedging instruments are
        measured at fair value determined using the quoted market prices for
        the same or similar instruments. Derivative instruments that are not
        designated in hedging relationships are classified as held for
        trading and measured at fair value determined by using quoted market
        prices for the same or similar instruments and changes in the fair
        values of such derivative instruments are recognized in net income as
        they arise.

        Cash and cash equivalents - The carrying amounts included in the
        Consolidated Balance Sheet approximate fair value because of the
        short maturity of these instruments.

        Carrying value and fair value of financial instruments
        ------------------------------------------------------
        The carrying values of financial instruments equal or approximate
        their fair values with the exception of long-term debt which has a
        carrying value of approximately $2,779 million and a fair value of
        approximately $3,068 million at March 31, 2007.

    12  Stock-based compensation

        In the first quarter of 2007, under CP's stock option plans, the
        Company issued 1,299,800 options to purchase Common Shares at the
        price of $62.57 per share, based on the closing price on the day
        prior to the grant date. In tandem with these options, 432,050 stock
        appreciation rights were issued at the exercise price of $62.57.
        Also, all 30,000 unvested Restricted Share Units, issued in 2005,
        were cancelled in the first quarter of 2006.

        Pursuant to the employee plan, options may be exercised upon vesting,
        which is between 24 months and 36 months after the grant date, and
        will expire after 10 years. Some options vest after 48 months, unless
        certain performance targets are achieved, in which case vesting is
        accelerated. These options expire five years after the grant date.
        Other options only vest if certain performance targets are achieved
        and expire approximately five years after the grant date.

        The following is a summary of the Company's fixed stock option plans
        as of March 31 (including options granted under the Directors' Stock
        Option Plan, which was suspended in 2003):

                                  2007                        2006
                       --------------------------  --------------------------
                                        Weighted                    Weighted
                                         average                     average
                         Number of      exercise     Number of      exercise
                           options         price       options         price
                       --------------------------  --------------------------
        Outstanding,
         January 1       6,815,494    $    38.50     7,971,917    $    32.07
        New options
         granted         1,299,800         62.57     1,376,500         57.70
        Exercised         (356,491)        29.82    (1,349,300)        28.48
        Forfeited/
         cancelled         (51,175)        35.48      (195,530)        39.69
                       ------------                ------------
        Outstanding,
         March 31        7,707,628    $    42.98     7,803,587    $    37.02
                       --------------------------  --------------------------
                       --------------------------  --------------------------
        Options
         exercisable
         at March 31     4,713,928    $    33.89     3,919,337    $    29.38
                       --------------------------  --------------------------
                       --------------------------  --------------------------

        Compensation expense is recognized over the vesting period for stock
        options issued since January 1, 2003, based on their estimated fair
        values on the date of grants, as determined by the Black-Scholes
        option pricing model. Had CP used the fair value method for options
        granted between January 1, 2002, and December 31, 2002, CP's pro
        forma basis net income and earnings per share would have been as
        follows:


                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                                    Restated
                                                   --------------------------

        Net income (in millions)    As reported     $    128.6    $    108.8
                                    Pro forma       $    128.6    $    108.6
                                                   --------------------------
                                                   --------------------------

        Pro forma basic and diluted earnings per share are unchanged from the
        amounts disclosed in the Statement of Consolidated Income.

        Under the fair value method, the fair value of options at the grant
        date is $11.2 million for options issued in the first quarter of 2007
        (first quarter of 2006 - $11.7 million). The weighted average fair
        value assumptions were approximately:

                                                      For the three months
                                                         ended March 31
                                                          2007          2006
                                                   --------------------------

        Expected option life (years)                      4.00          4.50
        Risk-free interest rate                           3.89%         4.06%
        Expected stock price volatility                     23%           22%
        Expected annual dividends per share         $     0.90    $     0.75
        Weighted average fair value of options
         granted during the year                    $    12.96    $    12.97
                                                   --------------------------
                                                   --------------------------

    13  Pensions and other benefits

        The total benefit cost for the Company's defined benefit pension
        plans, defined contribution pension plans and post-retirement
        benefits for the quarter ended March 31, 2007, was $27.4 million
        (quarter ended March 31, 2006 - $30.9 million).

    14  Significant customers

        During the first quarter of 2007, one customer comprised 11.1% of
        total revenue (first quarter of 2006 - 13.0%). At March 31, 2007, one
        customer represented 4.2% of total accounts receivable (March 31,
        2006 - 6.1%).

    15  Commitments and contingencies

        In the normal course of its operations, the Company becomes involved
        in various legal actions, including claims relating to injuries and
        damages to property. The Company maintains provisions it considers to
        be adequate for such actions. While the final outcome with respect to
        actions outstanding or pending at March 31, 2007, cannot be predicted
        with certainty, it is the opinion of management that their resolution
        will not have a material adverse effect on the Company's financial
        position or results of operations.

        Capital commitments
        At March 31, 2007, CP had multi-year capital commitments of
        $609.4 million, mainly for locomotive overhaul agreements, in the
        form of signed contracts or letters of intent. Payments for these
        commitments are due in 2007 through 2016.

        Operating lease commitments
        At March 31, 2007, minimum payments under operating leases were
        estimated at $605.4 million in aggregate, with annual payments in
        each of the next 5 years of: remainder of 2007 - $100.7 million; 2008
        - $100.2 million; 2009 - $72.1 million; 2010 - $56.5 million; 2011 -
        $51.2 million.

        Guarantees
        The Company has residual value guarantees on operating lease
        commitments of $363.9 million at March 31, 2007. The maximum amount
        that could be payable under these and all of the Company's other
        guarantees cannot be reasonably estimated due to the nature of
        certain of the guarantees. All or a portion of amounts paid under
        certain guarantees could be recoverable from other parties or through
        insurance. The Company has accrued for all guarantees that it expects
        to pay. At March 31, 2007, these accruals, which do not include any
        amounts for residual value guarantees, amounted to $7.5 million.



                            Summary of Rail Data
                            --------------------

                                                First Quarter
                               ----------------------------------------------
                                  2007       2006(1)    Variance       %
                               ----------------------------------------------

    Financial (millions, except
    ---------------------------
     per share data)
     ---------------
    Revenues
    --------
      Freight revenue          $ 1,090.9   $ 1,067.2   $    23.7         2.2
      Other revenue                 25.0        43.3       (18.3)      (42.3)
                              -----------------------------------
                                 1,115.9     1,110.5         5.4         0.5
                              -----------------------------------
    Operating expenses
    ------------------
      Compensation and
       benefits                    332.5       352.2       (19.7)       (5.6)
      Fuel                         171.2       157.9        13.3         8.4
      Materials                     62.4        57.6         4.8         8.3
      Equipment rents               55.5        44.6        10.9        24.4
      Depreciation and
       amortization                118.6       114.8         3.8         3.3
      Purchased services
       and other                   146.4       156.6       (10.2)       (6.5)
                              -----------------------------------
                                   886.6       883.7         2.9         0.3
                              -----------------------------------
    Operating income               229.3       226.8         2.5         1.1

      Other charges                  4.8         6.8        (2.0)      (29.4)
      Interest expense              46.8        47.3        (0.5)       (1.1)
      Income tax expense
       before foreign exchange
       (gains)/losses on
       long-term debt(2)            55.1        56.6        (1.5)       (2.7)
                              -----------------------------------
    Income before foreign
     exchange (gains)/losses
     on long-term debt(2)          122.6       116.1         6.5         5.6
                              -----------------------------------

    Foreign exchange (gains)/
    -------------------------
     losses on long-term debt
     ------------------------
     (FX on LTD)
     -----------
      FX on LTD                     (8.6)        6.4       (15.0)          -
      Income tax on FX on
       LTD(3)                        2.6         0.9         1.7           -
                              -----------------------------------
      FX on LTD (net of tax)        (6.0)        7.3       (13.3)          -
                              -----------------------------------
    Net income                 $   128.6   $   108.8   $    19.8        18.2
                              -----------------------------------
                              -----------------------------------
    Earnings per share (EPS)
    ------------------------
      Basic earnings per
       share                   $    0.83   $    0.69   $    0.14        20.3
      Diluted earnings per
       share                   $    0.82   $    0.68   $    0.14        20.6

    EPS before FX on LTD(2)
    -----------------------
      Basic earnings per
       share                   $    0.79   $    0.73   $    0.06         8.2
      Diluted earnings per
       share                   $    0.78   $    0.72   $    0.06         8.3

    Weighted average number
     of shares outstanding
     (millions)                    155.5       158.5        (3.0)       (1.9)

    Operating ratio(2)(4)(%)        79.5        79.6        (0.1)          -

    ROCE before FX on LTD
     (after tax)(2)(4)(%)           10.1         9.6         0.5           -

    Net debt to net debt plus
     equity (%)                     36.4        39.9        (3.5)          -

    EBIT before FX on
     LTD(2)(4)(millions)       $   224.5   $   220.0   $     4.5         2.0
    EBITDA before FX on
     LTD(2)(4)(millions)       $   343.1   $   334.8   $     8.3         2.5


    (1) Certain comparative period figures have been restated for retroactive
        application of a new accounting standard adopted in 2006 related to
        stock-based compensation for employees eligible to retire before the
        vesting date.

    (2) These are earnings measures that are not in accordance with GAAP and
        may not be comparable to similar measures of other companies.
        See note on non-GAAP earnings measures attached to commentary.

    (3) Income tax on FX on LTD is discussed in the current MD&A in the
        "Other Income Statement Items" section - "Income Taxes".

    (4) EBIT:             Earnings before interest and taxes.
        EBITDA:           Earnings before interest, taxes, and depreciation
                          and amortization.
        ROCE (after tax): Return on capital employed (after tax) =
                          earnings before after-tax interest expense
                          (last 12 months) divided by average net debt plus
                          equity.
        Operating ratio:  Operating expenses divided by revenues.



                                                First Quarter
                               ----------------------------------------------
                                  2007        2006     Variance        %
                               ----------------------------------------------
    Commodity Data
    --------------

    Freight Revenues
     (millions)
    - Grain                    $   219.6   $   211.3   $     8.3         3.9
    - Coal                         131.3       160.2       (28.9)      (18.0)
    - Sulphur and fertilizers      122.4        93.1        29.3        31.5
    - Forest products               72.0        83.4       (11.4)      (13.7)
    - Industrial and consumer
       products                    151.9       148.3         3.6         2.4
    - Automotive                    82.1        78.3         3.8         4.9
    - Intermodal                   311.6       292.6        19.0         6.5
                              -----------------------------------
    Total Freight Revenues     $ 1,090.9   $ 1,067.2   $    23.7         2.2
                              -----------------------------------

    Millions of Revenue
     Ton-Miles (RTM)
    - Grain                        7,484       7,474          10         0.1
    - Coal                         4,583       5,054        (471)       (9.3)
    - Sulphur and fertilizers      4,984       3,455       1,529        44.3
    - Forest products              2,000       2,434        (434)      (17.8)
    - Industrial and consumer
       products                    4,133       4,341        (208)       (4.8)
    - Automotive                     625         603          22         3.6
    - Intermodal                   6,926       6,727         199         3.0
                              -----------------------------------
    Total RTMs                    30,735      30,088         647         2.2
                              -----------------------------------

    Freight Revenue per
     RTM (cents)
    - Grain                         2.93        2.83        0.10         3.5
    - Coal                          2.86        3.17       (0.31)       (9.8)
    - Sulphur and fertilizers       2.46        2.69       (0.23)       (8.6)
    - Forest products               3.60        3.43        0.17         5.0
    - Industrial and consumer
       products                     3.68        3.42        0.26         7.6
    - Automotive                   13.14       12.99        0.15         1.2
    - Intermodal                    4.50        4.35        0.15         3.4

    Freight Revenue per RTM         3.55        3.55           -           -

    Carloads (thousands)
    - Grain                         89.3        92.4        (3.1)       (3.4)
    - Coal                          58.5        78.7       (20.2)      (25.7)
    - Sulphur and fertilizers       50.2        39.0        11.2        28.7
    - Forest products               30.1        37.6        (7.5)      (19.9)
    - Industrial and consumer
       products                     75.7        79.7        (4.0)       (5.0)
    - Automotive                    42.4        42.3         0.1         0.2
    - Intermodal                   287.6       281.8         5.8         2.1
                              -----------------------------------
    Total Carloads                 633.8       651.5       (17.7)       (2.7)
                              -----------------------------------

    Freight Revenue per
     Carload
    - Grain                    $   2,459   $   2,287   $     172         7.5
    - Coal                         2,244       2,036         208        10.2
    - Sulphur and fertilizers      2,438       2,387          51         2.1
    - Forest products              2,392       2,218         174         7.8
    - Industrial and consumer
       products                    2,007       1,861         146         7.8
    - Automotive                   1,936       1,851          85         4.6
    - Intermodal                   1,083       1,038          45         4.3

    Freight Revenue per
     Carload                   $   1,721   $   1,638   $      83         5.1



                                                First Quarter
                               ----------------------------------------------
                                  2007       2006(1)    Variance       %
                               ----------------------------------------------

    Operations and Productivity
    ---------------------------

    Freight gross ton-miles
     (GTM) (millions)             57,560      57,014         546         1.0
    Revenue ton-miles (RTM)
     (millions)                   30,735      30,088         647         2.2
    Average number of active
     employees                    14,884      15,267        (383)       (2.5)
    Number of active employees
     at end of period             15,048      15,394        (346)       (2.2)

    FRA personal injuries per
     200,000 employee-hours          1.9         2.1        (0.2)       (9.5)
    FRA train accidents per
     million train-miles             1.8         1.2         0.6        50.0

    Total operating expenses
     per RTM (cents)                2.88        2.94       (0.06)       (2.0)
    Total operating expenses
     per GTM (cents)                1.54        1.55       (0.01)       (0.6)
    Compensation and benefits
     expense per GTM (cents)        0.58        0.62       (0.04)       (6.5)
    GTMs per average active
     employee (000)                3,867       3,734         133         3.6

    Miles of road operated at
     end of period(2)             13,260      13,693        (433)       (3.2)

    Average train speed - AAR
     definition (mph)               23.2        25.3        (2.1)       (8.3)
    Terminal dwell time - AAR
     definition (hours)             24.0        21.3         2.7        12.7
    Car miles per car day          134.6       132.1         2.5         1.9
    Average daily total cars
     on-line - AAR definition
     (000)                          81.3        80.9         0.4         0.5

    U.S. gallons of locomotive
     fuel per 1,000 GTMs -
     freight & yard                 1.26        1.24        0.02         1.6
    U.S. gallons of locomotive
     fuel consumed - total
     (millions)(3)                  72.4        71.1         1.3         1.8

    Average foreign exchange
     rate (US$/Canadian$)          0.854       0.873      (0.019)       (2.2)
    Average foreign exchange
     rate (Canadian$/US$)          1.171       1.146       0.025         2.2


    (1) Certain comparative period figures have been restated for retroactive
        application of a new accounting standard adopted in 2006 related to
        stock-based compensation for employees eligible to retire before the
        vesting date.

    (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.

    





For further information:

For further information: Media: Leslie Pidcock, Tel.: (403) 319-6878,
e-mail: leslie_pidcock@cpr.ca; Investment Community: Janet Weiss, Assistant
Vice-President Investor Relations, Tel.: (403) 319-3591, e-mail:
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