Canadian Pacific announces third-quarter results
"We delivered strong cost control and tight resource management this quarter while traffic volumes remained under pressure," said
For the third-quarter and the first nine months of 2009, the results of the Dakota, Minnesota & Eastern Railroad (DM&E) are fully consolidated with CP's results; however, for the same periods in 2008 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, which is a non-GAAP measure. Financial data presented on a pro forma basis, redistributes DM&E's operating results from an equity income basis of accounting to a line-by-line consolidation of DM&E revenues and expenses.
THIRD-QUARTER 2009 COMPARED WITH THIRD-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 20 per cent from $1.4 billion
- Operating expenses were $827 million, down 20 percent from $1.0
billion
- Income decreased to $144 million from $184 million, or 22 per cent
- Diluted earnings per share decreased to $0.85 from $1.19, or 29 per
cent
- Operating ratio increased 20 basis points to 76.0 per cent
SUMMARY OF FIRST NINE MONTHS OF 2009 COMPARED WITH FIRST NINE MONTHS OF
2008
- Net income was virtually flat at $415 million compared with $416
million in 2008
- Diluted earnings per share were $2.50 down from $2.68 or seven per
cent
EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER
SPECIFIED ITEMS ON A PRO FORMA BASIS:
- Total revenues were $3.2 billion down 18 per cent from $3.9 billion
- Operating expenses were $2.6 billion a decrease of 17 per cent from
$3.1 billion
- Income was $298 million a decrease of 34 per cent from $451 million
- Diluted earnings per share were $1.80 down from $2.90 or 38 per cent
- Operating ratio increased 130 basis points to 80.3 per cent from 79.0
per cent
FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED
ITEMS
CP had a foreign exchange loss on long-term debt of
Other specified items in the third-quarter of 2009 included two property sales of
In the third quarter of 2009 other specified items included a redemption and adjustments for an improvement in fair market value of long-term floating rate notes received in replacement of the investment in Asset-Backed Commercial Paper (ABCP) of
Presentation of non-GAAP earnings
CP presents non-GAAP earnings measures in this news release to provide an additional basis for evaluating underlying earnings and liquidity trends in its business that can be compared with prior periods' results of operations. When foreign exchange gains and losses on long-term debt and other specified items are excluded from diluted earnings per share, income and income tax expense, these are non-GAAP measures. Additional non-GAAP measures 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. These non-GAAP earnings measures exclude foreign currency translation effects on long-term debt, which can be volatile and short term. The impact of volatile short-term rate fluctuations on foreign-denominated debt is only realized when long-term debt matures or is settled. 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
The non-GAAP earnings measures described in this news release have no standardized meanings and are not defined by Canadian generally accepted accounting principles and, therefore, are unlikely to be comparable to similar measures presented by other companies.
Note on forward-looking information
This news release contains certain forward-looking statements relating but not limited to our operations, anticipated financial performance and business prospects. Undue reliance should not be placed on forward-looking information as actual results may differ materially.
By its nature, CP's forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to the following factors: changes in business strategies; general North American and global economic, 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.
Canadian Pacific, through the ingenuity of its employees located across
CONSOLIDATED STATEMENT OF INCOME
(in millions of Canadian dollars, except per share data)
For the three months For the nine months
ended September 30 ended September 30
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Revenues
Freight $ 1,061.5 $ 1,239.5 $ 3,084.2 $ 3,557.0
Other 26.7 25.2 97.1 74.9
-------------------------- -------------------------
1,088.2 1,264.7 3,181.3 3,631.9
Operating expenses
Compensation and
benefits 320.2 312.3 962.7 956.1
Fuel 134.0 275.8 422.7 766.3
Materials 45.8 49.3 164.3 171.3
Equipment rents 42.9 44.4 139.8 136.4
Depreciation and
amortization 132.7 120.8 400.3 365.4
Purchased services
and other 151.4 162.3 465.1 487.7
-------------------------- -------------------------
827.0 964.9 2,554.9 2,883.2
-------------------------- -------------------------
Revenues less
operating expenses 261.2 299.8 626.4 748.7
Gain on sale of
partnership interest
(Note 4) - - 81.2 -
Gain on sale of
Windsor Station and a
land sale in Western
Canada (Note 5) 79.1 - 79.1 -
Gain (loss) in fair
value of long-term
floating rate notes/
asset-backed
commercial paper
(Note 12) 1.6 (28.1) 6.3 (49.4)
Foreign exchange gain
(loss) on long-term
debt (0.1) (2.9) 2.7 (12.4)
Equity income in
Dakota, Minnesota &
Eastern Railroad
Corporation (Note 13) - 16.5 - 40.9
Less:
Other income and
charges (Note 7) 1.6 2.8 28.2 14.4
Net interest
expense (Note 8) 64.7 64.5 210.4 187.3
-------------------------- -------------------------
Income before income
tax expense 275.5 218.0 557.1 526.1
Income tax expense
(Note 9) 80.1 47.3 141.9 110.0
-------------------------- -------------------------
Net income $ 195.4 $ 170.7 $ 415.2 $ 416.1
-------------------------- -------------------------
-------------------------- -------------------------
Basic earnings per
share (Note 10) $ 1.16 $ 1.11 $ 2.51 $ 2.71
-------------------------- -------------------------
-------------------------- -------------------------
Diluted earnings per
share (Note 10) $ 1.16 $ 1.10 $ 2.50 $ 2.68
-------------------------- -------------------------
-------------------------- -------------------------
See notes to interim consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions of Canadian dollars)
For the three months For the nine months
ended September 30 ended September 30
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Comprehensive income
Net Income $ 195.4 $ 170.7 $ 415.2 $ 416.1
Other comprehensive
income
Unrealized foreign
exchange (loss)
gain on:
Translation of
the net
investment in
U.S. subsidiaries (135.6) 60.0 (221.2) 97.2
Translation of
the U.S. dollar-
denominated long-
term debt
designated as a
hedge of the net
investment in U.S.
subsidiaries 134.3 (57.8) 216.4 (92.8)
Change in
derivatives
designated as
cash flow hedges:
Realized loss
(gain) on cash
flow hedges
settled in the
period 0.7 (3.5) 3.5 (12.4)
Unrealized (loss)
gain on cash
flow hedges (3.1) (7.7) 0.1 7.5
Realized loss
(gain) on cash
flow hedges
settled in prior
periods (0.1) (0.1) 1.7 1.5
-------------------------- -------------------------
Other comprehensive
(loss) income
before income taxes (3.8) (9.1) 0.5 1.0
Income tax (expense)
recovery (17.2) 10.2 (30.9) 12.9
-------------------------- -------------------------
Other comprehensive
(loss) income (21.0) 1.1 (30.4) 13.9
-------------------------- -------------------------
Comprehensive income $ 174.4 $ 171.8 $ 384.8 $ 430.0
-------------------------- -------------------------
-------------------------- -------------------------
See notes to interim consolidated financial statements.
CONSOLIDATED BALANCE SHEET
(in millions of Canadian dollars)
September 30 December 31
2009 2008
Restated
(see Note 2)
-------------------------
(unaudited)
Assets
Current assets
Cash and cash equivalents (Note 6) $ 615.9 $ 117.6
Accounts receivable (Note 11) 498.6 647.4
Materials and supplies 169.0 215.8
Future income taxes 66.8 76.5
Other 58.0 65.7
-------------------------
1,408.3 1,123.0
Investments (Note 12) 165.0 151.1
Net properties 12,203.7 12,576.3
Assets held for sale 4.9 39.6
Prepaid pension costs and other assets 1,332.6 1,326.1
Goodwill and intangible assets (Note 13) 206.5 237.2
-------------------------
Total assets $ 15,321.0 $ 15,453.3
-------------------------
-------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowing $ 57.7 $ 150.1
Accounts payable and accrued liabilities 871.7 1,034.9
Income and other taxes payable 34.0 42.2
Dividends payable 41.6 38.1
Long-term debt maturing within one year 390.0 44.0
-------------------------
1,395.0 1,309.3
Other long-term liabilities 815.9 865.2
Long-term debt (Note 14) 3,701.3 4,685.8
Future income taxes 2,663.6 2,610.0
Shareholders' equity
Share capital (Note 15) 1,728.3 1,220.8
Contributed surplus 34.9 40.2
Accumulated other comprehensive income 47.9 78.3
Retained income 4,934.1 4,643.7
-------------------------
6,745.2 5,983.0
-------------------------
Total liabilities and shareholders' equity $ 15,321.0 $ 15,453.3
-------------------------
-------------------------
Commitments and contingencies (Note 20)
See notes to interim consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of Canadian dollars)
For the three months For the nine months
ended September 30 Ended September 30
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Operating activities
Net income $ 195.4 $ 170.7 $ 415.2 $ 416.1
Reconciliation of
net income to cash
provided by
operating
activities:
Depreciation and
amortization 132.7 120.8 400.3 365.4
Future income
taxes 117.6 28.5 179.0 56.3
(Gain)/loss in
fair value of
long-term
floating rate
notes/ asset-
backed commercial
paper (Note 12) (1.6) 28.1 (6.3) 49.4
Foreign exchange
(gain) loss on
long-term debt 0.1 2.9 (2.7) 12.4
Amortization and
accretion charges 1.5 2.3 8.0 7.4
Equity income, net
of cash received (0.2) (15.5) 0.9 (38.9)
Gain on sale of
partnership
interest (Note 4) - - (81.2) -
Gain sale of
Windsor Station
and a land sale
in Western Canada
(Note 5) (79.1) - (79.1) -
Net loss on
repurchase of
debt (Note 14) - - 16.6 -
Restructuring and
environmental
remediation
payments (10.9) (11.9) (29.9) (36.4)
Pension funding
in excess of
expense (19.5) (16.0) (61.0) (42.5)
Other operating
activities, net 17.5 (30.3) 3.5 2.3
Change in non-cash
working capital
balances related
to operations
(Note 11) 59.6 (0.2) (3.6) (170.4)
-------------------------- -------------------------
Cash provided by
operating
activities 413.1 279.4 759.7 621.1
-------------------------- -------------------------
Investing activities
Additions to
properties (191.2) (242.1) (596.1) (606.8)
Additions to
investments and
other assets - (20.9) - (213.0)
Reductions to
investments and
other assets 0.2 0.4 12.5 -
Additions to
investment in
Dakota, Minnesota
& Eastern Railroad
Corporation
(Note 13) - (0.8) - (8.3)
Net proceeds from
disposal of
transportation
properties
(Notes 4 & 5) 107.1 17.0 218.7 14.4
-------------------------- -------------------------
Cash used in
investing
activities (83.9) (246.4) (364.9) (813.7)
-------------------------- -------------------------
Financing activities
Dividends paid (41.6) (38.1) (121.3) (110.6)
Issuance of CP
Common Shares
(Note 15) 5.3 1.3 504.5 18.3
Net increase
(decrease) in
short-term
borrowing 2.1 25.0 (92.4) 50.3
Issuance of
long-term debt
(Note 14) - - 409.5 1,068.7
Repayment of
long-term debt
(Note 14) (7.0) (7.6) (613.8) (1,088.1)
Settlement of
treasury rate lock - - - (30.9)
Settlement of
foreign exchange
forward on
long-term debt
(Note 16) 4.9 - 34.1 -
-------------------------- -------------------------
Cash (used in)
provided by
financing
activities (36.3) (19.4) 120.6 (92.3)
------------------------- -------------------------
Effect of foreign
exchange fluctuations
on U.S. dollar-
denominated cash and
cash equivalents (11.3) 3.4 (17.1) 4.7
-------------------------- -------------------------
Cash position
Increase (decrease)
in cash and cash
equivalents 281.6 17.0 498.3 (280.2)
Cash and cash
equivalents at
beginning of
period 334.3 80.9 117.6 378.1
------------------------- -------------------------
Cash and cash
equivalents at
end of period
(Note 6) $ 615.9 $ 97.9 $ 615.9 $ 97.9
-------------------------- -------------------------
-------------------------- -------------------------
Certain of the comparative figures have been reclassified in order to be
consistent with the 2009 presentation.
See notes to interim consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in millions of Canadian dollars)
(unaudited) For the nine months ended September 30, 2009
--------------------------------------------------
Accumulated
other
Share Contributed comprehensive Retained
Capital Surplus income income
--------------------------------------------------
Balance at December 31,
2008, as previously
reported $ 1,220.8 $ 40.2 $ 78.3 $ 4,654.1
Adjustment for change
in accounting policy
(Note 2) (10.4)
------------
Balance at December 31,
2008, as restated 4,643.7
Net Income 415.2
Other comprehensive loss (30.4)
Dividends (124.8)
Shares issued (Note 15) 488.9
Stock compensation
(recovery) expense (2.3)
Shares issued under
stock option plans 18.6 (3.0)
--------------------------------------------------
Balance at September 30,
2009 $ 1,728.3 $ 34.9 $ 47.9 $ 4,934.1
--------------------------------------------------
--------------------------------------------------
For the nine months ended September 30, 2008
--------------------------------------------------
Balance at December 31,
2007, as previously
reported $ 1,188.6 $ 42.4 $ 39.6 $ 4,187.3
Adjustment for change
in accounting policy
(Note 2) (7.4)
------------
Balance at December 31,
2007, as restated 4,179.9
Net Income 416.1
Other comprehensive income 13.9
Dividends (114.1)
Stock compensation expense 8.3
Shares issued under
stock option plans 30.3 (9.4)
--------------------------------------------------
Balance at September 30,
2008 $ 1,218.9 $ 41.3 $ 53.5 $ 4,481.9
--------------------------------------------------
--------------------------------------------------
See notes to interim consolidated financial statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
(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") 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 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 New accounting changes
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 September 30, 2008, the adoption of this section
resulted in an increase to "Purchased services and other" expense of
$3.4 million and a decrease to "Income tax expense" of $1.4 million.
This change also resulted in a $0.01 decrease to previously reported
basic and diluted earnings per share for the third quarter of 2008.
For the nine months ended September 30, 2008, the adoption of this
section resulted in an increase to "Purchased services and other"
expense of $3.8 million and a decrease to "Income tax expense" of
$1.5 million. This change also resulted in a $0.01 decrease to
previously reported basic earnings per share and $0.02 decrease to
previously reported diluted earnings per share for the nine months
ended September 30, 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 Future accounting changes
International Financial Reporting Standards ("IFRS") / U.S. GAAP
On February 13, 2008, the Canadian Accounting Standards Board
("AcSB") confirmed that publicly accountable enterprises will be
required to adopt IFRS in place of Canadian GAAP for interim and
annual reporting purposes for fiscal years beginning on or after
January 1, 2011, unless, as permitted by Canadian securities
regulations, registrants were to adopt U.S. GAAP on or before this
date. CP has determined that, commencing on January 1, 2010, it will
adopt U.S. GAAP for its financial reporting. As a result, CP will not
be adopting IFRS in 2011.
Business combinations, consolidated financial statements and non-
controlling interests
In January 2009, the CICA issued three new standards:
Business combinations, Section 1582
This section replaces the former Section 1581 "Business
combinations" and provides the Canadian equivalent to International
Financial Reporting Standard IFRS 3 "Business Combinations" (January
2008). The new standard requires the acquiring entity in a business
combination to recognize most of the assets acquired and liabilities
assumed in the transaction at fair value including contingent assets
and liabilities; and recognize and measure goodwill acquired in the
business combination or a gain in the case of a bargain purchase.
Acquisition-related costs are to be expensed.
Consolidated financial statements, Section 1601 and Non-controlling
interests, Section 1602
These two sections replace Section 1600 "Consolidated financial
statements". Section 1601 "Consolidated financial statements" carries
forward guidance from Section 1600 "Consolidated financial
statements" with the exception of non-controlling interests which are
addressed in a separate section. Section 1602 "Non-controlling
interests" requires the Company to report non-controlling interests
within equity, separately from the equity of the owners of the
parent, and transactions between an entity and non-controlling
interests as equity transactions.
All three standards are effective January 1, 2011; however, adoption
of these standards by the Company is not expected given the decision
to adopt U.S. GAAP. Early adoption of all three standards is
permitted.
Financial Instruments - Disclosures
The CICA amended Section 3862 "Financial Instruments - Disclosures",
to include additional disclosures about fair value measurements and
to enhance liquidity risk disclosures associated with financial
instruments. This standard is effective for the annual period ending
December 31, 2009. The adoption of this standard will not impact the
amounts reported in the Company's financial statements as it relates
to disclosure.
4 Gain on sale of partnership interest
During the second quarter of 2009, the Company completed a sale of a
portion of its investment in the Detroit River Tunnel Partnership
("DRTP") to its existing partner, reducing the Company's ownership
from 50% to 16.5%. The sale was agreed to on March 31, 2009 but was
subject to regulatory approval, which was received during the second
quarter. The proceeds received in the second quarter from the
transaction were $110 million. Additional proceeds of $22 million are
contingent on achieving certain future freight volumes through the
tunnel, and have not been recognized. The gain on this transaction
was $81.2 million ($68.7 million after tax). Effective April 1, 2009,
the Company discontinued proportionate consolidation and is
accounting for its remaining investment in the DRTP under the equity
method of accounting.
5 Gain on sale of Windsor Station and a land sale in Western Canada
During the third quarter of 2009, the Company completed two
significant real estate sales, resulting in gains of $79.1 million
($68.1 million after tax).
The Company sold Windsor Station, its former head office in Montreal,
for proceeds of $80.0 million, including the assumption of a mortgage
of $16 million due in 2011. CP will continue to occupy a portion of
Windsor Station through a lease for a 10-year period after the sale.
As a result, part of the transaction is considered to be a sale-
leaseback and consequently a gain of $19.5 million related to this
part of the transaction has been deferred and is being amortized over
the remainder of the lease term.
The Company sold land in Western Canada for transit purposes for
proceeds of $43.0 million.
6 Cash and cash equivalents
(in millions of September 30 December 31 September 30
Canadian dollars) 2009 2008 2008
---------------------------------------
Cash $ 9.0 $ 11.3 $ 9.3
Short term investments;
Government guaranteed
investments 439.0 - 15.4
Deposits with financial
institutions 167.9 106.3 73.2
---------------------------------------
Total cash and cash
equivalents $ 615.9 $ 117.6 $ 97.9
---------------------------------------
---------------------------------------
All cash is invested in accordance with policies approved by the
Company's Board of Directors which require minimum credit ratings.
Government and financial institutions meet these standards if they
carry AA or A1 ratings, or the equivalent, from at least two credit
rating agencies.
7 Other income and charges
For the three months For the nine months
(in millions of ended September 30 ended September 30
Canadian dollars) 2009 2008 2009 2008
------------------------- -------------------------
Accretion of
accruals recorded
at present value $ 2.0 $ 1.5 $ 6.6 $ 4.6
Accretion of
long-term
floating rate
notes (Note 12) (1.3) - (1.3) -
Net loss on
repurchase of debt
(Note 14) - - 16.6 -
Other exchange
(gains) losses (1.9) (0.7) (1.1) 1.2
Other 2.8 2.0 7.4 8.6
------------------------- -------------------------
Total other income
and charges $ 1.6 $ 2.8 $ 28.2 $ 14.4
------------------------- -------------------------
------------------------- -------------------------
8 Net interest expense
For the three months For the nine months
(in millions of ended September 30 ended September 30
Canadian dollars) 2009 2008 2009 2008
------------------------- -------------------------
Interest expense $ 65.4 $ 66.2 $ 214.4 $ 195.7
Interest income (0.7) (1.7) (4.0) (8.4)
------------------------- -------------------------
Total net interest
expense $ 64.7 $ 64.5 $ 210.4 $ 187.3
------------------------- -------------------------
------------------------- -------------------------
9 Income taxes
During the first quarter of 2009, legislation was substantively
enacted to reduce British Columbia provincial income tax rates. As a
result of these changes, the Company recorded an $11.2 million
benefit in future tax liability and income tax expense, related to
the revaluation of its future income tax balances as at December 31,
2008.
During the nine months ended September 30, 2008, legislation was
substantively enacted to reduce provincial income tax rates. As a
result of these changes, the Company recorded a $15.7 million benefit
in future tax liability and income tax expense for the nine months
ended September 30, 2008, related to the revaluation of its future
income tax balances as at December 31, 2007.
Cash taxes recovered, net of payments, for the three months ended
September 30, 2009, were $40.0 million (three months ended September
30, 2008 - cash taxes paid were $4.9 million). Cash taxes recovered,
net of payments, for the nine months ended September 30, 2009 were
$36.5 million (nine months ended September 30, 2008 - cash taxes paid
were $62.8 million).
10 Earnings per share
At September 30, 2009, the number of shares outstanding was 168.2
million (September 30, 2008 - 153.8 million).
Basic earnings per share have been calculated using net income for
the period divided by the weighted average number of Canadian Pacific
Railway Limited shares outstanding during the period.
Diluted earnings per share have been calculated using the treasury
stock method, which assumes that any proceeds received from the
exercise of in-the-money options would be used to purchase Common
Shares at the average market price for the period.
The number of shares used in earnings per share calculations is
reconciled as follows:
For the three months For the nine months
ended September 30 ended September 30
2009 2008 2009 2008
(in millions) (restated) (restated)
------------------------- -------------------------
Weighted average
shares outstanding 168.1 153.8 165.7 153.6
Dilutive effect of
stock options 0.6 1.3 0.3 1.6
------------------------- -------------------------
Weighted average
diluted shares
outstanding 168.7 155.1 166.0 155.2
------------------------- -------------------------
------------------------- -------------------------
(in dollars)
Basic earnings
per share $ 1.16 $ 1.11 $ 2.51 $ 2.71
Diluted earnings
per share $ 1.16 $ 1.10 $ 2.50 $ 2.68
------------------------- -------------------------
------------------------- -------------------------
For the three and nine months ended September 30, 2009, 2,542,300 and
2,540,740 options were excluded from the computation of diluted
earnings per share because their effects were not dilutive (three and
nine months ended September 30, 2008 - 1,227,750 and 821,133).
11 Accounts receivable
In the second quarter of 2008, the Company's accounts receivable
securitization program was terminated. As a result of this
termination, in the Company's Consolidated Balance Sheet, Accounts
receivable increased by $120.0 million and in the consolidated
statement of cash flows the Change in non-cash working capital
balances related to operations reflected an outflow of
$120.0 million. As well, the related servicing asset and liability
which had previously been recognized are no longer required to be
maintained and were settled as part of the termination.
12 Investments
September 30 December 31
(in millions of Canadian dollars) 2009 2008
-------------------------
Rail investments accounted for on an
equity basis $ 54.4 $ 48.4
Long-term floating rate notes/Asset-backed
commercial paper 67.9 72.7
Other investments 42.7 30.0
-------------------------
Total investments $ 165.0 $ 151.1
-------------------------
-------------------------
Gain/loss in fair value of long-term floating rate notes/asset-backed
commercial paper ("ABCP")
At September 30, 2009, the Company held replacement long-term
floating rate notes, with a total settlement value of $130.3 million.
At December 31, 2008, the Company held the original ABCP issued by a
number of trusts with an original cost of $143.6 million.
During the third quarter of 2009 the Company received $0.2 million in
partial redemption of its Master Asset Vehicle ("MAV") 2 Class A-1
notes and MAV 2 Class 7 Ineligible Assets (IA) tracking notes. These
redemptions were close to the original investment value of the
redeemed notes. During the second quarter of 2009 the Company
received $12.3 million in partial redemption of its MAV 3 Class 9
Traditional Asset ("TA") Tracking notes and MAV 2 Class 8 Ineligible
Assets ("IA") Tracking notes representing 100% of the original
investment value of the redeemed notes. As a result of the
restructuring and the subsequent redemptions of notes, at
September 30, 2009 the Company held replacement long-term floating
rate notes with settlement values, as follows:
- $118.0 million MAV 2 notes with eligible assets represented by a
combination of leveraged collateralized debt, synthetic assets and
traditional securitized assets with expected repayments over
approximately five to seven years:
- Class A-1: $59.1 million
- Class A-2: $45.9 million
- Class B: $8.3 million
- Class C: $3.5 million
- Class 14: $1.2 million
- $12.1 million MAV 2 IA Tracking notes representing assets that
have an exposure to US mortgages and sub-prime mortgages with
expected repayments over approximately four to 20 years:
- Class 3: $0.5 million
- Class 6: $5.5 million
- Class 7: $3.4 million
- Class 8: $0.1 million
- Class 13: $2.6 million
- $0.2 million MAV 3 Class 9 TA Tracking notes with expected
repayments over approximately seven years.
The MAV 2 Class A-1 notes have received an A rating by DBRS. However,
on August 11, 2009 the rating for the MAV 2 Class A-2 notes was
downgraded from A to BBB (low) under a negative watch by DBRS.
The valuation technique used by the Company to estimate the fair
value of its investment in long-term floating rate notes at
September 30, 2009 and ABCP at December 31, 2008, incorporates
probability weighted discounted cash flows considering the best
available public information regarding market conditions and other
factors that a market participant would consider for such
investments. The above noted redemption of notes and other minor
changes in assumptions have resulted in a gain of $1.6 million in the
quarter and $6.3 million for the nine months to September 30, 2009
(third quarter 2008 - $28.1 million charge against income, nine
months to September 30, 2008 - $49.4 million charge against income).
The interest rates and maturities of the various long-term floating
rate notes and ABCP, discount rates and credit losses modelled at
September 30, 2009 and December 31, 2008, respectively are:
September 30, 2009
Probability weighted average coupon interest Nil
rate
Weighted average discount rate 8.0%
Expected repayments of long-term floating four to 20 years
rate notes
Credit losses MAV 2 eligible
asset notes: nil
to 100%
MAV 2 IA notes:
25%
MAV 3 Class 9 TA
Tracking notes:
nil
December 31, 2008
Probability weighted average coupon interest 2.2%
rate
Weighted average discount rate 9.1%
Expected repayments of ABCP notes five to eight
years, other than
certain tracking
notes to be paid
down on
restructuring
Credit losses Notes expected to
be rated (1): nil
to 25%
Notes not expected
to be rated (2):
25 to 100%
(1) TA Tracking, Class A-1 and Class A-2 senior notes and IA
Tracking notes.
(2) Class B and Class C subordinated notes and IA Tracking notes.
The probability weighted discounted cash flows resulted in an
estimated fair value of the Company's long-term floating rate notes
of $67.9 million at September 30, 2009 (December 31, 2008 - ABCP
$72.7 million). The change in the original cost and estimated fair
value of the Company's long-term floating rate notes is as follows:
Original Estimated
cost fair value
-------------------------
As at January 1, 2009 $ 143.6 $ 72.7
Change due to restructuring,
January 21, 2009 (0.8) -
-------------------------
As at March 31, 2009 142.8 72.7
Redemption of notes (12.3) (7.9)
Accretion - 0.1
Change in market assumptions - 0.3
-------------------------
As at June 30, 2009 $ 130.5 $ 65.2
Redemption of notes (0.2) (0.1)
Accretion - 1.2
Change in market assumptions - 1.6
-------------------------
As at September 30, 2009 $ 130.3 $ 67.9
-------------------------
-------------------------
13 Dakota, Minnesota & Eastern Railroad Corporation ("DM&E")
Dakota, Minnesota & Eastern Railroad Corporation was acquired on
October 4, 2007 and is wholly-owned by the Company. The purchase was
subject to review and approval by the U.S. Surface Transportation
Board ("STB"), during which time the shares of DM&E were placed in a
voting trust. The STB approved the purchase effective on October 30,
2008, at which time the Company assumed control of DM&E. Subsequent
to October 30, 2008, the results of DM&E are consolidated with the
Company on a line-by-line basis.
The Company accounted for its investment in DM&E using the equity
method until the acquisition was approved by the STB and the Company
assumed control. Equity income from the Company's investment in DM&E,
which is recorded net of tax, was $16.5 million during the three
months ended September 30, 2008, and $40.9 million during the nine
months ended September 30, 2008 and is recorded in "Equity income in
Dakota, Minnesota & Eastern Railroad Corporation" on the Consolidated
Statement of Income.
As part of the acquisition of DM&E, CP recognized goodwill on the
allocation of the purchase price. Since that time the DM&E operations
have been integrated with CP's US operations and the reporting unit
for the goodwill is CP's US business component. As required under
generally accepted accounting principles, goodwill must be tested for
impairment at least annually, which for CP is annually as at October
1st.
14 Long-term debt
During the second quarter of 2009, the Company issued US$350 million
7.25% 10-year Notes for net proceeds of $408.5 million. The Notes are
unsecured, but carry a negative pledge. The proceeds from this
offering contributed to the repurchase of debt with a carrying amount
of $555.3 million pursuant to a tender offer for a total cost of
$571.9 million. Upon repurchase of the debt a net loss of
$16.6 million was recognized during the second quarter to "Other
income and charges". The loss consisted largely of premiums paid to
bond holders to tender their debt, and the write-off of unamortized
fees, partly offset by a fair value adjustment (gain) recognized on
the unwind of interest rate swaps associated with the 6.250% Notes
that were repurchased (see Note 16). The following table summarizes
the principal amount, carrying amount and cost to redeem debt
repurchased during the second quarter:
Principal
Amount Carrying Cost to
(in millions) in USD Amount Redeem
--------------------------------------
6.250% Notes due October 15,
2011 $ 154.3 $ 184.1 $ 184.6
5.75% Notes due May 15, 2013 298.6 342.7 359.1
6.50% Notes due May 15, 2018 24.8* 28.5 28.2
--------------------------------------
Total debt tendered $ 477.7 $ 555.3 $ 571.9
--------------------------------------
--------------------------------------
* Includes US$2.7 million principal amount of debt repurchased
prior to commencement of the debt tender.
15 Shareholders' equity
An analysis of Common Share balances is as follows:
For the three months For the nine months
ended September 30 ended September 30
(in millions) 2009 2008 2009 2008
---------------------------------------------
Share capital, beginning
of period 168.1 153.8 153.8 153.3
Shares issued under
stock option plans 0.1 - 0.5 0.5
Shares issued - - 13.9 -
---------------------------------------------
Share capital, end of
period 168.2 153.8 168.2 153.8
---------------------------------------------
---------------------------------------------
On February 3, 2009, CP filed a final prospectus offering for sale to
the public, primarily in Canada and the U.S., up to 13,900,000 CP
common shares at a price of $36.75 per share. The offering closed on
February 11, 2009, at which time CP issued 13,900,000 common shares,
including 1,300,000 common shares issued under the provisions of an
over-allotment option available to the underwriters of the common
share offering, for gross proceeds of approximately $511 million
(proceeds net of fees and issue costs were $488.9 million).
16 Financial instruments
Foreign exchange forward contracts
In June 2007, the Company entered into a currency forward to set the
exchange rate on US$400 million 6.250% Notes due 2011. This
derivative guarantees the amount of Canadian dollars that the Company
will repay when its US$400 million 6.250% Notes matures in October
2011. During the third quarter of 2009, the Company recorded a loss
of $5.0 million, and a loss of $21.8 million for the nine months
ended September 30, 2009 to "Foreign exchange gain (loss) on long-
term debt". These represent both realized and unrealized losses. For
the same periods in 2008, the Company recorded an unrealized gain of
$15.0 million for the quarter and $19.2 million for first nine months
of 2008.
During the first six months of 2009, CP unwound and settled
US$300 million of the US$400 million currency forward for total
proceeds of $31.1 million. As at June 30, $29.2 million of the total
proceeds had been collected, with the remaining $1.9 million
collected in the third quarter. In the third quarter of 2009, a
further US$30 million of the currency forward was unwound and settled
for total proceeds of $3.0 million. At September 30, 2009, the
unrealized gain on the remaining currency forward of $1.4 million
(December 31, 2008 - $57.3 million) was included in "Prepaid pension
costs and other assets".
Interest rate management
During the second quarter of 2009, CP unwound its outstanding
interest rate swap agreements for a gain of $16.8 million. The gain
was deferred as a fair value adjustment to the underlying debt that
was hedged and will be amortized to "Net interest expense" until such
time that the 6.250% Notes are repaid.
Subsequent to the unwinding of this swap a portion of the underlying
6.250% Notes were repurchased in the second quarter and, as a result,
a pro rata share of the fair value adjustment amounting to a
$6.5 million gain was recognized immediately to "Other income and
charges" as part of the net loss on repurchase of debt (see Note 14).
The Company recorded a gain of $3.1 million to "Net interest expense"
for the six months ended June 30, 2009, prior to the unwind of the
swaps. In the third quarter of 2009, subsequent to the unwind, the
Company amortized $1.4 million of the deferred gain to "Net interest
expense". The total gain recorded to "Net interest expense" for the
nine months ended September 30, 2009 was $4.5 million. For the three
months ended September 30, 2008, the Company recorded a gain of
$1.0 million and $2.1 million for the nine months ended September 30,
2008.
Stock-based compensation expense management
To minimize the volatility to compensation expense created by changes
in share price, the Company entered into a Total Return Swap ("TRS")
to reduce the volatility and total cost to the Company over time of
three types of stock-based compensation programs: share appreciation
rights ("SARs"), deferred share units ("DSUs"), and restricted share
units ("RSUs"). The TRS is a derivative that provides price
appreciation and dividends, in return for a charge by the
counterparty. The swaps were intended to minimize volatility to
"Compensation and benefits" expense by providing a gain to
substantially offset increased compensation expense as the share
price increased and a loss to offset reduced compensation expense
when the share price falls. If stock-based compensation share units
fall out of the money after entering the program, the loss associated
with the swap would no longer be offset by any compensation expense
reductions, which would reduce the effectiveness of the swap.
"Compensation and benefits" expense in the Consolidated Statement of
Income includes an unrealized gain on these swaps of $5.5 million in
the third quarter of 2009 and a net gain of $8.4 million for the nine
months ended September 30, 2009 which was inclusive of both realized
losses and unrealized gains (unrealized losses of $27.9 million for
the third quarter 2008 and $21.9 million for the nine months ended
September 30, 2008). During the first quarter of 2009, in order to
improve the effectiveness of the TRS in mitigating the volatility of
stock-based compensation programs, CP unwound a portion of the
program for a total cost of $31.1 million that was settled in the
second quarter of 2009. At September 30, 2009, the unrealized loss on
the remaining TRS of $28.4 million was included in "Other long-term
liabilities" on our Consolidated Balance Sheet (December 31, 2008 -
$67.9 million).
Fuel price management
At September 30, 2009, the Company had crude futures contracts, which
are accounted for as cash flow hedges, to purchase approximately
45,000 barrels during the remainder of 2009 at average quarterly
prices of US$38.19 per barrel. This represents approximately 3% of
estimated fuel purchases for the remainder of 2009. At September 30,
2009, the unrealized gain on these futures contracts was $1.6 million
(December 31, 2008 - $3.2 million) and was reflected in "Other"
current assets with the offset, net of tax, reflected in Accumulated
other comprehensive income ("AOCI") on our Consolidated Balance
Sheet.
At September 30, 2009, the Company had foreign exchange ("FX")
forward contracts (in conjunction with the crude purchases above),
which are accounted for as cash flow hedges, totalling US$1.1 million
for the remainder of 2009 at an average exchange rate of 1.23. At
September 30, 2009, the unrealized loss on these forward contracts
was $0.2 million (December 31, 2008 - loss of $0.1 million) and was
recognized in "Accounts payable and accrued liabilities" with the
offset, net of tax, reflected in "AOCI" on our Consolidated Balance
Sheet.
At September 30, 2009, the Company had diesel futures contracts,
which are accounted for as cash flow hedges, to purchase
approximately 285,000 barrels during the period October 2009 to
September 2010 at average quarterly prices of US$77.29 per barrel.
This represents approximately 5% of estimated fuel purchases for this
period. At September 30, 2009, the unrealized gain on these futures
contracts was $1.1 million (December 31, 2008 - unrealized loss
$4.5 million) and was reflected in "Other" current assets with the
offset, net of tax, reflected in "AOCI" on our Consolidated Balance
Sheet.
In addition, at September 30, 2009, the Company had heating oil crack
spread futures contracts, which were not designated nor accounted for
as cash flow hedges, to purchase approximately 150,000 barrels during
the fourth quarter of 2009 at an average price of US$6.05 per barrel.
This represents approximately 10% of estimated fuel purchases in the
fourth quarter. At September 30, 2009, the unrealized gain on these
futures contracts was $0.2 million and has been recognized in income
in "Fuel" expense.
For the third quarter of 2009, "Fuel" expense was decreased by
$1.5 million as a result of realized gains of $1.7 million arising
from settled swaps, partially offset by realized losses of
$0.2 million arising from settled FX forward contracts. For the third
quarter of 2008, "Fuel" expense was reduced by $3.4 million as a
result of realized gains of $3.8 million arising from settled swaps,
partially offset by realized losses of $0.4 million arising from
settled FX forward contracts.
For the nine months ended September 30, 2009, "Fuel" expense was
increased by $3.3 million due to a combination of realized losses of
$3.1 million arising from settled swaps and $0.2 million arising from
settled FX forward contracts. For the nine months ended September 30,
2008, "Fuel" expense was reduced by $12.2 million as a result of
realized gains of $13.9 million arising from settled swaps, partially
offset by realized losses of $1.7 million arising from settled FX
forward contracts.
Credit risk
Credit risk refers to the possibility that a customer or counterparty
will fail to fulfil its obligations under a contract and as a result,
create a financial loss for the Company. The Company's credit risk
regarding its investment in long-term floating rate notes are
discussed in more detail in Note 12.
Credit risk management
The railway industry services predominantly financially established
customers and the Company has experienced limited financial loss with
respect to credit risk. The credit worthiness of customers is
assessed using credit scores supplied by a third party, and through
direct monitoring of their financial well-being on a continual basis.
The Company establishes guidelines for customer credit limits and
should thresholds in these areas be reached, appropriate precautions
are taken to improve collectibility. There has been no significant
change to the Company's exposure to credit risk in the quarter.
17 Stock-based compensation
In the first nine months of 2009, under CP's stock option plans, the
Company issued 747,800 options to purchase Common Shares at the
weighted average price of $36.29 per share, based on the closing
price on the grant date. In tandem with these options, 747,450 stock
appreciation rights were issued at the weighted average exercise
price of $36.29.
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 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 September 30, 2009 (including options granted under the
Directors' Stock Option Plan, which was suspended in 2003):
2009 2008
----------------------- -----------------------
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
----------------------- -----------------------
Outstanding,
January 1 7,671,143 $ 49.52 6,981,108 $ 43.97
New options granted 747,800 36.29 1,360,800 71.59
Exercised (473,725) 32.01 (531,860) 34.49
Forfeited (203,675) 57.61 (91,450) 47.78
----------- -----------
Outstanding,
September 30 7,741,543 $ 49.10 7,718,598 $ 49.45
----------------------- -----------------------
----------------------- -----------------------
Options exercisable
at September 30 4,893,643 $ 42.94 4,608,798 $ 38.39
----------------------- -----------------------
----------------------- -----------------------
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.
Under the fair value method, the fair value of all tandem and non-
tandem options at the grant date was $5.4 million for options issued
in the first nine months of 2009 (first nine months of 2008 -
$21.0 million). Excluding tandem options, which are accounted for as
SARS, the fair value of non-tandem options was $nil (first nine
months of 2008 - $14.1 million). The weighted average fair value
assumptions were approximately:
For the nine months
ended September 30
2009 2008
-------------------------
Expected option life (years) 5.00 4.39
Risk-free interest rate 2.14% 3.54%
Expected stock price volatility 30% 22%
Expected annual dividends per share $ 0.99 $ 0.99
Weighted average fair value of options
granted during the year $ 7.24 $ 15.12
-------------------------
-------------------------
Performance share units
In the first nine months of 2009, the Company issued 404,580
Performance Share Units ("PSUs"). These units attract dividend
equivalents in the form of additional units based on the dividends
paid on the Company's common shares. PSUs vest and are settled in
cash approximately three years after the grant date contingent upon
CP's performance (performance factor). The expense related to the
PSUs is accrued based on the price of Common Shares at the end of the
period and the anticipated performance factor, over the vesting
period. In the first nine months of 2009, the expense recognized for
PSUs was $8.8 million.
18 Pensions and other benefits
The total benefit cost for the Company's defined benefit pension
plans and post-retirement benefits for the three months ended
September 30, 2009, was $10.3 million (three months ended
September 30, 2008 - $21.6 million) and for the nine months ended
September 30, 2009, was $23.7 million (nine months ended
September 30, 2008 - $58.9 million).
19 Significant customer
During the first nine months of 2009, one customer comprised 9.3% of
total revenue (first nine months of 2008 - 11.9%). At September 30,
2009, that same customer represented 4.3% of total accounts
receivable (September 30, 2008 - 4.7%).
20 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 September 30, 2009, 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 September 30, 2009, the Company had multi-year capital commitments
of $913.7 million, mainly for locomotive overhaul agreements, in the
form of signed contracts. Payments for these commitments are due in
2009 through 2028.
Operating lease commitments
At September 30, 2009, minimum payments under operating leases were
estimated at $968.9 million in aggregate, with annual payments in
each of the next five years of: balance of 2009 - $37.4 million; 2010
- $145.3 million; 2011 - $124.9 million; 2012 - $111.5 million;
2013 - $97.4 million.
Guarantees
At September 30, 2009, the Company had residual value guarantees on
operating lease commitments of $174.4 million. 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 September 30, 2009, these accruals amounted to
$8.3 million.
21 Capital disclosures
The Company monitors capital using a number of key financial metrics,
including:
- total debt to total capitalization; and
- interest-coverage ratio: earnings before interest and taxes
("EBIT") to net interest expense.
Both of these metrics have no standardized meanings prescribed by
GAAP and, therefore, are unlikely to be comparable to similar
measures of other companies.
The calculations for the aforementioned key financial metrics are as
follows:
Total debt to total capitalization
----------------------------------
Total debt, which is a non-GAAP measure, is the sum of long-term
debt, long-term debt maturing within one year and short-term
borrowing. This sum is divided by total debt plus total shareholders'
equity as presented on our Consolidated Balance Sheet.
Interest coverage ratio
-----------------------
EBIT, which is a non-GAAP measure that is calculated, on a twelve
month rolling basis, as revenues less operating expenses, less other
income and charges, plus equity income in DM&E, divided by net
interest expense. The ratio excludes changes in the estimated fair
value of the Company's investment in long-term floating rate
notes/ABCP and the gains on sale of partnership interest, Windsor
Station and a land sale in Western Canada as these are not in the
normal course of business.
The following table illustrates the financial metrics and their
corresponding guidelines currently in place:
---------------------------------------------------------------------
(in millions of Management September 30, September 30,
Canadian dollars) targets 2009 2008
---------------------------------------------------------------------
Long-term debt $ 3,701.3 $ 4,140.4
Long-term debt maturing
within one year 390.0 248.4
Short-term borrowing 57.7 280.0
---------------------------------------------------------------------
Total debt(1) $ 4,149.0 $ 4,668.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Shareholders' equity $ 6,745.2 $ 5,795.6
Total debt 4,149.0 4,668.8
---------------------------------------------------------------------
Total debt plus equity(1) $ 10,894.2 $ 10,464.4
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues less operating
expenses(2) $ 930.1 $ 1,054.2
Less:
Other income and charges (36.5) (22.9)
Plus:
Equity income in DM&E 10.4 53.2
---------------------------------------------------------------------
EBIT(1)(2) $ 904.0 $ 1,084.5
---------------------------------------------------------------------
---------------------------------------------------------------------
Total debt $ 4,149.0 $ 4,668.8
Total debt plus equity $ 10,894.2 $ 10,464.4
---------------------------------------------------------------------
Total debt to total No more than
capitalization(1) 50.0% 38.1% 44.6%
---------------------------------------------------------------------
---------------------------------------------------------------------
EBIT $ 904.0 $ 1,084.5
Net interest expense $ 284.2 $ 250.7
---------------------------------------------------------------------
Interest Coverage No less than
Ratio(1)(2) 4.0 3.2 4.3
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) These earnings measures have no standardized meanings prescribed
by Canadian GAAP and, therefore, are unlikely to be comparable to
similar measures of other companies.
(2) The balance is calculated on a rolling twelve-month basis.
The Company remains in compliance with all external financial
covenants.
The Company's financial objectives and strategy as described above
have remained substantially unchanged over the last two fiscal years.
The objectives are reviewed on an annual basis and financial metrics
and their management targets are monitored on a quarterly basis. In
2009, the Company changed one of its measures used to monitor capital
from net-debt to net-debt-plus-equity ratio to total debt to total
capitalization to better align with a more common convention used by
investors. The interest coverage ratio has decreased during the
twelve-month period ending September 30, 2009 due to a reduction in
year-over-year earnings and the unfavourable impact of a weakening
Canadian dollar. The interest coverage ratio for the period is below
the management target provided in the above table, due to lower
volumes as a result of the global recession that occurred during the
period.
In addition, CP issued 13,900,000 common shares generating net
proceeds of $488.9 million and monetized certain assets to reduce
indebtedness and further augment its cash position due to ongoing
uncertainty around the timing of the economic recovery.
The Company is also subject to a financial covenant of funded debt to
total capitalization in the revolver loan agreement. Performance to
this financial covenant is well within permitted limits.
Summary of Rail Data
--------------------
(Reconciliation of GAAP earnings to non-GAAP earnings on page 2)
----------------------------------------------------------------
Third Quarter
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
-------------------------------------------
Financial (millions, except
---------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 1,061.5 $ 1,239.5 $ (178.0) (14.4)
Other revenue 26.7 25.2 1.5 6.0
--------------------------------
1,088.2 1,264.7 (176.5) (14.0)
--------------------------------
Operating expenses
------------------
Compensation and benefits 320.2 312.3 (7.9) (2.5)
Fuel 134.0 275.8 141.8 51.4
Materials 45.8 49.3 3.5 7.1
Equipment rents 42.9 44.4 1.5 3.4
Depreciation and
amortization 132.7 120.8 (11.9) (9.9)
Purchased services and other 151.4 162.3 10.9 6.7
--------------------------------
827.0 964.9 137.9 14.3
--------------------------------
Revenues less operating
expenses 261.2 299.8 (38.6) (12.9)
Gain on sale of partnership
interest - - - -
Gain on sale of Windsor
Station and a land sale
in Western Canada 79.1 - 79.1 -
Gain (loss) in fair value of
long-term floating rate
notes/asset-backed
commercial paper 1.6 (28.1) 29.7 -
Foreign exchange gain (loss)
on long-term debt (0.1) (2.9) 2.8 -
Equity income in Dakota,
Minnesota & Eastern Railroad
Corporation (DM&E) - 16.5 (16.5) (100.0)
Less:
Other income and charges 1.6 2.8 1.2 42.9
Net interest expense 64.7 64.5 (0.2) (0.3)
--------------------------------
Income before income tax
expense 275.5 218.0 57.5 26.4
Income tax expense 80.1 47.3 (32.8) (69.3)
--------------------------------
Net income $ 195.4 $ 170.7 $ 24.7 14.5
--------------------------------
--------------------------------
Basic earnings per share $ 1.16 $ 1.11 $ 0.05 4.5
--------------------------------
--------------------------------
Diluted earnings per share $ 1.16 $ 1.10 $ 0.06 5.5
--------------------------------
--------------------------------
Year-to-date
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
-------------------------------------------
Financial (millions, except
---------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 3,084.2 $ 3,557.0 $ (472.8) (13.3)
Other revenue 97.1 74.9 22.2 29.6
--------------------------------
3,181.3 3,631.9 (450.6) (12.4)
--------------------------------
Operating expenses
------------------
Compensation and benefits 962.7 956.1 (6.6) (0.7)
Fuel 422.7 766.3 343.6 44.8
Materials 164.3 171.3 7.0 4.1
Equipment rents 139.8 136.4 (3.4) (2.5)
Depreciation and
amortization 400.3 365.4 (34.9) (9.6)
Purchased services and other 465.1 487.7 22.6 4.6
--------------------------------
2,554.9 2,883.2 328.3 11.4
--------------------------------
Revenues less operating
expenses 626.4 748.7 (122.3) (16.3)
Gain on sale of partnership
interest 81.2 - 81.2 -
Gain on sale of Windsor
Station and a land sale
in Western Canada 79.1 - 79.1 -
Gain (loss) in fair value of
long-term floating rate
notes/asset-backed
commercial paper 6.3 (49.4) 55.7 -
Foreign exchange gain (loss)
on long-term debt 2.7 (12.4) 15.1 -
Equity income in Dakota,
Minnesota & Eastern Railroad
Corporation (DM&E) - 40.9 (40.9) (100.0)
Less:
Other income and charges 28.2 14.4 (13.8) (95.8)
Net interest expense 210.4 187.3 (23.1) (12.3)
--------------------------------
Income before income tax
expense 557.1 526.1 31.0 5.9
Income tax expense 141.9 110.0 (31.9) (29.0)
--------------------------------
Net income $ 415.2 $ 416.1 $ (0.9) (0.2)
--------------------------------
--------------------------------
Basic earnings per share $ 2.51 $ 2.71 $ (0.20) (7.4)
--------------------------------
--------------------------------
Diluted earnings per share $ 2.50 $ 2.68 $ (0.18) (6.7)
--------------------------------
--------------------------------
(1) 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 the first three quarters of 2009.
(2) 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.
Summary of Rail Data (Page 2)
-----------------------------
Reconciliation of GAAP earnings to non-GAAP earnings
----------------------------------------------------
Third Quarter
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
-------------------------------------------
Financial (millions)
--------------------
Net income $ 195.4 $ 170.7 $ 24.7 14.5
Exclude:
Foreign exchange gain (loss)
----------------------------
on long-term debt (FX on LTD)
-----------------------------
FX on LTD (0.1) (2.9) 2.8 -
Income tax recovery
(expense) on FX on LTD(3) (18.1) 9.0 (27.1) -
--------------------------------
FX on LTD (net of tax) (18.2) 6.1 (24.3) -
Other specified items
---------------------
Gain on sale of partnership
interest - - - -
Income tax expense on
partnership interest - - - -
--------------------------------
Gain on sale of partnership
interest (net of tax) - - - -
--------------------------------
Gain on sale of Windsor
Station and a land sale
in Western Canada 79.1 - 79.1 -
Income tax expense on sale
of Windsor Station and a
land sale in Western Canada (11.0) - (11.0) -
--------------------------------
Gain on sale of Windsor
Station and a land sale in
Western Canada (net of tax) 68.1 - 68.1 -
--------------------------------
Gain (loss) in fair value
of long-term floating rate
notes/asset-backed
commercial paper (ABCP) 1.6 (28.1) 29.7 -
Income tax recovery (expense)
on gain (loss) in fair value
of long-term floating rate
notes/ABCP (0.3) 8.3 (8.6) -
--------------------------------
Gain (loss) in fair value
of long-term floating rate
notes/(ABCP) (net of tax) 1.3 (19.8) 21.1 -
--------------------------------
Income before foreign
exchange gain (loss) on
long-term debt and other
specified items(4) $ 144.2 $ 184.4 $ (40.2) (21.8)
--------------------------------
--------------------------------
Earnings per share (EPS)
------------------------
Diluted EPS, as determined
by GAAP $ 1.16 $ 1.10 $ 0.06 5.5
Exclude:
Diluted EPS, related to
FX on LTD, net of tax(4) (0.11) 0.04 (0.15) -
Diluted EPS, related to
other specified items,
net of tax(4) 0.42 (0.13) 0.55 -
--------------------------------
Diluted EPS, before FX on LTD
and other specified items(4) $ 0.85 $ 1.19 $ (0.34) (28.6)
--------------------------------
--------------------------------
Operating ratio(4)(5) (%) 76.0 76.3 0.3 -
Shares Outstanding
------------------
Weighted average (avg) number
of shares outstanding
(millions) 168.1 153.8 14.3 9.3
Weighted avg number of
diluted shares outstanding
(millions) 168.7 155.1 13.6 8.8
Foreign Exchange
----------------
Average foreign exchange
rate (US$/Canadian$) 0.899 0.966 (0.067) (6.9)
Average foreign exchange
rate (Canadian$/US$) 1.112 1.035 0.077 7.4
Year-to-date
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
-------------------------------------------
Financial (millions)
--------------------
Net income $ 415.2 $ 416.1 $ (0.9) (0.2)
Exclude:
Foreign exchange gain (loss)
----------------------------
on long-term debt (FX on LTD)
-----------------------------
FX on LTD 2.7 (12.4) 15.1 -
Income tax recovery
(expense) on FX on LTD(3) (27.1) 12.4 (39.5) -
--------------------------------
FX on LTD (net of tax) (24.4) - (24.4) -
Other specified items
---------------------
Gain on sale of partnership
interest 81.2 - 81.2 -
Income tax expense on
partnership interest (12.5) - (12.5) -
--------------------------------
Gain on sale of partnership
interest (net of tax) 68.7 - 68.7 -
--------------------------------
Gain on sale of Windsor
Station and a land sale
in Western Canada 79.1 - 79.1 -
Income tax expense on sale
of Windsor Station and a
land sale in Western Canada (11.0) - (11.0) -
--------------------------------
Gain on sale of Windsor
Station and a land sale in
Western Canada (net of tax) 68.1 - 68.1 -
--------------------------------
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 before foreign
exchange gain (loss) on
long-term debt and other
specified items(4) $ 298.3 $ 450.9 $ (152.6) (33.8)
--------------------------------
--------------------------------
Earnings per share (EPS)
------------------------
Diluted EPS, as determined
by GAAP $ 2.50 $ 2.68 $ (0.18) (6.7)
Exclude:
Diluted EPS, related to
FX on LTD, net of tax(4) (0.15) - (0.15) -
Diluted EPS, related to
other specified items,
net of tax(4) 0.85 (0.22) 1.07 -
--------------------------------
Diluted EPS, before FX on LTD
and other specified items(4) $ 1.80 $ 2.90 $ (1.10) (37.9)
--------------------------------
--------------------------------
Operating ratio(4)(5) (%) 80.3 79.4 (0.9) -
Shares Outstanding
------------------
Weighted average (avg) number
of shares outstanding
(millions) 165.7 153.6 12.1 7.9
Weighted avg number of
diluted shares outstanding
(millions) 166.0 155.2 10.8 7.0
Foreign Exchange
----------------
Average foreign exchange
rate (US$/Canadian$) 0.849 0.988 (0.139) (14.1)
Average foreign exchange
rate (Canadian$/US$) 1.178 1.012 0.166 16.4
(1) 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 the first three quarters of 2009.
(2) 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.
(3) Income tax on FX on LTD is discussed in the MD&A in the "Other Income
Statement Items" section - "Income Taxes".
(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 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
--------------------------------------
Third Quarter
-------------------------------------------
2009 2008(1)(2)(3) Fav/(Unfav) %
Pro forma
-------------------------------------------
Financial (millions, except
---------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 1,061.5 $ 1,340.0 $ (278.5) (20.8)
Other revenue 26.7 25.8 0.9 3.5
--------------------------------
1,088.2 1,365.8 (277.6) (20.3)
--------------------------------
Operating expenses
------------------
Compensation and benefits 320.2 331.0 10.8 3.3
Fuel 134.0 292.8 158.8 54.2
Materials 45.8 54.1 8.3 15.3
Equipment rents 42.9 48.6 5.7 11.7
Depreciation and
amortization 132.7 131.8 (0.9) (0.7)
Purchased services and other 151.4 177.3 25.9 14.6
--------------------------------
827.0 1,035.6 208.6 20.1
--------------------------------
Operating income(3)(4) 261.2 330.2 (69.0) (20.9)
Other income and charges 1.6 2.7 1.1 40.7
Net interest expense 64.7 67.7 3.0 4.4
Income tax expense before
foreign exchange gain
(loss) on long-term debt
and other specified items(3) 50.7 75.4 24.7 32.8
--------------------------------
Income before foreign exchange
gain (loss) on long-term debt
and other specified items(3) $ 144.2 $ 184.4 $ (40.2) (21.8)
--------------------------------
--------------------------------
Operating ratio(3)(5) (%) 76.0 75.8 (0.2) -
Diluted EPS, before FX on LTD
and other specified items(3) $ 0.85 $ 1.19 $ (0.34) (28.6)
Year-to-date
-------------------------------------------
2009 2008(1)(2)(3) Fav/(Unfav) %
Pro forma
-------------------------------------------
Financial (millions, except
---------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 3,084.2 $ 3,816.5 $ (732.3) (19.2)
Other revenue 97.1 76.6 20.5 26.8
--------------------------------
3,181.3 3,893.1 (711.8) (18.3)
--------------------------------
Operating expenses
------------------
Compensation and benefits 962.7 1,012.4 49.7 4.9
Fuel 422.7 813.2 390.5 48.0
Materials 164.3 184.3 20.0 10.9
Equipment rents 139.8 148.0 8.2 5.5
Depreciation and
amortization 400.3 397.2 (3.1) (0.8)
Purchased services and other 465.1 519.6 54.5 10.5
--------------------------------
2,554.9 3,074.7 519.8 16.9
--------------------------------
Operating income(3)(4) 626.4 818.4 (192.0) (23.5)
Other income and charges 28.2 14.0 (14.2) (101.4)
Net interest expense 210.4 189.1 (21.3) (11.3)
Income tax expense before
foreign exchange gain
(loss) on long-term debt
and other specified items(3) 89.5 164.4 74.9 45.6
--------------------------------
Income before foreign exchange
gain (loss) on long-term debt
and other specified items(3) $ 298.3 $ 450.9 $ (152.6) (33.8)
--------------------------------
--------------------------------
Operating ratio(3)(5) (%) 80.3 79.0 (1.3) -
Diluted EPS, before FX on LTD
and other specified items(3) $ 1.80 $ 2.90 $ (1.10) (37.9)
(1) Pro forma basis redistributes DM&E equity income to a line-by-line
consolidation of DM&E results for the first three quarters of 2008.
See note on non-GAAP earnings measures included in this press
release.
(2) 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.
(3) 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.
(4) Operating income is a non-GAAP term, which represents "revenue less
operating expenses".
(5) 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
---------------------------------------------
Third Quarter
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
Pro forma
-------------------------------------------
Commodity Data
--------------
Freight Revenues (millions)
- Grain $ 279.6 $ 262.4 $ 17.2 6.6
- Coal 119.7 161.0 (41.3) (25.7)
- Sulphur and fertilizers 80.3 126.1 (45.8) (36.3)
- Forest products 45.3 68.9 (23.6) (34.3)
- Industrial and consumer
products 191.6 249.3 (57.7) (23.1)
- Automotive 59.6 84.5 (24.9) (29.5)
- Intermodal 285.4 387.8 (102.4) (26.4)
--------------------------------
Total Freight Revenues $ 1,061.5 $ 1,340.0 $ (278.5) (20.8)
--------------------------------
Millions of Revenue Ton-Miles
(RTM)
- Grain 8,458 7,321 1,137 15.5
- Coal 4,784 5,580 (796) (14.3)
- Sulphur and fertilizers 2,747 4,785 (2,038) (42.6)
- Forest products 1,216 1,535 (319) (20.8)
- Industrial and consumer
products 4,570 5,651 (1,081) (19.1)
- Automotive 417 533 (116) (21.8)
- Intermodal 5,829 7,381 (1,552) (21.0)
--------------------------------
Total RTMs 28,021 32,786 (4,765) (14.5)
--------------------------------
Freight Revenue per RTM (cents)
- Grain 3.31 3.58 (0.27) (7.5)
- Coal 2.50 2.89 (0.39) (13.5)
- Sulphur and fertilizers 2.92 2.64 0.28 10.6
- Forest products 3.73 4.49 (0.76) (16.9)
- Industrial and consumer
products 4.19 4.41 (0.22) (5.0)
- Automotive 14.29 15.85 (1.56) (9.8)
- Intermodal 4.90 5.25 (0.35) (6.7)
Freight Revenue per RTM 3.79 4.09 (0.30) (7.3)
Carloads (thousands)
- Grain 117.6 112.0 5.6 5.0
- Coal 84.2 82.3 1.9 2.3
- Sulphur and fertilizers 29.7 46.7 (17.0) (36.4)
- Forest products 17.4 25.7 (8.3) (32.3)
- Industrial and consumer
products 86.6 110.8 (24.2) (21.8)
- Automotive 27.2 34.7 (7.5) (21.6)
- Intermodal 239.7 324.6 (84.9) (26.2)
--------------------------------
Total Carloads 602.4 736.8 (134.4) (18.2)
--------------------------------
Freight Revenue per Carload
- Grain $ 2,378 $ 2,343 $ 35 1.5
- Coal 1,422 1,956 (534) (27.3)
- Sulphur and fertilizers 2,704 2,700 4 0.1
- Forest products 2,603 2,681 (78) (2.9)
- Industrial and consumer
products 2,212 2,250 (38) (1.7)
- Automotive 2,191 2,435 (244) (10.0)
- Intermodal 1,191 1,195 (4) (0.3)
Freight Revenue per Carload $ 1,762 $ 1,819 $ (57) (3.1)
Year-to-date
-------------------------------------------
2009 2008(1)(2) Fav/(Unfav) %
Pro forma
-------------------------------------------
Commodity Data
--------------
Freight Revenues (millions)
- Grain $ 838.0 $ 750.7 $ 87.3 11.6
- Coal 331.2 481.6 (150.4) (31.2)
- Sulphur and fertilizers 219.8 399.9 (180.1) (45.0)
- Forest products 131.2 191.0 (59.8) (31.3)
- Industrial and consumer
products 565.3 686.8 (121.5) (17.7)
- Automotive 161.1 245.6 (84.5) (34.4)
- Intermodal 837.6 1,060.9 (223.3) (21.0)
--------------------------------
Total Freight Revenues $ 3,084.2 $ 3,816.5 $ (732.3) (19.2)
--------------------------------
Millions of Revenue Ton-Miles
(RTM)
- Grain 25,682 23,116 2,566 11.1
- Coal 12,504 16,975 (4,471) (26.3)
- Sulphur and fertilizers 6,646 15,879 (9,233) (58.1)
- Forest products 3,372 4,650 (1,278) (27.5)
- Industrial and consumer
products 12,891 16,548 (3,657) (22.1)
- Automotive 1,127 1,731 (604) (34.9)
- Intermodal 17,256 21,645 (4,389) (20.3)
--------------------------------
Total RTMs 79,478 100,544 (21,066) (21.0)
--------------------------------
Freight Revenue per RTM (cents)
- Grain 3.26 3.25 0.01 0.3
- Coal 2.65 2.84 (0.19) (6.7)
- Sulphur and fertilizers 3.31 2.52 0.79 31.3
- Forest products 3.89 4.11 (0.22) (5.4)
- Industrial and consumer
products 4.39 4.15 0.24 5.8
- Automotive 14.29 14.19 0.10 0.7
- Intermodal 4.85 4.90 (0.05) (1.0)
Freight Revenue per RTM 3.88 3.80 0.08 2.1
Carloads (thousands)
- Grain 348.4 337.0 11.4 3.4
- Coal 221.2 245.2 (24.0) (9.8)
- Sulphur and fertilizers 76.9 154.7 (77.8) (50.3)
- Forest products 50.4 76.8 (26.4) (34.4)
- Industrial and consumer
products 253.3 327.9 (74.6) (22.8)
- Automotive 70.8 111.5 (40.7) (36.5)
- Intermodal 721.9 936.4 (214.5) (22.9)
--------------------------------
Total Carloads 1,742.9 2,189.5 (446.6) (20.4)
--------------------------------
Freight Revenue per Carload
- Grain $ 2,405 $ 2,228 $ 177 7.9
- Coal 1,497 1,964 (467) (23.8)
- Sulphur and fertilizers 2,858 2,585 273 10.6
- Forest products 2,603 2,487 116 4.7
- Industrial and consumer
products 2,232 2,095 137 6.5
- Automotive 2,275 2,203 72 3.3
- Intermodal 1,160 1,133 27 2.4
Freight Revenue per Carload $ 1,770 $ 1,743 $ 27 1.5
(1) Pro forma basis redistributes DM&E equity income to a line-by-line
consolidation of DM&E results for the first three quarters of 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)
-----------------------------
Third Quarter
-------------------------------------------
2009 2008(1)(2)(3) Fav/(Unfav) %
-------------------------------------------
Operations Performance
----------------------
Pro forma Consolidated Data
---------------------------
including DM&E(1)
-----------------
Total operating expenses
per GTM (cents)(4) 1.54 1.63 0.09 5.5
Freight gross ton-miles (GTM)
(millions) 53,709 63,511 (9,802) (15.4)
Train miles (000)(5) 8,562 10,900 (2,338) (21.4)
Average number of active
employees - Total 15,420 17,385 1,965 11.3
Average number of active
employees - Expense 13,352 15,153 1,801 11.9
Number of employees at end
of period - Total 15,416 17,249 1,833 10.6
Number of employees at end
of period - Expense 13,371 15,081 1,710 11.3
U.S. gallons of locomotive
fuel per 1,000 GTMs -
freight & yard 1.09 1.14 0.05 4.4
U.S. gallons of locomotive
fuel consumed - total
(millions)(6) 58.1 72.0 13.9 19.3
Average fuel price (U.S.
dollars per U.S. gallon) 2.07 3.93 1.86 47.3
Fluidity Data (excluding DM&E)
------------------------------
Average terminal dwell - AAR
definition (hours) 20.7 21.3 0.6 2.8
Average train speed - AAR
definition (mph) 25.7 23.9 1.8 7.5
Car miles per car day 147.1 145.2 1.9 1.3
Average daily active cars
on-line (000) 44.5 53.4 8.9 16.7
Average daily active road
locomotives on-line 694 963 269 27.9
Safety
------
FRA personal injuries per
200,000 employee-hours
(CP only) 1.97 1.79 (0.18) (10.1)
FRA train accidents per
million train-miles (CP only) 0.64 1.58 0.94 59.5
FRA personal injuries per
200,000 employee-hours
(DM&E only) 3.23 4.12 0.89 21.6
FRA train accidents per
million train-miles
(DM&E only) 12.14 13.15 1.01 7.7
Year-to-date
-------------------------------------------
2009 2008(1)(2)(3) Fav/(Unfav) %
-------------------------------------------
Operations Performance
----------------------
Pro forma Consolidated Data
---------------------------
including DM&E(1)
-----------------
Total operating expenses
per GTM (cents)(4) 1.66 1.60 (0.06) (3.8)
Freight gross ton-miles (GTM)
(millions) 154,277 192,217 (37,940) (19.7)
Train miles (000)(5) 25,860 33,265 (7,405) (22.3)
Average number of active
employees - Total 15,209 16,904 1,695 10.0
Average number of active
employees - Expense 13,669 15,184 1,515 10.0
Number of employees at end
of period - Total 15,416 17,249 1,833 10.6
Number of employees at end
of period - Expense 13,371 15,081 1,710 11.3
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) 181.9 231.4 49.5 21.4
Average fuel price (U.S.
dollars per U.S. gallon) 1.97 3.47 1.50 43.2
Fluidity Data (excluding DM&E)
------------------------------
Average terminal dwell - AAR
definition (hours) 21.5 22.3 0.8 3.6
Average train speed - AAR
definition (mph) 25.7 23.8 1.9 8.0
Car miles per car day 144.0 143.5 0.5 0.3
Average daily active cars
on-line (000) 45.2 55.4 10.2 18.4
Average daily active road
locomotives on-line 749 1,003 254 25.3
Safety
------
FRA personal injuries per
200,000 employee-hours
(CP only) 1.74 1.47 (0.27) (18.4)
FRA train accidents per
million train-miles (CP only) 1.29 1.85 0.56 30.3
FRA personal injuries per
200,000 employee-hours
(DM&E only) 2.22 3.68 1.46 39.7
FRA train accidents per
million train-miles
(DM&E only) 8.11 11.74 3.63 30.9
(1) Pro forma basis redistributes DM&E equity income to a line-by-line
consolidation of DM&E results for the first three quarters of 2008.
See note on non-GAAP earnings measures included in this press
release.
(2) 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.
(3) Certain prior period figures have been revised to conform with
current presentation or have been updated to reflect new information.
(4) 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.
(5) 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.
(6) 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: Media: Mike LoVecchio, Tel.: (778) 772-9636, email: [email protected]; Investment Community: Janet Weiss, Assistant Vice-President, Investor Relations, Tel.: (403) 319-3591, email: [email protected]
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