CPKC reports third-quarter results driven by solid execution; poised for strong finish to 2024
Canadian Pacific Kansas City (CP) announced Q3 2024 results with revenues of $3.5 billion, up 6% from Q3 2023. The company reported diluted EPS of $0.90 and core adjusted combined diluted EPS of $0.99, an 8% increase year-over-year. Operating ratio increased by 120 basis points to 66.1%. Revenue Ton-Miles grew by 4%, while safety metrics improved with decreased FRA-reportable personal injury and train accident frequencies. CPKC maintains its guidance for double-digit core adjusted combined diluted EPS growth in 2024 versus 2023's $3.84, with RTMs expected to increase mid-single digits.
Canadian Pacific Kansas City (CP) ha annunciato i risultati del terzo trimestre del 2024 con ricavi di $3,5 miliardi, in crescita del 6% rispetto al terzo trimestre del 2023. L'azienda ha riportato un utile per azione diluito di $0,90 e un utile per azione diluito core rettificato combinato di $0,99, un incremento dell'8% su base annua. Il rapporto operativo è aumentato di 120 punti base, raggiungendo il 66,1%. I Ton-Miglia di fatturato sono cresciuti del 4%, mentre le metriche di sicurezza sono migliorate con una riduzione delle lesioni personali e della frequenza degli incidenti ferroviari riportabili alla FRA. CPKC mantiene le previsioni per una crescita a due cifre dell'utile per azione diluito core rettificato combinato nel 2024 rispetto ai $3,84 del 2023, con un aumento previsto dei RTM a un valore medio a una cifra.
Canadian Pacific Kansas City (CP) anunció los resultados del tercer trimestre de 2024 con ingresos de $3.5 mil millones, un aumento del 6% en comparación con el tercer trimestre de 2023. La empresa reportó un EPS diluido de $0.90 y un EPS combinado ajustado diluido core de $0.99, un aumento del 8% interanual. El ratio operativo aumentó en 120 puntos básicos, alcanzando el 66.1%. Los Ton-Millas de ingresos crecieron un 4%, mientras que los indicadores de seguridad mejoraron con una disminución en la frecuencia de lesiones personales reportables al FRA y accidentes de tren. CPKC mantiene su guía para un crecimiento de dos dígitos en el EPS diluido combinado ajustado core en 2024 en comparación con los $3.84 de 2023, con un aumento esperado en los RTM de un dígito medio.
캐나다 태평양 캔자스 시티 (CP)는 2024년 3분기 실적을 발표하며 수익이 35억 달러로, 2023년 3분기 대비 6% 증가했다고 밝혔습니다. 회사는 희석 주당순이익(EPS)이 $0.90이고, 조정된 핵심 희석 주당순이익이 $0.99로, 전년 대비 8% 증가했다고 보고했습니다. 운영 비율은 120bp 증가하여 66.1%에 이르렀습니다. 매출 톤-마일(Ton-Miles)은 4% 성장했으며, 안전 지표는 FRA에 보고된 개인 부상 및 열차 사고 빈도의 감소와 함께 향상되었습니다. CPKC는 2023년의 $3.84에 비해 2024년에 두 자릿수의 핵심 조정된 희석 EPS 성장에 대한 가이드를 유지하고 있으며, RTM은 중간 한 자릿수 증가가 예상됩니다.
Canadian Pacific Kansas City (CP) a annoncé les résultats du troisième trimestre 2024 avec des revenus de 3,5 milliards de dollars, soit une augmentation de 6 % par rapport au troisième trimestre 2023. La société a déclaré un BPA dilué de 0,90 $ et un BPA dilué combiné ajusté de base de 0,99 $, représentant une augmentation de 8 % d'une année sur l'autre. Le ratio opérationnel a augmenté de 120 points de base pour atteindre 66,1 %. Les Ton-Milles de revenus ont augmenté de 4 %, tandis que les indicateurs de sécurité se sont améliorés avec une diminution de la fréquence des blessures personnelles et des accidents de train reportables à la FRA. CPKC maintient ses prévisions de croissance à deux chiffres de l'EPS dilué combiné ajusté de base pour 2024 par rapport au 3,84 $ de 2023, avec des RTM qui devraient augmenter de manière à un chiffre au milieu.
Canadian Pacific Kansas City (CP) hat die Ergebnisse des dritten Quartals 2024 bekannt gegeben, mit Einnahmen von 3,5 Milliarden USD, was einem Anstieg von 6% im Vergleich zum dritten Quartal 2023 entspricht. Das Unternehmen berichtete von einem verwässerten EPS von 0,90 USD und einem angepassten, verwässerten Kern-EPS von 0,99 USD, was einer jährlichen Steigerung von 8% entspricht. Das Betriebsverhältnis erhöhte sich um 120 Basispunkte auf 66,1%. Die Umsatztonnenmeilen wuchsen um 4%, während sich die Sicherheitskennzahlen verbesserten, da die Häufigkeit von FRA-meldbaren Personenschäden und Zugunfällen abnahm. CPKC hält an seiner Prognose für ein zweistelliges Wachstum des angepassten Kern-EPS 2024 gegenüber den 3,84 USD von 2023 fest, wobei mit einem Anstieg der RTMs im niedrigen einstelligen Bereich gerechnet wird.
- Revenue increased 6% YoY to $3.5 billion
- Core adjusted combined diluted EPS grew 8% to $0.99
- Revenue Ton-Miles increased 4%
- Improved safety metrics with decreased accident and injury frequencies
- Maintained positive guidance for double-digit EPS growth
- Operating ratio increased 120 basis points to 66.1%
- Core adjusted combined OR increased 120 basis points to 62.9%
Insights
CPKC delivered a mixed third quarter with both positive and challenging elements. Revenue growth of
The
The safety metrics improvements are noteworthy, with decreases in both personal injury frequency and train accident rates. This demonstrates effective integration of safety protocols following the Kansas City Southern merger. The expanded North American network is proving advantageous for revenue generation, though the increased operating ratio suggests integration costs and operational challenges are still being worked through.
The guidance maintenance for double-digit EPS growth, despite moderating volume expectations, indicates confidence in cost synergy realization and pricing power. The network's unique Mexico exposure continues to be a key differentiator as near-shoring trends persist.
"During the third quarter, we delivered strong performance across the operations of our unrivaled North American network, despite dealing with a number of temporary headwinds," said Keith Creel, CPKC President and Chief Executive Officer. "We continue to see strong revenue growth, uniquely enabled by this new network. With our commitment to operational excellence, safety and customer service, we are doing what we said we would do and generating value for all stakeholders."
Third-quarter 2024 results
- Revenues increased by six percent to
$3.5 billion $3.3 billion - Reported operating ratio (OR) increased by 120 basis points to 66.1 percent from 64.9 percent in Q3 2023
- Core adjusted combined OR1 increased by 120 basis points to 62.9 percent from 61.7 percent in Q3 2023
- Reported diluted EPS increased to
$0.90 $0.84 - Core adjusted combined diluted EPS1 increased eight percent to
$0.99 $0.92 - Volumes, as measured in Revenue Ton-Miles (RTMs), increased four percent
- Federal Railroad Administration (FRA)-reportable personal injury frequency decreased to 0.85 from 1.02 in Q3 20232
- FRA-reportable train accident frequency decreased to 1.27 from 1.38 in Q3 20232
"I am proud of this team of railroaders for overcoming challenges to still deliver on our guidance; as we look to close 2024 with growing momentum, we've never been more excited about the opportunities ahead," Creel added. "Our strategic initiatives and investments position us well for more growth and success for the remainder of this year, in 2025 and beyond. Fueled by the strength of our dedicated team of railroaders, we are confident in our ability to continue producing results for our customers and long-term value for shareholders."
2024 Guidance
CPKC now expects RTMs3 to increase mid-single digits vs 2023 on a combined basis. CPKC continues to expect 2024 core adjusted combined diluted EPS1 to grow double digits versus 2023 core adjusted combined diluted EPS1 of
1 | These measures have no standardized meanings prescribed by accounting principles generally accepted in |
2 | The third-quarter 2023 FRA-reportable train accident frequency and FRA-reportable personal injury frequency have been restated to reflect new information available within specified periods stipulated by the FRA but that exceed the Company's financial reporting timeline. |
3 | The 2023 comparison for RTMs represents combined operating information to illustrate the estimated effects of the acquisition as if the acquisition closed on January 1, 2022. |
Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at 4:30 p.m. ET (2:30 p.m. MT) on Oct. 23, 2024.
Conference Call Access
International: 203-518-9708
*Conference ID: CPKCQ324
Callers should dial in 10 minutes prior to the call.
Webcast
We encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com.
A replay of the third-quarter conference call will be available by phone through Oct. 30, 2024, at 800-839-4014 (
Forward looking information
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the
The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.
Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian,
Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.
Forward-Looking Non-GAAP Measures
Although CPKC has provided forward-looking non-GAAP measures (core adjusted combined diluted EPS) management is unable to reconcile, without unreasonable efforts, the forward-looking core adjusted combined diluted EPS to the most comparable GAAP measure, due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value. In recent years, the Company has recognized acquisition-related costs, the merger termination payment received, KCS's gain on unwinding of interest rate hedges (net of Canadian Pacific's (CP) associated purchase accounting basis differences and tax), loss on derecognition of CPKC's previously held equity method investment in KCS, discrete tax items, changes in the outside basis tax difference between the carrying amount of the Company's equity investment in KCS and its tax basis of the investment, adjustments to provisions and settlements of Mexican taxes, changes in income tax rates, and changes to an uncertain tax item. Acquisition-related costs include legal, consulting, financing fees, integration costs including third-party services and system migration, debt exchange transaction costs, community investments, fair value gain or loss on FX forward contracts and interest rate hedges, FX gain on
About CPKC
With its global headquarters in
FINANCIAL STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the three months | For the nine months | |||
(in millions of Canadian dollars, except share and per share data) | 2024 | 2023 | 2024 | 2023 |
Revenues (Note 3) | ||||
Freight | $ 3,461 | $ 3,266 | $ 10,422 | $ 8,584 |
Non-freight | 88 | 73 | 250 | 195 |
Total revenues | 3,549 | 3,339 | 10,672 | 8,779 |
Operating expenses | ||||
Compensation and benefits (Note 8) | 644 | 598 | 1,946 | 1,695 |
Fuel | 419 | 430 | 1,343 | 1,153 |
Materials (Note 8) | 99 | 90 | 290 | 260 |
Equipment rents | 89 | 91 | 253 | 201 |
Depreciation and amortization (Note 8) | 472 | 451 | 1,412 | 1,086 |
Purchased services and other (Note 8) | 623 | 506 | 1,809 | 1,438 |
Total operating expenses | 2,346 | 2,166 | 7,053 | 5,833 |
Operating income | 1,203 | 1,173 | 3,619 | 2,946 |
Less: | ||||
Equity earnings of Kansas City Southern (Note 8, 9) | — | — | — | (230) |
Other expense (income) (Note 8, 10) | 1 | 13 | (41) | 36 |
Other components of net periodic benefit recovery (Note 12) | (89) | (85) | (265) | (254) |
Net interest expense (Note 8) | 192 | 207 | 598 | 565 |
Remeasurement loss of Kansas City Southern (Note 8) | — | — | — | 7,175 |
Income (loss) before income tax expense (recovery) | 1,099 | 1,038 | 3,327 | (4,346) |
Less: | ||||
Current income tax expense (Note 4) | 257 | 255 | 773 | 674 |
Deferred income tax expense (recovery) (Note 4, 8) | 5 | 3 | 40 | (7,925) |
Income tax expense (recovery) (Note 4) | 262 | 258 | 813 | (7,251) |
Net income | $ 837 | $ 780 | $ 2,514 | $ 2,905 |
Less: Net (loss) income attributable to non-controlling interest (Note 8) | — | — | (3) | 1 |
Net income attributable to controlling shareholders | $ 837 | $ 780 | $ 2,517 | $ 2,904 |
Earnings per share (Note 5) | ||||
Basic earnings per share | $ 0.90 | $ 0.84 | $ 2.70 | $ 3.12 |
Diluted earnings per share | $ 0.90 | $ 0.84 | $ 2.69 | $ 3.11 |
Weighted-average number of shares (millions) (Note 5) | ||||
Basic | 933.2 | 931.5 | 932.8 | 931.1 |
Diluted | 935.3 | 933.9 | 934.8 | 933.7 |
Dividends declared per share | $ 0.19 | $ 0.19 | $ 0.57 | $ 0.57 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
For the three months | For the nine months | |||
(in millions of Canadian dollars) | 2024 | 2023 | 2024 | 2023 |
Net income | $ 837 | $ 780 | $ 2,514 | $ 2,905 |
Net (loss) gain in foreign currency translation adjustments, net of hedging activities | (423) | 605 | 577 | (33) |
Change in derivatives designated as cash flow hedges | 1 | 2 | 5 | 5 |
Change in pension and post-retirement defined benefit plans | 12 | 8 | 35 | 13 |
Other comprehensive (loss) income from equity investees | (5) | — | (7) | 7 |
Other comprehensive (loss) income before income taxes | (415) | 615 | 610 | (8) |
Income tax (expense) recovery | (7) | 15 | (1) | (5) |
Other comprehensive (loss) income (Note 6) | (422) | 630 | 609 | (13) |
Comprehensive income | $ 415 | $ 1,410 | $ 3,123 | $ 2,892 |
Comprehensive (loss) income attributable to non-controlling interest (Note 6) | (15) | 20 | 16 | 13 |
Comprehensive income attributable to controlling shareholders | $ 430 | $ 1,390 | $ 3,107 | $ 2,879 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
September 30 | December 31 | |
(in millions of Canadian dollars) | 2024 | 2023 |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 463 | $ 464 |
Accounts receivable, net (Note 7) | 1,941 | 1,887 |
Materials and supplies | 407 | 400 |
Other current assets | 261 | 251 |
3,072 | 3,002 | |
Investments | 555 | 533 |
Properties | 53,242 | 51,744 |
Goodwill (Note 8) | 18,160 | 17,729 |
Intangible assets | 2,972 | 2,974 |
Pension asset | 3,604 | 3,338 |
Other assets | 620 | 582 |
Total assets | $ 82,225 | $ 79,902 |
Liabilities and equity | ||
Current liabilities | ||
Accounts payable and accrued liabilities | $ 2,594 | $ 2,567 |
Long-term debt maturing within one year (Note 10, 11) | 3,204 | 3,143 |
5,798 | 5,710 | |
Pension and other benefit liabilities | 580 | 581 |
Other long-term liabilities | 817 | 797 |
Long-term debt (Note 10, 11) | 18,710 | 19,351 |
Deferred income taxes | 11,240 | 11,052 |
Total liabilities | 37,145 | 37,491 |
Shareholders' equity | ||
Share capital | 25,672 | 25,602 |
Additional paid-in capital | 94 | 88 |
Accumulated other comprehensive loss (Note 6) | (28) | (618) |
Retained earnings | 18,405 | 16,420 |
44,143 | 41,492 | |
Non-controlling interest | 937 | 919 |
Total equity | 45,080 | 42,411 |
Total liabilities and equity | $ 82,225 | $ 79,902 |
See Contingencies (Note 14). |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months | For the nine months | |||
(in millions of Canadian dollars) | 2024 | 2023 | 2024 | 2023 |
Operating activities | ||||
Net income | $ 837 | $ 780 | $ 2,514 | $ 2,905 |
Reconciliation of net income to cash provided by operating activities: | ||||
Depreciation and amortization | 472 | 451 | 1,412 | 1,086 |
Deferred income tax expense (recovery) (Note 4) | 5 | 3 | 40 | (7,925) |
Pension recovery and funding (Note 12) | (79) | (76) | (230) | (231) |
Equity earnings of Kansas City Southern (Note 8, 9) | — | — | — | (230) |
Remeasurement loss of Kansas City Southern (Note 8) | — | — | — | 7,175 |
Dividend from Kansas City Southern (Note 9) | — | — | — | 300 |
Settlement of Mexican taxes (Note 4) | (2) | (75) | (2) | (75) |
Settlement of foreign currency forward contract (Note 11) | — | — | (65) | — |
Other operating activities, net | 59 | 11 | (9) | (8) |
Changes in non-cash working capital balances related to operations | (20) | (67) | (95) | (196) |
Net cash provided by operating activities | 1,272 | 1,027 | 3,565 | 2,801 |
Investing activities | ||||
Additions to properties | (748) | (733) | (2,083) | (1,767) |
Additions to Meridian Speedway properties | (9) | (19) | (29) | (27) |
Proceeds from sale of properties and other assets | 9 | 12 | 19 | 28 |
Cash acquired on control of Kansas City Southern (Note 8) | — | — | — | 298 |
Investment in government securities | — | — | — | (267) |
Other investing activities, net | (12) | (2) | 9 | (26) |
Net cash used in investing activities | (760) | (742) | (2,084) | (1,761) |
Financing activities | ||||
Dividends paid | (177) | (177) | (532) | (530) |
Issuance of Common Shares | 13 | 13 | 55 | 50 |
Repayment of long-term debt, excluding commercial paper (Note 10) | (89) | (12) | (309) | (1,108) |
Net (repayment) issuance of commercial paper (Note 10) | (343) | (147) | (705) | 403 |
Acquisition-related financing fees | — | (2) | — | (17) |
Other financing activities, net | — | 1 | — | — |
Net cash used in financing activities | (596) | (324) | (1,491) | (1,202) |
Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents | (10) | 8 | 9 | 5 |
Cash position | ||||
Net decrease in cash and cash equivalents | (94) | (31) | (1) | (157) |
Cash and cash equivalents at beginning of period | 557 | 325 | 464 | 451 |
Cash and cash equivalents at end of period | $ 463 | $ 294 | $ 463 | $ 294 |
Supplemental cash flow information | ||||
Income taxes paid | $ 173 | $ 205 | $ 724 | $ 648 |
Interest paid | $ 157 | $ 152 | $ 563 | $ 570 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
For the three months ended September 30 | ||||||||||
(in millions of Canadian dollars except per share data) | Common | Share capital | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings | Total shareholders' equity | Non- | Total equity | ||
Balance as at July 1, 2024 | 933.1 | $ 93 | $ 379 | $ 17,745 | $ 43,872 | $ 951 | ||||
Net income | — | — | — | — | 837 | 837 | — | 837 | ||
Contribution from non-controlling interest | — | — | — | — | — | — | 1 | 1 | ||
Other comprehensive loss (Note 6) | — | — | — | (407) | — | (407) | (15) | (422) | ||
Dividends declared ( | — | — | — | — | (177) | (177) | (177) | |||
Effect of stock-based compensation expense | — | — | 4 | — | — | 4 | — | 4 | ||
Shares issued under stock option plan | 0.2 | 17 | (3) | — | — | 14 | — | 14 | ||
Balance as at September 30, 2024 | 933.3 | $ 94 | $ (28) | $ 18,405 | $ 44,143 | $ 937 | ||||
Balance as at July 1, 2023 | 931.4 | $ 88 | $ (544) | $ 14,972 | $ 40,079 | $ 925 | ||||
Net income | — | — | — | — | 780 | 780 | — | 780 | ||
Other comprehensive income (Note 6) | — | — | — | 610 | — | 610 | 20 | 630 | ||
Dividends declared ( | — | — | — | — | (177) | (177) | — | (177) | ||
Effect of stock-based compensation expense | — | — | 5 | — | — | 5 | — | 5 | ||
Shares issued under stock option plan | 0.3 | 16 | (3) | — | — | 13 | — | 13 | ||
Balance as at September 30, 2023 | 931.7 | $ 90 | $ 66 | $ 15,575 | $ 41,310 | $ 945 | ||||
For the nine months ended September 30 | ||||||||||
(in millions of Canadian dollars except per share data) | Common | Share capital | Additional paid-in capital | Accumulated income (loss) | Retained earnings | Total shareholders' equity | Non- | Total equity | ||
Balance at January 1, 2024 | 932.1 | $ 88 | $ (618) | $ 16,420 | $ 41,492 | $ 919 | ||||
Net income (loss) | — | — | — | — | 2,517 | 2,517 | (3) | 2,514 | ||
Contribution from non-controlling interest | — | — | — | — | — | — | 2 | 2 | ||
Other comprehensive income (Note 6) | — | — | — | 590 | — | 590 | 19 | 609 | ||
Dividends declared ( | — | — | — | (532) | (532) | — | (532) | |||
Effect of stock-based compensation expense | — | — | 20 | — | — | 20 | — | 20 | ||
Shares issued under stock option plan | 1.2 | 70 | (14) | — | — | 56 | — | 56 | ||
Balance as at September 30, 2024 | 933.3 | $ 94 | $ (28) | $ 18,405 | $ 44,143 | $ 937 | ||||
Balance as at January 1, 2023 | 930.5 | $ 78 | $ 91 | $ 13,201 | $ 38,886 | $ — | ||||
Net income | — | — | — | — | 2,904 | 2,904 | 1 | 2,905 | ||
Other comprehensive (loss) income (Note 6) | — | — | — | (25) | — | (25) | 12 | (13) | ||
Dividends declared ( | — | — | — | — | (530) | (530) | — | (530) | ||
Effect of stock-based compensation expense | — | — | 24 | — | — | 24 | — | 24 | ||
Shares issued under stock option plan | 1.2 | 63 | (12) | — | — | 51 | — | 51 | ||
Non-controlling interest in connection with business acquisition | — | — | — | — | — | — | 932 | 932 | ||
Balance as at September 30, 2023 | 931.7 | $ 90 | $ 66 | $ 15,575 | $ 41,310 | $ 945 | ||||
See Notes to Interim Consolidated Financial Statements. |
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(unaudited)
1 Description of business and basis of presentation
Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning
On April 14, 2023, Canadian Pacific Railway Limited ("CPRL") assumed control of Kansas City Southern ("KCS") and changed its name to Canadian Pacific Kansas City Limited. These unaudited interim consolidated financial statements as at and for the three and nine months ended September 30, 2024 ("Interim Consolidated Financial Statements") include KCS as a consolidated subsidiary from April 14, 2023. For the period beginning on January 1, 2023 and ending on April 13, 2023, the Company's
These Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the
The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results.
2 Accounting changes
Recently adopted accounting standards
The accounting standards that have become effective during the three and nine months ended September 30, 2024 did not have a material impact on the Interim Consolidated Financial Statements.
Accounting standards not yet adopted
Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted.
3 Revenues
The following table presents disaggregated information about the Company's revenues from contracts with customers by major source:
For the three months | For the nine months | |||
(in millions of Canadian dollars) | 2024 | 2023 | 2024 | 2023 |
Grain | $ 668 | $ 600 | $ 2,063 | $ 1,652 |
Coal | 248 | 229 | 693 | 603 |
Potash | 144 | 133 | 461 | 409 |
Fertilizers and sulphur | 91 | 91 | 298 | 276 |
Forest products | 198 | 199 | 603 | 489 |
Energy, chemicals and plastics | 712 | 643 | 2,109 | 1,584 |
Metals, minerals and consumer products | 443 | 455 | 1,347 | 1,128 |
Automotive | 333 | 266 | 956 | 648 |
Intermodal | 624 | 650 | 1,892 | 1,795 |
Total freight revenues | 3,461 | 3,266 | 10,422 | 8,584 |
Non-freight excluding leasing revenues | 42 | 39 | 148 | 105 |
Revenues from contracts with customers | 3,503 | 3,305 | 10,570 | 8,689 |
Leasing revenues | 46 | 34 | 102 | 90 |
Total revenues | $ 3,549 | $ 3,339 | $ 10,672 | $ 8,779 |
4 Income taxes
During the nine months ended September 30, 2024, legislation was enacted to decrease the
During the three and nine months ended September 30, 2023, legislation was enacted to decrease the
The effective tax rates including discrete items for the three and nine months ended September 30, 2024 were
For the three months ended September 30, 2024, the effective tax rate was
For the three months ended September 30, 2023, the effective tax rate was
For the nine months ended September 30, 2024, the effective tax rate was
For the nine months ended September 30, 2023, the effective tax rate was
See Note 8 for information regarding the KCS acquisition and Note 9 for information regarding the investment in KCS.
Mexican Tax Audits
There are certain Mexican subsidiaries with ongoing audits for the years 2016-2019 and 2021. As at September 30, 2024, the Company believes that it has recorded sufficient income tax reserves with respect to these income tax examinations.
Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") closed audit examinations with the SAT for the tax years 2016-2020 in September 2023. The audit examinations were for corporate income tax and value added tax ("VAT"). The settlement of these audits resulted in a payment of
2014 Tax Assessment
CPKCM's 2014 Tax Assessment is currently in litigation before the Federal Collegiate Circuit Courts. For further detail, please see Note 14.
5 Earnings per share
For the three months | For the nine months | |||
(in millions, except per share data) | 2024 | 2023 | 2024 | 2023 |
Net income attributable to controlling shareholders | $ 837 | $ 780 | $ 2,517 | $ 2,904 |
Weighted-average basic shares outstanding | 933.2 | 931.5 | 932.8 | 931.1 |
Dilutive effect of stock options | 2.1 | 2.4 | 2.0 | 2.6 |
Weighted-average diluted shares outstanding | 935.3 | 933.9 | 934.8 | 933.7 |
Earnings per share - basic | $ 0.90 | $ 0.84 | $ 2.70 | $ 3.12 |
Earnings per share - diluted | $ 0.90 | $ 0.84 | $ 2.69 | $ 3.11 |
For the three and nine months ended September 30, 2024, there were 0.5 million and 0.5 million stock options, respectively, excluded from the computation of diluted earnings per share because their effects were not dilutive (three and nine months ended September 30, 2023 - 0.3 million and 0.3 million, respectively).
6 Changes in Accumulated other comprehensive loss ("AOCL") by component
Changes in AOCL attributable to controlling shareholders, net of tax, by component are as follows:
For the three months ended September 30 | |||||
(in millions of Canadian dollars) | Foreign currency | Derivatives | Pension and post- retirement defined benefit plans | Equity | Total |
Opening balance, July 1, 2024 | $ 1,816 | $ 8 | $ (1,446) | $ 1 | $ 379 |
Other comprehensive loss before reclassifications | (412) | — | — | (5) | (417) |
Amounts reclassified from AOCL | — | 1 | 9 | — | 10 |
Net other comprehensive (loss) income | (412) | 1 | 9 | (5) | (407) |
Closing balance, September 30, 2024 | $ 1,404 | $ 9 | $ (1,437) | $ (4) | $ (28) |
Opening balance, July 1, 2023 | $ 857 | $ 2 | $ (1,406) | $ 3 | $ (544) |
Other comprehensive income before reclassifications | 603 | — | — | — | 603 |
Amounts reclassified from AOCI | — | 1 | 6 | — | 7 |
Net other comprehensive income | 603 | 1 | 6 | — | 610 |
Closing balance, September 30, 2023 | $ 1,460 | $ 3 | $ (1,400) | $ 3 | $ 66 |
For the nine months ended September 30 | |||||
(in millions of Canadian dollars) | Foreign currency | Derivatives | Pension and post- retirement defined benefit plans | Equity | Total |
Opening balance, January 1, 2024 | $ 837 | $ 5 | $ (1,463) | $ 3 | $ (618) |
Other comprehensive income (loss) before reclassifications | 567 | — | — | (7) | 560 |
Amounts reclassified from AOCL | — | 4 | 26 | — | 30 |
Net other comprehensive income (loss) | 567 | 4 | 26 | (7) | 590 |
Closing balance, September 30, 2024 | $ 1,404 | $ 9 | $ (1,437) | $ (4) | $ (28) |
Opening balance, January 1, 2023 | $ 1,505 | $ — | $ (1,410) | $ (4) | $ 91 |
Other comprehensive (loss) income before reclassifications | (45) | — | (9) | 6 | (48) |
Amounts reclassified from AOCI | — | 3 | 19 | 1 | 23 |
Net other comprehensive (loss) income | (45) | 3 | 10 | 7 | (25) |
Closing balance, September 30, 2023 | $ 1,460 | $ 3 | $ (1,400) | $ 3 | $ 66 |
7 Accounts receivable, net
(in millions of Canadian dollars) | As at September 30, 2024 | As at December 31, 2023 |
Total accounts receivable | $ 2,035 | $ 1,976 |
Allowance for credit losses | (94) | (89) |
Total accounts receivable, net | $ 1,941 | $ 1,887 |
8 Business acquisition
Kansas City Southern
On December 14, 2021, the Company purchased
Accordingly, the Company commenced consolidation of KCS on the Control Date, accounting for the acquisition as a business combination achieved in stages. The results from operations and cash flows have been consolidated prospectively from the Control Date. The Company derecognized its previously held equity method investment in KCS of
The identifiable assets acquired, and liabilities and non-controlling interest assumed were measured at their provisional fair values at the Control Date, with certain exceptions, including income taxes, certain contingent liabilities, and contract liabilities. The provisional fair values of the tangible assets were determined using valuation techniques including, but not limited to, the market approach and the cost approach. The significant assumptions used to determine the provisional fair value of the tangible assets included, but were not limited to, a selection of comparable assets and an appropriate inflation rate. Presented with the acquired Properties are concession and related assets held under the terms of a concession from the Mexican government (the "Concession"). The Concession expires in June 2047 and is renewable under certain conditions for additional periods, each of up to 50 years.
The provisional fair values of the intangible assets were determined using valuation techniques including, but not limited to, the multi-period excess earnings method, the replacement cost method, the relief from royalty method and the income approach. The significant assumptions used to determine the provisional fair values of the intangible assets included, but were not limited to, the renewal probability and term of the Mexican concession extension, discount rates, earnings before interest, tax, depreciation, and amortization ("EBITDA") margins and terminal growth rates.
The fair value of non-controlling interest was determined using a combination of the income and market approaches to determine the fair value of Meridian Speedway LLC in which Norfolk Southern Corporation ("NSC") owns a non-controlling interest, and this fair value was allocated proportionately between KCS and NSC.
The accounting for the acquisition of KCS was completed on April 13, 2024, with the end of the measurement period and the final validation of the fair values assigned to acquired assets and assumed liabilities. This validation was completed using additional information about facts and circumstances as of the Control Date, that was obtained during the measurement period.
The following table summarizes the final purchase price allocation with the amounts recognized in respect of the identifiable assets acquired and liabilities and non-controlling interest assumed on the Control Date, as well as the fair value of the previously held equity interest in KCS and the measurement period adjustments recorded:
(in millions of Canadian dollars) | Preliminary | Measurement | Final allocation |
Net assets acquired: | |||
Cash and cash equivalents | $ 298 | $ — | $ 298 |
Net working capital | 51 | (161) | (110) |
Properties | 28,748 | 1 | 28,749 |
Intangible assets | 3,022 | — | 3,022 |
Other long-term assets | 496 | (6) | 490 |
Debt including debt maturing within one year | (4,545) | — | (4,545) |
Deferred income taxes | (6,984) | 62 | (6,922) |
Other long-term liabilities | (406) | (37) | (443) |
Total identifiable net assets | $ 20,680 | $ (141) | $ 20,539 |
Goodwill | 17,491 | 141 | 17,632 |
$ 38,171 | $ — | $ 38,171 | |
Consideration: | |||
Fair value of previously held equity method investment | $ 37,227 | $ — | $ 37,227 |
Intercompany payable balance, net acquired | 12 | — | 12 |
Fair value of non-controlling interest | 932 | — | 932 |
Total | $ 38,171 | $ — | $ 38,171 |
During the measurement period, adjustments were recorded as a result of new information that was obtained about facts and circumstances of certain KCS assets and liabilities as of the Control Date. New information obtained during 2023 was primarily in relation to CPKCM's value added tax assets and liabilities, as well as income and other tax positions. New information obtained during the first quarter of 2024 was primarily in relation to KCS's environmental liabilities, certain liabilities for other taxes in
The net working capital acquired included trade receivables of
Intangible assets of
Net working capital and Other long-term liabilities included environmental liabilities of
The excess of the total consideration, over the amounts allocated to acquired assets and assumed liabilities and non-controlling interest recognized, has been recognized as goodwill of
In relation to certain Mexican tax liabilities identified and recorded through Goodwill during the measurement period, in the first quarter of 2024 the Company also recorded further accruals for liabilities incurred since the Control Date of
On a pro forma basis, if the Company had consolidated KCS beginning on January 1, 2022, the revenue and net income attributable to controlling shareholders of the combined entity would be as follows for the three and nine months ended September 30, 2023:
Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||
(in millions of Canadian dollars) | KCS Historical(1) | Pro Forma CPKC | KCS Historical(1) | Pro Forma CPKC |
Revenue | $ — | $ 3,339 | $ 1,351 | $ 10,133 |
Net income attributable to controlling shareholders | — | 780 | 280 | 2,151 |
(1) | KCS's historical amounts were translated into Canadian dollars at the Bank of |
For the nine months ended September 30, 2023, the supplemental pro forma Net income attributable to controlling shareholders for the combined entity were adjusted for:
- the removal of the remeasurement loss of
$7,175 million - depreciation and amortization of differences between the historic carrying value and the preliminary fair value of tangible and intangible assets and investments prior to the Control Date;
- amortization of differences between the carrying amount and the fair value of debt through net interest expense prior to the Control Date;
- the elimination of intercompany transactions prior to the Control Date between the Company and KCS;
- miscellaneous amounts have been reclassified across revenue, operating expenses, and non-operating income or expense, consistent with CPKC's financial statement captions;
- the removal of equity earnings from KCS, previously recognized as an equity method investment prior to the Control Date, of
$230 million - income tax adjustments including:
- the derecognition of a deferred income tax recovery of
$7,832 million - the derecognition of a deferred income tax recovery for the nine months ended September 30, 2023 on CPKC unitary state apportionment changes; and
- a deferred income tax recovery prior to the Control Date on amortization of fair value adjustments to investments, properties, intangible assets, and debt.
- the derecognition of a deferred income tax recovery of
During the three and nine months ended September 30, 2024, the Company incurred
$11 million $17 million $1 million $5 million $24 million $68 million
During the three and nine months ended September 30, 2023, the Company incurred
$1 million $64 million $1 million $1 million $22 million $87 million - $nil and
$6 million
Acquisition-related costs of $nil and
During the three and nine months ended September 30, 2024, the Company recognized
$85 million $246 million - $nil and
$2 million $1 million $2 million $4 million $14 million - a recovery of
$1 million $5 million
During the three and nine months ended September 30, 2023, the Company recognized
$81 million $149 million - $nil and
$48 million $1 million $2 million $5 million $11 million
9 Investment in KCS
On April 14, 2023, the Company assumed control of KCS and derecognized its equity method investment in KCS (see Note 8).
For the period January 1 to April 13, 2023, the Company recognized
The following table presents summarized financial information for KCS, on its historical cost basis:
Consolidated Statement of Income
(in millions of Canadian dollars)(1) | For the period January 1 to April 13, 2023 |
Total revenues | $ 1,351 |
Total operating expenses | 888 |
Operating income | 463 |
Less: Other(2) | 83 |
Income before income taxes | 380 |
Net income | $ 280 |
(1) | Amounts translated at the average foreign exchange ("FX") rate for the period January 1 to April 13, 2023 of |
(2) | Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net. |
10 Debt
During the nine months ended September 30, 2024, the Company repaid
Debt repurchase
During the three and nine months ended September 30, 2024, the Company repurchased, on the open market, certain Senior Notes with principal values of
Credit facility
Effective June 25, 2024, the Company entered into a third amended and restated revolving credit facility (the "facility") agreement to extend the maturity dates of its five-year
Commercial paper program
The Company has a commercial paper program, under which it may issue up to a maximum aggregate principal amount of
11 Financial instruments
A. Fair values of financial instruments
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
The Company's short-term financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term borrowings, including commercial paper and term loans. The carrying value of short-term financial instruments approximate their fair value.
The carrying value of the Company's debt does not approximate its fair value. The estimated fair value has been determined based on market information, where available, or by discounting future payments of principal and interest at estimated interest rates expected to be available to the Company at the balance sheet date. All measurements are classified as Level 2. The Company's long-term debt, including current maturities, with a carrying value of
B. Financial risk management
FX management
Net investment hedge
The majority of the Company's
Mexican Peso-
The Company's Mexican subsidiaries have net
The Company measures the foreign currency derivative contracts at fair value each period and recognizes any change in "Other expense (income)". The cash flows associated with these instruments are classified as "Operating activities" within the Interim Consolidated Statements of Cash Flows.
During the nine months ended September 30, 2024, the Company recorded a loss of
Offsetting
The Company's foreign currency forward contracts were executed with counterparties in the
12 Pension and other benefits
During the three and nine months ended September 30, 2024, the Company made contributions to its defined benefit pension plans of
Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:
For the three months ended September 30 | ||||||
Pensions | Other benefits | Total | ||||
(in millions of Canadian dollars) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
Current service cost | $ 21 | $ 18 | $ 3 | $ 2 | $ 24 | $ 20 |
Other components of net periodic benefit (recovery) cost: | ||||||
Interest cost on benefit obligation | 116 | 122 | 6 | 5 | 122 | 127 |
Expected return on plan assets | (223) | (220) | — | — | (223) | (220) |
Recognized net actuarial loss | 10 | 8 | — | — | 10 | 8 |
Amortization of prior service costs | 2 | — | — | — | 2 | — |
Total other components of net periodic benefit (recovery) cost | (95) | (90) | 6 | 5 | (89) | (85) |
Net periodic benefit (recovery) cost | $ (74) | $ (72) | $ 9 | $ 7 | $ (65) | $ (65) |
For the nine months ended September 30 | ||||||
Pensions | Other benefits | Total | ||||
(in millions of Canadian dollars) | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
Current service cost | $ 63 | $ 53 | $ 9 | $ 7 | $ 72 | $ 60 |
Other components of net periodic benefit (recovery) cost: | ||||||
Interest cost on benefit obligation | 350 | 365 | 18 | 16 | 368 | 381 |
Expected return on plan assets | (668) | (661) | — | — | (668) | (661) |
Recognized net actuarial loss | 30 | 24 | — | — | 30 | 24 |
Amortization of prior service costs | 5 | 1 | — | 1 | 5 | 2 |
Total other components of net periodic benefit (recovery) cost | (283) | (271) | 18 | 17 | (265) | (254) |
Net periodic benefit (recovery) cost | $ (220) | $ (218) | $ 27 | $ 24 | $ (193) | $ (194) |
13 Stock-based compensation
As at September 30, 2024, the Company had several stock-based compensation plans including a stock options plan, various cash-settled liability plans, and an employee share purchase plan. These plans resulted in an expense for the three and nine months ended September 30, 2024 of
Stock options plan
In the nine months ended September 30, 2024, under the Company's stock options plan, the Company issued 817,609 options at the weighted-average price of
Under the fair value method, the fair value of the stock options at grant date was approximately
For the nine months | |
Expected option life (years)(1) | 4.75 |
Risk-free interest rate(2) | 3.88 % |
Expected share price volatility(3) | 28.38 % |
Expected annual dividends per share(4) | |
Expected forfeiture rate(5) | 3.12 % |
Weighted-average grant date fair value per option granted during the period |
(1) | Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour or, when available, specific expectations regarding future exercise behaviour were used to estimate the expected life of the option. |
(2) | Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the option. |
(3) | Based on the historical volatility of the Company's stock price over a period commensurate with the expected term of the option. |
(4) | Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. |
(5) | The Company estimates forfeitures based on past experience. This rate is monitored on a periodic basis. |
Performance share unit plans
During the nine months ended September 30, 2024, the Company issued 568,159 Performance Share Units ("PSUs") with a grant date fair value of
The performance period for 568,159 PSUs and all PDSUs granted in the nine months ended September 30, 2024 is January 1, 2024 to December 31, 2026 and the performance factors are Free Cash Flow ("FCF"), annualized earnings before interest, tax, depreciation, and amortization ("EBITDA"), and Total Shareholder Return ("TSR") compared to the S&P/TSX 60 Index, TSR compared to the S&P 500 Industrials Index, and TSR compared to Class 1 Railroads.
The performance period for all of the 431,430 PSUs and 12,694 PDSUs granted in 2021 was January 1, 2021 to December 31, 2023, and the performance factors were Return on Invested Capital ("ROIC"), TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I Railways. The resulting payout was
14 Contingencies
Litigation
In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage 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, 2024 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 business, financial position, results of operations, or liquidity. However, an unexpected adverse resolution of one or more of these legal actions could have a material adverse effect on the Company's business, financial position, results of operations, or liquidity in a particular quarter or fiscal year.
Legal proceedings related to Lac-Mégantic rail accident
On July 6, 2013, a train carrying petroleum crude oil operated by Montréal
Following the derailment, MMAC sought court protection in
A number of legal proceedings, set out below, were commenced in
(1)
(2) The AGQ sued the Company in the
(3) A class action in the
(4) Eight subrogated insurers sued the Company in the
On December 11, 2017, the AGQ Action, the Class Action and the Promutuel Action were consolidated. The joint liability trial of these consolidated claims commenced on September 21, 2021 with oral arguments ending on June 15, 2022. The
(5) Forty-eight plaintiffs (all individual claims joined in one action) sued the Company, MMAC, and Harding in the
(6) The MMAR
(7) The class and mass tort action commenced against the Company in June 2015 in
(8) The trustee for the wrongful death trust commenced Carmack Amendment claims against the Company in North Dakota Federal Court, seeking to recover approximately
At this stage of the proceedings, any potential responsibility and the quantum of potential losses cannot be determined. Nevertheless, the Company denies liability and is vigorously defending these proceedings.
Court decision related to Remington Development Corporation legal claim
On October 20, 2022, the Court of King's Bench of
2014 Tax Assessment
On April 13, 2022, the SAT delivered an audit assessment of CPKCM's 2014 tax returns (the "2014 Assessment"). As at September 30, 2024, the 2014 Assessment was Ps.6,247 million (
On October 10, 2022, CPKCM submitted a petition of annulment lawsuit before the Federal Administrative Court, challenging the 2014 Assessment, its notification, and the dismissal of the Administrative Appeal Resolution. On January 5, 2023, the Administrative Court granted a definitive injunction against the enforcement and collection of the 2014 Tax Assessment.
On April 24, 2024, the Administrative Court resolved the annulment lawsuit confirming the Administrative Appeal Resolution and the 2014 Assessment (the "Administrative Court Resolution"). On June 21, 2024, CPKCM challenged the Administrative Court Resolution by submitting an Amparo petition (Demanda de Amparo) before the Collegiate Circuit Court (Tribunal Colegiado de Circuito). CPKCM expects to prevail based on the technical merits of its case.
On August 15, 2024, the Administrative Court informed CPKCM that the SAT submitted two motions (recurso de reclamación and recurso de queja) claiming that the Administrative Court did not cite the applicable legal provisions when granting the injunction against any tax collection action of the 2014 Tax Assessment. Because all the applicable requirements to grant the injunction have been satisfied by CPKCM and the surety bond has been approved and accepted by the SAT, it is not expected that the outcome of these motions will result in the enforcement and collection of the 2014 Assessment until the Amparo petition is resolved by the Collegiate Circuit Court.
Environmental liabilities
Environmental remediation accruals, recorded on an undiscounted basis unless a reliable, determinable estimate as to an amount and timing of costs can be established, cover site-specific remediation programs.
The accruals for environmental remediation represent the Company's best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recorded accruals include the Company's best estimate of all probable costs, the Company's total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, and as environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable.
The expense included in "Purchased services and other" in the Company's Interim Consolidated Statements of Income for the three and nine months ended September 30, 2024 was
Summary of Rail Data(1)
Third Quarter | Year-to-date | ||||||||
(in millions, except per share data) | 2024 | 2023 | Total | % | 2024 | 2023 | Total | % | |
Revenues | |||||||||
Freight | $ 3,461 | $ 3,266 | $ 195 | 6 | $ 10,422 | $ 8,584 | $ 1,838 | 21 | |
Non-freight | 88 | 73 | 15 | 21 | 250 | 195 | 55 | 28 | |
Total revenues | 3,549 | 3,339 | 210 | 6 | 10,672 | 8,779 | 1,893 | 22 | |
Operating expenses | |||||||||
Compensation and benefits | 644 | 598 | 46 | 8 | 1,946 | 1,695 | 251 | 15 | |
Fuel | 419 | 430 | (11) | (3) | 1,343 | 1,153 | 190 | 16 | |
Materials | 99 | 90 | 9 | 10 | 290 | 260 | 30 | 12 | |
Equipment rents | 89 | 91 | (2) | (2) | 253 | 201 | 52 | 26 | |
Depreciation and amortization | 472 | 451 | 21 | 5 | 1,412 | 1,086 | 326 | 30 | |
Purchased services and other | 623 | 506 | 117 | 23 | 1,809 | 1,438 | 371 | 26 | |
Total operating expenses | 2,346 | 2,166 | 180 | 8 | 7,053 | 5,833 | 1,220 | 21 | |
Operating income | 1,203 | 1,173 | 30 | 3 | 3,619 | 2,946 | 673 | 23 | |
Less: | |||||||||
Equity earnings of Kansas City Southern | — | — | — | — | — | (230) | 230 | (100) | |
Other expense (income) | 1 | 13 | (12) | (92) | (41) | 36 | (77) | (214) | |
Other components of net periodic benefit recovery | (89) | (85) | (4) | 5 | (265) | (254) | (11) | 4 | |
Net interest expense | 192 | 207 | (15) | (7) | 598 | 565 | 33 | 6 | |
Remeasurement loss of Kansas City Southern | — | — | — | — | — | 7,175 | (7,175) | (100) | |
Income (loss) before income tax expense (recovery) | 1,099 | 1,038 | 61 | 6 | 3,327 | (4,346) | 7,673 | (177) | |
Less: | |||||||||
Current income tax expense | 257 | 255 | 2 | 1 | 773 | 674 | 99 | 15 | |
Deferred income tax expense (recovery) | 5 | 3 | 2 | 67 | 40 | (7,925) | 7,965 | (101) | |
Income tax expense (recovery) | 262 | 258 | 4 | 2 | 813 | (7,251) | 8,064 | (111) | |
Net income | $ 837 | $ 780 | $ 57 | 7 | $ 2,905 | $ (391) | (13) | ||
Less: Net (loss) income attributable to non-controlling interest | — | — | — | — | (3) | 1 | (4) | (400) | |
Net income attributable to controlling shareholders | $ 837 | $ 780 | $ 57 | 7 | $ 2,904 | $ (387) | (13) | ||
Operating ratio (%) | 66.1 | 64.9 | 1.2 | 120 bps | 66.1 | 66.4 | (0.3) | (30) bps | |
Basic earnings per share | $ 0.90 | $ 0.84 | $ 0.06 | 7 | $ 2.70 | $ 3.12 | $ (0.42) | (13) | |
Diluted earnings per share | $ 0.90 | $ 0.84 | $ 0.06 | 7 | $ 2.69 | $ 3.11 | $ (0.42) | (14) | |
Shares Outstanding | |||||||||
Weighted average number of basic shares outstanding (millions) | 933.2 | 931.5 | 1.7 | — | 932.8 | 931.1 | 1.7 | — | |
Weighted average number of diluted shares outstanding (millions) | 935.3 | 933.9 | 1.4 | — | 934.8 | 933.7 | 1.1 | — | |
Foreign Exchange | |||||||||
Average foreign exchange rate (U.S.$/Canadian$) | 0.74 | 0.75 | (0.01) | (1) | 0.74 | 0.74 | — | — | |
Average foreign exchange rate (Canadian$/U.S.$) | 1.36 | 1.34 | 0.02 | 1 | 1.36 | 1.35 | 0.01 | 1 | |
Average foreign exchange rate (Mexican peso/Canadian$) | 13.88 | 12.72 | 1.16 | 9 | 13.00 | 13.20 | (0.20) | (2) | |
Average foreign exchange rate (Canadian$/Mexican peso) | 0.0721 | 0.0786 | (0.0065) | (8) | 0.0769 | 0.0758 | 0.0011 | 1 | |
(1) | The results of Kansas City Southern ("KCS") are included on a consolidated basis from April 14, 2023, the date the Company acquired control. From December 14, 2021 to April 13, 2023, the Company recorded its interest in KCS under the equity method of accounting. |
Summary of Rail Data (Continued)(1)
Third Quarter | Year-to-date | ||||||||
Commodity Data | 2024 | 2023 | Total | % | 2024 | 2023 | Total | % | |
Freight Revenues (millions) | |||||||||
- Grain | $ 668 | $ 600 | $ 68 | 11 | $ 2,063 | $ 1,652 | $ 411 | 25 | |
- Coal | 248 | 229 | 19 | 8 | 693 | 603 | 90 | 15 | |
- Potash | 144 | 133 | 11 | 8 | 461 | 409 | 52 | 13 | |
- Fertilizers and sulphur | 91 | 91 | — | — | 298 | 276 | 22 | 8 | |
- Forest products | 198 | 199 | (1) | (1) | 603 | 489 | 114 | 23 | |
- Energy, chemicals and plastics | 712 | 643 | 69 | 11 | 2,109 | 1,584 | 525 | 33 | |
- Metals, minerals and consumer products | 443 | 455 | (12) | (3) | 1,347 | 1,128 | 219 | 19 | |
- Automotive | 333 | 266 | 67 | 25 | 956 | 648 | 308 | 48 | |
- Intermodal | 624 | 650 | (26) | (4) | 1,892 | 1,795 | 97 | 5 | |
Total Freight Revenues | $ 3,461 | $ 3,266 | $ 195 | 6 | $ 8,584 | $ 1,838 | 21 | ||
Freight Revenue per Revenue Ton-Mile ("RTM") (cents) | |||||||||
- Grain | 5.06 | 4.88 | 0.18 | 4 | 5.03 | 4.97 | 0.06 | 1 | |
- Coal | 4.17 | 3.77 | 0.40 | 11 | 4.08 | 3.84 | 0.24 | 6 | |
- Potash | 3.21 | 3.56 | (0.35) | (10) | 3.40 | 3.34 | 0.06 | 2 | |
- Fertilizers and sulphur | 7.80 | 7.91 | (0.11) | (1) | 7.76 | 7.67 | 0.09 | 1 | |
- Forest products | 8.90 | 8.82 | 0.08 | 1 | 8.98 | 8.48 | 0.50 | 6 | |
- Energy, chemicals and plastics | 7.46 | 7.14 | 0.32 | 4 | 7.29 | 6.82 | 0.47 | 7 | |
- Metals, minerals and consumer products | 9.11 | 8.62 | 0.49 | 6 | 9.26 | 8.45 | 0.81 | 10 | |
- Automotive | 23.94 | 25.85 | (1.91) | (7) | 25.88 | 25.85 | 0.03 | — | |
- Intermodal | 7.17 | 7.65 | (0.48) | (6) | 7.21 | 7.29 | (0.08) | (1) | |
Total Freight Revenue per RTM | 6.72 | 6.62 | 0.10 | 2 | 6.70 | 6.40 | 0.30 | 5 | |
Freight Revenue per Carload | |||||||||
- Grain | $ 5,260 | $ 4,710 | $ 550 | 12 | $ 5,314 | $ 4,731 | $ 583 | 12 | |
- Coal | 2,038 | 1,783 | 255 | 14 | 2,045 | 1,911 | 134 | 7 | |
- Potash | 3,547 | 3,811 | (264) | (7) | 3,630 | 3,665 | (35) | (1) | |
- Fertilizers and sulphur | 5,909 | 5,909 | — | — | 6,008 | 5,798 | 210 | 4 | |
- Forest products | 5,841 | 5,378 | 463 | 9 | 5,776 | 5,464 | 312 | 6 | |
- Energy, chemicals and plastics | 4,890 | 4,626 | 264 | 6 | 4,876 | 4,636 | 240 | 5 | |
- Metals, minerals and consumer products | 3,464 | 3,403 | 61 | 2 | 3,434 | 3,473 | (39) | (1) | |
- Automotive | 5,228 | 4,547 | 681 | 15 | 5,154 | 4,519 | 635 | 14 | |
- Intermodal | 1,499 | 1,429 | 70 | 5 | 1,536 | 1,554 | (18) | (1) | |
Total Freight Revenue per Carload | $ 3,169 | $ 2,892 | $ 277 | 10 | $ 3,207 | $ 2,982 | $ 225 | 8 | |
(1) | KCS's freight revenues are included on a consolidated basis from April 14, 2023, the date the Company acquired control of KCS. From December 14, 2021 to April 13, 2023, the Company recorded its interest in KCS under the equity method of accounting, therefore, no KCS data was included in those periods. |
Summary of Rail Data (Continued)(1)
Third Quarter | Year-to-date | ||||||||
Commodity Data | 2024 | 2023 | Total | % | 2024 | 2023 | Total | % | |
Millions of RTM | |||||||||
- Grain | 13,193 | 12,284 | 909 | 7 | 41,003 | 33,245 | 7,758 | 23 | |
- Coal | 5,951 | 6,081 | (130) | (2) | 16,997 | 15,700 | 1,297 | 8 | |
- Potash | 4,484 | 3,736 | 748 | 20 | 13,559 | 12,236 | 1,323 | 11 | |
- Fertilizers and sulphur | 1,167 | 1,151 | 16 | 1 | 3,838 | 3,598 | 240 | 7 | |
- Forest products | 2,224 | 2,256 | (32) | (1) | 6,712 | 5,768 | 944 | 16 | |
- Energy, chemicals and plastics | 9,548 | 9,006 | 542 | 6 | 28,911 | 23,218 | 5,693 | 25 | |
- Metals, minerals and consumer products | 4,865 | 5,279 | (414) | (8) | 14,540 | 13,342 | 1,198 | 9 | |
- Automotive | 1,391 | 1,029 | 362 | 35 | 3,694 | 2,507 | 1,187 | 47 | |
- Intermodal | 8,697 | 8,498 | 199 | 2 | 26,234 | 24,615 | 1,619 | 7 | |
Total RTMs | 51,520 | 49,320 | 2,200 | 4 | 155,488 | 134,229 | 21,259 | 16 | |
Carloads (thousands) | |||||||||
- Grain | 127.0 | 127.4 | (0.4) | — | 388.2 | 349.2 | 39.0 | 11 | |
- Coal | 121.7 | 128.4 | (6.7) | (5) | 338.8 | 315.6 | 23.2 | 7 | |
- Potash | 40.6 | 34.9 | 5.7 | 16 | 127.0 | 111.6 | 15.4 | 14 | |
- Fertilizers and sulphur | 15.4 | 15.4 | — | — | 49.6 | 47.6 | 2.0 | 4 | |
- Forest products | 33.9 | 37.0 | (3.1) | (8) | 104.4 | 89.5 | 14.9 | 17 | |
- Energy, chemicals and plastics | 145.6 | 139.0 | 6.6 | 5 | 432.5 | 341.7 | 90.8 | 27 | |
- Metals, minerals and consumer products | 127.9 | 133.7 | (5.8) | (4) | 392.2 | 324.8 | 67.4 | 21 | |
- Automotive | 63.7 | 58.5 | 5.2 | 9 | 185.5 | 143.4 | 42.1 | 29 | |
- Intermodal | 416.3 | 455.0 | (38.7) | (9) | 1,231.9 | 1,155.1 | 76.8 | 7 | |
Total Carloads | 1,092.1 | 1,129.3 | (37.2) | (3) | 3,250.1 | 2,878.5 | 371.6 | 13 | |
(1) | Includes KCS information for the period from April 14, 2023 onwards. From December 14, 2021 to April 13, 2023, the Company recorded its interest in KCS under the equity method of accounting, therefore, no KCS data was included in those periods. |
Summary of Rail Data (Continued)(1)
Third Quarter | Year-to-date | ||||||||
2024 | 2023 | Total | % | 2024 | 2023 | Total | % | ||
Operations Performance | |||||||||
Gross ton-miles ("GTMs") (millions) | 94,869 | 90,987 | 3,882 | 4 | 287,257 | 247,086 | 40,171 | 16 | |
Train miles (thousands) | 11,257 | 10,979 | 278 | 3 | 34,776 | 28,813 | 5,963 | 21 | |
Average train weight - excluding local traffic (tons) | 9,155 | 8,974 | 181 | 2 | 8,955 | 9,370 | (415) | (4) | |
Average train length - excluding local traffic (feet) | 7,821 | 7,737 | 84 | 1 | 7,629 | 7,954 | (325) | (4) | |
Average terminal dwell (hours) | 10.3 | 11.2 | (0.9) | (8) | 9.8 | 10.8 | (1.0) | (9) | |
Average train speed (miles per hour, or "mph")(2) | 18.8 | 17.7 | 1.1 | 6 | 19.1 | 19.3 | (0.2) | (1) | |
Locomotive productivity (GTMs / operating horsepower)(3) | 167 | 155 | 12 | 8 | 165 | 173 | (8) | (5) | |
Fuel efficiency(4) | 1.016 | 1.036 | (0.020) | (2) | 1.036 | 1.019 | 0.017 | 2 | |
96.4 | 94.2 | 2.2 | 2 | 297.7 | 251.7 | 46.0 | 18 | ||
Average fuel price ( | 3.19 | 3.41 | (0.22) | (6) | 3.32 | 3.45 | (0.13) | (4) | |
Total Employees and Workforce | |||||||||
Total employees (average)(6) | 20,164 | 20,310 | (146) | (1) | 20,201 | 17,608 | 2,593 | 15 | |
Total employees (end of period)(6) | 20,224 | 20,243 | (19) | — | 20,224 | 20,243 | (19) | — | |
Workforce (end of period)(7) | 20,341 | 20,340 | 1 | — | 20,341 | 20,340 | 1 | — | |
Safety Indicators(8) | |||||||||
FRA personal injuries per 200,000 employee-hours | 0.85 | 1.02 | (0.17) | (17) | 0.94 | 1.18 | (0.24) | (20) | |
FRA train accidents per million train-miles | 1.27 | 1.38 | (0.11) | (8) | 0.98 | 1.05 | (0.07) | (7) | |
(1) | Includes KCS information for the period from April 14, 2023 onwards. From December 14, 2021 to April 13, 2023, the Company recorded its interest in KCS under the equity method of accounting, therefore, no KCS data was included in those periods. |
(2) | Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated by dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customers or foreign railroads and excludes the time and distance travelled by: i) trains used in or around CPKC's yards; ii) passenger trains; and iii) trains used for repairing track. An increase in average train speed indicates improved on-time performance resulting in improved asset utilization. |
(3) | Locomotive productivity is defined as the daily average GTMs divided by daily average operating horsepower. Operating horsepower excludes units offline, tied up or in storage, or in use on other railways, and includes foreign units. |
(4) | Fuel efficiency is defined as |
(5) | Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. |
(6) | An employee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with CPKC. CPKC monitors employment levels in order to efficiently meet service and strategic requirements. The number of employees is a key driver to total compensation and benefits costs. |
(7) | Workforce is defined as employees plus contractors and consultants |
(8) | Federal Railroad Administration ("FRA") personal injuries per 200,000 employee-hours and FRA train accidents per million train-miles for the three and nine months ended September 30, 2023 have been restated to reflect new information available within specified periods stipulated by the FRA but that exceed the Company's financial reporting timeline. |
Non-GAAP Measures
The Company presents Non-GAAP measures, including Core adjusted combined operating ratio and Core adjusted combined diluted earnings per share, to provide an additional basis for evaluating underlying earnings trends in the Company's current period's financial results that can be compared with the results of operations in prior periods. Management believes these Non-GAAP measures facilitate a multi-period assessment of long-term profitability.
These Non-GAAP measures have no standardized meaning and are not defined by accounting principles generally accepted in
Non-GAAP Performance Measures
On April 14, 2023 (the "Control Date"), Canadian Pacific Railway Limited obtained control of KCS and CPKC began consolidating KCS, which had been accounted for under the equity method of accounting between December 14, 2021 and April 13, 2023. On the Control Date, CPKC's previously-held interest in KCS was remeasured to its Control Date fair value. CPKC presents Core adjusted combined measures to provide a comparison to prior period financial information as adjusted to exclude certain significant items and KCS purchase accounting. The most directly comparable GAAP measures to certain Non-GAAP measures already include KCS's net income attributable to shareholders as a result of applying the equity method of accounting following the acquisition of shares of KCS on December 14, 2021. For example, CPKC's nine months ended September 30, 2023 diluted earnings per share, which included equity earnings of KCS for the period January 1 through April 13, 2023, is used to reconcile to Core adjusted combined diluted earnings per share. Conversely, the most directly comparable GAAP measure to certain other Non-GAAP measures does not include KCS's equity earnings. For example, the operating ratio, which is used to reconcile to Core adjusted combined operating ratio, did not include KCS's operating ratio for the period January 1 through April 13, 2023, as equity income was recognized within non-operating earnings. These measures are calculated by (1) adding KCS historical GAAP results and giving effect to transaction accounting adjustments in a consistent manner with Regulation S-X Article 11 ("Article 11"), where applicable, and (2) adjusting for KCS purchase accounting and significant items that management believes affect the comparability between periods.
Management believes these Non-GAAP measures provide meaningful supplemental information about our operating results because they exclude certain significant items that are not considered indicative of future financial trends either by nature or amount or provide improved comparability to past performance. As a result, these items are excluded for management's assessment of operational performance, allocation of resources, and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, acquisition-related costs, adjustments to provisions and settlements of Mexican taxes, KCS's gain on unwinding of interest rate hedges (net of CPKC's associated purchase accounting basis differences and tax), as recognized within "Equity earnings of Kansas City Southern" in the Company's Interim Consolidated Statements of Income, loss on derecognition of CPKC's previously held equity method investment in KCS, discrete tax items, changes in the outside basis tax difference between the carrying amount of CPKC's equity investment in KCS and its tax basis of this investment, a deferred income tax recovery related to the elimination of the deferred income tax liability on the outside basis difference of the investment, changes in income tax rates, changes to an uncertain tax item, and certain items outside the control of management. Acquisition-related costs include legal, consulting, integration costs including third-party services and system migration, debt exchange transaction costs, community investments, fair value gain or loss on foreign exchange ("FX") forward contracts and interest rate hedges, FX gain on
In addition, Core adjusted combined operating ratio and Core adjusted combined diluted earnings per share exclude KCS purchase accounting. KCS purchase accounting represents the amortization of basis differences being the incremental depreciation and amortization in relation to fair value adjustments to properties and intangible assets, incremental amortization in relation to fair value adjustments to KCS's investments, amortization of the change in fair value of debt of KCS assumed on the Control Date, and depreciation and amortization of fair value adjustments that are attributable to the non-controlling interest, as recognized within "Depreciation and amortization", "Other expense (income)", "Net interest expense", and "Net (loss) income attributable to non-controlling interest", respectively, in the Company's Interim Consolidated Statements of Income. During the periods that KCS was equity accounted for, from December 14, 2021 to April 13, 2023, KCS purchase accounting represents the amortization of basis differences, being the difference in value between the consideration paid to acquire KCS and the underlying carrying value of the net assets of KCS immediately prior to its acquisition by the Company, net of tax, as recognized within "Equity earnings of Kansas City Southern" in the Company's Interim Consolidated Statements of Income. All assets subject to KCS purchase accounting contribute to income generation and will continue to amortize over their estimated useful lives. Excluding KCS purchase accounting from GAAP results provides financial statement users with additional transparency by isolating the impact of KCS purchase accounting.
Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures
The following tables reconcile the most directly comparable measures presented in accordance with GAAP to the Non-GAAP measures:
Core Adjusted Combined Diluted Earnings per Share
Core adjusted combined diluted earnings per share is calculated using Net income attributable to controlling shareholders reported on a GAAP basis adjusted for significant items less KCS purchase accounting, divided by the weighted-average diluted number of Common Shares outstanding during the period as determined in accordance with GAAP. Between December 14, 2021 and April 13, 2023, KCS was accounted for in CPKC's diluted earnings per share reported on a GAAP basis using the equity method of accounting and on a consolidated basis beginning April 14, 2023. As the equity method of accounting and consolidation both provide the same diluted earnings per share for CPKC, no adjustment is required to pre-control diluted earnings per share to be comparable on a consolidated basis.
Significant items for the first nine months of 2024 and the twelve months of 2023 are as follows:
In the first nine months of 2024, there were three significant items included in Net income attributable to controlling shareholders as reported on a GAAP basis as follows:
- in the second quarter, a deferred income tax recovery of
$3 million Arkansas state corporate income tax rate, that had minimal impact on Diluted EPS; - during the first nine months, adjustments to provisions and settlements of Mexican taxes of
$3 million $4 million $1 million - in the third quarter, adjustments to provisions and settlements of Mexican taxes of
$7 million $6 million $1 million 1 cent ; and - in the first quarter, adjustments to provisions and settlements of Mexican taxes of
$10 million $10 million 1 cent ; and
- in the third quarter, adjustments to provisions and settlements of Mexican taxes of
- during the first nine months, acquisition-related costs of
$90 million $65 million $25 million $17 million $5 million $68 million 7 cents as follows:- in the third quarter, acquisition-related costs of
$36 million $26 million $10 million $11 million $1 million $24 million 3 cents ; - in the second quarter, acquisition-related costs of
$28 million $19 million $9 million $2 million $2 million $24 million 2 cents ; and - in the first quarter, acquisition-related costs of
$26 million $20 million $6 million $4 million $2 million $20 million 2 cents .
- in the third quarter, acquisition-related costs of
In 2023, there were five significant items included in Net income attributable to controlling shareholders as reported on a GAAP basis as follows:
- in the second quarter, a remeasurement loss of KCS of
$7,175 million $7.68 - during the course of the year, adjustments to provisions and settlements of Mexican taxes of
$16 million 2 cents as follows:- in the fourth quarter, adjustments to provisions and settlements of Mexican taxes of
$1 million - in the third quarter, adjustments to provisions and settlements of Mexican taxes of
$15 million $9 million $6 million $3 million 2 cents ;
- in the fourth quarter, adjustments to provisions and settlements of Mexican taxes of
- during the course of the year, a deferred income tax recovery of
$72 million 7 cents as follows:- in the fourth quarter, a deferred income tax recovery of
$7 million 1 cent ; - in the third quarter, a deferred income tax recovery of
$14 million Iowa andArkansas state corporate income tax rates, that favourably impacted Diluted EPS by2 cents ; and - in the second quarter, a deferred income tax recovery of
$51 million 5 cents ;
- in the fourth quarter, a deferred income tax recovery of
- during the course of the year, deferred income tax recoveries of
$7,855 million $8.42 - in the second quarter, a deferred income tax recovery of
$7,832 million $8.39 - in the first quarter, a deferred income tax recovery of
$23 million 3 cents ; and
- in the second quarter, a deferred income tax recovery of
- during the course of the year, acquisition-related costs of
$201 million $164 million $37 million $71 million $2 million $111 million $6 million $11 million 17 cents as follows:- in the fourth quarter, acquisition-related costs of
$32 million $24 million $8 million $7 million $1 million $24 million 2 cents ; - in the third quarter, acquisition-related costs of
$24 million $18 million $6 million $1 million $1 million $22 million 2 cents ; - in the second quarter, acquisition-related costs of
$120 million $101 million $19 million $63 million $53 million $3 million $1 million 11 cents ; and - in the first quarter, acquisition-related costs of
$25 million $21 million $4 million $12 million $3 million $10 million 2 cents .
- in the fourth quarter, acquisition-related costs of
KCS purchase accounting included in Net income attributable to controlling shareholders as reported on a GAAP basis was as follows:
2024:
- during the first nine months, KCS purchase accounting of
$259 million $188 million $71 million $246 million $2 million $14 million $2 million $5 million 20 cents as follows:- in the third quarter, KCS purchase accounting of
$89 million $65 million $24 million $85 million $4 million $1 million $1 million 7 cents ; - in the second quarter, KCS purchase accounting of
$86 million $62 million $24 million $82 million $1 million $5 million $2 million 6 cents ; and - in the first quarter, KCS purchase accounting of
$84 million $61 million $23 million $79 million $1 million $5 million $1 million $2 million 7 cents .
- in the third quarter, KCS purchase accounting of
2023:
- during the course of the year, KCS purchase accounting of
$297 million $228 million $69 million $234 million $1 million $17 million $2 million $48 million $5 million 25 cents as follows:- in the fourth quarter, KCS purchase accounting of
$87 million $62 million $25 million $85 million $1 million $6 million $5 million 7 cents ; - in the third quarter, KCS purchase accounting of
$87 million $63 million $24 million $81 million $5 million $1 million 7 cents ; - in the second quarter, KCS purchase accounting of
$81 million $61 million $20 million $68 million $6 million $1 million $6 million 6 cents ; and - in the first quarter, KCS purchase accounting of
$42 million 5 cents .
- in the fourth quarter, KCS purchase accounting of
For the three months | For the nine months | For the year ended | |||
2024 | 2023 | 2024 | 2023 | 2023 | |
CPKC diluted earnings per share as reported | $ 0.90 | $ 0.84 | $ 2.69 | $ 3.11 | $ 4.21 |
Less: | |||||
Significant items (pre-tax): | |||||
Remeasurement loss of KCS | — | — | — | (7.68) | (7.68) |
Adjustments to provisions and settlements of Mexican taxes | 0.01 | — | — | — | — |
Acquisition-related costs | (0.04) | (0.03) | (0.10) | (0.19) | (0.21) |
KCS purchase accounting | (0.10) | (0.09) | (0.28) | (0.23) | (0.32) |
Add: | |||||
Tax effect of adjustments(1) | (0.04) | (0.04) | (0.11) | (0.09) | (0.11) |
Adjustments to provisions and settlements of Mexican taxes | — | 0.02 | — | 0.02 | 0.02 |
Income tax rate changes | — | (0.02) | — | (0.06) | (0.07) |
Deferred income tax recovery on the outside basis difference of the investment in KCS | — | — | — | (8.42) | (8.42) |
Core adjusted combined diluted earnings per share | $ 0.99 | $ 0.92 | $ 2.96 | $ 2.66 | $ 3.84 |
(1) | The tax effect of adjustments was calculated as the pre-tax effect of the significant items and KCS purchase accounting listed above multiplied by the applicable tax rate for the above items of |
Core Adjusted Combined Operating Ratio
Core adjusted combined operating ratio is calculated from reported GAAP revenue and operating expenses adjusted for (1) KCS operating income prior to the Control Date and giving effect to transaction accounting adjustments in a consistent manner with Article 11, where applicable, (2) significant items (acquisition-related costs and adjustments to provisions and settlement of Mexican taxes) that are reported within Operating income, and (3) KCS purchase accounting recognized in "Depreciation and amortization" and "Purchased services and other".
This combined measure does not purport to represent what the actual consolidated results of operations would have been had the Company obtained control of KCS and consolidation actually occurred on January 1, 2022, nor is it indicative of future results. This information is based upon assumptions that CPKC believes reasonably reflect the impact to CPKC's historical financial information, on a supplemental basis, of obtaining control of KCS had it occurred as of January 1, 2022. This information does not include anticipated costs related to integration activities, cost savings or synergies that may be achieved by the combined company.
Significant items included in operating ratio on a combined basis were as follows:
2024:
- during the first nine months, adjustments to provisions and settlements of Mexican taxes of
$3 million 0.1% as follows:- in the third quarter, adjustments to provisions and settlements of Mexican taxes of
$7 million 0.2% ; and - in the first quarter, adjustments to provisions and settlements of Mexican taxes of
$10 million 0.3% ; and
- in the third quarter, adjustments to provisions and settlements of Mexican taxes of
- during the first nine months, acquisition-related costs were
$90 million $17 million $5 million $68 million 0.8% as follows:- in the third quarter, acquisition-related costs of
$36 million $11 million $1 million $24 million 1.0% ; - in the second quarter, acquisition-related costs of
$28 million $2 million $2 million $24 million 0.7% ; and - in the first quarter, acquisition-related costs of
$26 million $4 million $2 million $20 million 0.8% .
- in the third quarter, acquisition-related costs of
2023:
- during the first nine months, acquisition-related costs were
$165 million $75 million $1 million $89 million 1.6% as follows:- in the third quarter, acquisition-related costs of
$24 million $1 million $1 million $22 million 0.8% ; - in the second quarter, acquisition-related costs of
$116 million $63 million $53 million 3.5% ; and - in the first quarter, acquisition-related costs of
$25 million $11 million $14 million 0.7% .
- in the third quarter, acquisition-related costs of
KCS purchase accounting included in operating ratio on a combined basis was as follows:
2024:
- during the first nine months, KCS purchase accounting of
$248 million $246 million $2 million 2.3% as follows:- in the third quarter, KCS purchase accounting of
$85 million 2.4% ; - in the second quarter, KCS purchase accounting of
$83 million $82 million $1 million 2.3% ; and - in the first quarter, KCS purchase accounting of
$80 million $79 million $1 million 2.3% .
- in the third quarter, KCS purchase accounting of
2023:
- during the first nine months, KCS purchase accounting of
$241 million 2.4% as follows:- in the third quarter, KCS purchase accounting of
$81 million 2.4% ; - in the second quarter, KCS purchase accounting of
$80 million 2.4% ; and - in the first quarter, KCS purchase accounting of
$80 million 2.3% .
- in the third quarter, KCS purchase accounting of
For the three months ended | For the nine months ended | |||
2024 | 2023 | 2024 | 2023 | |
CPKC operating ratio as reported | 66.1 % | 64.9 % | 66.1 % | 66.4 % |
Add: | ||||
KCS operating income as reported prior to Control Date(1) | — % | — % | — % | (0.2) % |
Pro forma Article 11 transaction accounting adjustments(2) | — % | — % | — % | 1.1 % |
66.1 % | 64.9 % | 66.1 % | 67.3 % | |
Less: | ||||
Adjustments to provisions and settlements of Mexican taxes | (0.2) % | — % | 0.1 % | — % |
Acquisition-related costs | 1.0 % | 0.8 % | 0.8 % | 1.6 % |
KCS purchase accounting in Operating expenses | 2.4 % | 2.4 % | 2.3 % | 2.4 % |
Core adjusted combined operating ratio | 62.9 % | 61.7 % | 62.9 % | 63.3 % |
(1) | KCS results were translated into Canadian dollars at the Bank of |
(2) | Pro forma Article 11 transaction accounting adjustments for January 1 through April 13, 2023 represent adjustments made in a manner consistent with Article 11. For January 1 through April 13, 2023 in the nine months ended September 30, 2023, depreciation and amortization of differences between the historical carrying values and the fair values of KCS's tangible and intangible assets and investments prior to the Control Date that unfavourably impacted operating ratio by |
For more information about these pro forma transaction accounting adjustments for the three months ended March 31, 2023, please see Exhibit 99.1 "Selected Unaudited Combined Summary of Historical Financial Data" of CPKC's Current Report on Form 8-K furnished with the Securities and Exchange Commission on May 15, 2023. |
Contacts: Media, mediarelations@cpkcr.com; Investment Community, Chris de Bruyn, 403-319-3591, investor@cpkcr.com
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SOURCE CPKC
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