CPKC's strong second-quarter results demonstrate advantages of North American network; carrying momentum into second half of 2024
"Our excellent second quarter results showcase how the advantages of this unrivaled North American network are being realized," said
Second-quarter 2024 results1
- Reported operating ratio (OR) decreased by 550 basis points to 64.8 percent from 70.3 percent in Q2 2023
- Core adjusted combined OR2 decreased 280 basis points to 61.8 percent from 64.6 percent in Q2 2023
- Reported diluted EPS decreased to
$0.97 from$1.42 in Q2 2023 - Core adjusted combined diluted EPS2 increased 27 percent to
$1.05 from$0.83 in Q2 2023 - Volumes, as measured in Revenue Ton-Miles3 (RTMs), increased six percent on a combined basis
-
Federal Railroad Administration (FRA)-reportable train accident frequency decreased to 0.77 from 0.80 in Q2 2023 on a combined basis4 - FRA-reportable personal injury frequency decreased to 0.81 from 1.31 in Q2 2023 on a combined basis4
"Looking ahead, we are confident in our strategy and our team's ability to continue this momentum. We are well on track to deliver on our guidance for the year, leveraging our strong operational foundation to deliver sustainable growth and value for our stakeholders," Creel added. "Together, we are moving forward with a clear vision of success for all stakeholders and an industry leading team in place to execute it."
1 |
The results of |
2 |
These measures have no standardized meanings prescribed by accounting principles generally accepted in |
3 |
These operating statistics represent combined operating information to illustrate the estimated effects of the acquisition for the second quarter ended |
4 |
FRA statistics for Q2 2023 reflect Canadian Pacific (CP) and KCS results on a combined basis. The second-quarter 2023 FRA-reportable train accident frequency and FRA-reportable personal injury frequency on a combined basis were previously reported as 0.79 and 1.25 respectively. These restatements reflect new information available within a specified period as stipulated by the FRA but that exceeds CPKC's financial reporting timeline. |
Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at
Conference Call Access
International: 203-518-9708
*Conference ID: CPKCQ224
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 second-quarter conference call will be available by phone through
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.
About CPKC
With its global headquarters in
FINANCIAL STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
For the three months |
For the six months |
||
(in millions of Canadian dollars, except share and per share data) |
2024 |
2023 |
2024 |
2023 |
Revenues (Note 3) |
|
|
|
|
Freight |
$ 3,534 |
$ 3,101 |
$ 6,961 |
$ 5,318 |
Non-freight |
69 |
73 |
162 |
122 |
Total revenues |
3,603 |
3,174 |
7,123 |
5,440 |
Operating expenses |
|
|
|
|
Compensation and benefits (Note 8) |
612 |
659 |
1,302 |
1,097 |
Fuel |
466 |
397 |
924 |
723 |
Materials (Note 8) |
97 |
98 |
191 |
170 |
Equipment rents |
82 |
80 |
164 |
110 |
Depreciation and amortization (Note 8) |
473 |
410 |
940 |
635 |
Purchased services and other (Note 8) |
606 |
586 |
1,186 |
932 |
Total operating expenses |
2,336 |
2,230 |
4,707 |
3,667 |
|
|
|
|
|
Operating income |
1,267 |
944 |
2,416 |
1,773 |
Less: |
|
|
|
|
Equity earnings of |
— |
(26) |
— |
(230) |
Other (income) expense (Note 8, 10) |
(40) |
21 |
(42) |
23 |
Other components of net periodic benefit recovery (Note 12) |
(88) |
(83) |
(176) |
(169) |
Net interest expense (Note 8) |
200 |
204 |
406 |
358 |
Remeasurement loss of |
— |
7,175 |
— |
7,175 |
Income (loss) before income tax expense (recovery) |
1,195 |
(6,347) |
2,228 |
(5,384) |
Less: |
|
|
|
|
Current income tax expense (Note 4) |
274 |
281 |
516 |
419 |
Deferred income tax expense (recovery) (Note 4, 8) |
18 |
(7,953) |
35 |
(7,928) |
Income tax expense (recovery) (Note 4) |
292 |
(7,672) |
551 |
(7,509) |
Net income |
$ 903 |
$ 1,325 |
$ 1,677 |
$ 2,125 |
Less: Net (loss) income attributable to non-controlling interest (Note 8) |
(2) |
1 |
(3) |
1 |
Net income attributable to controlling shareholders |
$ 905 |
$ 1,324 |
$ 1,680 |
$ 2,124 |
|
|
|
|
|
Earnings per share (Note 5) |
|
|
|
|
Basic earnings per share |
$ 0.97 |
$ 1.42 |
$ 1.80 |
$ 2.28 |
Diluted earnings per share |
$ 0.97 |
$ 1.42 |
$ 1.80 |
$ 2.28 |
|
|
|
|
|
Weighted-average number of shares (millions) (Note 5) |
|
|
|
|
Basic |
932.8 |
931.2 |
932.6 |
930.9 |
Diluted |
934.6 |
933.8 |
934.5 |
933.6 |
|
|
|
|
|
Dividends declared per share |
$ 0.19 |
$ 0.19 |
$ 0.38 |
$ 0.38 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
For the three months |
For the six months |
||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
Net income |
$ 903 |
$ 1,325 |
$ 1,677 |
$ 2,125 |
Net gain (loss) in foreign currency translation adjustments, net of hedging activities |
301 |
(611) |
1,000 |
(638) |
Change in derivatives designated as cash flow hedges |
3 |
1 |
4 |
3 |
Change in pension and post-retirement defined benefit plans |
11 |
(3) |
23 |
5 |
Other comprehensive (loss) income from equity investees |
(2) |
4 |
(2) |
7 |
Other comprehensive income (loss) before income taxes |
313 |
(609) |
1,025 |
(623) |
Income tax (expense) recovery |
— |
(17) |
6 |
(20) |
Other comprehensive income (loss) (Note 6) |
313 |
(626) |
1,031 |
(643) |
Comprehensive income |
$ 1,216 |
$ 699 |
$ 2,708 |
$ 1,482 |
Comprehensive income (loss) attributable to non-controlling interest |
9 |
(7) |
31 |
(7) |
Comprehensive income attributable to controlling shareholders |
$ 1,207 |
$ 706 |
$ 2,677 |
$ 1,489 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
|
|
|
(in millions of Canadian dollars) |
2024 |
2023 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 557 |
$ 464 |
Accounts receivable, net (Note 7) |
1,893 |
1,887 |
Materials and supplies |
421 |
400 |
Other current assets |
334 |
251 |
|
3,205 |
3,002 |
Investments |
559 |
533 |
Properties |
53,470 |
51,744 |
|
18,411 |
17,729 |
Intangible assets |
3,035 |
2,974 |
Pension asset |
3,516 |
3,338 |
Other assets |
596 |
582 |
Total assets |
$ 82,792 |
$ 79,902 |
Liabilities and equity |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
$ 2,611 |
$ 2,567 |
Long-term debt maturing within one year (Note 10, 11) |
3,668 |
3,143 |
|
6,279 |
5,710 |
Pension and other benefit liabilities |
582 |
581 |
Other long-term liabilities |
812 |
797 |
Long-term debt (Note 10, 11) |
18,956 |
19,351 |
Deferred income taxes |
11,340 |
11,052 |
Total liabilities |
37,969 |
37,491 |
Shareholders' equity |
|
|
Share capital |
25,655 |
25,602 |
Additional paid-in capital |
93 |
88 |
Accumulated other comprehensive income (loss) (Note 6) |
379 |
(618) |
Retained earnings |
17,745 |
16,420 |
|
43,872 |
41,492 |
Non-controlling interest |
951 |
919 |
Total equity |
44,823 |
42,411 |
Total liabilities and equity |
$ 82,792 |
$ 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 six months |
||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
Operating activities |
|
|
|
|
Net income |
$ 903 |
$ 1,325 |
$ 1,677 |
$ 2,125 |
Reconciliation of net income to cash provided by operating activities: |
|
|
|
|
Depreciation and amortization |
473 |
410 |
940 |
635 |
Deferred income tax expense (recovery) (Note 4) |
18 |
(7,953) |
35 |
(7,928) |
Pension recovery and funding (Note 12) |
(75) |
(78) |
(151) |
(155) |
Equity earnings of |
— |
(26) |
— |
(230) |
Remeasurement loss of |
— |
7,175 |
— |
7,175 |
Dividend from |
— |
— |
— |
300 |
Settlement of foreign currency forward contracts (Note 11) |
— |
— |
(65) |
— |
Other operating activities, net |
(69) |
28 |
(68) |
(19) |
Changes in non-cash working capital balances related to operations |
28 |
11 |
(75) |
(129) |
Net cash provided by operating activities |
1,278 |
892 |
2,293 |
1,774 |
Investing activities |
|
|
|
|
Additions to properties |
(808) |
(628) |
(1,335) |
(1,034) |
Additions to |
(16) |
(8) |
(20) |
(8) |
Proceeds from sale of properties and other assets |
9 |
12 |
10 |
16 |
Cash acquired on control of |
— |
298 |
— |
298 |
Investment in government securities |
— |
(267) |
— |
(267) |
Other investing activities, net |
33 |
(24) |
21 |
(24) |
Net cash used in investing activities |
(782) |
(617) |
(1,324) |
(1,019) |
Financing activities |
|
|
|
|
Dividends paid |
(178) |
(176) |
(355) |
(353) |
Issuance of Common Shares |
20 |
19 |
42 |
37 |
Repayment of long-term debt, excluding commercial paper (Note 10) |
(149) |
(610) |
(220) |
(1,096) |
Net (repayment) issuance of commercial paper (Note 10) |
(157) |
550 |
(362) |
550 |
Acquisition-related financing fees |
— |
(15) |
— |
(15) |
Other financing activities, net |
— |
(1) |
— |
(1) |
Net cash used in financing activities |
(464) |
(233) |
(895) |
(878) |
Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents |
6 |
(7) |
19 |
(3) |
Cash position |
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
38 |
35 |
93 |
(126) |
Cash and cash equivalents at beginning of period |
519 |
290 |
464 |
451 |
Cash and cash equivalents at end of period |
$ 557 |
$ 325 |
$ 557 |
$ 325 |
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
Income taxes paid |
$ 309 |
$ 259 |
$ 551 |
$ 443 |
Interest paid |
$ 161 |
$ 271 |
$ 406 |
$ 418 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
|
For the three months ended |
|||||||||
(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 |
|
932.6 |
|
|
$ 95 |
$ 77 |
$ 17,018 |
$ 42,819 |
$ 942 |
|
Net income (loss) |
|
— |
|
— |
— |
— |
905 |
905 |
(2) |
903 |
Contribution from non-controlling interest |
|
— |
|
— |
— |
— |
— |
— |
— |
— |
Other comprehensive income (Note 6) |
|
— |
|
— |
— |
302 |
— |
302 |
11 |
313 |
Dividends declared ( |
|
— |
|
— |
— |
— |
(178) |
(178) |
|
(178) |
Effect of stock-based compensation expense |
|
— |
|
— |
3 |
— |
— |
3 |
— |
3 |
Shares issued under stock option plan |
|
0.5 |
|
26 |
(5) |
— |
— |
21 |
— |
21 |
Balance as at |
|
933.1 |
|
|
$ 93 |
$ 379 |
$ 17,745 |
$ 43,872 |
$ 951 |
|
Balance as at |
|
930.9 |
|
|
$ 84 |
$ 74 |
$ 13,824 |
$ 39,520 |
$ — |
|
Net income |
|
— |
|
— |
— |
— |
1,324 |
1,324 |
1 |
1,325 |
Other comprehensive loss (Note 6) |
|
— |
|
— |
— |
(618) |
— |
(618) |
(8) |
(626) |
Dividends declared ( |
|
— |
|
— |
— |
— |
(176) |
(176) |
— |
(176) |
Effect of stock-based compensation expense |
|
— |
|
— |
9 |
— |
— |
9 |
— |
9 |
Shares issued under stock option plan |
|
0.5 |
|
25 |
(5) |
— |
— |
20 |
— |
20 |
Non-controlling interest in connection with business acquisition |
|
— |
|
— |
— |
— |
— |
— |
932 |
932 |
Balance as at |
|
931.4 |
|
|
$ 88 |
$ (544) |
$ 14,972 |
$ 40,079 |
$ 925 |
|
|
For the six months ended |
|||||||||
(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 |
|
932.1 |
|
|
$ 88 |
$ (618) |
$ 16,420 |
$ 41,492 |
$ 919 |
|
Net income (loss) |
|
— |
|
— |
— |
— |
1,680 |
1,680 |
(3) |
1,677 |
Contribution from non-controlling interest |
|
— |
|
— |
— |
— |
— |
— |
1 |
1 |
Other comprehensive income (Note 6) |
|
— |
|
— |
— |
997 |
— |
997 |
34 |
1,031 |
Dividends declared ( |
|
— |
|
— |
— |
|
(355) |
(355) |
— |
(355) |
Effect of stock-based compensation expense |
|
— |
|
— |
16 |
— |
— |
16 |
— |
16 |
Shares issued under stock option plan |
|
1.0 |
|
53 |
(11) |
— |
— |
42 |
— |
42 |
Balance as at |
|
933.1 |
|
|
$ 93 |
$ 379 |
$ 17,745 |
$ 43,872 |
$ 951 |
|
Balance as at |
|
930.5 |
|
|
$ 78 |
$ 91 |
$ 13,201 |
$ 38,886 |
$ — |
|
Net income |
|
— |
|
— |
— |
— |
2,124 |
2,124 |
1 |
2,125 |
Other comprehensive loss (Note 6) |
|
— |
|
— |
— |
(635) |
— |
(635) |
(8) |
(643) |
Dividends declared ( |
|
— |
|
— |
— |
— |
(353) |
(353) |
— |
(353) |
Effect of stock-based compensation expense |
|
— |
|
— |
19 |
— |
— |
19 |
— |
19 |
Shares issued under stock option plan |
|
0.9 |
|
47 |
(9) |
— |
— |
38 |
— |
38 |
Non-controlling interest in connection with business acquisition |
|
— |
|
— |
— |
— |
— |
— |
932 |
932 |
Balance as at |
|
931.4 |
|
|
$ 88 |
$ (544) |
$ 14,972 |
$ 40,079 |
$ 925 |
|
See Notes to Interim Consolidated Financial Statements. |
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1 Description of business and basis of presentation
On
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 six months ended
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 six months |
||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
Grain |
$ 665 |
$ 537 |
$ 1,395 |
$ 1,052 |
Coal |
236 |
219 |
445 |
374 |
Potash |
180 |
144 |
317 |
276 |
Fertilizers and sulphur |
103 |
89 |
207 |
185 |
Forest products |
203 |
187 |
405 |
290 |
Energy, chemicals and plastics |
695 |
575 |
1,397 |
941 |
Metals, minerals and consumer products |
464 |
440 |
904 |
673 |
Automotive |
358 |
257 |
623 |
382 |
Intermodal |
630 |
653 |
1,268 |
1,145 |
Total freight revenues |
3,534 |
3,101 |
6,961 |
5,318 |
Non-freight excluding leasing revenues |
43 |
39 |
106 |
66 |
Revenues from contracts with customers |
3,577 |
3,140 |
7,067 |
5,384 |
Leasing revenues |
26 |
34 |
56 |
56 |
Total revenues |
$ 3,603 |
$ 3,174 |
$ 7,123 |
$ 5,440 |
4 Income taxes
During the three months ended
The effective tax rates including discrete items for the three and six months ended
For the three months ended
For the three months ended
For the six months ended
For the six months ended
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
2014 Tax Assessment
The
5 Earnings per share
|
For the three months |
For the six months |
||
(in millions, except per share data) |
2024 |
2023 |
2024 |
2023 |
Net income attributable to controlling shareholders |
$ 905 |
$ 1,324 |
$ 1,680 |
$ 2,124 |
Weighted-average basic shares outstanding |
932.8 |
931.2 |
932.6 |
930.9 |
Dilutive effect of stock options |
1.8 |
2.6 |
1.9 |
2.7 |
Weighted-average diluted shares outstanding |
934.6 |
933.8 |
934.5 |
933.6 |
Earnings per share - basic |
$ 0.97 |
$ 1.42 |
$ 1.80 |
$ 2.28 |
Earnings per share - diluted |
$ 0.97 |
$ 1.42 |
$ 1.80 |
$ 2.28 |
For the three and six months ended
6 Changes in Accumulated other comprehensive income ("AOCI") by component
Changes in AOCI attributable to controlling shareholders, net of tax, by component are as follows:
|
For the three months ended |
||||
(in millions of Canadian dollars) |
Foreign currency |
Derivatives |
Pension and post- retirement defined benefit plans |
Equity |
Total |
Opening balance, |
$ 1,522 |
$ 6 |
$ (1,454) |
$ 3 |
$ 77 |
Other comprehensive income (loss) before reclassifications |
294 |
— |
— |
(2) |
292 |
Amounts reclassified from AOCI |
— |
2 |
8 |
— |
10 |
Net other comprehensive income (loss) |
294 |
2 |
8 |
(2) |
302 |
Closing balance, |
$ 1,816 |
$ 8 |
$ (1,446) |
$ 1 |
$ 379 |
Opening balance, |
$ 1,478 |
$ 1 |
$ (1,404) |
$ (1) |
$ 74 |
Other comprehensive (loss) income before reclassifications |
(621) |
— |
(9) |
3 |
(627) |
Amounts reclassified from AOCI |
— |
1 |
7 |
1 |
9 |
Net other comprehensive (loss) income |
(621) |
1 |
(2) |
4 |
(618) |
Closing balance, |
$ 857 |
$ 2 |
$ (1,406) |
$ 3 |
$ (544) |
|
For the six months ended |
||||
(in millions of Canadian dollars) |
Foreign currency |
Derivatives |
Pension and post- retirement defined benefit plans |
Equity |
Total |
Opening balance, |
$ 837 |
$ 5 |
$ (1,463) |
$ 3 |
$ (618) |
Other comprehensive income (loss) before reclassifications |
979 |
— |
— |
(2) |
977 |
Amounts reclassified from AOCI |
— |
3 |
17 |
— |
20 |
Net other comprehensive income (loss) |
979 |
3 |
17 |
(2) |
997 |
Closing balance, |
$ 1,816 |
$ 8 |
$ (1,446) |
$ 1 |
$ 379 |
Opening balance, |
$ 1,505 |
$ — |
$ (1,410) |
$ (4) |
$ 91 |
Other comprehensive (loss) income before reclassifications |
(648) |
— |
(9) |
6 |
(651) |
Amounts reclassified from AOCI |
— |
2 |
13 |
1 |
16 |
Net other comprehensive (loss) income |
(648) |
2 |
4 |
7 |
(635) |
Closing balance, |
$ 857 |
$ 2 |
$ (1,406) |
$ 3 |
$ (544) |
7 Accounts receivable, net
(in millions of Canadian dollars) |
As at |
As at |
Total accounts receivable |
$ 1,987 |
$ 1,976 |
Allowance for credit losses |
(94) |
(89) |
Total accounts receivable, net |
$ 1,893 |
$ 1,887 |
8 Business acquisition
On
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
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
The accounting for the acquisition of KCS was completed on
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 |
|
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 $697 million and accounts payable and accrued liabilities of
Intangible assets of
Net working capital and Other long-term liabilities included environmental liabilities of $15 million and $160 million, respectively, and legal and personal injury claims of $44 million and $40 million, respectively, which are contingent on the outcome of uncertain future events. The values are measured at estimated cost and evaluated for changes in facts at the end of the reporting period.
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
On a pro forma basis, if the Company had consolidated KCS beginning on
|
Three Months Ended
|
Six Months Ended
|
||
(in millions of Canadian dollars) |
KCS |
Pro Forma |
KCS |
Pro Forma |
Revenue |
$ 164 |
$ 3,338 |
$ 1,351 |
$ 6,794 |
Net income attributable to controlling shareholders |
34 |
615 |
280 |
1,371 |
(1) |
KCS's historical amounts were translated into Canadian dollars at the |
For the three and six months ended
- the removal of the remeasurement loss of
$7,175 million upon the derecognition of CPRL's previously held equity method investment in KCS from the three and six months endedJune 30, 2023 , which included the reclassification of associated accumulated other comprehensive income to retained earnings; - 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
$26 million and$230 million for the three and six months endedJune 30, 2023 , respectively (see Note 9); and - income tax adjustments including:
- the derecognition of a deferred income tax recovery of
$7,832 million for the three and six months endedJune 30, 2023 related to the elimination of the deferred income tax liability on the outside basis difference of the investment in KCS; - the derecognition of a deferred income tax recovery for the three months ended
June 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 six months ended
-
$2 million and$6 million were recognized in "Compensation and benefits", respectively, primarily related to retention and synergy related incentive compensation costs; -
$2 million and$4 million were recognized in "Materials", respectively; and -
$24 million and$44 million were recognized in "Purchased services and other", respectively, primarily related to system migration, restructuring, and third party purchased services.
During the three and six months ended
-
$63 million and$63 million were recognized in "Compensation and benefits", respectively; -
$53 million and$65 million were recognized in "Purchased services and other", respectively; and -
$3 million and$6 million were recognized in "Other (income) expense", respectively.
Acquisition-related costs of $1 million and $11 million incurred by KCS during the three and six months ended
During the three and six months ended
-
$82 million and$161 million recognized in "Depreciation and amortization", respectively; -
$1 million and$2 million recognized in "Purchased services and other", respectively; - $nil and
$1 million recognized in "Other (income) expense", respectively; -
$5 million and$10 million recognized in "Net interest expense", respectively; and - a recovery of
$2 million and$4 million recognized in "Net (loss) income attributable to non-controlling interest", respectively.
During the three and six months ended
-
$68 million and$68 million recognized in "Depreciation and amortization", respectively; -
$6 million and$48 million recognized in "Equity earnings ofKansas City Southern ", respectively; -
$1 million and$1 million recognized in "Other (income) expense", respectively; and -
$6 million and$6 million recognized in "Net interest expense", respectively.
9 Investment in KCS
On
For the period
The following table presents summarized financial information for KCS, on its historical cost basis:
Consolidated Statements of Income
(in millions of Canadian dollars)(1) |
For the period |
For the period
|
Total revenues |
$ 164 |
$ 1,351 |
Total operating expenses |
109 |
888 |
Operating income |
55 |
463 |
Less: Other(2) |
9 |
83 |
Income before income taxes |
46 |
380 |
Net income |
$ 34 |
$ 280 |
(1) |
Amounts translated at the average foreign exchange ("FX") rate for the period |
(2) |
Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net. |
10 Debt
During the six months ended
Debt repurchase
During the three months ended
During the second quarter of 2024 the company also committed to the repurchase of
Credit facility
Effective
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 (income) expense". The cash flows associated with these instruments are classified as "Operating activities" within the Interim Consolidated Statements of Cash Flows.
During the six months ended
Offsetting
The Company's foreign currency forward contracts were executed with counterparties in the
12 Pension and other benefits
In the three and six months ended
Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:
|
For the three months ended |
|||||
|
Pensions |
Other benefits |
Total |
|||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
Current service cost |
$ 21 |
$ 17 |
$ 3 |
$ 3 |
$ 24 |
$ 20 |
Other components of net periodic benefit (recovery) cost: |
|
|
|
|
|
|
Interest cost on benefit obligation |
117 |
122 |
6 |
6 |
123 |
128 |
Expected return on plan assets |
(222) |
(221) |
— |
— |
(222) |
(221) |
Recognized net actuarial loss |
10 |
8 |
— |
— |
10 |
8 |
Amortization of prior service costs |
1 |
1 |
— |
1 |
1 |
2 |
Total other components of net periodic benefit (recovery) cost |
(94) |
(90) |
6 |
7 |
(88) |
(83) |
Net periodic benefit (recovery) cost |
$ (73) |
$ (73) |
$ 9 |
$ 10 |
$ (64) |
$ (63) |
|
For the six months ended |
|||||
|
Pensions |
Other benefits |
Total |
|||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
Current service cost |
$ 42 |
$ 35 |
$ 6 |
$ 5 |
$ 48 |
$ 40 |
Other components of net periodic benefit (recovery) cost: |
|
|
|
|
|
|
Interest cost on benefit obligation |
234 |
243 |
12 |
11 |
246 |
254 |
Expected return on plan assets |
(445) |
(441) |
— |
— |
(445) |
(441) |
Recognized net actuarial loss |
20 |
16 |
— |
— |
20 |
16 |
Amortization of prior service costs |
3 |
1 |
— |
1 |
3 |
2 |
Total other components of net periodic benefit (recovery) cost |
(188) |
(181) |
12 |
12 |
(176) |
(169) |
Net periodic benefit (recovery) cost |
$ (146) |
$ (146) |
$ 18 |
$ 17 |
$ (128) |
$ (129) |
13 Stock-based compensation
As at
Stock options plan
In the six months ended
Under the fair value method, the fair value of the stock options at grant date was approximately
|
For the six 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 six months ended
The performance period for 568,159 PSUs and all PDSUs granted in the six months ended
The performance period for all of the 431,430 PSUs and 12,694 PDSUs granted in 2021 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
Legal proceedings related to Lac-Mégantic rail accident
On
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
(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
(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
On
2014 Tax Assessment
On
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 six months ended
Summary of Rail Data (1)
|
Second Quarter |
|
Year-to-date |
||||||
(in millions, except per share data) |
2024 |
2023 |
Total Change |
% Change |
|
2024 |
2023 |
Total Change |
% Change |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
Freight |
$ 3,534 |
$ 3,101 |
$ 433 |
14 |
|
|
$ 5,318 |
$ 1,643 |
31 |
Non-freight |
69 |
73 |
(4) |
(5) |
|
162 |
122 |
40 |
33 |
Total revenues |
3,603 |
3,174 |
429 |
14 |
|
7,123 |
5,440 |
1,683 |
31 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Compensation and benefits |
612 |
659 |
(47) |
(7) |
|
1,302 |
1,097 |
205 |
19 |
Fuel |
466 |
397 |
69 |
17 |
|
924 |
723 |
201 |
28 |
Materials |
97 |
98 |
(1) |
(1) |
|
191 |
170 |
21 |
12 |
Equipment rents |
82 |
80 |
2 |
3 |
|
164 |
110 |
54 |
49 |
Depreciation and amortization |
473 |
410 |
63 |
15 |
|
940 |
635 |
305 |
48 |
Purchased services and other |
606 |
586 |
20 |
3 |
|
1,186 |
932 |
254 |
27 |
Total operating expenses |
2,336 |
2,230 |
106 |
5 |
|
4,707 |
3,667 |
1,040 |
28 |
|
|
|
|
|
|
|
|
|
|
Operating income |
1,267 |
944 |
323 |
34 |
|
2,416 |
1,773 |
643 |
36 |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
Equity earnings of |
— |
(26) |
26 |
(100) |
|
— |
(230) |
230 |
(100) |
Other (income) expense |
(40) |
21 |
(61) |
(290) |
|
(42) |
23 |
(65) |
(283) |
Other components of net periodic benefit recovery |
(88) |
(83) |
(5) |
6 |
|
(176) |
(169) |
(7) |
4 |
Net interest expense |
200 |
204 |
(4) |
(2) |
|
406 |
358 |
48 |
13 |
Remeasurement loss of |
— |
7,175 |
(7,175) |
(100) |
|
— |
7,175 |
(7,175) |
(100) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense (recovery) |
1,195 |
(6,347) |
7,542 |
(119) |
|
2,228 |
(5,384) |
7,612 |
(141) |
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
Current income tax expense |
274 |
281 |
(7) |
(2) |
|
516 |
419 |
97 |
23 |
Deferred income tax expense (recovery) |
18 |
(7,953) |
7,971 |
(100) |
|
35 |
(7,928) |
7,963 |
(100) |
Income tax expense (recovery) |
292 |
(7,672) |
7,964 |
(104) |
|
551 |
(7,509) |
8,060 |
(107) |
|
|
|
|
|
|
|
|
|
|
Net income |
$ 903 |
$ 1,325 |
$ (422) |
(32) |
|
|
$ 2,125 |
$ (448) |
(21) |
|
|
|
|
|
|
|
|
|
|
Less: Net (loss) income attributable to non-controlling shareholders |
(2) |
1 |
(3) |
(300) |
|
(3) |
1 |
(4) |
(400) |
|
|
|
|
|
|
|
|
|
|
Net income attributable to controlling shareholders |
$ 905 |
$ 1,324 |
$ (419) |
(32) |
|
|
$ 2,124 |
$ (444) |
(21) |
Operating ratio (%) |
64.8 |
70.3 |
(5.5) |
(550) bps |
|
66.1 |
67.4 |
(1.3) |
(130) bps |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ 0.97 |
$ 1.42 |
$ (0.45) |
(32) |
|
$ 1.80 |
$ 2.28 |
$ (0.48) |
(21) |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$ 0.97 |
$ 1.42 |
$ (0.45) |
(32) |
|
$ 1.80 |
$ 2.28 |
$ (0.48) |
(21) |
|
|
|
|
|
|
|
|
|
|
Shares Outstanding |
|
|
|
|
|
|
|
|
|
Weighted average number of basic shares outstanding (millions) |
932.8 |
931.2 |
1.6 |
— |
|
932.6 |
930.9 |
1.7 |
— |
Weighted average number of diluted shares outstanding (millions) |
934.6 |
933.8 |
0.8 |
— |
|
934.5 |
933.6 |
0.9 |
— |
|
|
|
|
|
|
|
|
|
|
Foreign Exchange |
|
|
|
|
|
|
|
|
|
Average foreign exchange rate (U.S.$/Canadian$) |
0.73 |
0.75 |
(0.02) |
(3) |
|
0.74 |
0.74 |
— |
— |
Average foreign exchange rate (Canadian$/U.S.$) |
1.37 |
1.34 |
0.03 |
2 |
|
1.36 |
1.35 |
0.01 |
1 |
Average foreign exchange rate (Mexican peso/Canadian$) |
12.61 |
13.16 |
(0.55) |
(4) |
|
12.61 |
13.47 |
(0.86) |
(6) |
Average foreign exchange rate (Canadian$/Mexican peso) |
0.0794 |
0.0760 |
0.0034 |
4 |
|
0.0794 |
0.0742 |
0.0052 |
7 |
(1) |
The results of |
Summary of Rail Data (Continued) (1)
|
Second Quarter |
|
Year-to-date |
||||||
Commodity Data |
2024 |
2023 |
Total Change |
% Change |
|
2024 |
2023 |
Total Change |
% Change |
|
|
|
|
|
|
|
|
|
|
Freight Revenues (millions) |
|
|
|
|
|
|
|
|
|
- Grain |
$ 665 |
$ 537 |
$ 128 |
24 |
|
$ 1,395 |
$ 1,052 |
$ 343 |
33 |
- Coal |
236 |
219 |
17 |
8 |
|
445 |
374 |
71 |
19 |
- Potash |
180 |
144 |
36 |
25 |
|
317 |
276 |
41 |
15 |
- Fertilizers and sulphur |
103 |
89 |
14 |
16 |
|
207 |
185 |
22 |
12 |
- Forest products |
203 |
187 |
16 |
9 |
|
405 |
290 |
115 |
40 |
- Energy, chemicals and plastics |
695 |
575 |
120 |
21 |
|
1,397 |
941 |
456 |
48 |
- Metals, minerals and consumer products |
464 |
440 |
24 |
5 |
|
904 |
673 |
231 |
34 |
- Automotive |
358 |
257 |
101 |
39 |
|
623 |
382 |
241 |
63 |
- Intermodal |
630 |
653 |
(23) |
(4) |
|
1,268 |
1,145 |
123 |
11 |
|
|
|
|
|
|
|
|
|
|
Total Freight Revenues |
$ 3,534 |
$ 3,101 |
$ 433 |
14 |
|
$ 6,961 |
$ 5,318 |
$ 1,643 |
31 |
|
|
|
|
|
|
|
|
|
|
Freight Revenue per Revenue Ton-Mile ("RTM") (cents) |
|
|
|
|
|
|
|
|
|
- Grain |
5.02 |
4.91 |
0.11 |
2 |
|
5.02 |
5.02 |
— |
— |
- Coal |
4.07 |
3.85 |
0.22 |
6 |
|
4.03 |
3.89 |
0.14 |
4 |
- Potash |
3.63 |
3.21 |
0.42 |
13 |
|
3.49 |
3.25 |
0.24 |
7 |
- Fertilizers and sulphur |
7.89 |
8.04 |
(0.15) |
(2) |
|
7.75 |
7.56 |
0.19 |
3 |
- Forest products |
9.05 |
8.76 |
0.29 |
3 |
|
9.02 |
8.26 |
0.76 |
9 |
- Energy, chemicals and plastics |
7.21 |
7.18 |
0.03 |
— |
|
7.21 |
6.62 |
0.59 |
9 |
- Metals, minerals and consumer products |
9.33 |
8.54 |
0.79 |
9 |
|
9.34 |
8.35 |
0.99 |
12 |
- Automotive |
27.41 |
25.60 |
1.81 |
7 |
|
27.05 |
25.85 |
1.20 |
5 |
- Intermodal |
7.28 |
7.40 |
(0.12) |
(2) |
|
7.23 |
7.10 |
0.13 |
2 |
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue per RTM |
6.78 |
6.55 |
0.23 |
4 |
|
6.70 |
6.26 |
0.44 |
7 |
|
|
|
|
|
|
|
|
|
|
Freight Revenue per Carload |
|
|
|
|
|
|
|
|
|
- Grain |
$ 5,159 |
$ 4,590 |
$ 569 |
12 |
|
$ 5,341 |
$ 4,743 |
$ 598 |
13 |
- Coal |
2,167 |
1,908 |
259 |
14 |
|
2,050 |
1,998 |
52 |
3 |
- Potash |
3,644 |
3,618 |
26 |
1 |
|
3,669 |
3,598 |
71 |
2 |
- Fertilizers and sulphur |
6,059 |
5,855 |
204 |
3 |
|
6,053 |
5,745 |
308 |
5 |
- Forest products |
5,867 |
5,374 |
493 |
9 |
|
5,745 |
5,524 |
221 |
4 |
- Energy, chemicals and plastics |
4,881 |
4,510 |
371 |
8 |
|
4,869 |
4,642 |
227 |
5 |
- Metals, minerals and consumer products |
3,447 |
3,403 |
44 |
1 |
|
3,420 |
3,522 |
(102) |
(3) |
- Automotive |
5,416 |
4,573 |
843 |
18 |
|
5,115 |
4,499 |
616 |
14 |
- Intermodal |
1,561 |
1,501 |
60 |
4 |
|
1,555 |
1,635 |
(80) |
(5) |
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue per Carload |
$ 3,256 |
$ 2,899 |
$ 357 |
12 |
|
$ 3,226 |
$ 3,040 |
$ 186 |
6 |
(1) |
KCS's freight revenues are included on a consolidated basis from |
Summary of Rail Data (Continued) (1)
|
Second Quarter |
|
Year-to-date |
||||||
Commodity Data |
2024 |
2023 |
Total Change |
% Change |
|
2024 |
2023 |
Total Change |
% Change |
|
|
|
|
|
|
|
|
|
|
Millions of RTM |
|
|
|
|
|
|
|
|
|
- Grain |
13,240 |
10,947 |
2,293 |
21 |
|
27,810 |
20,961 |
6,849 |
33 |
- Coal |
5,794 |
5,694 |
100 |
2 |
|
11,046 |
9,619 |
1,427 |
15 |
- Potash |
4,965 |
4,490 |
475 |
11 |
|
9,075 |
8,500 |
575 |
7 |
- Fertilizers and sulphur |
1,305 |
1,107 |
198 |
18 |
|
2,671 |
2,447 |
224 |
9 |
- Forest products |
2,244 |
2,134 |
110 |
5 |
|
4,488 |
3,512 |
976 |
28 |
- Energy, chemicals and plastics |
9,644 |
8,005 |
1,639 |
20 |
|
19,363 |
14,212 |
5,151 |
36 |
- Metals, minerals and consumer products |
4,974 |
5,152 |
(178) |
(3) |
|
9,675 |
8,063 |
1,612 |
20 |
- Automotive |
1,306 |
1,004 |
302 |
30 |
|
2,303 |
1,478 |
825 |
56 |
- Intermodal |
8,658 |
8,827 |
(169) |
(2) |
|
17,537 |
16,117 |
1,420 |
9 |
|
|
|
|
|
|
|
|
|
|
Total RTMs |
52,130 |
47,360 |
4,770 |
10 |
|
103,968 |
84,909 |
19,059 |
22 |
|
|
|
|
|
|
|
|
|
|
Carloads (thousands) |
|
|
|
|
|
|
|
|
|
- Grain |
128.9 |
117.0 |
11.9 |
10 |
|
261.2 |
221.8 |
39.4 |
18 |
- Coal |
108.9 |
114.8 |
(5.9) |
(5) |
|
217.1 |
187.2 |
29.9 |
16 |
- Potash |
49.4 |
39.8 |
9.6 |
24 |
|
86.4 |
76.7 |
9.7 |
13 |
- Fertilizers and sulphur |
17.0 |
15.2 |
1.8 |
12 |
|
34.2 |
32.2 |
2.0 |
6 |
- Forest products |
34.6 |
34.8 |
(0.2) |
(1) |
|
70.5 |
52.5 |
18.0 |
34 |
- Energy, chemicals and plastics |
142.4 |
127.5 |
14.9 |
12 |
|
286.9 |
202.7 |
84.2 |
42 |
- Metals, minerals and consumer products |
134.6 |
129.3 |
5.3 |
4 |
|
264.3 |
191.1 |
73.2 |
38 |
- Automotive |
66.1 |
56.2 |
9.9 |
18 |
|
121.8 |
84.9 |
36.9 |
43 |
- Intermodal |
403.5 |
435.1 |
(31.6) |
(7) |
|
815.6 |
700.1 |
115.5 |
16 |
|
|
|
|
|
|
|
|
|
|
Total Carloads |
1,085.4 |
1,069.7 |
15.7 |
1 |
|
2,158.0 |
1,749.2 |
408.8 |
23 |
(1) |
Includes KCS information for the period from |
Summary of Rail Data (Continued) (1)
|
Second Quarter |
Year-to-date |
|||||||
|
2024 |
2023 |
Total Change |
% Change |
|
2024 |
2023 |
Total Change |
% Change |
|
|
|
|
|
|
|
|
|
|
Operations Performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross ton-miles ("GTMs") (millions) |
96,579 |
88,650 |
7,929 |
9 |
|
192,388 |
156,099 |
36,289 |
23 |
Train miles (thousands) |
11,523 |
10,577 |
946 |
9 |
|
23,518 |
17,834 |
5,684 |
32 |
Average train weight - excluding local traffic (tons) |
9,090 |
9,107 |
(17) |
— |
|
8,860 |
9,569 |
(709) |
(7) |
Average train length - excluding local traffic (feet) |
7,761 |
7,846 |
(85) |
(1) |
|
7,538 |
8,064 |
(526) |
(7) |
Average terminal dwell (hours) |
9.5 |
10.3 |
(0.8) |
(8) |
|
9.6 |
9.7 |
(0.1) |
(1) |
Average train speed (miles per hour, or "mph")(2) |
19.3 |
18.7 |
0.6 |
3 |
|
19.2 |
20.1 |
(0.9) |
(4) |
Locomotive productivity (GTMs / operating horsepower)(3) |
172 |
164 |
8 |
5 |
|
165 |
182 |
(17) |
(9) |
Fuel efficiency(4) |
1.027 |
1.036 |
(0.009) |
(1) |
|
1.046 |
1.009 |
0.037 |
4 |
|
99.2 |
91.8 |
7.4 |
8 |
|
201.3 |
157.5 |
43.8 |
28 |
Average fuel price ( |
3.44 |
3.33 |
0.11 |
3 |
|
3.39 |
3.47 |
(0.08) |
(2) |
|
|
|
|
|
|
|
|
|
|
Total Employees and Workforce |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employees (average)(6) |
20,441 |
19,579 |
862 |
4 |
|
20,219 |
16,257 |
3,962 |
24 |
Total employees (end of period)(6) |
20,374 |
20,624 |
(250) |
(1) |
|
20,374 |
20,624 |
(250) |
(1) |
Workforce (end of period)(7) |
20,482 |
20,726 |
(244) |
(1) |
|
20,482 |
20,726 |
(244) |
(1) |
|
|
|
|
|
|
|
|
|
|
Safety Indicators (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRA personal injuries per 200,000 employee-hours |
0.81 |
1.37 |
(0.56) |
(41) |
|
0.97 |
1.28 |
(0.31) |
(24) |
FRA train accidents per million train-miles |
0.77 |
0.76 |
0.01 |
1 |
|
0.83 |
0.85 |
(0.02) |
(2) |
(1) |
Includes KCS information for the period from |
(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) |
|
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
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
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 (income) expense", "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
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
In the first six 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 tax recovery of
$3 million due to a decrease in theArkansas state corporate income tax rate, that had minimal impact on Diluted EPS; - in the first quarter, adjustments to provisions and settlements of Mexican taxes of
$10 million ($10 million after deferred tax recovery) recognized in "Compensation and benefits", that unfavourably impacted Diluted EPS by1 cent ; and - during the first six months, acquisition-related costs of
$54 million in connection with the KCS acquisition ($39 million after current tax recovery of$15 million ), including costs of$6 million recognized in "Compensation and benefits",$4 million recognized in "Materials", and$44 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by4 cents as follows:- in the second quarter, acquisition-related costs of
$28 million in connection with the KCS acquisition ($19 million after current tax recovery of$9 million ) including costs of$2 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents ; and - in the first quarter, acquisition-related costs of
$26 million in connection with the KCS acquisition ($20 million after current tax recovery of$6 million ) including costs of$4 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents .
- in the second 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:
- during the course of the year, a total current tax expense of
$16 million related to a tax settlement with the Servicio de Administración Tributaria (the "SAT") of$13 million and a reserve for the estimated impact of potential future audit settlements of$3 million , that unfavourably impacted Diluted EPS by2 cents as follows:- in the fourth quarter, a current tax expense of
$1 million related to a tax settlement with the SAT, that had minimal impact on Diluted EPS; and - in the third quarter, a total current tax expense of
$15 million related to a tax settlement with the SAT of$9 million and reserves for the estimated impact of potential future audit settlements of$6 million of which$3 million was settled in the fourth quarter, that unfavourably impacted Diluted EPS by2 cents ;
- in the fourth quarter, a current tax expense of
- in the second quarter, a remeasurement loss of KCS of
$7,175 million recognized in "Remeasurement loss ofKansas City Southern " due to the derecognition of CPKC's previously held equity method investment in KCS and remeasurement at its Control Date fair value, that unfavourably impacted Diluted EPS by$7.68 ; - during the course of the year, a deferred tax recovery of
$72 million on account of changes in tax rates and apportionment, that favourably impacted Diluted EPS by7 cents as follows:- in the fourth quarter, a deferred tax recovery of
$7 million due to CPKC unitary state apportionment changes, that favourably impacted Diluted EPS by1 cent ; - in the third quarter, a deferred tax recovery of
$14 million due to decreases in theIowa andArkansas state corporate income tax rates, that favourably impacted Diluted EPS by2 cents ; and - in the second quarter, a deferred tax recovery of
$51 million due to CPKC unitary state apportionment changes, that favourably impacted Diluted EPS by5 cents ;
- in the fourth quarter, a deferred tax recovery of
- during the course of the year, a deferred tax recovery of
$7,855 million on changes in the outside basis difference on the equity investment in KCS that favourably impacted Diluted EPS by$8.42 as follows:- in the second quarter, a deferred tax recovery of
$7,832 million related to the elimination of the deferred tax liability on the outside basis difference of the investment in KCS, that favourably impacted Diluted EPS by$8.39 ; and - in the first quarter, a deferred tax recovery of
$23 million on changes in the outside basis difference of the equity investment in KCS, that favourably impacted Diluted EPS by3 cents ; and
- in the second quarter, a deferred tax recovery of
- during the course of the year, acquisition-related costs of
$201 million in connection with the KCS acquisition ($164 million after current tax recovery of$37 million ), including an expense of$71 million recognized in "Compensation and benefits",$2 million recognized in "Materials",$111 million recognized in "Purchased services and other",$6 million recognized in "Other (income) expense", and$11 million recognized in "Equity earnings ofKansas City Southern ", that unfavourably impacted Diluted EPS by17 cents as follows:- in the fourth quarter, acquisition-related costs of
$32 million ($24 million after current tax recovery of$8 million ), including costs of$7 million recognized in "Compensation and benefits",$1 million recognized in "Materials", and$24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents ; - in the third quarter, acquisition-related costs of
$24 million ($18 million after current tax recovery of$6 million ), including costs of$1 million recognized in "Compensation and benefits",$1 million recognized in "Materials", and$22 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents ; - in the second quarter, acquisition-related costs of
$120 million ($101 million after current tax recovery of$19 million ), including costs of$63 million recognized in "Compensation and benefits",$53 million recognized in "Purchased services and other",$3 million recognized in "Other (income) expense", and$1 million recognized in "Equity earnings ofKansas City Southern ", that unfavourably impacted Diluted EPS by11 cents ; and - in the first quarter, acquisition-related costs of
$25 million ($21 million after current tax recovery of$4 million ), including costs of$12 million recognized in "Purchased services and other",$3 million recognized in "Other (income) expense", and$10 million recognized in "Equity earnings ofKansas City Southern ", that unfavourably impacted Diluted EPS by2 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 six months ended
June 30, 2024 , KCS purchase accounting of$170 million ($123 million after deferred tax recovery of$47 million ), including costs of$161 million recognized in "Depreciation and amortization",$2 million recognized in "Purchased services and other" related to the amortization of equity investments,$10 million recognized in "Net interest expense",$1 million recognized in "Other (income) expense", and a recovery of$4 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by13 cents as follows:- in the second quarter, KCS purchase accounting of
$86 million ($62 million after deferred tax recovery of$24 million ), including costs of$82 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$5 million recognized in "Net interest expense", and a recovery of$2 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by6 cents ; and - in the first quarter, KCS purchase accounting of
$84 million ($61 million after deferred tax recovery of$23 million ), including costs of$79 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$5 million recognized in "Net interest expense",$1 million recognized in "Other (income) expense", and a recovery of$2 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by7 cents .
- in the second quarter, KCS purchase accounting of
2023:
- during the course of the year, KCS purchase accounting of
$297 million ($228 million after deferred tax recovery of$69 million ), including costs of$234 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$17 million recognized in "Net interest expense",$2 million recognized in "Other (income) expense",$48 million recognized in "Equity earnings ofKansas City Southern ", and a recovery of$5 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by25 cents as follows:- in the fourth quarter, KCS purchase accounting of
$87 million ($62 million after deferred tax recovery of$25 million ), including costs of$85 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$6 million recognized in "Net interest expense", and a recovery of$5 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by7 cents ; - in the third quarter, KCS purchase accounting of
$87 million ($63 million after deferred tax recovery of$24 million ), including costs of$81 million recognized in "Depreciation and amortization",$5 million recognized in "Net interest expense", and$1 million in recognized in "Other (income) expense", that unfavourably impacted Diluted EPS by7 cents ; - in the second quarter, KCS purchase accounting of
$81 million ($61 million after deferred tax recovery of$20 million ), including costs of$68 million recognized in "Depreciation and amortization",$6 million recognized in "Net interest expense",$1 million recognized in "Other (income) expense", and$6 million recognized in "Equity earnings ofKansas City Southern ", that unfavourably impacted Diluted EPS by6 cents ; and - in the first quarter, KCS purchase accounting of
$42 million recognized in "Equity earnings ofKansas City Southern ", that unfavourably impacted Diluted EPS by5 cents .
- in the fourth quarter, KCS purchase accounting of
|
For the three months |
For the six months |
For the year ended |
||
|
2024 |
2023 |
2024 |
2023 |
2023 |
CPKC diluted earnings per share as reported |
$ 0.97 |
$ 1.42 |
$ 1.80 |
$ 2.28 |
$ 4.21 |
Less: |
|
|
|
|
|
Significant items (pre-tax): |
|
|
|
|
|
Remeasurement loss of KCS |
— |
(7.68) |
— |
(7.68) |
(7.68) |
Adjustments to provisions and settlements of Mexican taxes |
— |
— |
(0.01) |
— |
— |
Acquisition-related costs |
(0.03) |
(0.13) |
(0.06) |
(0.16) |
(0.21) |
KCS purchase accounting |
(0.09) |
(0.09) |
(0.18) |
(0.14) |
(0.32) |
Add: |
|
|
|
|
|
Tax effect of adjustments(1) |
(0.04) |
(0.05) |
(0.07) |
(0.06) |
(0.11) |
Adjustments to provisions and settlements of Mexican taxes |
— |
— |
— |
— |
0.02 |
Income tax rate changes |
— |
(0.05) |
— |
(0.05) |
(0.07) |
Deferred tax recovery on the outside basis difference of the investment in KCS |
— |
(8.39) |
— |
(8.42) |
(8.42) |
Core adjusted combined diluted earnings per share |
$ 1.05 |
$ 0.83 |
$ 1.98 |
$ 1.73 |
$ 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 28.72% and 26.61% for the three and six months ended June 30, 2024, respectively, and 0.54% and 0.58% for the three and six months ended June 30, 2023, and 1.37% for the year ended |
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
Significant items included in operating ratio on a combined basis were as follows:
2024:
- in the first quarter, adjustments to provisions and settlements of Mexican taxes of
$10 million recognized in "Compensation and benefits", that unfavourably impacted operating ratio by 0.1% for the first six months endedJune 30, 2024 ; and - during the six months ended
June 30, 2024 , acquisition-related costs were$54 million in connection with the KCS acquisition including costs of$6 million recognized in "Compensation and benefits",$4 million recognized in "Materials", and$44 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 0.8% as follows:- in the second quarter, acquisition-related costs of
$28 million including costs of$2 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$24 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 0.7%; and - in the first quarter, acquisition-related costs of
$26 million including costs of$4 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$20 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 0.8%.
- in the second quarter, acquisition-related costs of
2023:
- during the six months ended
June 30, 2023 , acquisition-related costs were$141 million in connection with the KCS acquisition including costs of$74 million recognized in "Compensation and benefits" and$67 million recognized in "Purchased services and other", that unfavourably impacted operating ratio on a combined basis, calculated in a manner consistent with Article 11, by 2.1% as follows:- in the second quarter, acquisition-related costs of
$116 million including costs of$63 million recognized in "Compensation and benefits", and$53 million recognized in "Purchased services and other", that unfavourably impacted operating ratio on a combined basis by 3.5%; and - in the first quarter, acquisition-related costs of
$25 million including costs of$11 million recognized in "Compensation and benefits", and$14 million recognized in "Purchased services and other", that unfavourably impacted operating ratio on a combined basis by 0.7%.
- in the second quarter, acquisition-related costs of
KCS purchase accounting included in operating ratio on a combined basis was as follows:
2024:
- during the six months ended
June 30, 2024 , KCS purchase accounting of$163 million including$161 million recognized in "Depreciation and amortization" and$2 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3% as follows:- in the second quarter, KCS purchase accounting of
$83 million including$82 million recognized in "Depreciation and amortization" and$1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%; and - in the first quarter, KCS purchase accounting of
$80 million including$79 million recognized in "Depreciation and amortization" and$1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%.
- in the second quarter, KCS purchase accounting of
2023:
- during the six months ended
June 30, 2023 , KCS purchase accounting of$160 million , recognized in "Depreciation and amortization", that unfavourably impacted operating ratio on a combined basis, calculated in a manner consistent with Article 11, by 2.4% as follows:- in the second quarter, KCS purchase accounting of
$80 million , that unfavourably impacted operating ratio on a combined basis by 2.4%; and - in the first quarter, KCS purchase accounting of
$80 million , that unfavourably impacted operating ratio on a combined basis by 2.3%.
- in the second quarter, KCS purchase accounting of
|
For the three months |
For the six months |
||
|
2024 |
2023 |
2024 |
2023 |
CPKC operating ratio as reported |
64.8 % |
70.3 % |
66.1 % |
67.4 % |
Add: |
|
|
|
|
KCS operating income as reported prior to Control Date(1) |
— % |
(0.2) % |
— % |
(0.3) % |
Pro forma Article 11 transaction accounting adjustments(2) |
— % |
0.4 % |
— % |
1.4 % |
|
64.8 % |
70.5 % |
66.1 % |
68.5 % |
Less: |
|
|
|
|
Adjustments to provisions and settlements of Mexican taxes |
— % |
— % |
0.1 % |
— % |
Acquisition-related costs |
0.7 % |
3.5 % |
0.8 % |
2.1 % |
KCS purchase accounting in Operating expenses |
2.3 % |
2.4 % |
2.3 % |
2.4 % |
Core adjusted combined operating ratio |
61.8 % |
64.6 % |
62.9 % |
64.0 % |
(1) |
KCS results were translated into Canadian dollars at the |
|
(2) |
Pro forma Article 11 transaction accounting adjustments for |
|
|
• |
For |
|
• |
For |
For more information about these pro forma transaction accounting adjustments for the three months ended |
|
Contacts: Media, mediarelations@cpkcr.com; Investment Community,
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SOURCE CPKC