Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of October, 2014

 

 

CANADIAN PACIFIC RAILWAY LIMITED

(Commission File No. 1-01342)

CANADIAN PACIFIC RAILWAY COMPANY

(Commission File No. 1-15272)

(translation of each Registrant’s name into English)

 

 

7550 Ogden Dale Road S.E., Calgary, Alberta, Canada, T2C 4X9

(address of principal executive offices)

 

 

Indicate by check mark whether the registrants file or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F  ¨ Form 40-F  x

Indicate by check mark if the registrants are submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrants are submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

This Report furnished on Form 6-K shall be incorporated by reference into the Registration Statements of Canadian Pacific Railway Limited on Form S-8 (File Nos. 333-127943, 333-13962, 333-140955, 333-183891, 333-183892, 333-183893, 333-188826 and 333-188827).

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     

CANADIAN PACIFIC RAILWAY LIMITED

(Registrant)

Date:    October 21, 2014

     

Signed:     /s/ Paul A. Guthrie

    By:   Name:      Paul A. Guthrie
      Title:        Corporate Secretary
     

CANADIAN PACIFIC RAILWAY COMPANY

(Registrant)

Date:    October 21, 2014

    By:  

Signed:    /s/ Paul A. Guthrie

      Name:     Paul A. Guthrie
      Title:       Corporate Secretary


LOGO

Release: Immediate October 21, 2014

CP reports record Q3 – 2014 net income of C$400M or $2.31 per diluted share

Delivers strongest financial results in company’s history

Calgary, AB – Canadian Pacific Railway Limited (TSX: CP) (NYSE: CP) today announced record Q3 2014 financial results.

Net income in the third quarter rose to a record $400 million, or $2.31 per diluted share, from $324 million, or $1.84 per share, in the third quarter of 2013. This represents an increase of 26 percent in earnings per share year-over-year.

THIRD-QUARTER 2014 RESULTS COMPARED WITH THIRD-QUARTER 2013:

 

- Revenue rose 9 percent to a record $1.670 billion

 

- Operating expenses rose 4 percent to $1.049 billion

 

- Operating Ratio fell to a record low 62.8 percent, an improvement of 310 basis points

 

- Operating income rose 19 percent to $621 million, the highest ever

“The CP team delivered another quarter of impressive results,” said E. Hunter Harrison, CP’s Chief Executive Officer. “Going forward, we will continue to execute on our plan of delivering safe, superior service to our customers, focusing on further efficiency and capacity initiatives and building on our solid foundation for growth.”

“Despite recent volatility in commodity prices, we are confident in the strength of the franchise and are on track to finish the year with CP’s strongest quarter to date,” Harrison said.

Note on forward-looking information

This news release contains certain forward-looking information within the meaning of applicable securities laws relating, but not limited, to our operations, priorities and plans, anticipated financial performance, business prospects, planned capital expenditures, programs and strategies. This forward-looking information also includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as “financial expectations”, “key assumptions”, “anticipate”, “believe”, “expect”, “plan”, “will”, “outlook”, “should” or similar words suggesting future outcomes. To the extent that CP has provided guidance using non-GAAP financial measures, the Company may not be able to provide a reconciliation to a GAAP measure, due to unknown variables and uncertainty related to future results.

Undue reliance should not be placed on forward-looking information as actual results may differ materially from the forward-looking information. Forward-looking information is not a guarantee of future performance. By its nature, CP’s forward-looking information involves numerous assumptions, 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; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in commodity prices; uncertainty surrounding timing and volumes of commodities being shipped via CP; inflation; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities arising from

 

1


derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; and various events that could disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and governmental response to them, and technological changes. The foregoing list of factors is not exhaustive.

These and other factors are detailed from time to time in reports filed by CP with securities regulators in Canada and the United States. Reference should be made to “Management’s Discussion and Analysis” in CP’s annual and interim reports, Annual Information Form and Form 40-F. Readers are cautioned not to place undue reliance on forward-looking information. Forward-looking information is based on current expectations, estimates and projections and it is possible that predictions, forecasts, projections, and other forms of forward-looking information will not be achieved by CP. Except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise.

About Canadian Pacific

Canadian Pacific (TSX:CP)(NYSE:CP) is a transcontinental railway in Canada and the United States with direct links to eight major ports, including Vancouver and Montreal, providing North American customers a competitive rail service with access to key markets in every corner of the globe. CP is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit www.cpr.ca to see the rail advantages of CP.

Contacts

Media

Martin Cej

Tel: 403-512-5730

martin_cej@cpr.ca

24/7 Media Pager: 855-242-3674

Investment Community

Nadeem Velani

Tel: 403-319-3591

email: investor@cpr.ca

 

2


CANADIAN PACIFIC RAILWAY LIMITED

 

INTERIM CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)

 

     For the three months
ended September 30
     For the nine months
ended September 30
 
     2014      2013      2014      2013  

Revenues

           

Freight

   $ 1,629      $ 1,495      $ 4,745      $ 4,412  

Other

     41        39        115        114  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     1,670        1,534        4,860        4,526  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses

           

Compensation and benefits

     347        324        1,034        1,050  

Fuel

     249        226        793        742  

Materials

     47        36        146        115  

Equipment rents

     36        44        117        134  

Depreciation and amortization

     135        139        413        421  

Purchased services and other

     235        241        726        758  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     1,049        1,010        3,229        3,220  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     621        524        1,631        1,306  

Less:

           

Other income and charges

     1        —          4        11  

Net interest expense

     70        70        209        208  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     550        454        1,418        1,087  

Income tax expense (Note 4)

     150        130        393        294  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 400      $ 324      $ 1,025      $ 793  
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share (Note 5)

           

Basic earnings per share

   $ 2.33      $ 1.85      $ 5.90      $ 4.54  

Diluted earnings per share

   $ 2.31      $ 1.84      $ 5.84      $ 4.50  

Weighted-average number of shares (in millions) (Note 5)

           

Basic

     171.9        175.1        173.9        174.8  

Diluted

     173.5        176.5        175.5        176.3  

Dividends declared per share

   $ 0.3500      $ 0.3500      $ 1.0500      $ 1.0500  

Certain of the comparative figures have been reclassified in order to be consistent with the 2014 presentation. (Note 13)

See Notes to Interim Consolidated Financial Statements.

 

3


CANADIAN PACIFIC RAILWAY LIMITED

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions of Canadian dollars)

(unaudited)

 

    

For the three months

ended September 30

   

For the nine months

ended September 30

 
     2014     2013     2014     2013  

Net income

   $ 400     $ 324     $ 1,025     $ 793  

Net (loss) gain in foreign currency translation adjustments, net of hedging activities

     (26     2       (19     (1

Change in derivatives designated as cash flow hedges

     —         —         (2     —    

Change in defined benefit pension and post-retirement plans

     31       50       93       299  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income before income taxes

     5       52       72       298  

Income tax benefit recovery (expense)

     15       (22     (1     (63
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (Note 3)

     20       30       71       235  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 420     $ 354     $ 1,096     $ 1,028  
  

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Interim Consolidated Financial Statements.

 

4


CANADIAN PACIFIC RAILWAY LIMITED

 

INTERIM CONSOLIDATED BALANCE SHEETS AS AT,

(in millions of Canadian dollars)

(unaudited)

 

     September 30
2014
    December 31
2013
 

Assets

    

Current assets

    

Cash and cash equivalents

   $ 315     $ 476  

Restricted cash and cash equivalents

     84       411  

Accounts receivable, net

     739       580  

Materials and supplies

     168       165  

Deferred income taxes

     164       344  

Other current assets

     68       53  
  

 

 

   

 

 

 
     1,538       2,029  

Investments

     107       92  

Properties

     14,040       13,327  

Assets held for sale (Note 6)

     —         222  

Goodwill and intangible assets

     170       162  

Pension asset

     1,210       1,028  

Other assets

     160       200  
  

 

 

   

 

 

 

Total assets

   $ 17,225     $ 17,060  
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Current liabilities

    

Accounts payable and accrued liabilities

   $ 1,213     $ 1,189  

Long-term debt maturing within one year

     132       189  
  

 

 

   

 

 

 
     1,345       1,378  

Pension and other benefit liabilities

     657       657  

Other long-term liabilities

     399       338  

Long-term debt

     4,752       4,687  

Deferred income taxes

     2,980       2,903  
  

 

 

   

 

 

 

Total liabilities

     10,133       9,963  

Shareholders’ equity (Note 7)

    

Share capital

     2,240       2,240  

Additional paid-in capital

     35       34  

Accumulated other comprehensive loss (Note 3)

     (1,432     (1,503

Retained earnings

     6,249       6,326  
  

 

 

   

 

 

 
     7,092       7,097  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 17,225     $ 17,060  
  

 

 

   

 

 

 

Contingencies (Note 12)

See Notes to Interim Consolidated Financial Statements.

 

5


CANADIAN PACIFIC RAILWAY LIMITED

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions of Canadian dollars)

(unaudited)

 

     For the three months
ended September 30
    For the nine months
ended September 30
 
         2014             2013             2014             2013      

Operating activities

        

Net income

   $ 400     $ 324     $ 1,025     $ 793  

Reconciliation of net income to cash provided by operating activities:

        

Depreciation and amortization

     135       139       413       421  

Deferred income taxes (Note 4)

     120       110       194       260  

Pension funding in excess of expense (Note 11)

     (38     (17     (103     (40

Other operating activities, net

     (1     (21     39       (40

Change in non-cash working capital balances related to operations

     (82     (31     (102     (103
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by operating activities

     534       504       1,466       1,291  
  

 

 

   

 

 

   

 

 

   

 

 

 

Investing activities

        

Additions to properties

     (414     (298     (936     (802

Proceeds from the sale of west end of Dakota, Minnesota and Eastern Railroad (Note 6)

     —         —         236       —    

Proceeds from the sale of properties and other assets

     10       11       26       38  

Change in restricted cash and cash equivalents used to collateralize letters of credit

     318       (247     327       (346

Other

     1       (1     —         (27
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in investing activities

     (85     (535     (347     (1,137
  

 

 

   

 

 

   

 

 

   

 

 

 

Financing activities

        

Dividends paid

     (61     (62     (184     (183

Issuance of CP common shares

     14       6       50       69  

Purchase of CP common shares (Note 7)

     (455     —         (987     —    

Repayment of long-term debt

     (21     (19     (175     (45

Settlement of foreign exchange forward on long-term debt (Note 9)

     17       —         17       —    

Other

     (3     —          (3     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in financing activities

     (509     (75     (1,282     (159
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of foreign currency fluctuations on U.S. dollar- denominated cash and cash equivalents

     6       (7     2       1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash position

        

Decrease in cash and cash equivalents

     (54     (113     (161     (4

Cash and cash equivalents at beginning of period

     369       442       476       333  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 315     $ 329     $ 315     $ 329  
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

        

Income taxes paid

   $ 103     $ 16     $ 142     $ 27  

Interest paid

   $ 60     $ 58     $ 220     $ 209  

See Notes to Interim Consolidated Financial Statements.

 

6


CANADIAN PACIFIC RAILWAY LIMITED

 

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in millions of Canadian dollars, except common share amounts)

(unaudited)

 

     Common
shares
(in millions)
    Share
capital
    Additional
paid-in
capital
    Accumulated
other
comprehensive
loss
    Retained
earnings
    Total
shareholders’
equity
 

Balance at January 1, 2014

     175.4     $ 2,240     $ 34     $ (1,503   $ 6,326     $ 7,097  

Net income

     —         —         —         —         1,025       1,025  

Other comprehensive income (Note 3)

     —         —         —         71       —         71  

Dividends declared

     —         —         —         —         (183     (183

Effect of stock-based compensation expense

     —         —         16       —         —         16  

CP common shares repurchased (Note 7)

     (5.3     (68     —         —         (919     (987

Shares issued under stock option plans (Note 10)

     0.9       68       (15     —         —         53  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2014

     171.0     $ 2,240     $ 35     $ (1,432   $ 6,249     $ 7,092  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Common
shares
(in millions)
     Share
capital
     Additional
paid-in
capital
    Accumulated
other
comprehensive
loss
    Retained
earnings
    Total
shareholders’
equity
 

Balance at January 1, 2013

     173.9      $ 2,127      $ 41     $ (2,768   $ 5,697     $ 5,097  

Net income

     —          —          —         —         793       793  

Other comprehensive income (Note 3)

     —          —          —         235       —         235  

Dividends declared

     —          —          —         —         (185     (185

Effect of stock-based compensation expense

     —          —          14       —         —         14  

Shares issued under stock option plans (Note 10)

     1.3        94        (20     —         —         74  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013

     175.2      $ 2,221      $ 35     $ (2,533   $ 6,305     $ 6,028  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Interim Consolidated Financial Statements.

 

7


CANADIAN PACIFIC RAILWAY LIMITED

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

1 Basis of presentation

These unaudited interim consolidated financial statements of Canadian Pacific Railway Limited (“CP”, or the “Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2013 annual consolidated financial statements. The accounting policies used are consistent with the accounting policies used in preparing the 2013 annual consolidated financial statements.

CP’s operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons.

In management’s opinion, the unaudited interim consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.

 

2 Future accounting changes

Reporting discontinued operations and disclosures of disposals of components

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, an amendment to FASB Accounting Standards Codification (“ASC”) Topic 205 and Topic 360. The update amends the definition of a discontinued operation in Topic 205, expands disclosure requirements for transactions that meet the definition of a discontinued operation and requires entities to disclose information about individually significant components that are disposed of or held for sale and do not qualify as discontinued operations. In addition, an entity is required to separately present assets and liabilities of a discontinued operation for all comparative periods and separately present assets and liabilities of assets held for sale in the initial period in which the disposal group is classified as held for sale on the face of the consolidated balance sheets. For each period in which assets and liabilities are separately presented on the consolidated balance sheets, those amounts should not be offset and presented as a single amount. This ASU will be effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2014, and will be applied prospectively. The adoption of this ASU is not expected to have a material impact to the Company’s financial statements.

Revenue from contracts with customers

In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a new FASB ASC, Topic 606, which supersedes the revenue recognition requirements in Topic 605 and most industry-specific guidance throughout the Industry Topics of the Codification. This new standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires enhanced disclosures about revenue to help users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This ASU will be effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2016. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the ASU. The Company has not, at this time, ascertained the full impact on the consolidated financial statements from the adoption of this new standard but does not expect the impact to be material.

 

8


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

3 Changes in accumulated other comprehensive loss (“AOCL”) by component

 

     For the three months ended September 30     For the nine months ended September 30  
(in millions of Canadian dollars)    Foreign
currency
net of
hedging
activities(1)
    Derivatives
and other(1)
    Pension
and post-
retirement
defined
benefit
plans(1)(2)
    Total(1)     Foreign
currency
net of
hedging
activities(1)
     Derivatives
and other(1)
    Pension
and post-
retirement
defined
benefit
plans(1)(2)
    Total(1)  

Opening balance, 2014

   $ 114      $ (18   $ (1,548   $ (1,452   $ 105       $ (15   $ (1,593   $ (1,503
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

     (4     —         —         (4     5        —         —         5  

Amounts reclassified from accumulated other comprehensive loss (income)

     —         —         24       24       —          (3     69       66  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) income

     (4     —         24       20       5        (3     69       71  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Closing balance, 2014

   $ 110      $ (18   $ (1,524   $ (1,432   $ 110       $ (18   $ (1,524   $ (1,432
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Opening balance, 2013

   $ 94      $ (14   $ (2,643   $ (2,563   $ 74       $ (14   $ (2,828   $ (2,768
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before reclassifications

     (7     (7     —          (14     13        8       102       123  

Amounts reclassified from accumulated other comprehensive loss (income)

     —          7       37       44       —           (8     120       112  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net current-period other comprehensive (loss) income

     (7 )     —         37       30       13        —          222       235  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Closing balance, 2013

   $ 87      $ (14   $ (2,606   $ (2,533   $ 87       $ (14   $ (2,606   $ (2,533
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) Amounts are presented net of tax.
(2) Reclassified from Accumulated other comprehensive loss.

Amounts in Pension and post-retirement defined benefit plans reclassified from Accumulated other comprehensive loss

 

     For the three months
ended September 30
    For the nine months
ended September 30
 
(in millions of Canadian dollars)    2014     2013     2014     2013  

Amortization of prior service costs(1)

   $ (17   $ (18   $ (51   $ (41

Recognition of net actuarial loss(1)

     48       68       144       205  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total before income tax

     31       50       93       164  

Income tax recovery

     (7     (13     (24     (44
  

 

 

   

 

 

   

 

 

   

 

 

 

Net of income tax

   $ 24     $ 37     $ 69     $ 120  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Impacts Compensation and benefits on the Interim Consolidated Statements of Income.

 

9


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

4 Income taxes

 

    

For the three months

ended September 30

    

For the nine months

ended September 30

 
(in millions of Canadian dollars)    2014      2013      2014      2013  

Current income tax expense

   $ 30      $ 20      $ 199      $ 34  

Deferred income tax expense

     120        110        194        260  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense

   $ 150      $ 130      $ 393      $ 294  
  

 

 

    

 

 

    

 

 

    

 

 

 

The effective income tax rate for the three and nine months ended September 30, 2014 were 27.2% and 27.7%, respectively (three and nine months ended September 30, 2013 – 28.6% and 27.1%, respectively). The changes in tax rates were primarily due to the impact of a change in the province of British Columbia’s corporate income tax rate in the third quarter of 2013, which was partially offset by the benefit recognized for the 2012 U.S. federal track maintenance credit of $6 million enacted in the first quarter of 2013.

 

5 Earnings per share

At September 30, 2014, the number of shares outstanding was 171.0 million (September 30, 2013 – 175.2 million).

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

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

 

     For the three months
ended September 30
     For the nine months
ended September 30
 
(in millions)    2014      2013      2014      2013  

Weighted-average basic shares outstanding

     171.9        175.1        173.9        174.8  

Dilutive effect of stock options

     1.6        1.4        1.6        1.5  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average diluted shares outstanding

     173.5        176.5        175.5        176.3  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three and nine months ended September 30, 2014, there were 15,980 options and 82,146 options, respectively, excluded from the computation of diluted earnings per share because their effects were not dilutive (three and nine months ended September 30, 2013 – 8,800 and 38,872, respectively).

 

6 Assets held for sale

On May 30, 2014, the Company completed the sale of the west end of Dakota, Minnesota and Eastern (“DM&E West”) to Genesee & Wyoming Inc. (“G&W”) for net proceeds of U.S. $218 million (CDN $236 million). The Company and G&W are currently in the process of finalizing closing adjustments.

 

7 Shareholders’ equity

On February 20, 2014, the Board of Directors of the Company approved a share repurchase program, and in March 2014, the Company filed a new normal course issuer bid (“bid”) to purchase, for cancellation, up to 5.3 million of its outstanding Common Shares. On September 29, 2014, the Company announced the amendment of the bid to increase the maximum number of its Common Shares that may be purchased from 5.3 million to 12.7 million of its outstanding Commons Shares, effective October 2, 2014. Under the filing, share purchases may be made during the twelve months period that began March 17, 2014, and ends March 16, 2015. The purchases are made at the market price on the day of purchase, with consideration allocated to share capital up to the average carrying amount of the shares, and any excess allocated to retained earnings.

 

10


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

7 Shareholders’ equity (continued)

 

The following table provides the activities under the share repurchase program:

 

     For the three months
ended September 30
     For the nine months
ended September 30
 
     2014      2014  

Number of common shares repurchased

     2,000,392        5,270,374  

Weighted-average price per share(1)

   $ 210.91      $ 187.33  

Amount of repurchase (in millions)(1)

   $ 422      $ 987  
  

 

 

    

 

 

 

 

  (1)  Includes brokerage fees.

 

8 Revolving credit facility

At September 26, 2014, the Company terminated its existing revolving credit facility agreement dated as of November 29, 2013. On the same day, CP entered into a new revolving credit facility (the “facility”) agreement with 15 highly rated financial institutions for a commitment amount of U.S. $2 billion. The facility includes a U.S. $1 billion five years portion and a U.S. $1 billion one year plus one year term out portion. The facility can accommodate draws of cash and/or letters of credit at market competitive pricing. At September 30, 2014, the facility is undrawn. The facility agreement requires the Company not to exceed a maximum debt to total capitalization ratio. At September 30, 2014, the Company satisfied this threshold stipulated in the financial covenant.

 

9 Financial instruments

 

  A. Fair values of financial instruments

The Company categorizes its financial assets and liabilities measured at fair value in line with the fair value hierarchy established by GAAP that prioritizes, with respect to reliability, the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets and liabilities and give the highest priority to these inputs. Level 2 and 3 inputs are based on significant other observable inputs and significant unobservable inputs, respectively, and give lower priority to these inputs.

When possible, the estimated fair value is based on quoted market prices and, if not available, estimates from third party brokers. For non-exchange traded derivatives classified in Level 2, the Company uses standard valuation techniques to calculate fair value. Primary inputs to these techniques include observable market prices (interest, foreign exchange and commodity) and volatility, depending on the type of derivative and nature of the underlying risk. The Company uses inputs and data used by willing market participants when valuing derivatives and considers its own credit default swap spread as well as those of its counterparties in its determination of fair value.

The carrying values of financial instruments equal or approximate their fair values with the exception of long-term debt which has a fair value of approximately $5,952 million at September 30, 2014 (December 31, 2013 - $5,572 million) and a carrying value of $4,884 million at September 30, 2014 (December 31, 2013 – $4,876 million). The estimated fair value of current and long-term borrowings has been determined based on market information where available, or by discounting future payments of interest and principal at estimated interest rates expected to be available to the Company at period end. All derivatives and long-term debt are classified as Level 2.

 

  B. Financial risk management

Derivative financial instruments

Derivative financial instruments may be used to selectively reduce volatility associated with fluctuations in interest rates, foreign exchange (“FX”) rates, the price of fuel and stock-based compensation expense. Where derivatives are designated as hedging instruments, the relationship between the hedging instruments and their associated hedged items is documented, as well as the risk management objective and strategy for the use of the hedging instruments. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the Consolidated Balance Sheet, commitments or forecasted transactions. At the time a derivative contract is entered into and at least quarterly thereafter, an assessment is made whether the derivative item is effective in offsetting the changes in fair value or cash flows of the hedged items. The derivative qualifies for hedge accounting treatment if it is effective in substantially mitigating the risk it was designed to address.

 

11


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

9 Financial instruments (continued)

 

It is not the Company’s intent to use financial derivatives or commodity instruments for trading or speculative purposes.

Foreign exchange management

The Company conducts business transactions and owns assets in both Canada and the United States. As a result, the Company is exposed to fluctuations in value of financial commitments, assets, liabilities, income or cash flows due to changes in FX rates. The Company may enter into foreign exchange risk management transactions primarily to manage fluctuations in the exchange rate between Canadian and U.S. currencies. FX exposure is primarily mitigated through natural offsets created by revenues, expenditures and balance sheet positions incurred in the same currency. Where appropriate, the Company may negotiate with customers and suppliers to reduce the net exposure.

Occasionally the Company may enter into short-term FX forward contracts as part of its cash management strategy.

Net investment hedge

The FX gains and losses on long-term debt are mainly unrealized and can only be realized when U.S. dollar denominated long-term debt matures or is settled. The Company also has long-term FX exposure on its investment in U.S. affiliates. The majority of the Company’s U.S. dollar denominated long-term debt has been designated as a hedge of the net investment in foreign subsidiaries. This designation has the effect of mitigating volatility on net income by offsetting long-term FX gains and losses on U.S. dollar denominated long-term debt and gains and losses on its net investment. The effective portion recognized in “Other comprehensive income” for the three and nine months ended September 30, 2014 was an unrealized foreign exchange loss of $175 million and $186 million, respectively (three and nine months ended September 30, 2013 unrealized foreign exchange gain of $65 million and a loss of $112 million, respectively). There was no ineffectiveness during the three and nine months ended September 30, 2014 and comparative periods.

Foreign exchange forward contracts

The Company may enter into FX forward contracts to lock in the amount of Canadian dollars it has to pay on its U.S. denominated debt maturities.

At September 30, 2014, the Company had no remaining FX forward contracts to fix the exchange rate on US denominated debt maturities. At December 31, 2013, the Company had FX forward contracts to fix the exchange rate on U.S. $100 million of principal outstanding on a capital lease due in January 2014, U.S. $175 million of its 6.50% Notes due in May 2018, and U.S. $100 million of its 7.25% Notes due in May 2019. These derivatives, which were accounted for as cash flow hedges, guaranteed the amount of Canadian dollars that the Company would repay when these obligations mature.

During the three months ended March 31, 2014, the Company settled the FX forward contract related to the repayment of a capital lease due in January 2014 for proceeds of $8 million.

During the three months ended June 30, 2014, the Company de-designated and settled prior to maturity the FX forward contracts related to the repayment of its 6.50% Notes due in May 2018 and its 7.25% Notes due in May 2019 for proceeds of $17 million settled in the third quarter of 2014 with the offset recorded as realized gains of $3 million in “Accumulated other comprehensive loss” and $14 million in “Retained earnings”. Amounts remaining in “Accumulated other comprehensive loss” are being amortized to “Other income and charges” until the underlying debts, which were hedged, are repaid.

During the three months ended September 30, 2014, the amount being amortized to “Other income and charges” is not significant.

During the three and nine months ended September 30, 2014, the combined realized and unrealized foreign exchange gain was $nil and $3 million, respectively (three and nine months ended September 30, 2013 – unrealized loss of $6 million and unrealized gain of $9 million, respectively), were recorded in “Other income and charges” in relation to these settled derivatives. Gains recorded in “Other income and charges” were largely offset by losses on the underlying debt which the settled derivatives were designated to hedge. Similarly, losses were largely offset by gains on the underlying debt.

At December 31, 2013, the unrealized gains derived from these FX forwards was $25 million of which $6 million was included in “Other current assets” and $19 million in “Other assets” with the offsets reflected as unrealized gains of $5 million in “Accumulated other comprehensive loss” and $20 million in “Retained earnings”.

At September 30, 2014, the Company expected that, during the next twelve months, a pre-tax gain of $1 million would be reclassified to “Other income and charges”.

 

12


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

10 Stock-based compensation

At September 30, 2014, the Company had several stock-based compensation plans, including stock option plans, various cash settled liability plans and an employee stock savings plan. These plans resulted in an expense of $42 million and $102 million for the three and nine months ended September 30, 2014, respectively (three and nine months ended September 30, 2013 - an expense of $9 million and $52 million, respectively).

Regular options

In the nine months ended September 30, 2014, under CP’s stock option plans, the Company issued 424,440 regular options at the weighted-average price of $173.81 per share, based on the closing price on the grant date.

Pursuant to the employee plans, these regular options may be exercised upon vesting, which is between 12 and 48 months after the grant date, and will expire after 10 years.

Under the fair value method, the fair value of the regular options at the grant date was $21 million. The weighted-average fair value assumptions were approximately:

 

     For the nine months
ended September, 30 2014
 
  

Grant price

   $ 173.81  

Expected option life (years)(1)

     5.96  

Risk-free interest rate(2)

     1.66

Expected stock price volatility(3)

     28.70

Expected annual dividends per share(4)

   $ 1.40  

Expected forfeiture rate(5)

     1.20

Weighted-average grant date fair value per regular options granted during the period

   $ 48.68   
  

 

 

 

 

(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 remaining term at the time of the grant.
(3)  Based on the historical stock price volatility of the Company’s stock 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 estimated forfeitures based on past experience. This rate is monitored on a periodic basis.

Performance share unit (“PSU”) plan

In the nine months ended September 30, 2014, the Company issued 165,500 PSUs with a grant date fair value of approximately $25 million. These units attract dividend equivalents in the form of additional units based on the dividends paid on the Company’s Common Shares. PSUs vest and are settled in cash, or in CP common shares approximately three years after the grant date, contingent upon CP’s performance (“performance factor”). The fair value of PSUs is measured, both on the grant date and each subsequent quarter until settlement, utilizing a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the performance factor and market conditions stipulated in the grant.

Deferred share unit (“DSU”) plan

In the nine months ended September 30, 2014, the Company granted 52,169 DSUs with a grant date fair value of approximately $9 million. DSUs vest over various periods of up to 48 months and are only redeemable for a specified period after employment is terminated. An expense to income for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods.

Restricted share unit (“RSU”) plan

In the nine months ended September 30, 2014, the Company granted 15,918 RSUs with a grant date fair value of approximately $3 million. RSUs are subject to time vesting over 36 months. An expense to income for RSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods.

 

13


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

11 Pensions and other benefits

In the three and nine months ended September 30, 2014, the Company made contributions of $25 million and $64 million, respectively (three and nine months ended September 30, 2013 — $24 million and $76 million, respectively), to its defined benefit pension plans. The net periodic benefit cost for defined benefit pension plans and other benefits recognized in the three and nine months ended September 30, 2014 included the following components:

 

    

For the three months

ended September 30

 
   Pensions     Other benefits  
(in millions of Canadian dollars)    2014     2013     2014      2013  

Current service cost (benefits earned by employees in the period)

   $ 27     $ 34     $ 4      $ 4  

Interest cost on benefit obligation

     120       111       5        5  

Expected return on fund assets

     (190     (186     —          —    

Recognized net actuarial loss (gain)

     47       66       1        (2

Amortization of prior service costs

     (17     (18     —          —    
  

 

 

   

 

 

   

 

 

    

 

 

 

Net periodic (recovery) benefit cost

   $ (13   $ 7     $ 10      $ 7  
  

 

 

   

 

 

   

 

 

    

 

 

 

 

     For the nine months  
     ended September 30  
     Pensions     Other benefits  
(in millions of Canadian dollars)    2014     2013     2014      2013  

Current service cost (benefits earned by employees in the period)

   $ 80     $ 102     $ 11      $ 12  

Interest cost on benefit obligation

     358       334       17        16  

Expected return on fund assets

     (568     (559     —          —    

Recognized net actuarial loss

     142       200       2        1  

Amortization of prior service costs

     (51     (41     —          —    
  

 

 

   

 

 

   

 

 

    

 

 

 

Net periodic (recovery) benefit cost

   $ (39   $ 36     $ 30      $ 29  
  

 

 

   

 

 

   

 

 

    

 

 

 

 

12 Contingencies

In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damages to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending at September 30, 2014 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company’s financial position or results of operations individually and in aggregate.

Legal proceedings related to Lac-Mégantic rail accident

On July 6, 2013, a train carrying crude oil operated by Montreal Maine and Atlantic Railway (“MM&A”) derailed and exploded in Lac-Mégantic, Quebec on a section of railway line owned by MM&A. The previous day CP had interchanged the train to MM&A, and after that interchange MM&A exercised exclusive control over the train.

Following this incident, the Minister of Sustainable Development, Environment, Wildlife and Parks of Quebec issued an order directing certain named parties to recover the contaminants and to clean up and decontaminate the derailment site. CP was added as a named party on August 14, 2013. CP is a party to an administrative appeal with respect to this order.

 

14


CANADIAN PACIFIC RAILWAY LIMITED

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(unaudited)

 

12 Contingencies (continued)

 

A class action lawsuit has also been filed in the Superior Court of Quebec on behalf of a class of persons and entities residing in, owning or leasing property in, operating a business in or physically present in Lac-Mégantic. The lawsuit seeks damages caused by the derailment including for wrongful deaths, personal injuries, and property damages. CP was added as a defendant on August 16, 2013. In the wake of the derailment and ensuing litigation, MM&A filed for bankruptcy in Canada and the United States.

At this early stage in the legal proceedings, any potential liability and the quantum of potential loss cannot be determined. Nevertheless, CP denies liability for MM&A’s derailment and will vigorously defend itself in both proceedings and any proceeding that may be commenced in the future.

Environmental liabilities

Environmental remediation accruals cover site-specific remediation programs. Environmental remediation accruals are measured on an undiscounted basis unless a reliably determinable estimate as to amount and timing of costs can be established. The accruals are recorded when the costs to remediate are probable and reasonably estimable. Certain future costs to monitor sites are discounted at a risk free rate.

The accruals for environmental remediation represent CP’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 CP’s best estimate of all probable costs, CP’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, 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, are not expected to be material to CP’s financial position, but 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” for the three and nine months ended September 30, 2014 was $1 million and $2 million, respectively (three and nine months ended September 30, 2013 — $4 million and $5 million, respectively). Provisions for environmental remediation costs are recorded in “Other long-term liabilities”, except for the current portion which is recorded in “Accounts payable and accrued liabilities”. The total amount provided at September 30, 2014 was $91 million (December 31, 2013 — $90 million). Payments are expected to be made over 10 years to 2024.

 

13 Reclassification of comparative figures

Billings to third parties for the recovery of costs incurred for freight car repairs and servicing have been reclassified from “Purchased services and other” to “Compensation and benefits” and “Materials” within “Operating expenses”, in order to match the billings with the costs incurred on behalf of third parties. As a result, the changes to these components of “Operating expenses” for the three and nine months ended September 30, 2013 are noted below. “Operating expenses” in total were unchanged as a result of this reclassification.

 

(in millions of Canadian dollars)    Compensation
and benefits
    Materials     Purchased
services and

other
 

For the three months ended September 30, 2013

      

As previously reported

   $ 331     $ 54     $ 216  

(Decrease) increase

     (7     (18     25  
  

 

 

   

 

 

   

 

 

 

As reclassified

   $ 324     $ 36     $ 241  
  

 

 

   

 

 

   

 

 

 

For the nine months ended September 30, 2013

      

As previously reported

   $ 1,075     $ 184     $ 664  

(Decrease) increase

     (25     (69     94  
  

 

 

   

 

 

   

 

 

 

As reclassified

   $ 1,050     $ 115     $ 758  
  

 

 

   

 

 

   

 

 

 

 

15


LOGO

 

Summary of Rail Data

 

Third Quarter          Year-to-date  

    2014    

     2013      Change     %          2014      2013      Change     %  
          Financial (millions, except per share data)           
          Revenues           
$ 1,629      $ 1,495      $ 134       9     

Freight revenue

   $ 4,745      $ 4,412      $ 333       8  
  41        39        2       5     

Other revenue

     115        114        1       1  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  1,670        1,534        136       9      Total revenues      4,860        4,526        334       7  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
          Operating expenses           
  347        324        23       7     

Compensation and benefits(1)

     1,034        1,050        (16     (2
  249        226        23       10     

Fuel

     793        742        51       7  
  47        36        11       31     

Materials(1)

     146        115        31       27  
  36        44        (8     (18  

Equipment rents

     117        134        (17     (13
  135        139        (4     (3  

Depreciation and amortization

     413        421        (8     (2
  235        241        (6     (2  

Purchased services and other(1)

     726        758        (32     (4

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  1,049        1,010        39       4      Total operating expenses      3,229        3,220        9       —    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  621        524        97       19      Operating income      1,631        1,306        325       25  
          Less:           
  1        —          1      

- Other income and charges

     4        11        (7     (64
  70        70        —        

- Net interest expense

     209        208        1       —    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  550        454        96       21      Income before income tax expense      1,418        1,087        331       30  
  150        130        20       15     

Income tax expense

     393        294        99        34   

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
$ 400      $ 324      $ 76       23      Net income    $ 1,025      $ 793      $ 232       29  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  62.8        65.9        (3.1     (310 )bps    Operating ratio (%)      66.4        71.1        (4.7     (470 ) bps 
$ 2.33      $ 1.85      $ 0.48       26     

Basic earnings per share

   $ 5.90      $ 4.54      $ 1.36       30  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
$ 2.31      $ 1.84      $ 0.47       26     

Diluted earnings per share

   $ 5.84      $ 4.50      $ 1.34       30  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
          Shares Outstanding           
  171.9        175.1        (3.2     (2   Weighted average number of shares outstanding (millions)      173.9        174.8        (0.9     (1
  173.5        176.5        (3.0     (2   Weighted average number of diluted shares outstanding (millions)      175.5        176.3        (0.8     —    
          Foreign Exchange           
  0.93        0.96        (0.03     (3   Average foreign exchange rate (US$/Canadian$)      0.92        0.98        (0.06     (6
  1.08        1.04        0.04       4      Average foreign exchange rate (Canadian$/US$)      1.09        1.02        0.07       7  

 

(1)  Billings to third parties for the recovery of costs incurred for freight car repairs and servicing have been reclassified from Purchased services and other to Compensation and benefits and Materials within Operating expenses.

 

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Summary of Rail Data (Page 2)

 

Third Quarter          Year-to-date  
2014      2013      Change     %          2014      2013      Change     %  
          Commodity Data           
         

Freight Revenues (millions)

          
$ 248      $ 212      $ 36       17     

- Canadian Grain

   $ 721      $ 606      $ 115       19  
  127        107        20       19     

- U.S. Grain

     348        309        39       13  
  150        177        (27     (15  

- Coal

     463        470        (7     (1
  70        66        4       6     

- Potash

     251        243        8       3  
  55        63        (8     (13  

- Fertilizers and sulphur

     173        201        (28     (14
  52        51        1       2     

- Forest products

     152        157        (5     (3
  160        142        18       13     

- Chemicals and plastics

     462        419        43       10  
  136        78        58       74     

- Crude

     354        267        87       33  
  190        164        26       16     

- Metals, minerals, and consumer products

     521        449        72       16  
  83        95        (12     (13  

- Automotive

     275        298        (23     (8
  202        170        32       19     

- Domestic intermodal

     579        511        68       13  
  156        170        (14     (8  

- International intermodal

     446        482        (36     (7

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
$ 1,629      $ 1,495      $ 134       9     

Total Freight Revenues

   $ 4,745      $ 4,412      $ 333       8  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
         

Millions of Revenue Ton-Miles (RTM)

          
  6,790        5,363        1,427       27     

- Canadian Grain

     19,710        16,010        3,700       23  
  3,011        2,501        510       20     

- U.S. Grain

     8,229        7,967        262       3  
  5,422        6,440        (1,018     (16  

- Coal

     16,804        17,396        (592     (3
  2,812        2,583        229       9     

- Potash

     10,219        10,473        (254     (2
  915        1,179        (264     (22  

- Fertilizers and sulphur

     3,119        3,847        (728     (19
  1,036        1,093        (57     (5  

- Forest products

     2,959        3,583        (624     (17
  3,409        3,218        191       6     

- Chemicals and plastics

     9,941        10,187        (246     (2
  4,625        2,894        1,731       60     

- Crude

     11,799        10,025        1,774       18  
  2,993        2,825        168       6     

- Metals, minerals, and consumer products

     8,404        7,675        729       9  
  420        533        (113     (21  

- Automotive

     1,531        1,766        (235     (13
  3,076        2,565        511       20     

- Domestic intermodal

     8,713        7,628        1,085       14  
  3,040        3,490        (450     (13  

- International intermodal

     8,925        10,281        (1,356     (13
                    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  37,549        34,684        2,865       8     

Total RTMs

     110,353        106,838        3,515       3  

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
         

Freight Revenue per RTM (cents)

          
  3.65        3.96        (0.31     (8  

- Canadian Grain

     3.66        3.78        (0.12     (3
  4.22        4.26        (0.04     (1  

- U.S. Grain

     4.23        3.88        0.35       9  
  2.76        2.76        —         —      

- Coal

     2.76        2.70        0.06       2  
  2.51        2.64        (0.13     (5  

- Potash

     2.46        2.32        0.14       6  
  6.06        5.32        0.74       14     

- Fertilizers and sulphur

     5.56        5.23        0.33       6  
  5.01        4.66        0.35       8     

- Forest products

     5.13        4.38        0.75       17  
  4.68        4.40        0.28       6     

- Chemicals and plastics

     4.65        4.10        0.55       13  
  2.93        2.69        0.24       9     

- Crude

     3.00        2.66        0.34       13  
  6.36        5.83        0.53       9     

- Metals, minerals, and consumer products

     6.20        5.86        0.34       6  
  19.74        17.70        2.04       12     

- Automotive

     17.99        16.86        1.13       7  
  6.57        6.63        (0.06     (1  

- Domestic intermodal

     6.65        6.69        (0.04     (1
  5.11        4.86        0.25       5     

- International intermodal

     4.99        4.68        0.31       7  
  4.34        4.31        0.03       1     

Total Freight Revenue per RTM

     4.30        4.13        0.17       4  

 

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Summary of Rail Data (Page 3)

 

Third Quarter          Year-to-date  
2014      2013      Change     %          2014      2013      Change     %  
                    
         

Carloads (thousands)

          
  76        61        15       25     

- Canadian Grain

     216        181        35       19  
  44        45        (1     (2  

- U.S. Grain

     127        136        (9     (7
  73        90        (17     (19  

- Coal

     233        246        (13     (5
  24        24        —         —       

- Potash

     85        89        (4     (4
  15        17        (2     (12  

- Fertilizers and sulphur

     46        55        (9     (16
  15        15        —         —       

- Forest products

     44        51        (7     (14
  52        49        3       6     

- Chemicals and plastics

     146        148        (2     (1
  31        19        12       63     

- Crude

     80        65        15       23  
  71        61        10       16     

- Metals, minerals, and consumer products

     187        173        14       8  
  33        35        (2     (6  

- Automotive

     100        108        (8     (7
  111        93        18       19     

- Domestic intermodal

     318        275        43       16  
  142        166        (24     (14  

- International intermodal

     412        475        (63     (13

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
  687        675        12       2     

Total Carloads

     1,994        2,002        (8     —    

 

 

    

 

 

    

 

 

        

 

 

    

 

 

    

 

 

   
         

Freight Revenue per Carload

          
  $3,264      $ 3,512      $ (248     (7  

- Canadian Grain

   $ 3,336      $ 3,350        (14     —    
  2,878        2,360        518       22     

- U.S. Grain

     2,746        2,270        476       21  
  2,040        1,952        88       5     

- Coal

     1,987        1,912        75       4  
  2,917        2,842        75       3     

- Potash

     2,951        2,728        223       8  
  3,835        3,834        1       —       

- Fertilizers and sulphur

     3,790        3,670        120       3  
  3,426        3,145        281       9     

- Forest products

     3,443        3,096        347       11  
  3,097        2,899        198       7     

- Chemicals and plastics

     3,176        2,825        351       12  
  4,436        4,072        364       9     

- Crude

     4,446        4,107        339       8  
  2,697        2,700        (3     —       

- Metals, minerals, and consumer products

     2,785        2,599        186       7  
  2,519        2,747        (228     (8  

- Automotive

     2,741        2,747        (6     —    
  1,819        1,820        (1     —       

- Domestic intermodal

     1,823        1,857        (34     (2
  1,090        1,024        66       6     

- International intermodal

     1,079        1,014        65       6  
  $2,372      $ 2,214      $ 158       7     

Total Freight Revenue per Carload

   $ 2,380      $ 2,204        176       8  

 

18


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Summary of Rail Data (Page 4)

 

Third Quarter          Year-to-date  
2014      2013(1)      Change     %          2014      2013(1)      Change     %  
          Operations Performance           
  69,430        64,188        5,242       8     Freight gross ton-miles (millions)      203,112        199,098        4,014       2  
  37,549        34,684        2,865       8     Revenue ton-miles (millions)      110,353        106,838        3,515       3  
  8,990        8,837        153       2     Train miles (thousands)      27,052        28,476        (1,424     (5
  8,264        7,817        447       6     Average train weight — excluding local traffic (tons)      8,037        7,485        552       7  
  6,912        6,746        166       2     Average train length — excluding local traffic (feet)      6,726        6,485        241       4  
  8.1        7.2        0.9       13     Average terminal dwell — (hours)      8.9        6.9        2.0       29  
  18.8        19.1        (0.3     (2   Average train speed — (mph)(2)      17.6        18.6        (1.0     (5
  225.9        217.7        8.2       4     Locomotive productivity (daily average GTMs/active HP)      219.6        213.6        6.0       3  
  0.99        1.02        (0.03     (3   Fuel efficiency(3)      1.03        1.07        (0.04     (4
  68.0        64.7        3.3       5     U.S. gallons of locomotive fuel consumed (millions)(4)      206.7        210.3        (3.6     (2
  3.39        3.34        0.05       1     Average fuel price (U.S. dollars per U.S. gallon)      3.52        3.45        0.07       2  
  14,699        14,974        (275     (2   Total employees (average)(5)      14,577        15,122        (545     (4
  14,659        14,766        (107     (1   Total employees (end of period)(5)      14,659        14,766        (107     (1
  14,944        15,318        (374     (2   Workforce (end of period)(6)      14,944        15,318        (374     (2
          Safety           
  1.65        1.82        (0.17     (9   FRA personal injuries per 200,000 employee-hours      1.66        1.70        (0.04     (2
  1.62        1.83        (0.21     (11   FRA train accidents per million train-miles      1.29        1.92        (0.63     (33

 

(1)  Certain prior period figures have been revised to conform with current presentation or have been updated to reflect new information.
(2)  Incorporates a new reporting definition where average train speed measures the line-haul movement from origin to destination including terminal dwell hours, and excluding foreign railroad and customer delays.
(3)  Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs — freight and yard.
(4)  Includes gallons of fuel consumed from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities.
(5)  An employee is defined as an individual, including trainees, who has worked more than 40 hours in a standard biweekly pay period. This excludes part time employees, contractors, and consultants.
(6)  Workforce is defined as total employees plus part time employees, contractors, and consultants.

 

19