CALGARY, Jan. 26 /PRNewswire-FirstCall/ - Canadian Pacific Railway Limited (TSX/NYSE: CP) announced its fourth-quarter and full-year 2010 results today. Revenue in the fourth-quarter increased 13 per cent with gains across all lines of business. Reported net income in the fourth-quarter was $186 million, an increase of 27 per cent and diluted earnings per share was $1.09 for the quarter and $3.85 for the full year. Adjusted diluted earnings per share was $1.12 for the quarter and $3.87 for the full year.
"Fourth quarter saw double digit revenue growth, a continuation of our year-to-date trend," said Fred Green, President and Chief Executive Officer. "We delivered an improvement in our operating ratio by staying focused on three priorities: safety, asset velocity, and productivity. During the year we once again improved our industry leading train safety performance, a great accomplishment while moving a significant increase in volumes."
FOURTH-QUARTER 2010 RESULTS
- Total revenues increased 13 per cent to $1.3 billion
- Adjusted operating income increased 34 per cent to $298 million
- Adjusted operating ratio improved 360 basis points to 77.0 per cent
- Adjusted diluted earnings per share increased 51 per cent to $1.12
per share
FULL YEAR 2010 RESULTS
- Total revenues increased 13 per cent to $5.0 billion
- Adjusted operating income increased 39 per cent to $1.1 billion
- Adjusted operating ratio improved 410 basis points to 77.6 per cent
- Adjusted diluted earnings per share increased 54 per cent to $3.87
per share
- Made a pension prepayment of $650 million and reduced long-term debt
by approximately $250 million
- Increased the current dividend rate by 9% to $1.08 per share
"We continue to see strong demand for rail service across all lines of business," added Fred Green. "We are ramping up our resources and making long-term investments in our company to meet growing demand, further improve customer service, and achieve our three to five year target of a low 70's operating ratio."
2011 Assumptions
The 2011 defined benefit pension contributions are currently estimated to be between $100 million to $125 million, lower than our previous estimates of $150 million to $200 million. Defined benefit pension contributions for 2012 to 2015 are estimated to be between $125 million to $175 million. The contribution levels reflect the Company's intention with respect to application of voluntary prepayments. Defined benefit pension expenses in 2011 are expected to be $46 million up from $36 million in 2010.
CP plans to spend in the range of $950 million to $1.05 billion on capital programs in 2011, as announced on January 12, 2011.
CP expects its tax rate to be in the 24 per cent to 26 per cent range in 2011.
Presentation of non-GAAP earnings measures
CP presents non-GAAP earnings measures in this news release to provide an additional basis for evaluating underlying earnings and liquidity trends in its business that can be compared with prior periods' results of operations. Income, diluted earnings per share, operating expense and operating ratio, excluding foreign exchange gains and losses on long-term debt and other specified items, are referred to in this news release as "Adjusted earnings", "Adjusted diluted earnings per share", "Adjusted operating expense" and "Adjusted operating ratio".
When foreign exchange gains and losses on long-term debt and other specified items are excluded from diluted earnings per share, income and income tax expense, these are non-GAAP measures.
These non-GAAP earnings measures exclude foreign currency translation effects on long-term debt, and related income taxes, which can be volatile and short term. The impact of volatile short-term rate fluctuations on foreign-denominated debt is only realized when long-term debt matures or is settled. Other specified items are material transactions that may include, but are not limited to, restructuring and asset impairment charges, gains and losses on non-routine sales of assets, unusual income tax adjustments, and other items that do not typify normal business activities. A reconciliation of income, excluding foreign exchange gains and losses on long-term debt and other specified items, to net income as presented in the financial statements is detailed in the attached Summary of Rail Data. In addition, these non-GAAP measures exclude other specified items (described below) that are not a part of CP's normal ongoing revenues and operating expenses.
The non-GAAP earnings measures described in this news release have no standardized meanings and are not defined by accounting principles generally accepted in the United States and, therefore, are unlikely to be comparable to similar measures presented by other companies.
Foreign exchange gain and loss on long-term debt and other specified items
In fourth-quarter 2009, CP recorded a loss of $38 million after tax charge on the early termination of a shortline railway contract. As well, a tax rate change and an income tax settlement related to a prior year resulted in a net benefit of $56 million.
For the full year 2009, in addition to the other specified items noted above, there was a $69 million after tax gain on the sale of a partnership interest and a $68 million after tax gain on the sale of significant real estate. CP also had a gain on long-term floating rate notes of $5 million after tax, compared to a gain of $2 million after tax, recorded for full year 2010.
CP had a net foreign exchange loss after tax of $5 million on long-term debt in the fourth quarter of 2010, compared with a gain of $3 million after tax in fourth-quarter 2009.
For the full year 2010, CP had a net foreign exchange loss on long-term debt of $6 million, compared with a net foreign exchange loss of $28 million after tax for the full year 2009.
As part of a consolidated financing strategy, CP structures its U.S. dollar long-term debt in different taxing jurisdictions. As well, a portion of this debt is designated as a net investment hedge against our net investment in foreign subsidiaries. Although the taxes on foreign exchange gains and losses on long-term debt generally offset one another, because they may be in different tax jurisdictions, the resulting net tax can vary significantly.
CP began reporting its financial results in accordance with U.S. GAAP as of January 1, 2010. All prior period comparative numbers contained in this release conform to U.S. GAAP. Additional historical U.S. GAAP financial reports can be found at www.cpr.ca.
Note on forward-looking information
This news release contains certain forward-looking statements relating but not limited to our operations, anticipated financial performance and business prospects, including statements relating to our target operating ratio, and expected 2011 pension expenses, capital programs and tax rate. Undue reliance should not be placed on forward-looking information as actual results may differ materially.
By its nature, CP's forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods, timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and investments, including long-term floating rate notes; and various events that could disrupt operations, including severe weather conditions, security threats and governmental response to them, and technological changes.
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 (CP: TSX/NYSE) operates a North American transcontinental railroad providing freight transportation services, logistics solutions and supply chain expertise. Incorporating best-in-class technology and environmental practices, CP is re-defining itself as a modern 21st century transportation company built on safety, service reliability and operational efficiency. Visit cpr.ca and see how Canadian Pacific is Driving the Digital Railway.
CANADIAN PACIFIC RAILWAY LIMITED
CONSOLIDATED STATEMENT OF INCOME
(in millions of Canadian dollars, except per share data)
(unaudited)
For the three months For the year
ended December 31 ended December 31
2010 2009 2010 2009
Restated Restated
(see Note 2) (see Note 2)
----------------------- -----------------------
----------------------- -----------------------
Revenues
Freight $ 1,262.1 $ 1,115.8 $ 4,853.3 $ 4,279.8
Other 32.2 27.4 128.2 122.4
----------------------- -----------------------
1,294.3 1,143.2 4,981.5 4,402.2
Operating expenses
Compensation and
benefits 362.3 316.7 1,431.0 1,306.6
Fuel 202.4 157.6 728.1 580.3
Materials 56.0 42.1 214.2 217.6
Equipment rents 48.5 53.0 206.0 226.0
Depreciation and
amortization 121.2 122.2 489.6 483.2
Purchased services and
other 206.2 229.6 796.5 783.0
Gain on sale of
significant properties - - - (79.1)
Loss on termination of
lease with shortline
railway - 54.5 - 54.5
------------------------ -----------------------
996.6 975.7 3,865.4 3,572.1
------------------------ -----------------------
Operating income 297.7 167.5 1,116.1 830.1
Gain on sale of
partnership interest - - - 81.2
Less:
Other (income) and
charges (4.7) (7.0) (12.0) 12.4
Interest expense 65.2 68.4 257.3 267.6
------------------------ -----------------------
Income before income tax
expense 237.2 106.1 870.8 631.3
Income tax expense
(recovery) 51.4 (40.1) 220.1 81.3
------------------------ -----------------------
Net income $ 185.8 $ 146.2 $ 650.7 $ 550.0
------------------------ -----------------------
------------------------ -----------------------
Earnings per share
Basic earnings per
share $ 1.10 $ 0.87 $ 3.86 $ 3.31
Diluted earnings per
share $ 1.09 $ 0.87 $ 3.85 $ 3.30
Weighted average number
of shares (millions)
Basic 169.1 168.3 168.8 166.3
Diluted 169.7 168.9 169.2 166.8
Dividends declared per
share $ 0.2700 $ 0.2475 $ 1.0575 $ 0.9900
See notes to interim consolidated financial information.
CONSOLIDATED BALANCE SHEET
(in millions of Canadian dollars)
(unaudited)
December 31 December 31
2010 2009
Restated
(see Note 2)
-----------------------
Assets
Current assets
Cash and cash equivalents $ 360.6 $ 679.1
Accounts receivable, net 459.0 655.1
Materials and supplies 114.1 132.7
Deferred income taxes 222.3 128.1
Other current assets 47.8 46.5
-----------------------
1,203.8 1,641.5
Investments 144.9 156.7
Net properties 11,996.8 11,978.5
Goodwill and intangible assets 189.8 202.3
Other assets 140.6 175.8
-----------------------
Total assets $ 13,675.9 $ 14,154.8
-----------------------
-----------------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities $ 1,007.8 $ 1,000.7
Long-term debt maturing within one year 281.7 605.3
-----------------------
1,289.5 1,606.0
Pension and other benefits liabilities (Note 3) 1,115.7 1,453.9
Other long-term liabilities 468.0 479.9
Long-term debt 4,033.2 4,138.2
Deferred income taxes 1,944.8 1,818.7
-----------------------
Total liabilities 8,851.2 9,496.7
Shareholders' equity
Share capital 1,812.8 1,771.1
Additional paid-in capital 24.7 30.8
Accumulated other comprehensive loss (2,085.8) (1,744.7)
Retained earnings 5,073.0 4,600.9
-----------------------
4,824.7 4,658.1
-----------------------
Total liabilities and shareholders' equity $ 13,675.9 $ 14,154.8
-----------------------
-----------------------
See notes to interim consolidated financial information.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of Canadian dollars)
(unaudited)
For the three months For the year
ended December 31 ended December 31
2010 2009 2010 2009
Restated Restated
(see Note 2) (see Note 2)
----------------------- -----------------------
----------------------- -----------------------
Operating activities
Net income $ 185.8 $ 146.2 $ 650.7 $ 550.0
Reconciliation of net
income to cash
provided by
operating activities:
Depreciation and
amortization 121.2 122.2 489.6 483.2
Deferred income taxes 50.8 (25.6) 211.2 133.0
Gain on sale of
partnership interest - - - (81.2)
Gain on sale of
significant properties - - - (79.1)
Pension funding
less than / in
(excess) of expense
(Note 3) 4.7 (524.4) (800.9) (572.0)
Other operating
activities, net (37.9) (44.7) (32.2) (85.7)
Change in non-cash
working capital
balances related to
operations 56.2 106.2 (16.3) 102.7
----------------------- -----------------------
Cash provided by (used
in) operating activities 380.8 (220.1) 502.1 450.9
----------------------- -----------------------
Investing activities
Additions to properties (282.2) (139.4) (726.1) (703.5)
Proceeds from the sale
of properties and other
assets 42.7 49.9 88.9 337.4
Other, net 1.6 7.4 1.6 7.4
----------------------- -----------------------
Cash used in investing
activities (237.9) (82.1) (635.6) (358.7)
----------------------- -----------------------
Financing activities
Dividends paid (45.6) (41.6) (174.5) (162.9)
Issuance of CP Common
Shares 5.5 9.0 32.4 513.5
Collection of receivable
from financial
institution - - 219.8 -
Issuance of long-term
debt - 463.2 355.2 872.7
Repayment of long-term
debt (8.3) (4.6) (612.8) (617.9)
Net increase (decrease)
in short-term borrowing 9.0 (57.7) 9.0 (150.1)
Other financing
activities - - 3.1 34.1
----------------------- -----------------------
Cash (used in) provided
by financing
activities (39.4) 368.3 (167.8) 489.4
----------------------- -----------------------
Effect of foreign
exchange fluctuations on
U.S. dollar-denominated
cash and cash equivalents (10.7) (2.9) (17.2) (20.0)
----------------------- -----------------------
Cash position
Increase (decrease) in
cash and cash
equivalents 92.8 63.2 (318.5) 561.6
Cash and cash
equivalents at
beginning of period 267.8 615.9 679.1 117.5
----------------------- -----------------------
Cash and cash equivalents
at end of period $ 360.6 $ 679.1 $ 360.6 $ 679.1
----------------------- -----------------------
----------------------- -----------------------
Supplemental disclosures
of cash flow information
Income taxes paid
(refunded) $ 1.8 $ (2.5) $ 8.3 $ (38.9)
----------------------- -----------------------
----------------------- -----------------------
Interest paid $ 94.5 $ 92.4 $ 346.8 $ 289.3
----------------------- -----------------------
----------------------- -----------------------
See notes to interim consolidated financial information.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in millions of Canadian dollars, except common share amounts)
(unaudited)
---------- -------------------------------------------------
Accumulated
Common other Total
shares Additional compre- share-
(in Share paid-in hensive Retained holders'
millions) capital capital loss earnings equity
---------- -------------------------------------------------
Balance at
December 31,
2009, as
previously
reported 168.5 $1,771.1 $ 30.8 $(1,746.3) $4,665.2 $4,720.8
Cumulative
adjustment
for change
in accounting
policy
(Note 2) - - - 1.6 (64.3) (62.7)
---------- -------------------------------------------------
Balance at
December 31,
2009, as
restated 168.5 1,771.1 30.8 (1,744.7) 4,600.9 4,658.1
---------- -------------------------------------------------
Net income - - - - 650.7 650.7
Other
comprehensive
income - - - (341.1) - (341.1)
---------- -------------------------------------------------
Comprehensive
income - - - (341.1) 650.7 309.6
---------- -------------------------------------------------
Dividends
declared - - - - (178.6) (178.6)
Stock
compensation
expense - - 1.2 - - 1.2
Shares issued
under stock
option plans 0.7 41.7 (7.3) - - 34.4
---------- -------------------------------------------------
Balance at
December 31,
2010 169.2 $1,812.8 $ 24.7 $(2,085.8) $5,073.0 $4,824.7
---------- -------------------------------------------------
---------- -------------------------------------------------
-------------------------------
Other
compre- Compre-
hensive Net hensive
income income income
-------------------------------
Comprehensive income -
three months ended
December 31, 2010 $ (393.3) $ 185.8 $(207.5)
-------------------------------
-------------------------------
See notes to interim consolidated financial information.
CANADIAN PACIFIC RAILWAY LIMITED
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2010
(unaudited)
1 Basis of presentation
These unaudited consolidated financial statements of Canadian Pacific
Railway Limited ("CP", "the Company" or "Canadian Pacific Railway")
reflect management's estimates and assumptions that are necessary for
their fair presentation in conformity with accounting principles
generally accepted in the United States ("GAAP"). They do not include
all disclosures required under GAAP for annual financial statements
and should be read in conjunction with the 2009 U.S. GAAP
consolidated financial statements. The policies used are consistent
with the policies used in preparing the 2009 U.S. GAAP consolidated
financial statements, except as discussed in Note 2. The Company's
investments in which CP has significant influence, which are not
consolidated, are accounted for using the equity method.
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. The
irregular pace of the recovery in 2010 from the global recession has
affected financial results such that seasonal fluctuations may not be
consistent with those in prior years. The timing of a return to
seasonal trends consistent with years prior to 2009 will depend on
the continued recovery of the economy and the related impact on the
Company's customers.
2 Accounting changes
Consolidations
In June 2009, the Financial Accounting Standards Board ("FASB")
issued Amendments to Consolidation of Variable Interest Entities. The
guidance retains the scope of the previous guidance and removes the
exemption of entities previously considered qualifying special
purpose entities. In addition, it replaces the previous quantitative
approach with a qualitative analysis approach for determining whether
the enterprise's variable interest or interests give it a controlling
financial interest in a variable interest entity. The guidance is
further amended to require ongoing reassessments of whether an
enterprise is the primary beneficiary of a variable interest entity
and requires enhanced disclosures about an enterprise's involvement
in a variable interest entity. The guidance is applicable to all
variable interest entities that existed at January 1, 2010, the date
of adoption, or are created thereafter. The Company has variable
interests in variable interest entities, however, the adoption of the
new guidance did not change the previous assessment that the Company
is not the primary beneficiary and as such does not consolidate the
variable interest entities.
Accounting for transfers of financial assets
The FASB has released additional guidance with respect to the
accounting and disclosure of transfers of financial assets such as
securitized accounts receivable. Although the Company currently does
not have an accounts receivable securitization program, the guidance,
which includes revisions to the derecognition criteria in a transfer
and the treatment of qualifying special purpose entities, would be
applicable to any future securitization. The new guidance is
effective for the Company from January 1, 2010. The adoption of this
guidance had no impact to the Company's financial statements.
Fair value measurement and disclosure
In January 2010, the FASB amended the disclosure requirements related
to fair value measurements. The update provides for new disclosures
regarding transfers in and out of Level 1 and Level 2 financial asset
and liability categories and expanded disclosures in the Level 3
reconciliation. The update also provides clarification that the level
of disaggregation should be at the class level and that disclosures
about inputs and valuation techniques are required for both recurring
and nonrecurring fair value measurements that fall in either Level 2
or Level 3. New disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the expanded
disclosures in the Level 3 reconciliation, which are effective for
fiscal years beginning after December 15, 2010.
Rail grinding
During the second quarter of 2010, the Company changed its accounting
policy for the treatment of rail grinding costs. In prior periods, CP
had capitalized such costs and depreciated them over the expected
economic life of the rail grinding. The Company concluded that,
although the accounting treatment was within acceptable accounting
standards, it is preferable to expense the costs as incurred, given
the subjectivity in determining the expected economic life and the
associated depreciation methodology. The accounting policy change has
been accounted for on a retrospective basis. The effects of the
adjustment to January 1, 2010 resulted in an adjustment to decrease
net properties by $89.0 million, deferred income taxes by $26.3
million, and shareholders equity by $62.7 million. As a result of the
change the following increases (decreases) to financial statement
line items occurred:
(in millions of Canadian dollars, except per share data)
For the three
months ended For the year
December 31 ended December 31
2010 2009 2010 2009 2008
--------------------------------------------
Changes to Consolidated Statement of Income and Comprehensive Income
Depreciation and
amortization $ (4.3) $ (3.5) $(15.7) $(14.0) $ (8.9)
Compensation and benefits 0.8 1.0 2.3 2.8 2.7
Fuel - 0.1 - 0.1 0.1
Materials 0.3 0.7 0.8 1.8 1.7
Purchased services and other 4.5 5.2 13.8 15.9 15.4
--------------------------------------------
Total operating expenses 1.3 3.5 1.2 6.6 11.0
Income tax expense (0.5) (0.2) (0.7) (1.2) (3.2)
--------------------------------------------
Net income $ (0.8) $ (3.3) $ (0.5) $ (5.4) $ (7.8)
--------------------------------------------
Basic earnings per share $ - $(0.02) $ - $(0.03) $(0.05)
Diluted earnings per share $ - $(0.02) $ - $(0.03) $(0.05)
Other comprehensive
income (loss) 0.6 0.3 0.9 2.4 (2.8)
--------------------------------------------
Comprehensive income $ (0.2) $ (3.0) $ 0.4 $ (3.0) $(10.6)
--------------------------------------------
--------------------------------------------
Changes to Consolidated Statement of Cash Flows
Cash provided by
operating activities
(decrease) $ (5.6) $ (7.0) $(16.9) $(20.6) $(19.9)
Cash used in investing
activities (decrease) $ (5.6) $ (7.0) $(16.9) $(20.6) $(19.9)
Changes to Consolidated Balance Sheet
As at As at As at
December 31 December 31 December 31
2010 2009 2008
-------------------------------------
Net properties $ (88.6) $ (89.0) $ (86.2)
Deferred income tax liability (26.3) (26.3) (26.5)
Accumulated other
comprehensive loss (income) 2.5 1.6 (0.8)
Retained earnings (64.8) (64.3) (58.9)
Future accounting changes
There have been no new accounting pronouncements issued that are
expected to have a significant impact to the Company's financial
statements.
3 Pensions and other benefits
In the third quarter of 2010, at the Company's option, a $650 million
prepayment to the Company's main Canadian defined benefit pension
plan was made.
During the fourth quarter of 2009, the Company chose to accelerate
funding of future pension obligations through a voluntary prepayment
of approximately $500 million to the Company's defined benefit
pension plans.
The Company's annual actuarial valuation of its pension and
post-retirement benefit plan assets and obligations was completed at
December 31, 2010. As a result of lower discount rates at
December 31, 2010, pension and post-retirement benefit liabilities
increased by $547.8 million, other comprehensive income was reduced
by $407.6 million and the Company's deferred tax liability was
reduced by $140.2 million.
4 Reclassification of comparative figures
Certain comparative figures have been reclassified in order to be
consistent with the 2010 presentation.
Summary of Rail Data
--------------------
(Reconciliation of GAAP earnings to non-GAAP earnings on pages 2 and 3)
-----------------------------------------------------------------------
Fourth Quarter
-------------------------------------------
2010 2009(1) Fav/(Unfav) %
-------------------------------------------
Financial (millions, except
----------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 1,262.1 $ 1,115.8 $ 146.3 13.1
Other revenue 32.2 27.4 4.8 17.5
---------------------------------
1,294.3 1,143.2 151.1 13.2
---------------------------------
Operating expenses
------------------
Compensation and benefits 362.3 316.7 (45.6) (14.4)
Fuel 202.4 157.6 (44.8) (28.4)
Materials 56.0 42.1 (13.9) (33.0)
Equipment rents 48.5 53.0 4.5 8.5
Depreciation and amortization 121.2 122.2 1.0 0.8
Purchased services and other 206.2 229.6 23.4 10.2
Gain on sale of significant
properties - - - -
Loss on termination of
lease with shortline railway - 54.5 54.5 100.0
---------------------------------
996.6 975.7 (20.9) (2.1)
---------------------------------
Operating income 297.7 167.5 130.2 77.7
Gain on sale of
partnership interest - - - -
Less:
Other (income) and charges (4.7) (7.0) (2.3) (32.9)
Interest expense 65.2 68.4 3.2 4.7
---------------------------------
Income before income
tax expense 237.2 106.1 131.1 123.6
Income tax expense (recovery) 51.4 (40.1) (91.5) (228.2)
---------------------------------
Net income $ 185.8 $ 146.2 $ 39.6 27.1
---------------------------------
---------------------------------
Basic earnings per share $ 1.10 $ 0.87 $ 0.23 26.4
---------------------------------
---------------------------------
Diluted earnings per share $ 1.09 $ 0.87 $ 0.22 25.3
---------------------------------
---------------------------------
Shares Outstanding
------------------
Weighted average (avg)
number of shares outstanding
(millions) 169.1 168.3 0.8 0.5
Weighted avg number of diluted
shares outstanding
(millions) 169.7 168.9 0.8 0.5
Foreign Exchange
----------------
Average foreign exchange rate
(US$/Canadian$) 0.98 0.94 (0.04) (4.3)
Average foreign exchange rate
(Canadian$/US$) 1.02 1.07 (0.05) (4.7)
Year
-------------------------------------------
2010 2009(1) Fav/(Unfav) %
-------------------------------------------
Financial (millions, except
----------------------------
per share data)
---------------
Revenues
--------
Freight revenue $ 4,853.3 $ 4,279.8 $ 573.5 13.4
Other revenue 128.2 122.4 5.8 4.7
---------------------------------
4,981.5 4,402.2 579.3 13.2
---------------------------------
Operating expenses
------------------
Compensation and benefits 1,431.0 1,306.6 (124.4) (9.5)
Fuel 728.1 580.3 (147.8) (25.5)
Materials 214.2 217.6 3.4 1.6
Equipment rents 206.0 226.0 20.0 8.8
Depreciation and amortization 489.6 483.2 (6.4) (1.3)
Purchased services and other 796.5 783.0 (13.5) (1.7)
Gain on sale of significant
properties - (79.1) (79.1) (100.0)
Loss on termination of
lease with shortline railway - 54.5 54.5 100.0
---------------------------------
3,865.4 3,572.1 (293.3) (8.2)
---------------------------------
Operating income 1,116.1 830.1 286.0 34.5
Gain on sale of
partnership interest - 81.2 (81.2) (100.0)
Less:
Other (income) and charges (12.0) 12.4 24.4 196.8
Interest expense 257.3 267.6 10.3 3.8
---------------------------------
Income before income
tax expense 870.8 631.3 239.5 37.9
Income tax expense (recovery) 220.1 81.3 (138.8) (170.7)
---------------------------------
Net income $ 650.7 $ 550.0 $ 100.7 18.3
---------------------------------
---------------------------------
Basic earnings per share $ 3.86 $ 3.31 $ 0.55 16.6
---------------------------------
---------------------------------
Diluted earnings per share $ 3.85 $ 3.30 $ 0.55 16.7
---------------------------------
---------------------------------
Shares Outstanding
------------------
Weighted average (avg)
number of shares outstanding
(millions) 168.8 166.3 2.5 1.5
Weighted avg number of diluted
shares outstanding
(millions) 169.2 166.8 2.4 1.4
Foreign Exchange
----------------
Average foreign exchange rate
(US$/Canadian$) 0.97 0.87 (0.10) (11.5)
Average foreign exchange rate
(Canadian$/US$) 1.03 1.15 (0.12) (10.4)
(1) Restated for the Company's change in accounting policy in relation
to the accounting for rail grinding.
Summary of Rail Data (Page 2)
-----------------------------
Adjusted Earnings Performance - Quarter
---------------------------------------
Non-GAAP Measures
-----------------
Fourth Quarter 2010
-----------------------------------
In millions, except Adjusted
operating ratio and Reported Adjustments (Non-GAAP)
per share data (GAAP) Fav/(Unfav) (2)
------------------------- -----------------------------------
Revenues $ 1,294.3 $ - $ 1,294.3
Expenses 996.6 - 996.6
------------------------- -----------------------------------
Operating income 297.7 - 297.7
Less:
Other (income) and charges (4.7) 0.6(3) (5.3)
Interest expense 65.2 - 65.2
------------------------- -----------------------------------
Income before income
tax expense 237.2 0.6 237.8
Income tax expense
(recovery) 51.4 3.7(4) 47.7
-----------------------------------
Net income $ 185.8 $ 4.3 $ 190.1(5)
------------------------- -----------------------------------
------------------------- -----------------------------------
Operating ratio (%) 77.0 - 77.0
Basic earnings per share $ 1.10 $ 0.02 $ 1.12
Diluted earnings per share $ 1.09 $ 0.03 $ 1.12
Fourth Quarter 2009(1) %
------------------------------------ Adjusted
In millions, except Adjusted (Non-GAAP)
operating ratio and Reported Adjustments (Non-GAAP) (2)
per share data (GAAP) Fav/(Unfav) (2) Fav/(Unfav)
-------------------------------------------------------------------------
Revenues $ 1,143.2 $ - $ 1,143.2 13.2
Expenses 975.7 54.5(6) 921.2 (8.2)
------------------------- -----------------------------------
Operating income 167.5 54.5 222.0 34.1
Less:
Other (income) and charges (7.0) (7.6)(7) 0.6 -
Interest expense 68.4 - 68.4 4.7
------------------------- -----------------------------------
Income before income
tax expense 106.1 46.9 153.0 55.4
Income tax expense
(recovery) (40.1) (67.5)(8) 27.4 (74.1)
-----------------------------------
Net income $ 146.2 $ (20.6) $ 125.6(5) 51.4
------------------------- -----------------------------------
------------------------- -----------------------------------
Operating ratio (%) 85.3 4.7 80.6 360 bps
Basic earnings per share $ 0.87 $ (0.12) $ 0.75 49.3
Diluted earnings per share $ 0.87 $ (0.13) $ 0.74 51.4
(1) Restated for the Company's change in accounting policy in relation to
the accounting for rail grinding.
(2) These earnings measures have no standardized meanings prescribed by
GAAP and are unlikely to be comparable to similar measures of other
companies.
(3) To exclude the gain in fair value of long-term floating rate notes of
$0.3 million due to short-term market changes and a loss in foreign
exchange on long-term debt (FX on LTD) of $0.9 million in order to
eliminate the impact of volatile short-term exchange rate
fluctuations.
(4) To exclude the tax expense associated with the gain in fair value of
long-term floating rate notes of $0.1 million and the tax expense
associated with the loss on FX on LTD of $3.6 million.
(5) These adjusted figures are also referred to as "Income, before FX on
LTD and other specified items".
(6) To exclude the loss of $54.5 million before tax which arose from the
termination of lease with a shortline railway.
(7) To exclude the gain in FX on LTD of $7.6 million in order to
eliminate the impact of volatile short-term exchange rate
fluctuations.
(8) To exclude the tax recovery associated with the loss on termination
of lease with a shortline railway of $16.9 million, the tax recovery
due to a rate reduction and settlement related to a prior year of
$55.7 million, and the tax expense associated with the gain on FX on
LTD of $5.1 million.
Summary of Rail Data (Page 3)
-----------------------------
Adjusted Earnings Performance - Year
------------------------------------
Non-GAAP Measures
-----------------
Year 2010
-----------------------------------
In millions, except Adjusted
operating ratio and Reported Adjustments (Non-GAAP)
per share data (GAAP) Fav/(Unfav) (2)
------------------------- -----------------------------------
Revenues $ 4,981.5 $ - $ 4,981.5
Expenses 3,865.4 - 3,865.4
------------------------- -----------------------------------
Operating income 1,116.1 - 1,116.1
Gain on sale of partnership
interest - - -
Less:
Other (income) and charges (12.0) (5.7)(3) (6.3)
Interest expense 257.3 - 257.3
------------------------- -----------------------------------
Income before income
tax expense 870.8 (5.7) 865.1
Income tax expense 220.1 9.2(4) 210.9
-----------------------------------
Net income $ 650.7 $ 3.5 $ 654.2(5)
------------------------- -----------------------------------
------------------------- -----------------------------------
Operating ratio (%) 77.6 - 77.6
Basic earnings per share $ 3.86 $ 0.02 $ 3.88
Diluted earnings per share $ 3.85 $ 0.02 $ 3.87
Year 2009(1) %
------------------------------------ Adjusted
In millions, except Adjusted (Non-GAAP)
operating ratio and Reported Adjustments (Non-GAAP) (2)
per share data (GAAP) Fav/(Unfav) (2) Fav/(Unfav)
-------------------------------------------------------------------------
Revenues $ 4,402.2 $ - $ 4,402.2 13.2
Expenses 3,572.1 (24.6)(6) 3,596.7 (7.5)
------------------------- -----------------------------------
Operating income 830.1 (24.6) 805.5 38.6
Gain on sale of partnership
interest 81.2 (81.2)(7) - -
Less:
Other (income) and charges 12.4 (9.9)(8) 22.3 128.3
Interest expense 267.6 - 267.6 3.8
------------------------- -----------------------------------
Income before income
tax expense 631.3 (115.7) 515.6 67.8
Income tax expense 81.3 (16.0)(9) 97.3 (116.8)
-----------------------------------
Net income $ 550.0 $ (131.7) $ 418.3(5) 56.4
------------------------- -----------------------------------
------------------------- -----------------------------------
Operating ratio (%) 81.1 (0.6) 81.7 410 bps
Basic earnings per share $ 3.31 $ (0.79) $ 2.52 54.0
Diluted earnings per share $ 3.30 $ (0.79) $ 2.51 54.2
(1) Restated for the Company's change in accounting policy in relation to
the accounting for rail grinding.
(2) These earnings measures have no standardized meanings prescribed by
GAAP and are unlikely to be comparable to similar measures of other
companies.
(3) To exclude the gain in fair value of long-term floating rate notes of
$3.4 million due to short-term market changes and a gain in foreign
exchange on long-term debt (FX on LTD) of $2.3 million in order to
eliminate the impact of volatile short-term exchange rate
fluctuations.
(4) To exclude the tax expense associated with the gain in fair value of
long-term floating rate notes of $1.0 million and the tax expense
associated with the gain on FX on LTD of $8.2 million.
(5) These adjusted figures are also referred to as "Income, before FX on
LTD and other specified items".
(6) To exclude the gain of $79.1 million before tax which arose from the
sale of significant properties and the loss of $54.5 million before
tax which arose from the termination of lease with a shortline
railway.
(7) To exclude the gain of $81.2 million before tax which arose from the
partial sale of the investment in the Detroit River Tunnel
Partnership ("DRTP").
(8) To exclude the gain in fair value of long-term floating rate notes of
$6.3 million due to short-term market changes and a gain in FX on LTD
of $3.6 million in order to eliminate the impact of volatile
short-term exchange rate fluctuations.
(9) To exclude the tax expense associated with the partial sale of the
investment in DRTP of $12.5 million, the tax expense associated with
the sale of significant properties of $11.0 million, the tax expense
associated with the gain in fair value of long-term floating rate
notes of $1.8 million, the tax expense associated with the gain on FX
on LTD of $31.3 million, the tax recovery associated with the loss on
termination of lease with a shortline railway of $16.9 million, and
the tax recovery due to a rate reduction and settlement related to a
prior year of $55.7 million.
Summary of Rail Data (Page 4)
-----------------------------
Fourth Quarter
-------------------------------------------
2010 2009 Fav/(Unfav) %
-------------------------------------------
Commodity Data
--------------
Freight Revenues (millions)
- Grain $ 299.8 $ 293.6 $ 6.2 2.1
- Coal 125.2 112.3 12.9 11.5
- Sulphur and fertilizers 132.0 85.1 46.9 55.1
- Forest products 50.2 42.8 7.4 17.3
- Industrial and consumer
products 240.0 205.2 34.8 17.0
- Automotive 75.3 67.9 7.4 10.9
- Intermodal 339.6 308.9 30.7 9.9
---------------------------------
Total Freight Revenues $ 1,262.1 $ 1,115.8 $ 146.3 13.1
---------------------------------
Millions of Revenue Ton-Miles (RTM)
- Grain 8,775 9,156 (381) (4.2)
- Coal 4,814 4,493 321 7.1
- Sulphur and fertilizers 4,963 2,716 2,247 82.7
- Forest products 1,344 1,098 246 22.4
- Industrial and consumer
products 6,046 4,762 1,284 27.0
- Automotive 501 480 21 4.4
- Intermodal 6,440 6,169 271 4.4
---------------------------------
Total RTMs 32,883 28,874 4,009 13.9
---------------------------------
Freight Revenue per RTM (cents)
- Grain 3.42 3.21 0.21 6.5
- Coal 2.60 2.50 0.10 4.0
- Sulphur and fertilizers 2.66 3.13 (0.47) (15.0)
- Forest products 3.74 3.90 (0.16) (4.1)
- Industrial and consumer
products 3.97 4.31 (0.34) (7.9)
- Automotive 15.03 14.15 0.88 6.2
- Intermodal 5.27 5.01 0.26 5.2
Total Freight Revenue per RTM 3.84 3.86 (0.02) (0.5)
Carloads (thousands)
- Grain 117.4 121.1 (3.7) (3.1)
- Coal 87.3 83.9 3.4 4.1
- Sulphur and fertilizers 47.9 31.9 16.0 50.2
- Forest products 18.6 16.4 2.2 13.4
- Industrial and consumer
products 102.1 92.6 9.5 10.3
- Automotive 34.0 32.9 1.1 3.3
- Intermodal 266.2 241.0 25.2 10.5
---------------------------------
Total Carloads 673.5 619.8 53.7 8.7
---------------------------------
Freight Revenue per Carload
- Grain $ 2,554 $ 2,424 $ 130 5.4
- Coal 1,434 1,338 96 7.2
- Sulphur and fertilizers 2,756 2,668 88 3.3
- Forest products 2,699 2,610 89 3.4
- Industrial and consumer
products 2,351 2,216 135 6.1
- Automotive 2,215 2,064 151 7.3
- Intermodal 1,276 1,282 (6) (0.5)
Total Freight Revenue per
Carload $ 1,874 $ 1,800 $ 74 4.1
Year
-------------------------------------------
2010 2009 Fav/(Unfav) %
-------------------------------------------
Commodity Data
--------------
Freight Revenues (millions)
- Grain $ 1,135.7 $ 1,137.1 $ (1.4) (0.1)
- Coal 490.8 443.8 47.0 10.6
- Sulphur and fertilizers 474.8 309.3 165.5 53.5
- Forest products 184.9 176.1 8.8 5.0
- Industrial and consumer
products 902.8 786.1 116.7 14.8
- Automotive 316.4 229.3 87.1 38.0
- Intermodal 1,347.9 1,198.1 149.8 12.5
---------------------------------
Total Freight Revenues $ 4,853.3 $ 4,279.8 $ 573.5 13.4
---------------------------------
Millions of Revenue Ton-Miles (RTM)
- Grain 34,556 34,838 (282) (0.8)
- Coal 19,021 16,997 2,024 11.9
- Sulphur and fertilizers 17,687 9,362 8,325 88.9
- Forest products 5,238 4,470 768 17.2
- Industrial and consumer
products 21,996 17,653 4,343 24.6
- Automotive 2,067 1,607 460 28.6
- Intermodal 25,863 23,425 2,438 10.4
---------------------------------
Total RTMs 126,428 108,352 18,076 16.7
---------------------------------
Freight Revenue per RTM (cents)
- Grain 3.29 3.26 0.03 0.9
- Coal 2.58 2.61 (0.03) (1.1)
- Sulphur and fertilizers 2.68 3.30 (0.62) (18.8)
- Forest products 3.53 3.94 (0.41) (10.4)
- Industrial and consumer
products 4.10 4.45 (0.35) (7.9)
- Automotive 15.31 14.27 1.04 7.3
- Intermodal 5.21 5.11 0.10 2.0
Total Freight Revenue per RTM 3.84 3.95 (0.11) (2.8)
Carloads (thousands)
- Grain 466.4 469.5 (3.1) (0.7)
- Coal 341.1 305.1 36.0 11.8
- Sulphur and fertilizers 177.2 108.8 68.4 62.9
- Forest products 71.6 66.8 4.8 7.2
- Industrial and consumer
products 396.9 345.9 51.0 14.7
- Automotive 137.3 103.7 33.6 32.4
- Intermodal 1,070.1 962.9 107.2 11.1
---------------------------------
Total Carloads 2,660.6 2,362.7 297.9 12.6
---------------------------------
Freight Revenue per Carload
- Grain $ 2,435 $ 2,422 $ 13 0.5
- Coal 1,439 1,455 (16) (1.1)
- Sulphur and fertilizers 2,679 2,843 (164) (5.8)
- Forest products 2,582 2,636 (54) (2.0)
- Industrial and consumer
products 2,275 2,273 2 0.1
- Automotive 2,304 2,211 93 4.2
- Intermodal 1,260 1,244 16 1.3
Total Freight Revenue per
Carload $ 1,824 $ 1,811 $ 13 0.7
Summary of Rail Data (Page 5)
-----------------------------
Fourth Quarter
-------------------------------------------
2010 2009(1) Fav/(Unfav) %
-------------------------------------------
Operations Performance
----------------------
Total operating expenses
per gross ton-miles (GTM)
(cents)(2) 1.59 1.77 0.18 10.2
Adjusted operating expenses
exclusive of land sales per
GTM (cents)(2)(3) 1.63 1.69 0.06 3.6
Freight gross ton-miles
(millions) 62,498 55,198 7,300 13.2
Train miles (000) 10,132 8,897 1,235 13.9
Average number of active
employees - Total 15,637 15,073 (564) (3.7)
Average number of active
employees - Expense 13,918 13,471 (447) (3.3)
Number of employees at
end of period - Total 15,250 14,665 (585) (4.0)
Number of employees at
end of period - Expense 14,048 13,614 (434) (3.2)
U.S. gallons of locomotive
fuel per 1,000 GTMs -
freight & yard 1.20 1.18 (0.02) (1.7)
U.S. gallons of locomotive
fuel consumed -
total (millions)(4) 74.3 64.7 (9.6) (14.8)
Average fuel price (U.S.
dollars per U.S. gallon) 2.68 2.28 (0.40) (17.5)
Fluidity Data (including DM&E)
------------------------------
Average terminal dwell -
AAR definition (hours) 22.2 n/a - -
Average train speed -
AAR definition (mph) 21.7 n/a - -
Car miles per car day 135.0 n/a - -
Average daily active cars
on-line (000) 61.2 n/a - -
Average daily active road
locomotives on-line 1,048 n/a - -
Fluidity Data (excluding DM&E)
------------------------------
Average terminal dwell -
AAR definition (hours) 22.2 23.1 0.9 3.9
Average train speed -
AAR definition (mph) 22.6 24.7 (2.1) (8.5)
Car miles per car day 143.7 139.2 4.5 3.2
Average daily active cars
on-line (000) 54.7 50.3 (4.4) (8.7)
Average daily active road
locomotives on-line 935 792 (143) (18.1)
Safety
------
FRA personal injuries per
200,000 employee-hours 1.86 2.15 0.29 13.5
FRA train accidents per
million train-miles 1.27 1.55 0.28 18.1
Year
-------------------------------------------
2010 2009(1) Fav/(Unfav) %
-------------------------------------------
Operations Performance
----------------------
Total operating expenses
per gross ton-miles (GTM)
(cents)(2) 1.59 1.71 0.12 7.0
Adjusted operating expenses
exclusive of land sales per
GTM (cents)(2)(3) 1.60 1.74 0.14 8.0
Freight gross ton-miles
(millions) 242,757 209,475 33,282 15.9
Train miles (000) 39,576 34,757 4,819 13.9
Average number of active
employees - Total 15,460 15,175 (285) (1.9)
Average number of active
employees - Expense 13,879 13,619 (260) (1.9)
Number of employees at
end of period - Total 15,250 14,665 (585) (4.0)
Number of employees at
end of period - Expense 14,048 13,614 (434) (3.2)
U.S. gallons of locomotive
fuel per 1,000 GTMs -
freight & yard 1.17 1.19 0.02 1.7
U.S. gallons of locomotive
fuel consumed -
total (millions)(4) 282.0 246.7 (35.3) (14.3)
Average fuel price (U.S.
dollars per U.S. gallon) 2.50 2.04 (0.46) (22.5)
Fluidity Data (including DM&E)
------------------------------
Average terminal dwell -
AAR definition (hours) 21.4 n/a - -
Average train speed -
AAR definition (mph) 22.7 n/a - -
Car miles per car day 139.9 n/a - -
Average daily active cars
on-line (000) 58.0 n/a - -
Average daily active road
locomotives on-line 1,015 n/a - -
Fluidity Data (excluding DM&E)
------------------------------
Average terminal dwell -
AAR definition (hours) 21.4 21.9 0.5 2.3
Average train speed -
AAR definition (mph) 23.8 25.5 (1.7) (6.7)
Car miles per car day 151.5 142.6 8.9 6.2
Average daily active cars
on-line (000) 50.9 46.6 (4.3) (9.2)
Average daily active road
locomotives on-line 898 760 (138) (18.2)
Safety
------
FRA personal injuries per
200,000 employee-hours 1.61 1.92 0.31 16.1
FRA train accidents per
million train-miles 1.63 1.81 0.18 9.9
(1) Certain prior period figures have been revised to conform with
current presentation or have been updated to reflect new information.
(2) Restated for the Company's change in accounting policy in relation to
the accounting for rail grinding.
(3) These earnings measures have no standardized meanings prescribed by
GAAP and are unlikely to be comparable to similar measures of other
companies. Adjusted operating expenses exclusive of land sales per
GTM is calculated consistently with total operating expenses per GTM
except for the exclusion of the loss on termination of lease with
shortline railway for the three months, and year ended December 31,
2009 of $54.5 million, a gain on sale of significant properties for
the year ended December 31, 2009 of $79.1 million and the exclusion
of net gains on land sales of $21.9 million and $11.6 million for the
three months ended December 31, 2010 and 2009, respectively, and
$27.9 million and $39.4 million for the year ended December 31, 2010
and 2009, respectively. Please refer to pages 2 and 3, Adjusted
Earnings Performance, Quarter and Year, Non-GAAP measures.
(4) Includes gallons of fuel consumed from freight, yard and commuter
service but excludes fuel used in capital projects and other
non-freight activities.
n/a - not available
SOURCE Canadian Pacific
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