CALGARY, AB, Jan. 27, 2022 /CNW/ - Canadian Pacific Railway
Limited (TSX: CP) (NYSE: CP) today announced its fourth-quarter
results, including revenues of $2.04
billion, operating ratio ("OR") of 59.2 percent, adjusted
OR1 of 57.5 percent, diluted earnings per share ("EPS")
of $0.74 and adjusted diluted
EPS1 of $0.95.
Fourth-quarter 2021 highlights
- Revenues increased 1 percent to $2.04
billion, from $2.01 billion in
Q4 2020
- Reported OR increased by 530 basis points to 59.2 percent from
53.9 percent. The OR in the fourth quarter of 2021 includes
$36 million in costs related to the
Kansas City Southern acquisition
- Adjusted OR, which excludes the acquisition-related costs,
increased 360 basis points to 57.5 percent
- Diluted EPS decreased to $0.74,
from $1.19 in Q4 2020, while adjusted
diluted EPS decreased to $0.95, from
$1.01 in Q4 2020
"I am tremendously proud of the resilience the CP team
demonstrated to deliver these results. CP's world-class railroaders
relied on our strong operating model and commitment to controlling
what we can control to safely deliver for customers and
shareholders despite the unique challenges faced in the quarter,"
said Keith Creel, CP President and
CEO.
"This quarter we also reached a crucial milestone in our journey
to create the first single-line rail network linking the U.S.,
Mexico and Canada by combining with Kansas City Southern,
which closed into voting trust Dec.
14," said Creel.
Full-year 2021 highlights
- Federal Railroad Administration ("FRA")-reportable personal
injuries declined 17 percent to a record-low 0.92 from the previous
record-low of 1.11 in 2020
- Revenues increased 4 percent to $8.0
billion, from $7.71 billion in
2020
- OR increased 280 basis points to 59.9 percent
- Adjusted OR increased 50 basis points to 57.6 percent
- Diluted EPS increased to $4.18
from $3.59, while adjusted diluted
EPS increased to $3.76, from
$3.53 in 2020
"During a historic year for CP, our dedicated team confronted
the adversity we faced throughout 2021 head-on with grit and
tenacity," said Creel. "I am excited for what lies ahead with this
franchise as we move past the uncertainty and extensive supply
chain disruptions created by the COVID-19 pandemic. The demand
environment and overall economic strength, combined with CP's
unique initiatives and service excellence, have us well-positioned
to drive profitable growth for our customers, employees and
shareholders. These factors, coupled with the progression of our
proposed combination with Kansas City Southern, position CP for
another history-making year."
1 These measures have no standardized meanings
prescribed by accounting principles generally accepted in
the United States of America
("GAAP") and, therefore, may not be comparable to similar measures
presented by other companies. For information regarding non-GAAP
measures, including reconciliations to the most comparable GAAP
measures, see the attached supplementary schedule Non-GAAP
Measures.
Conference Call Details
CP will discuss its results
with the financial community in a conference call beginning at
4:30 p.m. ET (2:30 p.m. MT) on Jan. 27,
2022.
Conference Call Access
Toronto participants dial in number:
1-416-764-8688
Operator assisted toll free dial in number: 1-888-390-0546
Callers should dial in 10 minutes prior to the call.
Webcast
We encourage you to access the webcast and
presentation material in the Investors section of CP's website at
investor.cpr.ca.
A replay of the fourth-quarter conference call will be available
by phone through to Feb. 3, 2022 at
416-764-8677 or toll free 1-888-390-0541, password 580172.
Note on forward-looking information
This news release
may contain certain forward-looking information and forward-looking
statements (collectively, "forward-looking information") within the
meaning of applicable securities laws. Forward-looking information
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. This news release contains forward-looking information
relating, but not limited to statements concerning, cost control
efforts, the success of our business, changes to economic and
industry conditions, our operations, priorities and plans,
anticipated financial and operational performance, business
prospects and demand for our services and growth opportunities.
The forward-looking information that may be in this news release
is based on current expectations, estimates, projections and
assumptions, having regard to CP's experience and its perception of
historical trends, and includes, but is not limited to,
expectations, estimates, projections and assumptions relating to:
changes in business strategies, North American and global economic
growth; commodity demand growth; sustainable industrial and
agricultural production; commodity prices and interest rates;
performance of our assets and equipment; sufficiency of our
budgeted capital expenditures in carrying out our business plan;
geopolitical conditions, applicable laws, regulations and
government policies; the availability and cost of labour, services
and infrastructure; the satisfaction by third parties of their
obligations to CP; and the anticipated impacts of the COVID-19
pandemic on CP businesses, operating results, cash flows and/or
financial condition. Although CP believes the expectations,
estimates, projections and assumptions reflected in the
forward-looking information presented herein are reasonable as of
the date hereof, there can be no assurance that they will prove to
be correct. Current conditions, economic and otherwise, render
assumptions, although reasonable when made, subject to greater
uncertainty.
Undue reliance should not be placed on forward-looking
information as actual results may differ materially from those
expressed or implied by forward-looking information. By its nature,
CP's forward-looking information involves inherent risks and
uncertainties that could cause actual results to differ materially
from the forward looking information, including, but not limited
to, the following factors: changes in business strategies and
strategic opportunities; general Canadian, U.S., Mexican and global
social, economic, political, credit and business conditions; risks
associated with agricultural production such as weather conditions
and insect populations; the availability and price of energy
commodities; the effects of competition and pricing pressures,
including competition from other rail carriers, trucking companies
and maritime shippers in Canada,
the U.S. and Mexico; North
American and global economic growth; industry capacity; shifts in
market demand; changes in commodity prices and commodity demand;
uncertainty surrounding timing and volumes of commodities being
shipped via CP; inflation; geopolitical instability; changes in
laws, regulations and government policies, including regulation of
rates; changes in taxes and tax rates; potential increases in
maintenance and operating costs; changes in fuel prices; disruption
in fuel supplies; uncertainties of investigations, proceedings or
other types of claims and litigation; compliance with environmental
regulations; labour disputes; changes in labour costs and labour
difficulties; risks and liabilities arising from derailments;
transportation of dangerous goods; timing of completion of capital
and maintenance projects; sufficiency of budgeted capital
expenditures in carrying out business plans; services and
infrastructure; the satisfaction by third parties of their
obligations; currency and interest rate fluctuations; exchange
rates; effects of changes in market conditions and discount rates
on the financial position of pension plans and investments; trade
restrictions or other changes to international trade arrangements;
the effects of current and future multinational trade agreements on
the level of trade among Canada,
the U.S. and Mexico; climate
change and the market and regulatory responses to climate change;
anticipated in-service dates; success of hedging activities;
operational performance and reliability; customer, regulatory and
other stakeholder approvals and support; regulatory and legislative
decisions and actions; the adverse impact of any termination or
revocation by the Mexican government of Kansas City Southern de
México, S.A. de C.V.'s Concession; public opinion; various events
that could disrupt operations, including severe weather, such as
droughts, floods, avalanches and earthquakes, and cybersecurity
attacks, as well as security threats and governmental response to
them, and technological changes; acts of terrorism, war or other
acts of violence or crime or risk of such activities; insurance
coverage limitations; material adverse changes in economic and
industry conditions, including the availability of short and
long-term financing; the pandemic created by the outbreak of
COVID-19 and its variants and resulting effects on economic
conditions, the demand environment for logistics requirements and
energy prices, restrictions imposed by public health authorities or
governments, fiscal and monetary policy responses by governments
and financial institutions, and disruptions to global supply
chains; the realization of anticipated benefits and synergies of
the KCS transaction and the timing thereof; the success of
integration plans for KCS; the focus of management time and
attention on the KCS transaction and other disruptions arising from
the transaction; estimated future dividends; financial strength and
flexibility; debt and equity market conditions, including the
ability to access capital markets on favourable terms or at all;
cost of debt and equity capital; and the ability of the management
of the Company, to execute key priorities, including those in
connection with the KCS transaction. 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
"Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Forward-Looking
Statements" in CP's annual and interim reports on Form 10-K and
10-Q.
Any forward-looking information contained in this news release
is made as of the date hereof. Except as required by law, CP
undertakes no obligation to update publicly or otherwise revise any
forward-looking information, or the foregoing assumptions and risks
affecting such forward-looking information, whether as a result of
new information, future events or otherwise.
About Canadian Pacific
Canadian Pacific is a
transcontinental railway in Canada
and the United States with direct
links to major ports on the west and east coasts. CP provides 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 cpr.ca to see
the rail advantages of CP. CP-IR
FINANCIAL INFORMATION
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
For the three
months
ended December 31
|
For the
year ended
December 31
|
(in millions of
Canadian dollars, except share and per share data)
|
2021
|
2020
|
2021
|
2020
|
Revenues
|
|
|
|
|
Freight
|
$
|
1,994
|
$
|
1,968
|
$
|
7,816
|
$
|
7,541
|
Non-freight
|
46
|
44
|
179
|
169
|
Total
revenues
|
2,040
|
2,012
|
7,995
|
7,710
|
Operating
expenses
|
|
|
|
|
Compensation and
benefits
|
405
|
433
|
1,570
|
1,560
|
Fuel
|
231
|
169
|
854
|
652
|
Materials
|
51
|
54
|
215
|
216
|
Equipment
rents
|
29
|
34
|
121
|
142
|
Depreciation and
amortization
|
206
|
197
|
811
|
779
|
Purchased services and
other (Note 4)
|
286
|
197
|
1,218
|
1,050
|
Total operating
expenses
|
1,208
|
1,084
|
4,789
|
4,399
|
|
|
|
|
|
Operating
income
|
832
|
928
|
3,206
|
3,311
|
Less:
|
|
|
|
|
Equity loss of Kansas
City Southern (Note 4)
|
141
|
—
|
141
|
—
|
Other (income)
expense (Note 2)
|
(16)
|
(96)
|
237
|
(7)
|
Merger termination fee
(Note 4)
|
—
|
—
|
(845)
|
—
|
Other components of
net periodic benefit recovery
|
(101)
|
(85)
|
(387)
|
(342)
|
Net interest
expense
|
125
|
112
|
440
|
458
|
Income before
income tax expense
|
683
|
997
|
3,620
|
3,202
|
Income tax expense
(Note 3)
|
151
|
195
|
768
|
758
|
Net
income
|
$
|
532
|
$
|
802
|
$
|
2,852
|
$
|
2,444
|
|
|
|
|
|
Earnings per share
(Note 1)
|
|
|
|
|
Basic earnings per
share
|
$
|
0.74
|
$
|
1.19
|
$
|
4.20
|
$
|
3.61
|
Diluted earnings per
share
|
$
|
0.74
|
$
|
1.19
|
$
|
4.18
|
$
|
3.59
|
|
|
|
|
|
Weighted-average
number of shares (millions) (Note 1)
|
|
|
|
|
Basic
|
718.4
|
671.0
|
679.7
|
677.2
|
Diluted
|
721.3
|
674.1
|
682.8
|
679.9
|
|
|
|
|
|
Dividends declared
per share (Note 1)
|
$
|
0.1900
|
$
|
0.1900
|
$
|
0.7600
|
$
|
0.7120
|
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(unaudited)
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Net income
|
$
|
532
|
$
|
802
|
$
|
2,852
|
$
|
2,444
|
Net (loss) gain in
foreign currency translation adjustments, net of
hedging activities
|
(294)
|
36
|
(291)
|
18
|
Change in derivatives
designated as cash flow hedges(1)
|
(21)
|
4
|
48
|
10
|
Change in pension and
post-retirement defined benefit plans (Note 6)
|
1,128
|
(541)
|
1,286
|
(407)
|
Equity accounted
investments(1)
|
9
|
(1)
|
9
|
(1)
|
Other comprehensive
income (loss) before income taxes
|
822
|
(502)
|
1,052
|
(380)
|
Income tax (expense)
recovery on above items
|
(282)
|
104
|
(341)
|
88
|
Other comprehensive
income (loss)
|
540
|
(398)
|
711
|
(292)
|
Comprehensive
income
|
$
|
1,072
|
$
|
404
|
$
|
3,563
|
$
|
2,152
|
(1)
Comparative figures have been reclassified to conform with current
period presentation.
|
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED BALANCE SHEETS AS
AT
(unaudited)
|
December
31
|
December
31
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
69
|
$
|
147
|
Restricted cash and
cash equivalents
|
13
|
—
|
Accounts receivable,
net
|
819
|
825
|
Materials and
supplies
|
235
|
208
|
Other current
assets
|
216
|
141
|
|
1,352
|
1,321
|
Investment in Kansas
City Southern (Note 4)
|
42,309
|
—
|
Investments
|
209
|
199
|
Properties
|
21,200
|
20,422
|
Goodwill and
intangible assets
|
371
|
366
|
Pension asset (Note
6)
|
2,317
|
894
|
Other
assets
|
419
|
438
|
Total
assets
|
$
|
68,177
|
$
|
23,640
|
Liabilities and
shareholders' equity
|
|
|
Current
liabilities
|
|
|
Accounts payable and
accrued liabilities
|
$
|
1,609
|
$
|
1,467
|
Long-term debt
maturing within one year (Note 5)
|
1,550
|
1,186
|
|
3,159
|
2,653
|
Pension and other
benefit liabilities (Note 6)
|
718
|
832
|
Other long-term
liabilities
|
542
|
585
|
Long-term debt (Note
5)
|
18,577
|
8,585
|
Deferred income taxes
(Note 3)
|
11,352
|
3,666
|
Total
liabilities
|
34,348
|
16,321
|
Shareholders'
equity
|
|
|
Share capital (Note
4)
|
25,475
|
1,983
|
Additional paid-in
capital
|
66
|
55
|
Accumulated other
comprehensive loss
|
(2,103)
|
(2,814)
|
Retained
earnings
|
10,391
|
8,095
|
|
33,829
|
7,319
|
Total liabilities
and shareholders' equity
|
$
|
68,177
|
$
|
23,640
|
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Operating
activities
|
|
|
|
|
Net income
|
$
|
532
|
$
|
802
|
$
|
2,852
|
$
|
2,444
|
Reconciliation of net
income to cash provided by operating activities:
|
|
|
|
|
Depreciation and
amortization
|
206
|
197
|
811
|
779
|
Deferred income tax
expense
|
52
|
88
|
242
|
221
|
Pension recovery and
funding
|
(61)
|
(58)
|
(249)
|
(250)
|
Equity loss of Kansas
City Southern (Note 4)
|
141
|
—
|
141
|
—
|
Foreign exchange loss
(gain) on debt and lease liabilities (Note 2)
|
32
|
(103)
|
(7)
|
(14)
|
Other operating
activities, net
|
14
|
—
|
(36)
|
11
|
Change in non-cash
working capital balances related to operations
|
(312)
|
59
|
(66)
|
(389)
|
Cash provided by
operating activities
|
604
|
985
|
3,688
|
2,802
|
Investing
activities
|
|
|
|
|
Additions to
properties
|
(421)
|
(330)
|
(1,532)
|
(1,671)
|
Investment in Kansas
City Southern (Note 4)
|
(10,526)
|
—
|
(12,299)
|
—
|
Investment in Detroit
River Tunnel Partnership
|
—
|
(398)
|
—
|
(398)
|
Investment in Central
Maine & Québec Railway
|
—
|
—
|
—
|
19
|
Proceeds from sale of
properties and other assets
|
31
|
13
|
96
|
22
|
Other
|
6
|
(2)
|
5
|
(2)
|
Cash used in
investing activities
|
(10,910)
|
(717)
|
(13,730)
|
(2,030)
|
Financing
activities
|
|
|
|
|
Dividends
paid
|
(127)
|
(128)
|
(507)
|
(467)
|
Issuance of CP Common
Shares
|
5
|
20
|
25
|
52
|
Purchase of CP Common
Shares
|
—
|
(564)
|
—
|
(1,509)
|
Issuance of long-term
debt, excluding commercial paper (Note 5)
|
10,673
|
—
|
10,673
|
958
|
Repayment of
long-term debt, excluding commercial paper
|
(10)
|
(10)
|
(359)
|
(84)
|
Proceeds from term
loan
|
—
|
—
|
633
|
—
|
Net (repayment)
issuance of commercial paper (Note 5)
|
(388)
|
384
|
(454)
|
270
|
Net increase in
short-term borrowings
|
—
|
—
|
—
|
5
|
Acquisition-related
financing fees
|
(6)
|
—
|
(51)
|
—
|
Other
|
(17)
|
—
|
(24)
|
11
|
Cash provided by
(used in) financing activities
|
10,130
|
(298)
|
9,936
|
(764)
|
Effect of foreign
currency fluctuations on U.S. dollar-denominated
cash and cash equivalents
|
35
|
(6)
|
41
|
6
|
Cash
position
|
|
|
|
|
(Decrease) increase
in cash, cash equivalents, and restricted cash
|
(141)
|
(36)
|
(65)
|
14
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
223
|
183
|
147
|
133
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
82
|
$
|
147
|
$
|
82
|
$
|
147
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
Income taxes
paid
|
$
|
151
|
$
|
127
|
$
|
552
|
$
|
582
|
Interest
paid
|
$
|
61
|
$
|
60
|
$
|
426
|
$
|
443
|
See Notes to Interim Consolidated Financial Information.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(unaudited)
|
|
For the three
months ended December 31
|
(in millions of
Canadian dollars except per
share data)
|
|
Common
shares (in
millions)
|
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
loss
|
Retained
earnings
|
Total
shareholders'
equity
|
Balance at October
1, 2021
|
|
666.9
|
|
$
|
2,008
|
$
|
68
|
$
|
(2,643)
|
$
|
10,035
|
$
|
9,468
|
Net income
|
|
—
|
|
—
|
—
|
—
|
532
|
532
|
Other comprehensive
income
|
|
—
|
|
—
|
—
|
540
|
—
|
540
|
Dividends declared
($0.190 per share)
|
|
—
|
|
—
|
—
|
—
|
(176)
|
(176)
|
Effect of stock-based
compensation
expense
|
|
—
|
|
—
|
5
|
—
|
—
|
5
|
Shares issued for
Kansas City Southern
acquisition (Note 4)
|
|
262.6
|
|
23,461
|
(5)
|
—
|
—
|
23,456
|
Shares issued under
stock option plan
|
|
0.2
|
|
6
|
(2)
|
—
|
—
|
4
|
Balance at
December 31, 2021
|
|
929.7
|
|
$
|
25,475
|
$
|
66
|
$
|
(2,103)
|
$
|
10,391
|
$
|
33,829
|
Balance at October 1,
2020
|
|
672.5
|
|
$
|
1,978
|
$
|
56
|
$
|
(2,416)
|
$
|
7,961
|
$
|
7,579
|
Net income
|
|
—
|
|
—
|
—
|
—
|
802
|
802
|
Other comprehensive
loss
|
|
—
|
|
—
|
—
|
(398)
|
—
|
(398)
|
Dividends declared
($0.190 per share)
|
|
—
|
|
—
|
—
|
—
|
(126)
|
(126)
|
Effect of stock-based
compensation
expense
|
|
—
|
|
—
|
4
|
—
|
—
|
4
|
CP Common Shares
repurchased
|
|
(6.7)
|
|
(19)
|
—
|
—
|
(542)
|
(561)
|
Shares issued under
stock option plan
|
|
0.5
|
|
24
|
(5)
|
—
|
—
|
19
|
Balance at December
31, 2020
|
|
666.3
|
|
$
|
1,983
|
$
|
55
|
$
|
(2,814)
|
$
|
8,095
|
$
|
7,319
|
|
|
For the year ended
December 31
|
(in millions of
Canadian dollars except per
share data)
|
|
Common
shares (in
millions)
|
|
Share
capital
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
loss
|
Retained
earnings
|
Total
shareholders'
equity
|
Balance at January
1, 2021
|
|
666.3
|
|
$
|
1,983
|
$
|
55
|
$
|
(2,814)
|
$
|
8,095
|
$
|
7,319
|
Net income
|
|
—
|
|
—
|
—
|
—
|
2,852
|
2,852
|
Other comprehensive
income
|
|
—
|
|
—
|
—
|
711
|
—
|
711
|
Dividends declared
($0.760 per share)
|
|
—
|
|
—
|
—
|
—
|
(556)
|
(556)
|
Effect of stock-based
compensation
expense
|
|
—
|
|
—
|
23
|
—
|
—
|
23
|
Shares issued for
Kansas City Southern
acquisition (Note 4)
|
|
262.6
|
|
23,461
|
(5)
|
—
|
—
|
23,456
|
Shares issued under
stock option plan
|
|
0.8
|
|
31
|
(7)
|
—
|
—
|
24
|
Balance at
December 31, 2021
|
|
929.7
|
|
$
|
25,475
|
$
|
66
|
$
|
(2,103)
|
$
|
10,391
|
$
|
33,829
|
Balance at January 1,
2020
|
|
685.0
|
|
$
|
1,993
|
$
|
48
|
$
|
(2,522)
|
$
|
7,549
|
$
|
7,068
|
Net income
|
|
—
|
|
—
|
—
|
—
|
2,444
|
2,444
|
Other comprehensive
loss
|
|
—
|
|
—
|
—
|
(292)
|
—
|
(292)
|
Dividends declared
($0.712 per share)
|
|
—
|
|
—
|
—
|
—
|
(479)
|
(479)
|
Effect of stock-based
compensation
expense
|
|
—
|
|
—
|
17
|
—
|
—
|
17
|
CP Common Shares
repurchased
|
|
(20.4)
|
|
(58)
|
—
|
—
|
(1,419)
|
(1,477)
|
Shares issued under
stock option plan
|
|
1.7
|
|
48
|
(10)
|
—
|
—
|
38
|
Balance at December
31, 2020
|
|
666.3
|
|
$
|
1,983
|
$
|
55
|
$
|
(2,814)
|
$
|
8,095
|
$
|
7,319
|
See Notes to Interim Consolidated Financial Information.
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
December 31, 2021
(unaudited)
1 Basis of presentation
This unaudited interim consolidated financial information of
Canadian Pacific Railway Limited ("CP", or "the Company"),
expressed in Canadian dollars, reflects management's estimates and
assumptions that are necessary for its fair presentation in
conformity with generally accepted accounting principles in
the United States of America
("GAAP"). It does not include all disclosures required under GAAP
for annual financial statements and interim financial statements,
and should be read in conjunction with the 2020 annual consolidated
financial statements and notes included in CP's 2020 Annual Report
on Form 10-K and 2021 interim consolidated financial statements.
The accounting policies used are consistent with the accounting
policies used in preparing the 2020 annual consolidated financial
statements.
On April 21, 2021, the Company's
shareholders approved a five-for-one share split of the Company's
issued and outstanding Common Shares. On May 13, 2021, the Company's shareholders of
record, as of May 5, 2021, received
four additional shares for every Common Share held.
Ex-distribution trading in the Company's Common Shares on a
split-adjusted basis commenced on May 14,
2021. Proportional adjustments were also made to outstanding
awards under the Company's stock-based compensation plans in order
to reflect the share split. All outstanding Common Shares,
stock-based compensation awards, and per share amounts herein have
been retrospectively adjusted to reflect the share split.
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 information includes 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 Other (income) expense
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Foreign exchange loss
(gain) on debt and lease liabilities
|
$
|
32
|
$
|
(103)
|
$
|
(7)
|
$
|
(14)
|
Other foreign
exchange losses (gains)
|
5
|
1
|
(4)
|
(1)
|
Acquisition-related
(recoveries) costs (Note 4)
|
(48)
|
—
|
247
|
—
|
Other
|
(5)
|
6
|
1
|
8
|
Other (income)
expense
|
$
|
(16)
|
$
|
(96)
|
$
|
237
|
$
|
(7)
|
3 Income taxes
During the fourth quarter and for the year ended 2021, the
Company recorded a deferred tax liability of $7.2 billion (U.S. $5.6 billion) on the outside basis
difference of its investment in Kansas City Southern ("KCS") as a
result of the KCS acquisition. The outside basis difference is the
excess of the carrying amount of CP's investment in KCS for
financial reporting over the tax basis of this investment.
During the fourth quarter and for the year ended 2021, the
Company recorded a deferred tax recovery of $33 million (U.S.
$26 million) on the outside basis
difference of the change in the equity investment in KCS from
initial recognition on December 14,
2021.
During the fourth quarter and for the year ended 2020, the
Company revalued its deferred income tax balances as a result of a
corporate income tax rate decrease due to a change relating to a
tax return filing election for the state of North Dakota, resulting in a net recovery of
$29 million.
4 Business acquisition
On December 14, 2021, CP completed
its acquisition of KCS for consideration of approximately
$36 billion (U.S. $28 billion), representing share
consideration, cash consideration, and payments to KCS of
$1,773 million (U.S.
$1,400 million) in the third
quarter of 2021 in connection with KCS's payment of the Canadian
National Railway ("CN") merger termination fees that related to
KCS's termination on September 15,
2021 of the Agreement and Plan of Merger entered into by KCS
and CN on May 21, 2021. KCS is a U.S.
Class I railway with approximately 7,100 route miles extending from
the midwest and southeast portions of the
United States south into Mexico and connects with all Class I
railways.
Under the terms of the Merger Agreement, the Company issued
approximately 262.6 million Common Shares to existing KCS common
stockholders at the exchange ratio of 2.884 Common Shares per share
of KCS common stock held (valued at approximately $23.5 billion (U.S. $18.3 billion)) and paid cash consideration
to existing KCS stockholders of U.S. $90 per share of KCS common stock held and U.S.
$37.50 per share of KCS preferred
stock held for a total of approximately $10.5 billion (U.S. $8.2 billion). The cash consideration paid
was financed by issuances of long-term debt of $2.2 billion and $8.6 billion (U.S. $6.7 billion) on November 24, 2021 and December 2, 2021, respectively (see Note 5).
CP accounts for its investment in KCS of $42,309 million, which includes the outside
basis deferred tax liability (see Note 3), using the equity method
of accounting while the Surface Transportation Board ("STB")
considers the Company's application to control KCS. Subject to
final approval by the STB, the Company would obtain control of KCS
and expects to account for its acquisition of KCS as a business
combination using the acquisition method of accounting.
During the second quarter of 2021, the Company received a merger
termination fee of $845 million (U.S. $700 million) from
KCS, recorded as "Merger termination fee" in the Company's Interim
Consolidated Statements of Income, as a result of KCS's termination
on May 21, 2021 of the Agreement and
Plan of Merger (the "Original Merger Agreement") entered into by CP
and KCS on March 21, 2021. During the
fourth quarter and for the year ended December 31, 2021, the Company incurred
$157 million and $599 million, respectively, in
acquisition-related costs associated with the KCS acquisition, of
which costs of $36 million and $183 million were recorded
within "Purchased services and other", and recoveries of
$48 million and costs of $247 million were recorded
within "Other (income) expense" in each period, respectively.
Acquisition-related costs, net of tax, of $169 million,
incurred by KCS during the 18 days from the date the transaction
closed into the voting trust, were included within "Equity loss of
Kansas City Southern" in the Company's Interim Consolidated
Statements of Income.
5 Debt
Issuance of long-term debt
During the fourth quarter of 2021, the Company issued the
following securities for total net proceeds of $10.7 billion to fund the cash consideration
component of the KCS acquisition:
Date
issued
|
Description of
securities
|
Maturity
|
Net
proceeds
|
November 24,
2021
|
$1.0 billion 1.589%
Notes
|
Nov 2023
|
$1.00
billion
|
|
$1.2 billion 2.540%
Notes
|
Feb 2028
|
$1.20
billion
|
December 2,
2021
|
U.S. $1.5 billion
1.350% Notes
|
Dec 2024
|
$1.91 billion (U.S.
$1.49 billion)
|
|
U.S. $1.0 billion
1.750% Notes
|
Dec 2026
|
$1.27 billion (U.S.
$0.99 billion)
|
|
U.S. $1.4 billion
2.450% Notes
|
Dec 2031
|
$1.78 billion (U.S.
$1.39 billion)
|
|
U.S. $1.0 billion
3.000% Notes
|
Dec 2041
|
$1.26 billion (U.S.
$0.99 billion)
|
|
U.S. $1.8 billion
3.100% Notes
|
Dec 2051
|
$2.26 billion (U.S.
$1.77 billion)
|
In conjunction with the above debt issuances, the Company
settled all outstanding forward starting floating-to-fixed interest
rate swap and interest rate bond lock hedges for a net payment of
$226 million.
Commercial paper program
The Company has a commercial paper program which enables it to
issue commercial paper up to a maximum aggregate principal amount
of U.S. $1.0 billion in the form of
unsecured promissory notes. The commercial paper program is backed
by the U.S. $1.3 billion revolving
credit facility. As at December 31,
2021, the Company had total commercial paper borrowings of
U.S. $265 million ($336 million), included in "Long-term debt
maturing within one year" on the Company's Interim Consolidated
Balance Sheets (December 31, 2020 -
U.S. $644 million). The weighted-average interest rate on
these borrowings was 0.32% (December 31,
2020 - 0.27%). The Company presents issuances and repayments
of commercial paper, all of which have a maturity of less than 90
days, in the Company's Interim Consolidated Statements of Cash
Flows on a net basis.
6 Pension and other benefits
The Company's defined benefit pension and post-retirement
benefit plans were remeasured at December
31, 2021, resulting in a pre-tax net actuarial gain of
$1,076 million. The gain was
primarily due to an increase in the discount rate used to measure
the benefit obligations from 2.58% at December 31, 2020 to 3.01% at December 31, 2021. The net actuarial gain
contributed $973 million to the
year-over-year increase in "Pension asset", $103 million to the year-over-year decrease in
"Pension and other benefit liabilities", and $808 million, net of tax, to "Other comprehensive
income".
Summary of Rail Data
|
Fourth
Quarter
|
|
Year
|
Financial
(millions, except per share data)
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Freight
|
$
|
1,994
|
$
|
1,968
|
$
|
26
|
1
|
|
$
|
7,816
|
$
|
7,541
|
$
|
275
|
4
|
Non-freight
|
46
|
44
|
2
|
5
|
|
179
|
169
|
10
|
6
|
Total
revenues
|
2,040
|
2,012
|
28
|
1
|
|
7,995
|
7,710
|
285
|
4
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
405
|
433
|
(28)
|
(6)
|
|
1,570
|
1,560
|
10
|
1
|
Fuel
|
231
|
169
|
62
|
37
|
|
854
|
652
|
202
|
31
|
Materials
|
51
|
54
|
(3)
|
(6)
|
|
215
|
216
|
(1)
|
—
|
Equipment
rents
|
29
|
34
|
(5)
|
(15)
|
|
121
|
142
|
(21)
|
(15)
|
Depreciation and
amortization
|
206
|
197
|
9
|
5
|
|
811
|
779
|
32
|
4
|
Purchased services and
other
|
286
|
197
|
89
|
45
|
|
1,218
|
1,050
|
168
|
16
|
Total operating
expenses
|
1,208
|
1,084
|
124
|
11
|
|
4,789
|
4,399
|
390
|
9
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
832
|
928
|
(96)
|
(10)
|
|
3,206
|
3,311
|
(105)
|
(3)
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Equity loss of Kansas
City Southern
|
141
|
—
|
141
|
100
|
|
141
|
—
|
141
|
100
|
Other (income)
expense
|
(16)
|
(96)
|
80
|
(83)
|
|
237
|
(7)
|
244
|
(3,486)
|
Merger termination
fee
|
—
|
—
|
—
|
—
|
|
(845)
|
—
|
(845)
|
100
|
Other components of
net periodic benefit recovery
|
(101)
|
(85)
|
(16)
|
19
|
|
(387)
|
(342)
|
(45)
|
13
|
Net interest
expense
|
125
|
112
|
13
|
12
|
|
440
|
458
|
(18)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Income before income
tax expense
|
683
|
997
|
(314)
|
(31)
|
|
3,620
|
3,202
|
418
|
13
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
151
|
195
|
(44)
|
(23)
|
|
768
|
758
|
10
|
1
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
532
|
$
|
802
|
$
|
(270)
|
(34)
|
|
$
|
2,852
|
$
|
2,444
|
$
|
408
|
17
|
Operating ratio
(%)
|
59.2
|
53.9
|
5.3
|
530
bps
|
|
59.9
|
57.1
|
2.8
|
280
bps
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share(1)
|
$
|
0.74
|
$
|
1.19
|
$
|
(0.45)
|
(38)
|
|
$
|
4.20
|
$
|
3.61
|
$
|
0.59
|
16
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share(1)
|
$
|
0.74
|
$
|
1.19
|
$
|
(0.45)
|
(38)
|
|
$
|
4.18
|
$
|
3.59
|
$
|
0.59
|
16
|
|
|
|
|
|
|
|
|
|
|
Shares
Outstanding(1)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of basic shares
outstanding (millions)
|
718.4
|
671.0
|
47.4
|
7
|
|
679.7
|
677.2
|
2.5
|
—
|
Weighted average
number of diluted shares
outstanding (millions)
|
721.3
|
674.1
|
47.2
|
7
|
|
682.8
|
679.9
|
2.9
|
—
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
|
|
|
Average foreign
exchange rate (U.S.$/Canadian$)
|
0.79
|
0.77
|
0.02
|
3
|
|
0.80
|
0.75
|
0.05
|
7
|
Average foreign
exchange rate (Canadian$/U.S.$)
|
1.26
|
1.30
|
(0.04)
|
(3)
|
|
1.25
|
1.34
|
(0.09)
|
(7)
|
|
|
(1)
|
As a result of the
five-for-one share split of the Company's issued and outstanding
Common Shares, which began trading on a post-split basis on May 14,
2021, per share amounts and all outstanding Common Shares for
comparative periods of 2020 have been retrospectively
adjusted.
|
Summary of Rail Data (Continued)
|
Fourth
Quarter
|
|
Year
|
Commodity
Data
|
2021
|
2020
|
Total
Change
|
%
Change
|
FX
Adjusted
%
Change(1)
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
FX
Adjusted
%
Change(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenues
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
- Grain
|
$
|
440
|
$
|
508
|
$
|
(68)
|
(13)
|
(12)
|
|
$
|
1,684
|
$
|
1,829
|
$
|
(145)
|
(8)
|
(5)
|
- Coal
|
134
|
155
|
(21)
|
(14)
|
(14)
|
|
625
|
566
|
59
|
10
|
11
|
- Potash
|
115
|
103
|
12
|
12
|
14
|
|
463
|
493
|
(30)
|
(6)
|
(3)
|
- Fertilizers and
sulphur
|
78
|
78
|
—
|
—
|
3
|
|
305
|
290
|
15
|
5
|
11
|
- Forest
products
|
89
|
84
|
5
|
6
|
10
|
|
348
|
328
|
20
|
6
|
12
|
- Energy, chemicals
and plastics
|
414
|
366
|
48
|
13
|
15
|
|
1,563
|
1,519
|
44
|
3
|
7
|
- Metals, minerals
and consumer products
|
193
|
155
|
38
|
25
|
28
|
|
728
|
629
|
99
|
16
|
22
|
-
Automotive
|
87
|
109
|
(22)
|
(20)
|
(18)
|
|
376
|
324
|
52
|
16
|
22
|
-
Intermodal
|
444
|
410
|
34
|
8
|
9
|
|
1,724
|
1,563
|
161
|
10
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight
Revenues
|
$
|
1,994
|
$
|
1,968
|
$
|
26
|
1
|
3
|
|
$
|
7,816
|
$
|
7,541
|
$
|
275
|
4
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue
per Revenue Ton-
Mile (RTM) (cents)
|
|
|
|
|
|
|
|
|
|
|
|
- Grain
|
4.66
|
4.23
|
0.43
|
10
|
12
|
|
4.43
|
4.38
|
0.05
|
1
|
4
|
- Coal
|
3.44
|
2.92
|
0.52
|
18
|
18
|
|
3.41
|
3.06
|
0.35
|
11
|
12
|
- Potash
|
2.90
|
2.50
|
0.40
|
16
|
18
|
|
2.78
|
2.62
|
0.16
|
6
|
9
|
- Fertilizers and
sulphur
|
6.66
|
6.02
|
0.64
|
11
|
14
|
|
6.30
|
6.19
|
0.11
|
2
|
7
|
- Forest
products
|
6.23
|
5.87
|
0.36
|
6
|
10
|
|
6.09
|
5.97
|
0.12
|
2
|
8
|
- Energy, chemicals
and plastics
|
6.74
|
5.91
|
0.83
|
14
|
16
|
|
6.14
|
6.28
|
(0.14)
|
(2)
|
1
|
- Metals, minerals
and consumer products
|
6.79
|
6.53
|
0.26
|
4
|
7
|
|
6.52
|
6.75
|
(0.23)
|
(3)
|
2
|
-
Automotive
|
22.48
|
22.95
|
(0.47)
|
(2)
|
1
|
|
21.30
|
24.53
|
(3.23)
|
(13)
|
(9)
|
-
Intermodal
|
6.63
|
5.81
|
0.82
|
14
|
15
|
|
6.22
|
5.61
|
0.61
|
11
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue
per RTM
|
5.54
|
4.89
|
0.65
|
13
|
15
|
|
5.22
|
4.96
|
0.26
|
5
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Freight Revenue
per Carload
|
|
|
|
|
|
|
|
|
|
|
|
- Grain
|
$
|
4,297
|
$
|
3,719
|
$
|
578
|
16
|
17
|
|
$
|
3,951
|
$
|
3,810
|
$
|
141
|
4
|
6
|
- Coal
|
1,991
|
2,103
|
(112)
|
(5)
|
(5)
|
|
2,144
|
2,174
|
(30)
|
(1)
|
(1)
|
- Potash
|
3,186
|
2,869
|
317
|
11
|
13
|
|
3,068
|
3,026
|
42
|
1
|
5
|
- Fertilizers and
sulphur
|
4,875
|
4,906
|
(31)
|
(1)
|
2
|
|
4,736
|
4,708
|
28
|
1
|
6
|
- Forest
products
|
4,811
|
4,641
|
170
|
4
|
8
|
|
4,728
|
4,581
|
147
|
3
|
9
|
- Energy, chemicals
and plastics
|
5,267
|
4,541
|
726
|
16
|
18
|
|
4,883
|
4,919
|
(36)
|
(1)
|
3
|
- Metals, minerals
and consumer products
|
3,244
|
2,914
|
330
|
11
|
14
|
|
3,076
|
3,034
|
42
|
1
|
7
|
-
Automotive
|
3,655
|
3,132
|
523
|
17
|
20
|
|
3,443
|
3,054
|
389
|
13
|
18
|
-
Intermodal
|
1,752
|
1,470
|
282
|
19
|
20
|
|
1,622
|
1,489
|
133
|
9
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Freight Revenue
per Carload
|
$
|
3,041
|
$
|
2,704
|
$
|
337
|
12
|
14
|
|
$
|
2,857
|
$
|
2,784
|
$
|
73
|
3
|
6
|
|
|
(1)
|
This earnings measure
has no standardized meaning prescribed by GAAP and, therefore, is
unlikely to be comparable to similar measures presented by other
companies. This measure is defined and reconciled in Non-GAAP
Measures of this Earnings Release.
|
Summary of Rail Data (Continued)
|
Fourth
Quarter
|
|
Year
|
Commodity Data
(Continued)
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Millions of
RTM
|
|
|
|
|
|
|
|
|
|
- Grain
|
9,435
|
12,013
|
(2,578)
|
(21)
|
|
37,999
|
41,747
|
(3,748)
|
(9)
|
- Coal
|
3,894
|
5,301
|
(1,407)
|
(27)
|
|
18,345
|
18,510
|
(165)
|
(1)
|
- Potash
|
3,966
|
4,120
|
(154)
|
(4)
|
|
16,671
|
18,784
|
(2,113)
|
(11)
|
- Fertilizers and
sulphur
|
1,172
|
1,296
|
(124)
|
(10)
|
|
4,845
|
4,683
|
162
|
3
|
- Forest
products
|
1,428
|
1,432
|
(4)
|
—
|
|
5,718
|
5,491
|
227
|
4
|
- Energy, chemicals
and plastics
|
6,141
|
6,191
|
(50)
|
(1)
|
|
25,469
|
24,172
|
1,297
|
5
|
- Metals, minerals and
consumer products
|
2,842
|
2,374
|
468
|
20
|
|
11,170
|
9,325
|
1,845
|
20
|
-
Automotive
|
387
|
475
|
(88)
|
(19)
|
|
1,765
|
1,321
|
444
|
34
|
-
Intermodal
|
6,696
|
7,054
|
(358)
|
(5)
|
|
27,704
|
27,858
|
(154)
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Total RTMs
|
35,961
|
40,256
|
(4,295)
|
(11)
|
|
149,686
|
151,891
|
(2,205)
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Carloads
(thousands)
|
|
|
|
|
|
|
|
|
|
- Grain
|
102.4
|
136.6
|
(34.2)
|
(25)
|
|
426.2
|
480.1
|
(53.9)
|
(11)
|
- Coal
|
67.3
|
73.7
|
(6.4)
|
(9)
|
|
291.5
|
260.4
|
31.1
|
12
|
- Potash
|
36.1
|
35.9
|
0.2
|
1
|
|
150.9
|
162.9
|
(12.0)
|
(7)
|
- Fertilizers and
sulphur
|
16.0
|
15.9
|
0.1
|
1
|
|
64.4
|
61.6
|
2.8
|
5
|
- Forest
products
|
18.5
|
18.1
|
0.4
|
2
|
|
73.6
|
71.6
|
2.0
|
3
|
- Energy, chemicals
and plastics
|
78.6
|
80.6
|
(2.0)
|
(2)
|
|
320.1
|
308.8
|
11.3
|
4
|
- Metals, minerals and
consumer products
|
59.5
|
53.2
|
6.3
|
12
|
|
236.7
|
207.3
|
29.4
|
14
|
-
Automotive
|
23.8
|
34.8
|
(11.0)
|
(32)
|
|
109.2
|
106.1
|
3.1
|
3
|
-
Intermodal
|
253.4
|
279.0
|
(25.6)
|
(9)
|
|
1,062.9
|
1,049.6
|
13.3
|
1
|
|
|
|
|
|
|
|
|
|
|
Total
Carloads
|
655.6
|
727.8
|
(72.2)
|
(10)
|
|
2,735.5
|
2,708.4
|
27.1
|
1
|
|
Fourth
Quarter
|
|
Year
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
FX
Adjusted
%
Change(1)
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
FX
Adjusted
%
Change(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
$
|
405
|
$
|
433
|
$
|
(28)
|
(6)
|
(6)
|
|
$
|
1,570
|
$
|
1,560
|
$
|
10
|
1
|
2
|
Fuel
|
231
|
169
|
62
|
37
|
40
|
|
854
|
652
|
202
|
31
|
37
|
Materials
|
51
|
54
|
(3)
|
(6)
|
(6)
|
|
215
|
216
|
(1)
|
—
|
1
|
Equipment
rents
|
29
|
34
|
(5)
|
(15)
|
(12)
|
|
121
|
142
|
(21)
|
(15)
|
(10)
|
Depreciation and
amortization
|
206
|
197
|
9
|
5
|
6
|
|
811
|
779
|
32
|
4
|
6
|
Purchased services and
other
|
286
|
197
|
89
|
45
|
47
|
|
1,218
|
1,050
|
168
|
16
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating
Expenses
|
$
|
1,208
|
$
|
1,084
|
$
|
124
|
11
|
13
|
|
$
|
4,789
|
$
|
4,399
|
$
|
390
|
9
|
12
|
|
|
(1)
|
This earnings measure
has no standardized meaning prescribed by GAAP and, therefore, is
unlikely to be comparable to similar measures presented by other
companies. This measure is defined and reconciled in Non-GAAP
Measures of this Earnings Release.
|
Summary of Rail Data (Continued)
|
Fourth
Quarter
|
|
Year
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
2021
|
2020
|
Total
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Operations
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross ton-miles
("GTMs") (millions)
|
64,574
|
71,977
|
(7,403)
|
(10)
|
|
271,921
|
272,360
|
(439)
|
—
|
Train miles
(thousands)
|
6,991
|
7,844
|
(853)
|
(11)
|
|
29,397
|
30,324
|
(927)
|
(3)
|
Average train
weight - excluding local traffic (tons)
|
10,011
|
9,889
|
122
|
1
|
|
9,967
|
9,707
|
260
|
3
|
Average train
length - excluding local traffic (feet)
|
8,229
|
8,207
|
22
|
—
|
|
8,200
|
7,929
|
271
|
3
|
Average terminal
dwell (hours)
|
7.5
|
6.7
|
0.8
|
12
|
|
7.2
|
6.5
|
0.7
|
11
|
Average train speed
(miles per hour, or "mph")(1)
|
22.3
|
21.9
|
0.4
|
2
|
|
21.6
|
22.0
|
(0.4)
|
(2)
|
Locomotive
productivity (GTMs / operating horsepower)(2)
|
193
|
207
|
(14)
|
(7)
|
|
201
|
207
|
(6)
|
(3)
|
Fuel
efficiency(3)
|
0.941
|
0.948
|
(0.007)
|
(1)
|
|
0.931
|
0.942
|
(0.011)
|
(1)
|
U.S. gallons of
locomotive fuel consumed (millions)(4)
|
60.8
|
68.2
|
(7.4)
|
(11)
|
|
253.3
|
256.7
|
(3.4)
|
(1)
|
Average fuel price
(U.S. dollars per U.S. gallon)
|
3.03
|
1.91
|
1.12
|
59
|
|
2.70
|
1.90
|
0.80
|
42
|
|
|
|
|
|
|
|
|
|
|
Total Employees
and Workforce
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total employees
(average)(5)
|
12,113
|
12,028
|
85
|
1
|
|
12,337
|
12,168
|
169
|
1
|
Total employees (end
of period)(5)
|
11,834
|
11,890
|
(56)
|
—
|
|
11,834
|
11,890
|
(56)
|
—
|
Workforce (end of
period)(6)
|
11,872
|
11,904
|
(32)
|
—
|
|
11,872
|
11,904
|
(32)
|
—
|
|
|
|
|
|
|
|
|
|
|
Safety
Indicators(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRA personal injuries
per 200,000 employee-hours
|
0.71
|
1.11
|
(0.40)
|
(36)
|
|
0.92
|
1.11
|
(0.19)
|
(17)
|
FRA train accidents
per million train-miles
|
1.03
|
0.70
|
0.33
|
47
|
|
1.10
|
0.96
|
0.14
|
15
|
|
|
(1)
|
Average train speed
is defined as a measure of the line-haul movement from origin to
destination including terminal dwell hours. It is calculated
dividing the total train miles travelled by the total train hours
operated. This calculation does not include delay time related to
customers or foreign railroads and excludes the time and distance
travelled by: i) trains used in or around CP's yards; ii) passenger
trains; and iii) trains used for repairing track.
|
(2)
|
Locomotive
productivity is defined as daily GTMs divided by daily average
operating horsepower. Operating horsepower excludes units offline,
up or in storage, or in use on other railways, and includes foreign
units online.
|
(3)
|
Fuel efficiency is
defined as U.S. gallons of locomotive fuel consumed per 1,000
GTMs.
|
(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 currently engaged in full-time, part-time,
or seasonal employment with CP.
|
(6)
|
Workforce is defined
as total employees plus contractors and consultants.
|
(7)
|
FRA personal injuries
per 200,000 employee-hours for the three months ended December 31,
2020 was previously reported as 1.07, restated to 1.11 in this
Earnings Release. This restatement reflects new information
available within specified periods stipulated by the FRA but that
exceed the Company's financial reporting timeline.
|
Non-GAAP Measures
The Company presents Non-GAAP measures to provide a basis for
evaluating underlying earnings and liquidity trends in the
Company's business that can be compared with the results of
operations in prior periods. In addition, these Non-GAAP measures
facilitate a multi-period assessment of long-term profitability,
allowing management and other external users of the Company's
consolidated financial information to compare profitability on a
long-term basis, including assessing future profitability, with
that of the Company's peers.
These Non-GAAP measures have no standardized meaning and are not
defined by accounting principles generally accepted in the United States of America ("GAAP") and,
therefore, may not be comparable to similar measures presented by
other companies. The presentation of these Non-GAAP measures is not
intended to be considered in isolation from, as a substitute for,
or as superior to the financial information presented in accordance
with GAAP.
Non-GAAP Performance Measures
The Company uses adjusted earnings results including Adjusted
income, Adjusted diluted earnings per share, Adjusted operating
income and Adjusted operating ratio to evaluate the Company's
operating performance and for planning and forecasting future
business operations and future profitability. These Non-GAAP
measures provide meaningful supplemental information regarding
operating results because they exclude certain significant items
that are not considered indicative of future financial trends
either by nature or amount. As a result, these items are excluded
for management assessment of operational performance, allocation of
resources and preparation of annual budgets. These significant
items may include, but are not limited to, restructuring and asset
impairment charges, individually significant gains and losses from
sales of assets, acquisition-related costs (including legal,
consulting, and financing fees, fair value gain or loss on FX
forward contracts and interest rate hedges, FX gain on U.S.
dollar-denominated cash on hand from the issuances of long-term
debt to fund the KCS acquisition, and transaction costs (net of
tax) incurred by KCS which were recognized within the Equity loss
of KCS), the merger termination payment received, the foreign
exchange ("FX") impact of translating the Company's debt and lease
liabilities (including borrowings under the credit facility),
discrete tax items, changes in the outside basis tax difference
between the carrying amount of CP's equity investment in KCS and
its tax basis of this investment, changes in income tax rates,
changes to an uncertain tax item, and certain items outside the
control of management. These items may not be non-recurring.
However, excluding these significant items from GAAP results allows
for a consistent understanding of the Company's consolidated
financial performance when performing a multi-period assessment
including assessing the likelihood of future results. Accordingly,
these Non-GAAP financial measures may provide insight to investors
and other external users of the Company's consolidated financial
information.
Significant items that impact reported earnings for 2021 and
2020 include:
2021:
- in the fourth quarter, a deferred tax recovery of $33 million on changes in the outside basis
difference of the equity investment in KCS that favourably impacted
Diluted EPS by 5 cents;
- in the second quarter, merger termination payment received of
$845 million ($748 million after current taxes) in connection
with KCS's termination of the Original Merger Agreement effective
May 21, 2021, that favourably
impacted Diluted EPS by $1.11;
- during the course of the year, acquisition-related costs of
$599 million in connection with the
KCS acquisition ($500 million after
current tax recovery of $107 million
net of deferred tax expense of $8
million), including an expense of $183 million recognized in Purchased services and
other, $169 million recognized in
Equity loss of KCS, and $247 million
recognized in Other expense (income), that unfavourably impacted
Diluted EPS by 75 cents as
follows:
-
- in the fourth quarter, acquisition-related costs of
$157 million ($157 million after current tax recovery of
$13 million net of deferred tax
expense of $13 million), including
costs of $36 million recognized in
Purchased services and other, $169
million in Equity loss of KCS, and a $48 million recovery recognized in Other (income)
expense, that unfavourably impacted Diluted EPS by 22 cents;
- in the third quarter, acquisition-related costs of $98 million ($80
million after current tax recovery of $61 million net of deferred tax expense of
$43 million), including costs of
$15 million recognized in Purchased
services and other and $83 million
recognized in Other expense (income), that unfavourably impacted
Diluted EPS by 12 cents;
- in the second quarter, acquisition-related costs of
$308 million ($236 million after current taxes of $25 million and deferred taxes of $47 million), including costs of $99 million recognized in Purchased services and
other and $209 million recognized in
Other expense (income), that unfavourably impacted Diluted EPS by
35 cents; and
- in the first quarter, acquisition-related costs of $36 million ($27
million after current taxes of $8
million and deferred taxes of $1
million), including costs of $33
million recognized in Purchased services and other and
$3 million recognized in Other
expense (income), that unfavourably impacted Diluted EPS by
4 cents; and
- during the course of the year, a net non-cash gain of
$7 million ($6
million after deferred tax) due to FX translation of debt
and lease liabilities that favourably impacted Diluted EPS by
1 cents as follows:
-
- in the fourth quarter, a $32
million loss ($28 million
after deferred tax) that unfavourably impacted Diluted EPS by
4 cents;
- in the third quarter, a $46
million loss ($40 million
after deferred tax) that unfavourably impacted Diluted EPS by
6 cents;
- in the second quarter, a $52
million gain ($45 million
after deferred tax) that favourably impacted Diluted EPS by
7 cents; and
- in the first quarter, a $33
million gain ($29 million
after deferred tax) that favourably impacted Diluted EPS by
4 cents.
2020:
- in the fourth quarter, a deferred tax recovery of $29 million due to a change relating to a tax
return filing election for the state of North Dakota that favourably impacted Diluted
EPS by 5 cents; and
- during the course of the year, a net non-cash gain of
$14 million ($12 million after deferred tax) due to FX
translation of debt and lease liabilities that favourably impacted
Diluted EPS by 2 cents as
follows:
-
- in the fourth quarter, a $103
million gain ($90 million
after deferred tax) that favourably impacted Diluted EPS by
13 cents;
- in the third quarter, a $40
million gain ($38 million
after deferred tax) that favourably impacted Diluted EPS by
6 cents;
- in the second quarter, an $86
million gain ($82 million
after deferred tax) that favourably impacted Diluted EPS by
12 cents; and
- in the first quarter, a $215
million loss ($198 million
after deferred tax) that unfavourably impacted Diluted EPS by
28 cents.
Reconciliation of GAAP Performance Measures to Non-GAAP
Performance Measures
The following tables reconcile the most directly comparable
measures presented in accordance with GAAP to the Non-GAAP
measures:
Adjusted income is calculated as Net income reported on a GAAP
basis adjusted for significant items.
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in
millions)
|
2021
|
2020
|
2021
|
2020
|
Net income as
reported
|
$
|
532
|
$
|
802
|
$
|
2,852
|
$
|
2,444
|
Less significant
items (pre-tax):
|
|
|
|
|
Acquisition-related
costs
|
(157)
|
—
|
(599)
|
—
|
Merger termination
fee
|
—
|
—
|
845
|
—
|
Impact of FX
translation (loss) gain on debt and lease liabilities
|
(32)
|
103
|
7
|
14
|
Add:
|
|
|
|
|
Tax effect of
adjustments(1)
|
(4)
|
13
|
(1)
|
2
|
Deferred tax recovery
on the outside basis difference of the investment in
KCS
|
(33)
|
—
|
(33)
|
—
|
Income tax rate
changes
|
—
|
(29)
|
—
|
(29)
|
Adjusted
income
|
$
|
684
|
$
|
683
|
$
|
2,565
|
$
|
2,403
|
(1)
|
The tax effect of
adjustments was calculated as the pre-tax effect of the adjustments
multiplied by the applicable tax rate for the above items of 2.27%
and 0.51% for the three months and year ended December 31, 2021,
and 12.35% and 13.58% for the three months and year ended December
31, 2020, respectively. The applicable tax rates reflect the
taxable jurisdictions and nature, being on account of capital or
income, of the significant items.
|
Adjusted diluted earnings per share is calculated using Adjusted
income, as defined above, divided by the weighted-average diluted
number of Common Shares outstanding during the period as determined
in accordance with GAAP.
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
|
2021
|
2020
|
2021
|
2020
|
Diluted earnings
per share as reported
|
$
|
0.74
|
$
|
1.19
|
$
|
4.18
|
$
|
3.59
|
Less significant
items (pre-tax):
|
|
|
|
|
Acquisition-related
costs
|
(0.22)
|
—
|
(0.88)
|
—
|
Merger termination
fee
|
—
|
—
|
1.24
|
—
|
Impact of FX
translation (loss) gain on debt and lease liabilities
|
(0.05)
|
0.15
|
0.01
|
0.02
|
Add:
|
|
|
|
|
Tax effect of
adjustments(1)
|
(0.01)
|
0.02
|
—
|
—
|
Deferred tax recovery
on the outside basis difference of the investment in
KCS
|
(0.05)
|
—
|
(0.05)
|
—
|
Income tax rate
changes
|
—
|
(0.05)
|
—
|
(0.04)
|
Adjusted diluted
earnings per share
|
$
|
0.95
|
$
|
1.01
|
$
|
3.76
|
$
|
3.53
|
(1)
|
The tax effect of
adjustments was calculated as the pre-tax effect of the adjustments
multiplied by the applicable tax rate for the above items of 2.27%
and 0.51% for the three months and year ended December 31, 2021,
and 12.35% and 13.58% for the three months and year ended December
31, 2020, respectively. The applicable tax rates reflect the
taxable jurisdictions and nature, being on account of capital or
income, of the significant items.
|
Adjusted operating income is calculated as Operating income
reported on a GAAP basis less significant items.
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Operating income
as reported
|
$
|
832
|
$
|
928
|
$
|
3,206
|
$
|
3,311
|
Less significant
item:
|
|
|
|
|
Acquisition-related
costs
|
(36)
|
—
|
(183)
|
—
|
Adjusted operating
income
|
$
|
868
|
$
|
928
|
$
|
3,389
|
$
|
3,311
|
Adjusted operating ratio excludes those significant items that
are reported within operating income.
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
|
2021
|
2020
|
2021
|
2020
|
Operating ratio as
reported
|
59.2
|
%
|
53.9
|
%
|
59.9
|
%
|
57.1
|
%
|
Less significant
item:
|
|
|
|
|
Acquisition-related
costs
|
1.7
|
%
|
—
|
%
|
2.3
|
%
|
—
|
%
|
Adjusted operating
ratio
|
57.5
|
%
|
53.9
|
%
|
57.6
|
%
|
57.1
|
%
|
Adjusted Return on Invested Capital ("Adjusted ROIC")
Adjusted ROIC is calculated as Adjusted return divided by
Adjusted average invested capital. Adjusted return is defined as
Net income adjusted for interest expense, tax effected at the
Company's adjusted annualized effective tax rate, and significant
items in the Company's Consolidated Financial Statements, tax
effected at the applicable tax rate. Adjusted average invested
capital is defined as the sum of total Shareholders' equity,
Long-term debt, and Long-term debt maturing within one year, as
presented in the Company's Consolidated Financial Statements, each
averaged between the beginning and ending balance over a rolling
12-month period, adjusted for the impact of significant items, tax
effected at the applicable tax rate, on closing balances as part of
this average. Adjusted ROIC excludes significant items reported in
the Company's Consolidated Financial Statements, as these
significant items are not considered indicative of future financial
trends either by nature or amount, and excludes interest expense,
net of tax, to incorporate returns on the Company's overall
capitalization. Adjusted ROIC is a performance measure that
measures how productively the Company uses its long-term capital
investments, representing critical indicators of good operating and
investment decisions made by management, and is an important
performance criteria in determining certain elements of the
Company's long-term incentive plan. Adjusted ROIC is reconciled
below from Return on average shareholders' equity, the most
comparable measure calculated in accordance with GAAP.
Calculation of Return on average shareholders' equity
|
For the year ended
December 31
|
(in millions, except
for percentages)
|
2021
|
2020
|
Net income as
reported
|
$
|
2,852
|
$
|
2,444
|
Average shareholders'
equity
|
$
|
20,574
|
$
|
7,194
|
Return on average
shareholders' equity
|
13.9%
|
34.0%
|
Reconciliation of Net income to Adjusted return
|
For the year ended
December 31
|
(in
millions)
|
2021
|
2020
|
Net income as
reported
|
$
|
2,852
|
$
|
2,444
|
Add:
|
|
|
Net interest
expense
|
440
|
458
|
Tax on
interest(1)
|
(106)
|
(113)
|
Significant
items:
|
|
|
Acquisition-related
costs
|
599
|
—
|
Merger termination
fee
|
(845)
|
—
|
Impact of FX
translation gain on debt
and lease liabilities (pre-tax)
|
(7)
|
(14)
|
Tax on significant
items(2)
|
(1)
|
2
|
Deferred tax recovery
on the outside basis
difference of the investment in KCS
|
(33)
|
—
|
Income tax rate
changes
|
—
|
(29)
|
Adjusted
return
|
$
|
2,899
|
$
|
2,748
|
(1)
|
Tax was calculated at
the adjusted annualized effective tax rate of 23.85% and 24.61% for
each of the above items for the years ended December 31, 2021 and
2020, respectively.
|
(2)
|
Tax was calculated as
the pre-tax effect of the adjustments multiplied by the applicable
tax rate for the above items of 0.51% and 13.58% for the years
ended December 31, 2021 and 2020, respectively.
|
Reconciliation of Average shareholders' equity to Adjusted
average invested capital
|
For the year ended
December 31
|
(in
millions)
|
2021
|
2020
|
Average
shareholders' equity
|
$
|
20,574
|
$
|
7,194
|
Average Long-term
debt, including long-term
debt maturing within one year
|
14,949
|
9,264
|
|
$
|
35,523
|
$
|
16,458
|
Less:
|
|
|
Significant items
(pre-tax):
|
|
|
Acquisition-related
costs
|
(300)
|
—
|
Merger termination
fee
|
423
|
—
|
Tax on significant
items(1)
|
1
|
—
|
Deferred tax recovery
on the outside basis difference of the
investment in KCS
|
16
|
—
|
Income tax rate
changes
|
—
|
15
|
Adjusted average
invested capital
|
$
|
35,383
|
$
|
16,443
|
(1)
|
Tax was calculated at
the pre-tax effect of the adjustment multiplied by the applicable
tax rate of 0.90% for the twelve months ended December 31, 2021.
The applicable tax rate reflects the taxable jurisdiction and
nature, being on account of capital or income, of the significant
item.
|
Calculation of Adjusted ROIC
|
For the year ended
December 31
|
(in millions, except
for percentages)
|
2021
|
2020
|
Adjusted
return
|
$
|
2,899
|
$
|
2,748
|
Adjusted average
invested capital
|
$
|
35,383
|
$
|
16,443
|
Adjusted
ROIC
|
8.2%
|
16.7%
|
Free Cash
Free cash is calculated as Cash provided by operating
activities, less Cash used in investing activities, adjusted for
changes in cash and cash equivalents balances resulting from FX
fluctuations, the operating cash flow impacts of
acquisition-related costs associated with the KCS transaction
including settlement of cash flow hedges upon debt issuance and FX
gain on U.S. dollar-denominated cash held to fund the KCS
acquisition, the merger termination payment received related to
KCS's termination of the Original Merger Agreement, and the
acquisitions of KCS, Central Maine
and Québec Railway ("CMQ") and Detroit River Tunnel Partnership
("DRTP"). Free cash is a measure that management considers to be a
valuable indicator of liquidity. Free cash is useful to investors
and other external users of the Company's Consolidated Financial
Statements as it assists with the evaluation of the Company's
ability to generate cash to satisfy debt obligations and
discretionary activities such as dividends, share repurchase
programs, and other strategic opportunities. The
acquisition-related costs associated with the KCS acquisition and
the merger termination payment received related to KCS's
termination of the Original Merger Agreement are not indicative of
operating trends and have been excluded from Free cash. The
acquisition of KCS, CMQ, and DRTP are not indicative of investment
trends and have also been excluded from Free cash. Free cash should
be considered in addition to, rather than as a substitute for, Cash
provided by operating activities.
Reconciliation of Cash Provided by Operating Activities to Free
Cash
|
For the three
months
ended December 31
|
For the year
ended
December 31
|
(in
millions)
|
2021
|
2020
|
2021
|
2020
|
Cash provided by
operating activities
|
$
|
604
|
$
|
985
|
$
|
3,688
|
$
|
2,802
|
Cash used in
investing activities
|
(10,910)
|
(717)
|
(13,730)
|
(2,030)
|
Effect of foreign
currency fluctuations on U.S.
dollar-denominated cash and
cash equivalents
|
35
|
(6)
|
41
|
6
|
Less:
|
|
|
|
|
Acquisition-related
costs
|
(293)
|
—
|
(340)
|
—
|
Merger termination
fee
|
—
|
—
|
845
|
—
|
Investment in Kansas
City Southern
|
(10,526)
|
—
|
(12,299)
|
—
|
Investment in Central
Maine and Québec Railway
|
—
|
—
|
—
|
19
|
Investment in Detroit
River Tunnel Partnership
|
—
|
(398)
|
—
|
(398)
|
Free
cash
|
$
|
548
|
$
|
660
|
$
|
1,793
|
$
|
1,157
|
Foreign Exchange Adjusted % Change
FX adjusted % change allows certain financial results to be
viewed without the impact of fluctuations in foreign currency
exchange rates, thereby facilitating period-to-period comparisons
in the analysis of trends in business performance. Financial result
variances at constant currency are obtained by translating the
comparable period of the prior year results denominated in U.S.
dollars at the foreign exchange rates of the current period.
FX adjusted % changes in revenues are further used in
calculating FX adjusted % change in freight revenue per carload and
RTM. FX adjusted % changes in revenues are as follows:
|
For the three
months ended December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Freight revenues by
line of business
|
|
|
|
|
|
Grain
|
$
|
440
|
$
|
508
|
$
|
(7)
|
$
|
501
|
(12)
|
Coal
|
134
|
155
|
—
|
155
|
(14)
|
Potash
|
115
|
103
|
(2)
|
101
|
14
|
Fertilizers and
sulphur
|
78
|
78
|
(2)
|
76
|
3
|
Forest
products
|
89
|
84
|
(3)
|
81
|
10
|
Energy, chemicals and
plastics
|
414
|
366
|
(6)
|
360
|
15
|
Metals, minerals and
consumer products
|
193
|
155
|
(4)
|
151
|
28
|
Automotive
|
87
|
109
|
(3)
|
106
|
(18)
|
Intermodal
|
444
|
410
|
(4)
|
406
|
9
|
Freight
revenues
|
1,994
|
1,968
|
(31)
|
1,937
|
3
|
Non-freight
revenues
|
46
|
44
|
(1)
|
43
|
7
|
Total
revenues
|
$
|
2,040
|
$
|
2,012
|
$
|
(32)
|
$
|
1,980
|
3
|
|
For the year ended
December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Freight revenues by
line of business
|
|
|
|
|
|
Grain
|
$
|
1,684
|
$
|
1,829
|
$
|
(48)
|
$
|
1,781
|
(5)
|
Coal
|
625
|
566
|
(4)
|
562
|
11
|
Potash
|
463
|
493
|
(16)
|
477
|
(3)
|
Fertilizers and
sulphur
|
305
|
290
|
(14)
|
276
|
11
|
Forest
products
|
348
|
328
|
(18)
|
310
|
12
|
Energy, chemicals and
plastics
|
1,563
|
1,519
|
(53)
|
1,466
|
7
|
Metals, minerals and
consumer products
|
728
|
629
|
(31)
|
598
|
22
|
Automotive
|
376
|
324
|
(15)
|
309
|
22
|
Intermodal
|
1,724
|
1,563
|
(27)
|
1,536
|
12
|
Freight
revenues
|
7,816
|
7,541
|
(226)
|
7,315
|
7
|
Non-freight
revenues
|
179
|
169
|
(2)
|
167
|
7
|
Total
revenues
|
$
|
7,995
|
$
|
7,710
|
$
|
(228)
|
$
|
7,482
|
7
|
FX adjusted % changes in operating expenses are as follows:
|
For the three
months ended December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Compensation and
benefits
|
$
|
405
|
$
|
433
|
$
|
(3)
|
$
|
430
|
(6)
|
Fuel
|
231
|
169
|
(4)
|
165
|
40
|
Materials
|
51
|
54
|
—
|
54
|
(6)
|
Equipment
rents
|
29
|
34
|
(1)
|
33
|
(12)
|
Depreciation and
amortization
|
206
|
197
|
(2)
|
195
|
6
|
Purchased services
and other
|
286
|
197
|
(3)
|
194
|
47
|
Total operating
expenses
|
$
|
1,208
|
$
|
1,084
|
$
|
(13)
|
$
|
1,071
|
13
|
|
For the year ended
December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Compensation and
benefits
|
$
|
1,570
|
$
|
1,560
|
$
|
(27)
|
$
|
1,533
|
2
|
Fuel
|
854
|
652
|
(29)
|
623
|
37
|
Materials
|
215
|
216
|
(3)
|
213
|
1
|
Equipment
rents
|
121
|
142
|
(8)
|
134
|
(10)
|
Depreciation and
amortization
|
811
|
779
|
(14)
|
765
|
6
|
Purchased services
and other
|
1,218
|
1,050
|
(30)
|
1,020
|
19
|
Total operating
expenses
|
$
|
4,789
|
$
|
4,399
|
$
|
(111)
|
$
|
4,288
|
12
|
FX adjusted % change in operating income is as follows:
|
For the three
months ended December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Operating
income
|
$
|
832
|
$
|
928
|
$
|
(19)
|
$
|
909
|
(8)
|
|
|
|
For the year ended
December 31
|
(in
millions)
|
Reported
2021
|
Reported
2020
|
Variance
due to FX
|
FX Adjusted
2020
|
FX Adjusted
% Change
|
Operating
income
|
$
|
3,206
|
$
|
3,311
|
$
|
(117)
|
$
|
3,194
|
—
|
Dividend Payout Ratio and Adjusted Dividend Payout
Ratio
Dividend payout ratio is calculated as dividends declared per
share divided by Diluted EPS. Adjusted dividend payout ratio is
calculated as dividends declared per share divided by Adjusted
diluted EPS, as defined above. This ratio is a measure of
shareholder return and provides information on the Company's
ability to declare dividends on an ongoing basis, excluding
significant items.
Calculation of Dividend Payout Ratio
|
For the year ended
December 31
|
(in dollars, except
for percentages)
|
2021
|
2020
|
Dividends declared
per share
|
$
|
0.7600
|
$
|
0.7120
|
Diluted
EPS
|
4.18
|
3.59
|
Dividend payout
ratio
|
18.2%
|
19.8%
|
Calculation of Adjusted Dividend Payout Ratio
|
For the year ended
December 31
|
(in dollars, except
for percentages)
|
2021
|
2020
|
Dividends declared
per share
|
$
|
0.7600
|
$
|
0.7120
|
Adjusted diluted
EPS
|
3.76
|
3.53
|
Adjusted dividend
payout ratio
|
20.2%
|
20.1%
|
Adjusted Net Debt to Adjusted EBITDA Ratio
Adjusted net debt to Adjusted earnings before interest, tax,
depreciation and amortization ("EBITDA") ratio is calculated as
Adjusted net debt divided by Adjusted EBITDA. The Adjusted net debt
to Adjusted EBITDA ratio is a key credit measure used to assess the
Company's financial capacity. The ratio provides information on the
Company's ability to service its debt and other long-term
obligations from operations, excluding significant items. The
Adjusted net debt to Adjusted EBITDA ratio is reconciled below from
the Long-term debt to Net income ratio, the most comparable measure
calculated in accordance with GAAP.
Calculation of Long-term Debt to Net Income Ratio
(in millions, except
for ratios)
|
2021
|
2020
|
Long-term debt
including long-term debt maturing within one year as at December
31
|
$
|
20,127
|
$
|
9,771
|
Net income for the
year ended December 31
|
$
|
2,852
|
$
|
2,444
|
Long-term debt to
Net income ratio
|
7.1
|
4.0
|
Reconciliation of Long-term Debt to Adjusted Net Debt
Adjusted net debt is defined as Long-term debt, Long-term debt
maturing within one year and Short-term borrowing as reported on
the Company's Consolidated Balance Sheets adjusted for pension
plans deficit, operating lease liabilities recognized on the
Company's Consolidated Balance Sheets, and Cash and cash
equivalents. Adjusted net debt is used as a measure of debt and
long-term obligations as part of the calculation of Adjusted Net
Debt to Adjusted EBITDA.
(in
millions)
|
2021
|
2020
|
Long-term debt
including long-term debt maturing within one year as at
December 31
|
$
|
20,127
|
$
|
9,771
|
Add:
|
|
|
Pension plans
deficit(1)
|
263
|
328
|
Operating lease
liabilities
|
283
|
311
|
Less:
|
|
|
Cash and cash
equivalents
|
69
|
147
|
Adjusted net debt
as at December 31
|
$
|
20,604
|
$
|
10,263
|
(1)
|
Pension plans deficit
is the total funded status of the Pension plans in deficit
only.
|
Reconciliation of Net Income to EBIT, Adjusted EBIT and Adjusted
EBITDA
Earnings before interest and tax ("EBIT") is calculated as Net
income before Net interest expense and Income tax expense. Adjusted
EBIT excludes significant items reported in both Operating income
and Other (income) expense. Adjusted EBITDA is calculated as
Adjusted EBIT plus operating lease expense and Depreciation and
amortization, less Other components of net periodic benefit
recovery. Adjusted EBITDA is used as a measure of liquidity derived
from operations, excluding significant items, as part of the
calculation of Adjusted Net Debt to Adjusted EBITDA.
|
For the year ended
December 31
|
(in
millions)
|
2021
|
2020
|
Net income as
reported
|
$
|
2,852
|
$
|
2,444
|
Add:
|
|
|
Net interest
expense
|
440
|
458
|
Income tax
expense
|
768
|
758
|
EBIT
|
4,060
|
3,660
|
Less significant
items (pre-tax):
|
|
|
Acquisition-related
costs
|
(599)
|
—
|
Merger termination
fee
|
845
|
—
|
Impact of FX
translation gain on debt and lease liabilities
|
7
|
14
|
Adjusted
EBIT
|
3,807
|
3,646
|
Add:
|
|
|
Operating lease
expense
|
72
|
78
|
Depreciation and
amortization
|
811
|
779
|
Less:
|
|
|
Other components of
net periodic benefit recovery
|
387
|
342
|
Adjusted
EBITDA
|
$
|
4,303
|
$
|
4,161
|
Calculation of Adjusted Net Debt to Adjusted EBITDA Ratio
(in millions, except
for ratios)
|
2021
|
2020
|
Adjusted net debt as
at December 31
|
$
|
20,604
|
$
|
10,263
|
Adjusted EBITDA for
the twelve months ended December 31
|
$
|
4,303
|
$
|
4,161
|
Adjusted net debt
to Adjusted EBITDA ratio
|
4.8
|
2.5
|
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content:https://www.prnewswire.com/news-releases/cp-delivers-solid-fourth-quarter-results-prepared-to-make-history-in-2022-301470133.html
SOURCE Canadian Pacific