CPKC reports first-quarter results; celebrating one year as a combined company
"One year into our historic combination, I am proud of what our dedicated family of railroaders has accomplished as we deliver on the benefits of our unrivalled network – spurring competition, increasing safety and connecting more markets for our customers," said
First-quarter 2024 results1
- Reported operating ratio (OR) increased by 400 basis points to 67.4 percent from 63.4 percent in Q1 2023
- Core adjusted combined OR2 increased 50 basis points to 64.0 percent from 63.5 percent in Q1 2023
- Reported diluted EPS decreased to
$0.83 from$0.86 in Q1 2023 - Core adjusted combined diluted EPS2 increased three percent to
$0.93 from$0.90 in Q1 2023 - Volumes, as measured in Revenue Ton-Miles3 (RTMs), increased one percent on a combined basis
-
Federal Railroad Administration (FRA)-reportable train accident frequency increased to 0.89 from 0.71 in Q1 2023 on a combined basis4 - FRA-reportable personal injury frequency increased to 1.15 from 1.12 in Q1 2023 on a combined basis4
"We exited last year with strong momentum and our performance in the first quarter, combined with an improving demand environment, has us well positioned to deliver on our 2024 guidance," Creel added. "As we enter the second year of our forever story, we are focused on safely executing on the unique and undeniable opportunities this franchise creates and delivering long-term value for our employees, customers and shareholders."
1 |
The results of |
2 |
These measures have no standardized meanings prescribed by accounting principles generally accepted in |
3 |
These operating statistics represent combined operating information to illustrate the estimated effects of the acquisition for the first quarter ended |
4 |
FRA statistics for Q1 2023 reflect Canadian Pacific (CP) and KCS results on a combined basis. In the first-quarter of 2023, CP standalone reported FRA personal injury frequency of 1.21 and FRA-reportable train accident frequency of 0.98. The first-quarter 2023 FRA-reportable personal injury frequency on a combined basis was previously reported as 1.15. This restatement reflects new information available within a specified period as stipulated by the FRA but that exceeds CPKC's financial reporting timeline. |
Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at
Conference Call Access
International: 203-518-9708
*Conference ID: CPKCQ124
Callers should dial in 10 minutes prior to the call.
Webcast
We encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com.
A replay of the first-quarter conference call will be available through
Forward looking information
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the
The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.
Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian,
Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.
About CPKC
With its global headquarters in
FINANCIAL STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
For the three months |
|
(in millions of Canadian dollars, except share and per share data) |
2024 |
2023 |
Revenues (Note 3) |
|
|
Freight |
$ 3,427 |
$ 2,217 |
Non-freight |
93 |
49 |
Total revenues |
3,520 |
2,266 |
Operating expenses |
|
|
Compensation and benefits (Note 8) |
690 |
438 |
Fuel |
458 |
326 |
Materials (Note 8) |
94 |
72 |
Equipment rents |
82 |
30 |
Depreciation and amortization (Note 8) |
467 |
225 |
Purchased services and other (Note 8) |
580 |
346 |
Total operating expenses |
2,371 |
1,437 |
|
|
|
Operating income |
1,149 |
829 |
Less: |
|
|
Equity earnings of |
— |
(204) |
Other (income) expense (Note 8) |
(2) |
2 |
Other components of net periodic benefit recovery (Note 12) |
(88) |
(86) |
Net interest expense (Note 8) |
206 |
154 |
Income before income tax expense |
1,033 |
963 |
Less: |
|
|
Current income tax expense (Note 4) |
242 |
139 |
Deferred income tax expense (Note 4) |
17 |
24 |
Income tax expense (Note 4) |
259 |
163 |
Net income |
$ 774 |
$ 800 |
Less: Net loss attributable to non-controlling interest (Note 8) |
(1) |
— |
Net income attributable to controlling shareholders |
$ 775 |
$ 800 |
|
|
|
Earnings per share (Note 5) |
|
|
Basic earnings per share |
$ 0.83 |
$ 0.86 |
Diluted earnings per share |
$ 0.83 |
$ 0.86 |
|
|
|
Weighted-average number of shares (millions) (Note 5) |
|
|
Basic |
932.4 |
930.7 |
Diluted |
934.4 |
933.5 |
|
|
|
Dividends declared per share |
$ 0.19 |
$ 0.19 |
|
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
For the three months |
|
(in millions of Canadian dollars) |
2024 |
2023 |
Net income |
$ 774 |
$ 800 |
Net gain (loss) in foreign currency translation adjustments, net of hedging activities |
699 |
(27) |
Change in derivatives designated as cash flow hedges |
1 |
2 |
Change in pension and post-retirement defined benefit plans |
12 |
8 |
Other comprehensive income from equity investees |
— |
3 |
Other comprehensive income (loss) before income taxes |
712 |
(14) |
Income tax recovery (expense) |
6 |
(3) |
Other comprehensive income (loss) (Note 6) |
718 |
(17) |
Comprehensive income |
$ 1,492 |
$ 783 |
Comprehensive income attributable to non-controlling interest |
22 |
— |
Comprehensive income attributable to controlling shareholders |
$ 1,470 |
$ 783 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
|
|
|
(in millions of Canadian dollars) |
2024 |
2023 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 519 |
$ 464 |
Accounts receivable, net (Note 7) |
1,943 |
1,887 |
Materials and supplies |
399 |
400 |
Other current assets |
285 |
251 |
|
3,146 |
3,002 |
Investments |
561 |
533 |
Properties |
52,693 |
51,744 |
|
18,228 |
17,729 |
Intangible assets |
3,026 |
2,974 |
Pension asset |
3,427 |
3,338 |
Other assets |
587 |
582 |
Total assets |
$ 81,668 |
$ 79,902 |
Liabilities and equity |
|
|
Current liabilities |
|
|
Accounts payable and accrued liabilities |
$ 2,525 |
$ 2,567 |
Long-term debt maturing within one year (Note 10, 11) |
3,899 |
3,143 |
|
6,424 |
5,710 |
Pension and other benefit liabilities |
583 |
581 |
Other long-term liabilities |
832 |
797 |
Long-term debt (Note 10, 11) |
18,829 |
19,351 |
Deferred income taxes |
11,239 |
11,052 |
Total liabilities |
37,907 |
37,491 |
Shareholders' equity |
|
|
Share capital |
25,629 |
25,602 |
Additional paid-in capital |
95 |
88 |
Accumulated other comprehensive income (loss) (Note 6) |
77 |
(618) |
Retained earnings |
17,018 |
16,420 |
|
42,819 |
41,492 |
Non-controlling interest |
942 |
919 |
Total equity |
43,761 |
42,411 |
Total liabilities and equity |
$ 81,668 |
$ 79,902 |
See Contingencies (Note 14). |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
For the three months |
|
(in millions of Canadian dollars) |
2024 |
2023 |
Operating activities |
|
|
Net income |
$ 774 |
$ 800 |
Reconciliation of net income to cash provided by operating activities: |
|
|
Depreciation and amortization |
467 |
225 |
Deferred income tax expense (Note 4) |
17 |
24 |
Pension recovery and funding (Note 12) |
(76) |
(77) |
Equity earnings of |
— |
(204) |
Dividend from |
— |
300 |
Settlement of foreign currency forward contracts (Note 11) |
(65) |
— |
Other operating activities, net |
1 |
(47) |
Changes in non-cash working capital balances related to operations |
(103) |
(140) |
Net cash provided by operating activities |
1,015 |
881 |
Investing activities |
|
|
Additions to properties |
(527) |
(405) |
Additions to |
(4) |
— |
Proceeds from sale of properties and other assets |
1 |
4 |
Other investing activities, net |
(12) |
— |
Net cash used in investing activities |
(542) |
(401) |
Financing activities |
|
|
Dividends paid |
(177) |
(177) |
Issuance of Common Shares |
22 |
18 |
Repayment of long-term debt, excluding commercial paper (Note 10) |
(71) |
(486) |
Net repayment of commercial paper (Note 10) |
(205) |
— |
Net cash used in financing activities |
(431) |
(645) |
Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents |
13 |
4 |
Cash position |
|
|
Net increase (decrease) in cash and cash equivalents |
55 |
(161) |
Cash and cash equivalents at beginning of period |
464 |
451 |
Cash and cash equivalents at end of period |
$ 519 |
$ 290 |
|
|
|
Supplemental cash flow information |
|
|
Income taxes paid |
$ 242 |
$ 184 |
Interest paid |
$ 245 |
$ 147 |
|
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
|
For the three months ended |
|||||||||
(in millions of Canadian dollars |
|
Common |
|
Share capital |
Additional paid-in capital |
Accumulated other comprehensive Income (loss) |
Retained earnings |
Total shareholders' equity |
Non- |
Total equity |
Balance as at |
|
932.1 |
|
|
$ 88 |
$ (618) |
$ 16,420 |
$ 41,492 |
$ 919 |
|
Net income (loss) |
|
— |
|
— |
— |
— |
775 |
775 |
(1) |
774 |
Contribution from non-controlling |
|
— |
|
— |
— |
— |
— |
— |
1 |
1 |
Other comprehensive income |
|
— |
|
— |
— |
695 |
— |
695 |
23 |
718 |
Dividends declared ( |
|
— |
|
— |
— |
— |
(177) |
(177) |
— |
(177) |
Effect of stock-based |
|
— |
|
— |
13 |
— |
— |
13 |
— |
13 |
Shares issued under stock option |
|
0.5 |
|
27 |
(6) |
— |
— |
21 |
— |
21 |
Balance as at |
|
932.6 |
|
|
$ 95 |
$ 77 |
$ 17,018 |
$ 42,819 |
$ 942 |
|
Balance as at |
|
930.5 |
|
|
$ 78 |
$ 91 |
$ 13,201 |
$ 38,886 |
$ — |
|
Net income |
|
— |
|
— |
— |
— |
800 |
800 |
— |
800 |
Other comprehensive loss (Note 6) |
|
— |
|
— |
— |
(17) |
— |
(17) |
— |
(17) |
Dividends declared ( |
|
— |
|
— |
— |
— |
(177) |
(177) |
— |
(177) |
Effect of stock-based |
|
— |
|
— |
10 |
— |
— |
10 |
— |
10 |
Shares issued under stock option |
|
0.4 |
|
22 |
(4) |
— |
— |
18 |
— |
18 |
Balance as at |
|
930.9 |
|
|
$ 84 |
$ 74 |
$ 13,824 |
$ 39,520 |
$ — |
|
See Notes to Interim Consolidated Financial Statements. |
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1 Description of business and basis of presentation
On
These unaudited interim consolidated financial statements as at and for the three months ended
The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results.
2 Accounting changes
Recently adopted accounting standards
The accounting standards that have become effective during the three months ended
Accounting standards not yet adopted
Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted.
3 Revenues
The following table presents disaggregated information about the Company's revenues from contracts with customers by major source:
|
For the three months |
|
(in millions of Canadian dollars) |
2024 |
2023 |
Grain |
$ 730 |
$ 515 |
Coal |
209 |
155 |
Potash |
137 |
132 |
Fertilizers and sulphur |
104 |
96 |
Forest products |
202 |
103 |
Energy, chemicals and plastics |
702 |
366 |
Metals, minerals and consumer products |
440 |
233 |
Automotive |
265 |
125 |
Intermodal |
638 |
492 |
Total freight revenues |
3,427 |
2,217 |
Non-freight excluding leasing revenues |
63 |
27 |
Revenues from contracts with customers |
3,490 |
2,244 |
Leasing revenues |
30 |
22 |
Total revenues |
$ 3,520 |
$ 2,266 |
4 Income taxes
The effective tax rate including discrete items for the three months ended
For the three months ended
For the three months ended
Mexican Tax Audits
There are certain Mexican subsidiaries with ongoing audits for the years 2016-2018 and 2021. As at
2014 Tax Assessment
The
5 Earnings per share
|
For the three months |
|
(in millions, except per share data) |
2024 |
2023 |
Net income attributable to controlling shareholders |
$ 775 |
$ 800 |
Weighted-average basic shares outstanding |
932.4 |
930.7 |
Dilutive effect of stock options |
2.0 |
2.8 |
Weighted-average diluted shares outstanding |
934.4 |
933.5 |
Earnings per share - basic |
$ 0.83 |
$ 0.86 |
Earnings per share - diluted |
$ 0.83 |
$ 0.86 |
For the three months ended
6 Changes in Accumulated other comprehensive income ("AOCI") by component
Changes in AOCI attributable to controlling shareholders, net of tax, by component are as follows:
|
For the three months ended |
||||
(in millions of Canadian dollars) |
Foreign currency |
Derivatives |
Pension and post- retirement defined benefit plans |
Equity |
Total |
Opening balance, |
$ 837 |
$ 5 |
$ (1,463) |
$ 3 |
$ (618) |
Other comprehensive income before |
685 |
— |
— |
— |
685 |
Amounts reclassified from AOCI |
— |
1 |
9 |
— |
10 |
Net other comprehensive income |
685 |
1 |
9 |
— |
695 |
Closing balance, |
$ 1,522 |
$ 6 |
$ (1,454) |
$ 3 |
$ 77 |
Opening balance, |
$ 1,505 |
$ — |
$ (1,410) |
$ (4) |
$ 91 |
Other comprehensive (loss) income |
(27) |
— |
— |
3 |
(24) |
Amounts reclassified from AOCI |
— |
1 |
6 |
— |
7 |
Net other comprehensive (loss) |
(27) |
1 |
6 |
3 |
(17) |
Closing balance, |
$ 1,478 |
$ 1 |
$ (1,404) |
$ (1) |
$ 74 |
7 Accounts receivable, net
(in millions of Canadian dollars) |
As at |
As at |
Total accounts receivable |
$ 2,038 |
$ 1,976 |
Allowance for credit losses |
(95) |
(89) |
Total accounts receivable, net |
$ 1,943 |
$ 1,887 |
8 Business acquisition
On
Accordingly, the Company commenced consolidation of KCS on the Control Date, accounting for the acquisition as a business combination achieved in stages. The results from operations and cash flows have been consolidated prospectively from the Control Date. The Company derecognized its previously held equity method investment in KCS of
The identifiable assets acquired, and liabilities and non-controlling interest assumed were measured at their provisional fair values at the Control Date, with certain exceptions, including income taxes, certain contingent liabilities and contract liabilities. The provisional fair values of the tangible assets were determined using valuation techniques including, but not limited to, the market approach and the cost approach. The significant assumptions used to determine the provisional fair value of the tangible assets included, but were not limited to, a selection of comparable assets and an appropriate inflation rate. Presented with the acquired Properties are concession and related assets held under the terms of a concession from the Mexican government. The Concession expires in
The provisional fair values of the intangible assets were determined using valuation techniques including, but not limited to, the multi-period excess earnings method, the replacement cost method, the relief from royalty method and the income approach. The significant assumptions used to determine the provisional fair values of the intangible assets included, but were not limited to, the renewal probability and term of the Mexican concession extension, discount rates, earnings before interest, tax, depreciation, and amortization ("EBITDA") margins and terminal growth rates.
The fair value of non-controlling interest was determined using a combination of the income and market approaches to determine the fair value of
The accounting for the acquisition of KCS was completed on
The following table summarizes the final purchase price allocation with the amounts recognized in respect of the identifiable assets acquired and liabilities and non-controlling interest assumed on the Control Date, as well as the fair value of the previously held equity interest in KCS and the measurement period adjustments recorded:
(in millions of Canadian dollars) |
Preliminary |
Measurement |
Final allocation |
Net assets acquired: |
|
|
|
Cash and cash equivalents |
$ 298 |
$ — |
$ 298 |
Net working capital |
51 |
(161) |
(110) |
Properties |
28,748 |
1 |
28,749 |
Intangible assets |
3,022 |
— |
3,022 |
Other long-term assets |
496 |
(6) |
490 |
Debt including debt maturing within one year |
(4,545) |
— |
(4,545) |
Deferred income taxes |
(6,984) |
62 |
(6,922) |
Other long-term liabilities |
(406) |
(37) |
(443) |
Total identifiable net assets |
$ 20,680 |
$ (141) |
$ 20,539 |
|
17,491 |
141 |
17,632 |
|
$ 38,171 |
$ — |
$ 38,171 |
Consideration: |
|
|
|
Fair value of previously held equity method investment |
$ 37,227 |
$ — |
$ 37,227 |
Intercompany payable balance, net acquired |
12 |
— |
12 |
Fair value of non-controlling interest |
932 |
— |
932 |
Total |
$ 38,171 |
$ — |
$ 38,171 |
During the measurement period, which ended on
The net working capital acquired included trade receivables of
Intangible assets of
Net working capital and Other long-term liabilities included environmental liabilities of
The excess of the total consideration, over the amounts allocated to acquired assets and assumed liabilities and non-controlling interest recognized, has been recognized as goodwill of
In relation to certain Mexican tax liabilities identified and recorded through
On a pro forma basis, if the Company had consolidated KCS beginning on
|
Three Months Ended
|
Three Months Ended
|
||
(in millions of Canadian dollars) |
KCS |
CPKC |
KCS |
Pro Forma |
Revenue |
$ — |
$ 3,520 |
$ 1,187 |
$ 3,456 |
Net income attributable to controlling shareholders |
— |
775 |
246 |
756 |
(1) |
KCS's results were translated into Canadian dollars at the |
For the three months ended
- depreciation and amortization of differences between the historic carrying value and the preliminary fair value of tangible and intangible assets and investments prior to the Control Date;
- amortization of differences between the carrying amount and the fair value of debt through net interest expense prior to the Control Date;
- the elimination of intercompany transactions prior to the Control Date between the Company and KCS;
- miscellaneous amounts have been reclassified across revenue, operating expenses, and non-operating income or expense, consistent with CPKC's financial statement captions;
- the removal of equity earnings from KCS, previously held as an equity method investment prior to the Control Date, of
$204 million for the three months endedMarch 31, 2023 ; and - income tax adjustments including:
- a deferred tax recovery prior to the Control Date on amortization of fair value adjustments to investments, properties, intangible assets, and debt; and
- a deferred tax recovery on the elimination of changes in the outside basis difference of the previously held equity investment in KCS.
During the three months ended
-
$4 million were recognized in "Compensation and benefits" primarily related to retention and synergy related incentive compensation costs; -
$2 million were recognized in "Materials"; and -
$20 million were recognized in "Purchased services and other" primarily related to software costs, relocation costs, and other third party purchased services.
During the three months ended
During the three months ended
-
$79 million recognized in "Depreciation and amortization"; -
$1 million recognized in "Purchased services and other"; -
$5 million recognized in "Net interest expense"; -
$1 million recognized in "Other (income) expense"; and - a recovery of
$2 million recognized in "Net loss attributable to non-controlling interest".
During the three months ended
9 Investment in KCS
On
For the three months ended
The following table presents summarized financial information for KCS, on its historical cost basis, for the period ended
Statement of Income
(in millions of Canadian dollars)(1) |
For the three months |
Total revenues |
$ 1,187 |
Total operating expenses |
779 |
Operating income |
408 |
Less: Other(2) |
74 |
Income before income taxes |
334 |
Net income |
$ 246 |
(1) |
Amounts translated at the average foreign exchange ("FX") rate |
(2) |
Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net. |
10 Debt
During the three months ended
Commercial paper program
The Company has a commercial paper program, under which it may issue up to a maximum aggregate principal amount of
11 Financial instruments
A. Fair values of financial instruments
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
The Company's short-term financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term borrowings, including commercial paper and term loans. The carrying value of short-term financial instruments approximate their fair value.
The carrying value of the Company's debt does not approximate its fair value. The estimated fair value has been determined based on market information, where available, or by discounting future payments of principal and interest at estimated interest rates expected to be available to the Company at the balance sheet date. All measurements are classified as Level 2. The Company's long-term debt, including current maturities, with a carrying value of
B. Financial risk management
FX management
Net investment hedge
The effect of the Company's net investment hedge included in "Other comprehensive income (loss)" for the three months ended
Mexican Peso-
The Company's Mexican subsidiaries have net
The Company measures the foreign currency derivative contracts at fair value each period and recognizes any change in "Other (income) expense". The cash flows associated with these instruments are classified as "Operating activities" within the Interim Consolidated Statements of Cash Flows.
During the three months ended
Offsetting
The Company's foreign currency forward contracts are executed with counterparties in the
12 Pension and other benefits
In the three months ended
Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:
|
For the three months ended |
|||||
|
Pensions |
Other benefits |
Total |
|||
(in millions of Canadian dollars) |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
Current service cost |
$ 21 |
$ 18 |
$ 3 |
$ 2 |
$ 24 |
$ 20 |
Other components of net periodic benefit |
|
|
|
|
|
|
Interest cost on benefit obligation |
117 |
121 |
6 |
5 |
123 |
126 |
Expected return on plan assets |
(223) |
(220) |
— |
— |
(223) |
(220) |
Recognized net actuarial loss |
10 |
8 |
— |
— |
10 |
8 |
Amortization of prior service costs |
2 |
— |
— |
— |
2 |
— |
Total other components of net periodic benefit |
(94) |
(91) |
6 |
5 |
(88) |
(86) |
Net periodic benefit (recovery) cost |
$ (73) |
$ (73) |
$ 9 |
$ 7 |
$ (64) |
$ (66) |
13 Stock-based compensation
As at
Stock options plan
In the three months ended
Under the fair value method, the fair value of the stock options at grant date was approximately
|
For the three months |
Expected option life (years)(1) |
4.75 |
Risk-free interest rate(2) |
3.88 % |
Expected share price volatility(3) |
28.38 % |
Expected annual dividends per share(4) |
|
Expected forfeiture rate(5) |
3.12 % |
Weighted-average grant date fair value per option granted during the period |
|
(1) |
Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour or, when available, specific expectations regarding future exercise behaviour were used to estimate the expected life of the option. |
(2) |
Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the option. |
(3) |
Based on the historical volatility of the Company's stock price over a period commensurate with the expected term of the option. |
(4) |
Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. |
(5) |
The Company estimates forfeitures based on past experience. This rate is monitored on a periodic basis. |
Performance share unit plans
During the three months ended
The performance period for 568,159 PSUs and all PDSUs granted in the three months ended
The performance period for all of the 431,430 PSUs and 12,694 PDSUs granted in 2021 was
14 Contingencies
Litigation
In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending at
Legal proceedings related to Lac-Mégantic rail accident
On
Following the derailment, MMAC sought court protection in
A number of legal proceedings, set out below, were commenced in
(1)
(2) The AGQ sued the Company in the
(3) A class action in the
(4) Eight subrogated insurers sued the Company in the
On
(5) Forty-eight plaintiffs (all individual claims joined in one action) sued the Company, MMAC, and Harding in the
(6) The MMAR
(7) The class and mass tort action commenced against the Company in
(8) The trustee for the wrongful death trust commenced Carmack Amendment claims against the Company in North Dakota Federal Court, seeking to recover approximately
At this stage of the proceedings, any potential responsibility and the quantum of potential losses cannot be determined. Nevertheless, the Company denies liability and is vigorously defending these proceedings.
Court decision related to
On
2014 Tax Assessment
In
Environmental liabilities
Environmental remediation accruals, recorded on an undiscounted basis unless a reliable, determinable estimate as to an amount and timing of costs can be established, cover site-specific remediation programs.
The accruals for environmental remediation represent the Company's best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recorded accruals include the Company's best estimate of all probable costs, the Company's total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, and as environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable.
The expense included in "Purchased services and other" in the Company's Interim Consolidated Statements of Income for the three months ended
Summary of Rail Data (1)
|
First Quarter |
|||
(in millions, except per share data) |
2024 |
2023 |
Total |
% Change |
|
|
|
|
|
Revenues |
|
|
|
|
Freight |
$ 3,427 |
$ 2,217 |
$ 1,210 |
55 |
Non-freight |
93 |
49 |
44 |
90 |
Total revenues |
3,520 |
2,266 |
1,254 |
55 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Compensation and benefits |
690 |
438 |
252 |
58 |
Fuel |
458 |
326 |
132 |
40 |
Materials |
94 |
72 |
22 |
31 |
Equipment rents |
82 |
30 |
52 |
173 |
Depreciation and amortization |
467 |
225 |
242 |
108 |
Purchased services and other |
580 |
346 |
234 |
68 |
Total operating expenses |
2,371 |
1,437 |
934 |
65 |
|
|
|
|
|
Operating income |
1,149 |
829 |
320 |
39 |
|
|
|
|
|
Less: |
|
|
|
|
Equity earnings of |
— |
(204) |
204 |
(100) |
Other (income) expense |
(2) |
2 |
(4) |
(200) |
Other components of net periodic benefit recovery |
(88) |
(86) |
(2) |
2 |
Net interest expense |
206 |
154 |
52 |
34 |
|
|
|
|
|
Income before income tax expense |
1,033 |
963 |
70 |
7 |
|
|
|
|
|
Less: |
|
|
|
|
Current income tax expense |
242 |
139 |
103 |
74 |
Deferred income tax expense |
17 |
24 |
(7) |
(29) |
Income tax expense |
259 |
163 |
96 |
59 |
|
|
|
|
|
Net income |
$ 774 |
$ 800 |
$ (26) |
(3) |
|
|
|
|
|
Less: Net loss attributable to non-controlling interest |
(1) |
— |
(1) |
100 |
|
|
|
|
|
Net income attributable to controlling shareholders |
$ 775 |
$ 800 |
$ (25) |
(3) |
Operating ratio (%) |
67.4 |
63.4 |
4.0 |
400 bps |
|
|
|
|
|
Basic earnings per share |
$ 0.83 |
$ 0.86 |
$ (0.03) |
(3) |
|
|
|
|
|
Diluted earnings per share |
$ 0.83 |
$ 0.86 |
$ (0.03) |
(3) |
|
|
|
|
|
Shares Outstanding |
|
|
|
|
Weighted average number of basic shares outstanding (millions) |
932.4 |
930.7 |
1.7 |
— |
Weighted average number of diluted shares outstanding (millions) |
934.4 |
933.5 |
0.9 |
— |
|
|
|
|
|
Foreign Exchange |
|
|
|
|
Average foreign exchange rate (U.S.$/Canadian$) |
0.74 |
0.74 |
— |
— |
Average foreign exchange rate (Canadian$/U.S.$) |
1.35 |
1.35 |
— |
— |
Average foreign exchange rate (Mexican peso/Canadian$) |
12.61 |
13.77 |
(1.16) |
(8) |
Average foreign exchange rate (Canadian$/Mexican peso) |
0.0793 |
0.0726 |
0.0067 |
9 |
|
|
(1) |
The results of |
Summary of Rail Data (Continued) (1)
|
First Quarter |
|||
Commodity Data |
2024 |
2023 |
Total |
% Change |
|
|
|
|
|
Freight Revenues (millions) |
|
|
|
|
- Grain |
$ 730 |
$ 515 |
$ 215 |
42 |
- Coal |
209 |
155 |
54 |
35 |
- Potash |
137 |
132 |
5 |
4 |
- Fertilizers and sulphur |
104 |
96 |
8 |
8 |
- Forest products |
202 |
103 |
99 |
96 |
- Energy, chemicals and plastics |
702 |
366 |
336 |
92 |
- Metals, minerals and consumer products |
440 |
233 |
207 |
89 |
- Automotive |
265 |
125 |
140 |
112 |
- Intermodal |
638 |
492 |
146 |
30 |
|
|
|
|
|
Total Freight Revenues |
$ 3,427 |
$ 2,217 |
$ 1,210 |
55 |
|
|
|
|
|
Freight Revenue per Revenue Ton-Mile ("RTM") (cents) |
|
|
|
|
- Grain |
5.01 |
5.14 |
(0.13) |
(3) |
- Coal |
3.98 |
3.95 |
0.03 |
1 |
- Potash |
3.33 |
3.29 |
0.04 |
1 |
- Fertilizers and sulphur |
7.61 |
7.16 |
0.45 |
6 |
- Forest products |
9.00 |
7.47 |
1.53 |
20 |
- Energy, chemicals and plastics |
7.22 |
5.90 |
1.32 |
22 |
- Metals, minerals and consumer products |
9.36 |
8.00 |
1.36 |
17 |
- Automotive |
26.58 |
26.37 |
0.21 |
1 |
- Intermodal |
7.19 |
6.75 |
0.44 |
7 |
|
|
|
|
|
Total Freight Revenue per RTM |
6.61 |
5.90 |
0.71 |
12 |
|
|
|
|
|
Freight Revenue per Carload |
|
|
|
|
- Grain |
$ 5,518 |
$ 4,914 |
$ 604 |
12 |
- Coal |
1,932 |
2,141 |
(209) |
(10) |
- Potash |
3,703 |
3,577 |
126 |
4 |
- Fertilizers and sulphur |
6,047 |
5,647 |
400 |
7 |
- Forest products |
5,627 |
5,819 |
(192) |
(3) |
- Energy, chemicals and plastics |
4,858 |
4,867 |
(9) |
— |
- Metals, minerals and consumer products |
3,392 |
3,770 |
(378) |
(10) |
- Automotive |
4,758 |
4,355 |
403 |
9 |
- Intermodal |
1,548 |
1,857 |
(309) |
(17) |
|
|
|
|
|
Total Freight Revenue per Carload |
$ 3,195 |
$ 3,263 |
$ (68) |
(2) |
|
|
(1) |
KCS's freight revenues are included on a consolidated basis from |
Summary of Rail Data (Continued) (1)
|
First Quarter |
|||
Commodity Data |
2024 |
2023 |
Total |
% Change |
|
|
|
|
|
Millions of RTM |
|
|
|
|
- Grain |
14,570 |
10,014 |
4,556 |
45 |
- Coal |
5,252 |
3,925 |
1,327 |
34 |
- Potash |
4,110 |
4,010 |
100 |
2 |
- Fertilizers and sulphur |
1,366 |
1,340 |
26 |
2 |
- Forest products |
2,244 |
1,378 |
866 |
63 |
- Energy, chemicals and plastics |
9,719 |
6,207 |
3,512 |
57 |
- Metals, minerals and consumer products |
4,701 |
2,911 |
1,790 |
61 |
- Automotive |
997 |
474 |
523 |
110 |
- Intermodal |
8,879 |
7,290 |
1,589 |
22 |
|
|
|
|
|
Total RTMs |
51,838 |
37,549 |
14,289 |
38 |
|
|
|
|
|
Carloads (thousands) |
|
|
|
|
- Grain |
132.3 |
104.8 |
27.5 |
26 |
- Coal |
108.2 |
72.4 |
35.8 |
49 |
- Potash |
37.0 |
36.9 |
0.1 |
— |
- Fertilizers and sulphur |
17.2 |
17.0 |
0.2 |
1 |
- Forest products |
35.9 |
17.7 |
18.2 |
103 |
- Energy, chemicals and plastics |
144.5 |
75.2 |
69.3 |
92 |
- Metals, minerals and consumer products |
129.7 |
61.8 |
67.9 |
110 |
- Automotive |
55.7 |
28.7 |
27.0 |
94 |
- Intermodal |
412.1 |
265.0 |
147.1 |
56 |
|
|
|
|
|
Total Carloads |
1,072.6 |
679.5 |
393.1 |
58 |
|
|
(1) |
Includes KCS information for the period from |
Summary of Rail Data (Continued) (1)
|
First Quarter |
|||
|
2024 |
2023 |
Total |
% Change |
|
|
|
|
|
Operations Performance |
|
|
|
|
|
|
|
|
|
Gross ton-miles ("GTMs") (millions) |
95,809 |
67,449 |
28,360 |
42 |
Train miles (thousands) |
11,995 |
7,257 |
4,738 |
65 |
Average train weight - excluding local traffic (tons) |
8,639 |
10,040 |
(1,401) |
(14) |
Average train length - excluding local traffic (feet) |
7,324 |
8,284 |
(960) |
(12) |
Average terminal dwell (hours) |
9.7 |
8.5 |
1.2 |
14 |
Average train speed (miles per hour, or "mph")(2) |
19.1 |
21.3 |
(2.2) |
(10) |
Locomotive productivity (GTMs / operating horsepower)(3) |
158 |
199 |
(41) |
(21) |
Fuel efficiency(4) |
1.065 |
0.973 |
0.092 |
9 |
|
102.0 |
65.7 |
36.3 |
55 |
Average fuel price ( |
3.34 |
3.68 |
(0.34) |
(9) |
|
|
|
|
|
Total Employees and Workforce |
|
|
|
|
|
|
|
|
|
Total employees (average)(6) |
19,997 |
12,935 |
7,062 |
55 |
Total employees (end of period)(6) |
20,158 |
13,122 |
7,036 |
54 |
Workforce (end of period)(7) |
20,261 |
13,182 |
7,079 |
54 |
|
|
|
|
|
Safety Indicators (8) |
|
|
|
|
|
|
|
|
|
FRA personal injuries per 200,000 employee-hours |
1.15 |
1.13 |
0.02 |
2 |
FRA train accidents per million train-miles |
0.89 |
0.98 |
(0.09) |
(9) |
|
|
(1) |
Includes KCS information for the period from |
(2) |
Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated by dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customers or foreign railroads and excludes the time and distance travelled by: i) trains used in or around CPKC's yards; ii) passenger trains; and iii) trains used for repairing track. An increase in average train speed indicates improved on-time performance resulting in improved asset utilization. |
(3) |
Locomotive productivity is defined as the daily average GTMs divided by daily average operating horsepower. Operating horsepower excludes units offline, tied up or in storage, or in use on other railways, and includes foreign units. |
(4) |
Fuel efficiency is defined as |
(5) |
Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. |
(6) |
An employee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with CPKC. CPKC monitors employment levels in order to efficiently meet service and strategic requirements. The number of employees is a key driver to total compensation and benefits costs. |
(7) |
Workforce is defined as employees plus contractors and consultants. |
(8) |
|
Non-GAAP Measures
The Company presents Non-GAAP measures, including Core adjusted combined operating ratio and Core adjusted combined diluted earnings per share, to provide an additional basis for evaluating underlying earnings trends in the Company's current period's financial results that can be compared with the results of operations in prior period. Management believes these Non-GAAP measures facilitate a multi-period assessment of long-term profitability.
These Non-GAAP measures have no standardized meaning and are not defined by accounting principles generally accepted in
Non-GAAP Performance Measures
On
Management believes the use of Non-GAAP measures provides meaningful supplemental information about our operating results because they exclude certain significant items that are not considered indicative of future financial trends either by nature or amount or provide improved comparability to past performance. As a result, these items are excluded for management's assessment of operational performance, allocation of resources, and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, acquisition-related costs, adjustments to provisions and settlements of Mexican taxes, KCS's gain on unwinding of interest rate hedges (net of CPKC's associated purchase accounting basis differences and tax), as recognized within "Equity earnings of
In addition, Core adjusted combined operating ratio and Core adjusted combined diluted earnings per share exclude KCS purchase accounting. KCS purchase accounting represents the amortization of basis differences being the incremental depreciation and amortization in relation to fair value adjustments to properties and intangible assets, incremental amortization in relation to fair value adjustments to KCS's investments, amortization of the change in fair value of debt of KCS assumed on the Control Date, and depreciation and amortization of fair value adjustments that are attributable to non-controlling interest, as recognized within "Depreciation and amortization", "Other (income) expense", "Net interest expense", and "Net loss attributable to non-controlling interest", respectively, in the Company's Interim Consolidated Statements of Income. During the periods that KCS was equity accounted for, from
Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures
The following tables reconcile the most directly comparable measures presented in accordance with GAAP to the Non-GAAP measures:
Core Adjusted Combined Diluted Earnings per Share
Core adjusted combined diluted earnings per share is calculated using Net income attributable to controlling shareholders reported on a GAAP basis adjusted for significant items less KCS purchase accounting, divided by the weighted-average diluted number of Common Shares outstanding during the period as determined in accordance with GAAP. Between
In the first quarter of 2024, there were two significant items included in the Net income attributable to controlling shareholders as reported on a GAAP basis as follows:
- adjustments to provisions for Mexican taxes of
$10 million ($10 million after deferred tax recovery) recognized in "Compensation and benefits", that unfavourably impacted Diluted EPS by1 cent ; and - acquisition-related costs of
$26 million in connection with the KCS acquisition ($20 million after current tax recovery of$6 million ) including costs of$4 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents .
In 2023, there were five significant items included in Net income attributable to controlling shareholders as reported on a GAAP basis as follows:
- during the course of the year, a total current tax expense of
$16 million related to a tax settlement with the Servicio de Administración Tributaria (the "SAT") of$13 million and a reserve for the estimated impact of potential future audit settlements of$3 million , that unfavourably impacted Diluted EPS by2 cents as follows:- in the fourth quarter, a current tax expense of
$1 million related to a tax settlement with the SAT that had minimal impact on Diluted EPS; and - in the third quarter, a total current tax expense of
$15 million related to a tax settlement with the SAT of$9 million and reserves for the estimated impact of potential future audit settlements of$6 million of which$3 million was settled in the fourth quarter, that unfavourably impacted Diluted EPS by2 cents ;
- in the fourth quarter, a current tax expense of
- in the second quarter, a remeasurement loss of KCS of
$7,175 million recognized in "Remeasurement loss ofKansas City Southern " due to the derecognition of CPKC's previously held equity method investment in KCS and remeasurement at its Control Date fair value that unfavourably impacted Diluted EPS by$7.68 ; - during the course of the year, a deferred tax recovery of
$72 million on account of changes in tax rates and apportionment that favourably impacted Diluted EPS by7 cents as follows:- in the fourth quarter, a deferred tax recovery of
$7 million due to CPKC unitary state apportionment changes that favourably impacted Diluted EPS by1 cent ; - in the third quarter, a deferred tax recovery of
$14 million due to decreases in theIowa andArkansas state tax rates that favourably impacted Diluted EPS by2 cents ; and - in the second quarter, a deferred tax recovery of
$51 million due to CPKC unitary state apportionment changes that favourably impacted Diluted EPS by5 cents ;
- in the fourth quarter, a deferred tax recovery of
- during the course of the year, a deferred tax recovery of
$7,855 million on changes in the outside basis difference on the equity investment in KCS that favourably impacted Diluted EPS by$8.42 as follows:- in the second quarter, a deferred tax recovery of
$7,832 million related to the elimination of the deferred tax liability on the outside basis difference of the investment in KCS that favourably impacted Diluted EPS by$8.39 ; and - in the first quarter, a deferred tax recovery of
$23 million on changes in the outside basis difference of the equity investment in KCS that favourably impacted Diluted EPS by3 cents ; and
- in the second quarter, a deferred tax recovery of
- during the course of the year, acquisition-related costs of
$201 million in connection with the KCS acquisition ($164 million after current tax recovery of$37 million ), including an expense of$71 million recognized in "Compensation and benefits",$2 million recognized in "Materials",$111 million recognized in "Purchased services and other",$6 million recognized in "Other expense", and$11 million recognized in "Equity earnings of KCS", that unfavourably impacted Diluted EPS by17 cents as follows:- in the fourth quarter, acquisition-related costs of
$32 million ($24 million after current tax recovery of$8 million ), including costs of$7 million recognized in "Compensation and benefits",$1 million recognized in "Materials", and$24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents ; - in the third quarter, acquisition-related costs of
$24 million ($18 million after current tax recovery of$6 million ), including costs of$1 million recognized in "Compensation and benefits",$1 million recognized in "Materials", and$22 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by2 cents ; - in the second quarter, acquisition-related costs of
$120 million ($101 million after current tax recovery of$19 million ), including costs of$63 million recognized in "Compensation and benefits",$53 million recognized in "Purchased services and other",$3 million recognized in "Other expense", and$1 million recognized in "Equity earnings of KCS", that unfavourably impacted Diluted EPS by11 cents ; and - in the first quarter, acquisition-related costs of
$25 million ($21 million after current tax recovery of$4 million ), including costs of$12 million recognized in "Purchased services and other",$3 million recognized in "Other (income) expense", and$10 million recognized in "Equity earnings of KCS", that unfavourably impacted Diluted EPS by2 cents .
- in the fourth quarter, acquisition-related costs of
KCS purchase accounting included in Net income attributable to controlling shareholders as reported on a GAAP basis was as follows:
2024:
- during the first quarter of 2024, KCS purchase accounting of
$84 million ($61 million after deferred tax recovery of$23 million ), including costs of$79 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$5 million recognized in "Net interest expense",$1 million recognized in "Other (income) expense", and a recovery of$2 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by7 cents .
2023:
- during the course of the year, KCS purchase accounting of
$297 million ($228 million after deferred tax recovery of$69 million ), including costs of$234 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$17 million recognized in "Net interest expense",$2 million recognized in "Other (income) expense",$48 million recognized in "Equity earnings of KCS", and a recovery of$5 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by25 cents as follows:- in the fourth quarter, KCS purchase accounting of
$87 million ($62 million after deferred tax recovery of$25 million ), including costs of$85 million recognized in "Depreciation and amortization",$1 million recognized in "Purchased services and other" related to the amortization of equity investments,$6 million recognized in "Net interest expense", and a recovery of$5 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by7 cents ; - in the third quarter, KCS purchase accounting of
$87 million ($63 million after deferred tax recovery of$24 million ), including costs of$81 million recognized in "Depreciation and amortization",$5 million recognized in "Net interest expense", and$1 million in recognized in "Other expense", that unfavourably impacted Diluted EPS by7 cents ; - in the second quarter, KCS purchase accounting of
$81 million ($61 million after deferred tax recovery of$20 million ), including costs of$68 million recognized in "Depreciation and amortization",$6 million recognized in "Net interest expense",$1 million recognized in "Other expense", and$6 million recognized in "Equity earnings of KCS", that unfavourably impacted Diluted EPS by6 cents ; and - in the first quarter, KCS purchase accounting of
$42 million recognized in "Equity earnings of KCS" that unfavourably impacted Diluted EPS by5 cents .
- in the fourth quarter, KCS purchase accounting of
|
For the three months |
For the year ended |
|
|
2024 |
2023 |
2023 |
CPKC diluted earnings per share as reported |
$ 0.83 |
$ 0.86 |
$ 4.21 |
Less: |
|
|
|
Significant items (pre-tax): |
|
|
|
Remeasurement loss of KCS |
— |
— |
(7.68) |
Adjustments to provisions and settlements of Mexican taxes |
(0.01) |
— |
— |
Acquisition-related costs |
(0.03) |
(0.03) |
(0.21) |
KCS purchase accounting |
(0.09) |
(0.05) |
(0.32) |
Add: |
|
|
|
Tax effect of adjustments(1) |
(0.03) |
(0.01) |
(0.11) |
Adjustments to provisions and settlements of Mexican taxes |
— |
— |
0.02 |
Income tax rate changes |
— |
— |
(0.07) |
Deferred tax recovery on the outside basis difference of the investment in KCS |
— |
(0.03) |
(8.42) |
Core adjusted combined diluted earnings per share(2) |
$ 0.93 |
$ 0.90 |
$ 3.84 |
(1) |
The tax effect of adjustments was calculated as the pre-tax effect of the significant items and KCS purchase accounting listed above multiplied by the applicable tax rate for the above items of 24.61% for the three months ended March 31, 2024, 5.75% for the three months ended March 31, 2023, and 1.37% for the year ended |
(2) |
The Company previously used the non-GAAP measure Core adjusted diluted earnings per share, which was calculated as diluted earnings per share adjusted for significant items less KCS purchase accounting. Core adjusted diluted earnings per share was |
Core Adjusted Combined Operating Ratio
Core adjusted combined operating ratio is calculated from reported GAAP revenue and operating expenses adjusted for (1) KCS operating income prior to the Control Date and giving effect to transaction accounting adjustments in a consistent manner with Regulation S-X Article 11 ("Article 11"), where applicable, (2) significant items (acquisition-related costs and adjustments to provisions and settlement of Mexican taxes) that are reported within Operating income, and (3) KCS purchase accounting recognized in "Depreciation and amortization" and "Purchased services and other".
This combined measure does not purport to represent what the actual consolidated results of operations would have been had the Company obtained control of KCS and consolidation actually occurred on
Significant items included in operating ratio on a combined basis were as follows:
2024:
- during the three months ended
March 31, 2024 , adjustments to provisions for Mexican taxes of$10 million recognized in "Compensation and benefits", that unfavourably impacted operating ratio by 0.3%; and - during the three months ended
March 31, 2024 , acquisition-related costs were$26 million in connection with the KCS acquisition including costs of$4 million recognized in "Compensation and benefits",$2 million recognized in "Materials", and$20 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 0.8%.
2023:
- during the three months ended
March 31, 2023 , acquisition-related costs were$25 million in connection with the KCS acquisition, calculated in a manner consistent with Article 11, including costs of$11 million recognized in "Compensation and benefits" and$14 million recognized in "Purchased services and other", that unfavourably impacted operating ratio on a combined basis by 0.7%.
KCS purchase accounting included in operating ratio on a combined basis was as follows:
2024:
- during the three months ended
March 31, 2024 , KCS purchase accounting of$80 million including$79 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%.
2023:
- during the three months ended
March 31, 2023 , KCS purchase accounting of$80 million , calculated in a manner consistent with Article 11, recognized in "Depreciation and amortization", that unfavourably impacted operating ratio on a combined basis by 2.3%.
|
For the three months ended |
|
|
2024 |
2023(3) |
CPKC operating ratio as reported |
67.4 % |
63.4 % |
Add: |
|
|
KCS operating income as reported prior to Control Date(1) |
— % |
0.8 % |
Pro forma Article 11 transaction accounting adjustments(2) |
— % |
2.3 % |
|
67.4 % |
66.5 % |
Less: |
|
|
Adjustments to provisions and settlements of Mexican taxes |
0.3 % |
— % |
Acquisition-related costs |
0.8 % |
0.7 % |
KCS purchase accounting in Operating expenses |
2.3 % |
2.3 % |
Core adjusted combined operating ratio |
64.0 % |
63.5 % |
(1) |
KCS results were translated into Canadian dollars at the |
(2) |
Pro forma Article 11 transaction accounting adjustments represent adjustments made for the three months ended |
|
For more information about these pro forma transaction accounting adjustments for the three months ended |
(3) |
The Company previously used the Non-GAAP measure Adjusted operating ratio, which was defined as operating ratio excluding those significant items that are reported within Operating income. Adjusted operating ratio was 62.9% for the three months ended |
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SOURCE CPKC