Condensed Consolidating Financial Information

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Financial Information

Canadian Pacific Railway Company, a 100%-owned subsidiary of Canadian Pacific Railway Limited (“CPRL”), is the issuer of certain debt securities, which are fully and unconditionally guaranteed by CPRL. The following tables present condensed consolidating financial information (“CCFI”) in accordance with Rule 3-10(c) of Regulation S-X.

Investments in subsidiaries are accounted for under the equity method when presenting the CCFI.

The tables include all adjustments necessary to reconcile the CCFI on a consolidated basis to CPRL’s consolidated financial statements for the periods presented.Interim Condensed Consolidating Statements of Income

For the three months ended September 30, 2017    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,092		$	455		$	—		$	1,547
Non-freight	—			38			90			(80		)	48
Total revenues	—			1,130			545			(80		)	1,595
Operating expenses
Compensation and benefits	—			149			104			3			256
Fuel	—			116			34			—			150
Materials	—			33			11			1			45
Equipment rents	—			35			—			—			35
Depreciation and amortization	—			108			54			—			162
Purchased services and other	—			195			146			(84		)	257
Total operating expenses	—			636			349			(80		)	905
Operating income	—			494			196			—			690
Less:
Other income and charges	(10		)	(100		)	5			—			(105		)
Net interest (income) expense	(2		)	126			(9		)	—			115
Income before income tax expense and equity in net earnings of subsidiaries	12			468			200			—			680
Less: Income tax expense	7			99			64			—			170
Add: Equity in net earnings of subsidiaries	505			136			—			(641		)	—
Net income	$	510		$	505		$	136		$	(641	)	$	510

Interim Condensed Consolidating Statements of Income

For the three months ended September 30, 2016                    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)		Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,078	$	432		$	—		$	1,510
Non-freight	—			35		95			(86		)	44
Total revenues	—			1,113		527			(86		)	1,554
Operating expenses
Compensation and benefits	—			181		111			2			294
Fuel	—			111		27			—			138
Materials	—			30		6			3			39
Equipment rents	—			48		(5		)	—			43
Depreciation and amortization	—			102		53			—			155
Purchased services and other	—			170		149			(91		)	228
Total operating expenses	—			642		341			(86		)	897
Operating income	—			471		186			—			657
Less:
Other income and charges	12			61		(2		)	—			71
Net interest (income) expense	(9		)	131		(6		)	—			116
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(3		)	279		194			—			470
Less: Income tax expense	9			73		41			—			123
Add: Equity in net earnings of subsidiaries	359			153		—			(512		)	—
Net income	$	347		$	359	$	153		$	(512	)	$	347

Interim Condensed Consolidating Statements of Income

For the nine months ended September 30, 2017

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	3,310		$	1,398		$	—		$	4,708
Non-freight	—			104			278			(249		)	133
Total revenues	—			3,414			1,676			(249		)	4,841
Operating expenses
Compensation and benefits	—			438			323			5			766
Fuel	—			370			110			—			480
Materials	—			101			28			13			142
Equipment rents	—			110			(2		)	—			108
Depreciation and amortization	—			325			168			—			493
Purchased services and other	—			613			466			(267		)	812
Total operating expenses	—			1,957			1,093			(249		)	2,801
Operating income	—			1,457			583			—			2,040
Less:
Other income and charges	(35		)	(166		)	7			—			(194		)
Net interest (income) expense	(9		)	390			(24		)	—			357
Income before income tax expense and equity in net earnings of subsidiaries	44			1,233			600			—			1,877
Less: Income tax expense	9			259			188			—			456
Add: Equity in net earnings of subsidiaries	1,386			412			—			(1,798		)	—
Net income	$	1,421		$	1,386		$	412		$	(1,798	)	$	1,421

Interim Condensed Consolidating Statements of Income

For the nine months ended September 30, 2016    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	3,182		$	1,282		$	—		$	4,464
Non-freight	—			101			289			(259		)	131
Total revenues	—			3,283			1,571			(259		)	4,595
Operating expenses
Compensation and benefits	—			563			339			5			907
Fuel	—			317			77			—			394
Materials	—			95			24			14			133
Equipment rents	—			155			(23		)	—			132
Depreciation and amortization	—			316			162			—			478
Purchased services and other	—			499			469			(278		)	690
Total operating expenses	—			1,945			1,048			(259		)	2,734
Operating income	—			1,338			523			—			1,861
Less:
Other income and charges	(61		)	(89		)	31			—			(119		)
Net interest expense (income)	—			373			(18		)	—			355
Income before income tax expense and equity in net earnings of subsidiaries	61			1,054			510			—			1,625
Less: Income tax expense	12			254			144			—			410
Add: Equity in net earnings of subsidiaries	1,166			366			—			(1,532		)	—
Net income	$	1,215		$	1,166		$	366		$	(1,532	)	$	1,215

Interim Condensed Consolidating Statements of Comprehensive Income

For the three months ended September 30, 2017                

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	510	$	505		$	136		$	(641	)	$	510
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		180			(161		)	—			19
Change in derivatives designated as cash flow hedges	—		2			—			—			2
Change in pension and post-retirement defined benefit plans	—		36			2			—			38
Other comprehensive income (loss) before income taxes	—		218			(159		)	—			59
Income tax expense on above items	—		(34		)	—			—			(34		)
Equity accounted investments	25		(159		)	—			134			—
Other comprehensive income (loss)	25		25			(159		)	134			25
Comprehensive income (loss)	$	535	$	530		$	(23	)	$	(507	)	$	535

Interim Condensed Consolidating Statements of Comprehensive Income

For the three months ended September 30, 2016    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	347	$	359		$	153	$	(512	)	$	347
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(70		)	63		—			(7		)
Change in derivatives designated as cash flow hedges	—		1			—		—			1
Change in pension and post-retirement defined benefit plans	—		45			2		—			47
Other comprehensive (loss) income before income taxes	—		(24		)	65		—			41
Income tax expense on above items	—		(3		)	—		—			(3		)
Equity accounted investments	38		65			—		(103		)	—
Other comprehensive income	38		38			65		(103		)	38
Comprehensive income	$	385	$	397		$	218	$	(615	)	$	385

Interim Condensed Consolidating Statements of Comprehensive Income

For the nine months ended September 30, 2017                

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	1,421	$	1,386		$	412		$	(1,798	)	$	1,421
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		342			(304		)	—			38
Change in derivatives designated as cash flow hedges	—		11			—			—			11
Change in pension and post-retirement defined benefit plans	—		108			5			—			113
Other comprehensive income (loss) before income taxes	—		461			(299		)	—			162
Income tax expense on above items	—		(77		)	(1		)	—			(78		)
Equity accounted investments	84		(300		)	—			216			—
Other comprehensive income (loss)	84		84			(300		)	216			84
Comprehensive income	$	1,505	$	1,470		$	112		$	(1,582	)	$	1,505

Interim Condensed Consolidating Statements of Comprehensive Income

For the nine months ended September 30, 2016    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	1,215	$	1,166		$	366		$	(1,532	)	$	1,215
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		260			(227		)	—			33
Change in derivatives designated as cash flow hedges	—		(75		)	—			—			(75		)
Change in pension and post-retirement defined benefit plans	—		131			6			—			137
Other comprehensive income (loss) before income taxes	—		316			(221		)	—			95
Income tax expense on above items	—		(49		)	(2		)	—			(51		)
Equity accounted investments	44		(223		)	—			179			—
Other comprehensive income (loss)	44		44			(223		)	179			44
Comprehensive income	$	1,259	$	1,210		$	143		$	(1,353	)	$	1,259

Interim Condensed Consolidating Balance SheetsAs at September 30, 2017

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	78		$	64	$	—		$	142
Accounts receivable, net	—			464			164		—			628
Accounts receivable, inter-company	101			139			185		(425		)	—
Short-term advances to affiliates	500			560			4,869		(5,929		)	—
Materials and supplies	—			124			33		—			157
Other current assets	—			40			25		—			65
	601			1,405			5,340		(6,354		)	992
Long-term advances to affiliates	591			—			410		(1,001		)	—
Investments	—			43			142		—			185
Investments in subsidiaries	9,746			11,201			—		(20,947		)	—
Properties	—			8,979			7,721		—			16,700
Goodwill and intangible assets	—			—			187		—			187
Pension asset	—			1,356			—		—			1,356
Other assets	—			51			8		—			59
Deferred income taxes	3			—			—		(3		)	—
Total assets	$	10,941		$	23,035		$	13,808	$	(28,305	)	$	19,479
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	82		$	745		$	312	$	—		$	1,139
Accounts payable, inter-company	15			282			128		(425		)	—
Short-term advances from affiliates	5,279			640			10		(5,929		)	—
Long-term debt maturing within one year	—			749			—		—			749
	5,376			2,416			450		(6,354		)	1,888
Pension and other benefit liabilities	—			657			69		—			726
Long-term advances from affiliates	—			1,001			—		(1,001		)	—
Other long-term liabilities	—			104			117		—			221
Long-term debt	—			7,334			50		—			7,384
Deferred income taxes	—			1,777			1,921		(3		)	3,695
Total liabilities	5,376			13,289			2,607		(7,358		)	13,914
Shareholders’ equity
Share capital	2,025			1,036			6,862		(7,898		)	2,025
Additional paid-in capital	42			1,641			268		(1,909		)	42
Accumulated other comprehensive (loss) income	(1,715		)	(1,716		)	411		1,305			(1,715		)
Retained earnings	5,213			8,785			3,660		(12,445		)	5,213
	5,565			9,746			11,201		(20,947		)	5,565
Total liabilities and shareholders’ equity	$	10,941		$	23,035		$	13,808	$	(28,305	)	$	19,479

Condensed Consolidating Balance Sheets

As at December 31, 2016                

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	100		$	64	$	—		$	164
Accounts receivable, net	—			435			156		—			591
Accounts receivable, inter-company	90			113			206		(409		)	—
Short-term advances to affiliates	500			692			4,035		(5,227		)	—
Materials and supplies	—			150			34		—			184
Other current assets	—			38			32		—			70
	590			1,528			4,527		(5,636		)	1,009
Long-term advances to affiliates	1			—			91		(92		)	—
Investments	—			47			147		—			194
Investments in subsidiaries	8,513			10,249			—		(18,762		)	—
Properties	—			8,756			7,933		—			16,689
Goodwill and intangible assets	—			—			202		—			202
Pension asset	—			1,070			—		—			1,070
Other assets	1			48			8		—			57
Deferred income taxes	11			—			—		(11		)	—
Total assets	$	9,116		$	21,698		$	12,908	$	(24,501	)	$	19,221
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	73		$	945		$	304	$	—		$	1,322
Accounts payable, inter-company	14			292			103		(409		)	—
Short-term advances from affiliates	4,403			816			8		(5,227		)	—
Long-term debt maturing within one year	—			25			—		—			25
	4,490			2,078			415		(5,636		)	1,347
Pension and other benefit liabilities	—			658			76		—			734
Long-term advances from affiliates	—			92			—		(92		)	—
Other long-term liabilities	—			152			132		—			284
Long-term debt	—			8,605			54		—			8,659
Deferred income taxes	—			1,600			1,982		(11		)	3,571
Total liabilities	4,490			13,185			2,659		(5,739		)	14,595
Shareholders’ equity
Share capital	2,002			1,037			5,823		(6,860		)	2,002
Additional paid-in capital	52			1,638			298		(1,936		)	52
Accumulated other comprehensive (loss) income	(1,799		)	(1,799		)	712		1,087			(1,799		)
Retained earnings	4,371			7,637			3,416		(11,053		)	4,371
	4,626			8,513			10,249		(18,762		)	4,626
Total liabilities and shareholders’ equity	$	9,116		$	21,698		$	12,908	$	(24,501	)	$	19,221

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended September 30, 2017

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	98		$	322		$	213		$	(106	)	$	527
Investing activities
Additions to properties	—			(193		)	(126		)	—			(319		)
Proceeds from sale of properties and other assets	—			11			2			—			13
Advances to affiliates	—			—			(50		)	50			—
Repayment of advances to affiliates	159			1			—			(160		)	—
Capital contributions to affiliates	—			(26		)	—			26			—
Repurchase of share capital from affiliates	—			32			—			(32		)	—
Cash provided by (used in) investing activities	159			(175		)	(174		)	(116		)	(306		)
Financing activities
Dividends paid	(83		)	(83		)	(23		)	106			(83		)
Return of share capital to affiliates	—			—			(32		)	32			—
Issuance of share capital	—			—			26			(26		)	—
Issuance of CP Common Shares	2			—			—			—			2
Purchase of CP Common Shares	(226		)	—			—			—			(226		)
Repayment of long-term debt, excluding commercial paper	—			(3		)	—			—			(3		)
Advances from affiliates	50			—			—			(50		)	—
Repayment of advances from affiliates	—			(159		)	(1		)	160			—
Cash used in financing activities	(257		)	(245		)	(30		)	222			(310		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(2		)	(5		)	—			(7		)
Cash position
(Decrease) increase in cash and cash equivalents	—			(100		)	4			—			(96		)
Cash and cash equivalents at beginning of period	—			178			60			—			238
Cash and cash equivalents at end of period	$	—		$	78		$	64		$	—		$	142

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended September 30, 2016

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	84		$	406		$	229		$	(128	)	$	591
Investing activities
Additions to properties	—			(238		)	(56		)	—			(294		)
Proceeds from sale of properties and other assets	—			6			10			—			16
Advances to affiliates	—			(275		)	(123		)	398			—
Repayment of advances to affiliates	—			14			—			(14		)	—
Capital contributions to affiliates	—			(46		)	—			46			—
Cash used in investing activities	—			(539		)	(169		)	430			(278		)
Financing activities
Dividends paid	(75		)	(75		)	(53		)	128			(75		)
Issuance of share capital	—			—			46			(46		)	—
Issuance of CP Common Shares	5			—			—			—			5
Purchase of CP Common Shares	(412		)	—			—			—			(412		)
Repayment of long-term debt, excluding commercial paper	—			(5		)	(7		)	—			(12		)
Net issuance of commercial paper	—			190			—			—			190
Advances from affiliates	398			—			—			(398		)	—
Repayment of advances from affiliates	—			—			(14		)	14			—
Cash (used in) provided by financing activities	(84		)	110			(28		)	(302		)	(304		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			—			2			—			2
Cash position
(Decrease) increase in cash and cash equivalents	—			(23		)	34			—			11
Cash and cash equivalents at beginning of period	—			47			45			—			92
Cash and cash equivalents at end of period	$	—		$	24		$	79		$	—		$	103

Interim Condensed Consolidating Statements of Cash Flows

For the nine months ended September 30, 2017

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	256		$	875		$	716		$	(398	)	$	1,449
Investing activities
Additions to properties	—			(494		)	(401		)	—			(895		)
Proceeds from sale of properties and other assets	—			17			12			—			29
Advances to affiliates	(1,079		)	(550		)	(1,157		)	2,786			—
Capital contributions to affiliates	—			(1,039		)	—			1,039			—
Repurchase of share capital from affiliates	—			32			—			(32		)	—
Other	—			6			(1		)	—			5
Cash used in investing activities	(1,079		)	(2,028		)	(1,547		)	3,793			(861		)
Financing activities
Dividends paid	(229		)	(229		)	(169		)	398			(229		)
Return of share capital to affiliates	—			—			(32		)	32			—
Issuance of share capital	—			—			1,039			(1,039		)	—
Issuance of CP Common Shares	39			—			—			—			39
Purchase of CP Common Shares	(368		)	—			—			—			(368		)
Repayment of long-term debt, excluding commercial paper	—			(17		)	—			—			(17		)
Advances from affiliates	1,381			1,405			—			(2,786		)	—
Settlement of forward starting swaps	—			(22		)	—			—			(22		)
Cash provided by financing activities	823			1,137			838			(3,395		)	(597		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(6		)	(7		)	—			(13		)
Cash position
Decrease in cash and cash equivalents	—			(22		)	—			—			(22		)
Cash and cash equivalents at beginning of period	—			100			64			—			164
Cash and cash equivalents at end of period	$	—		$	78		$	64		$	—		$	142

Interim Condensed Consolidating Statements of Cash Flows

For the nine months ended September 30, 2016    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	182		$	831		$	646		$	(338	)	$	1,321
Investing activities
Additions to properties	—			(576		)	(326		)	—			(902		)
Proceeds from sale of properties and other assets	—			74			13			—			87
Advances to affiliates	—			(792		)	(408		)	1,200			—
Repayment of advances to affiliates	—			222			—			(222		)	—
Capital contributions to affiliates	—			(403		)	—			403			—
Repurchase of share capital from affiliates	—			6			—			(6		)	—
Other	—			—			(2		)	—			(2		)
Cash used in investing activities	—			(1,469		)	(723		)	1,375			(817		)
Financing activities
Dividends paid	(182		)	(182		)	(156		)	338			(182		)
Return of share capital to affiliates	—			—			(6		)	6			—
Issuance of share capital	—			—			403			(403		)	—
Issuance of CP Common Shares	14			—			—			—			14
Purchase of CP Common Shares	(1,200		)	—			—			—			(1,200		)
Repayment of long-term debt, excluding commercial paper	—			(16		)	(14		)	—			(30		)
Net issuance of commercial paper	—			366			—			—			366
Advances from affiliates	1,186			—			14			(1,200		)	—
Repayment of advances from affiliates	—			—			(222		)	222			—
Other	—			(3		)	—			—			(3		)
Cash (used in) provided by financing activities	(182		)	165			19			(1,037		)	(1,035		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(5		)	(11		)	—			(16		)
Cash position
Decrease in cash and cash equivalents	—			(478		)	(69		)	—			(547		)
Cash and cash equivalents at beginning of period	—			502			148			—			650
Cash and cash equivalents at end of period	$	—		$	24		$	79		$	—		$	103