Canada | 001-01342 | 98-0355078 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Dated: January 18, 2018 | |||
CANADIAN PACIFIC RAILWAY LIMITED | |||
By: | /s/ Scott Cedergren | ||
Name: | Scott Cedergren | ||
Title: | Assistant Corporate Secretary |
• | Revenues up 5 percent to $1.71 billion from $1.64 billion |
• | Operating ratio improved by 10 basis points to 56.1 percent |
• | Adjusted diluted EPS rose 6 percent to $3.22 from $3.04 |
• | Revenues increased 5 percent to $6.55 billion from $6.23 billion |
• | Adjusted operating ratio improved by 40 basis-points to a record 58.2 percent from 58.6 percent |
• | Adjusted diluted EPS rose 11 percent to $11.39 from $10.29 |
For the three months ended December 31 | For the year ended December 31 | |||||||||||||||
(in millions of Canadian dollars, except share and per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | ||||||||||||||||
Freight | $ | 1,667 | $ | 1,596 | $ | 6,375 | $ | 6,060 | ||||||||
Non-freight | 46 | 41 | 179 | 172 | ||||||||||||
Total revenues | 1,713 | 1,637 | 6,554 | 6,232 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 269 | 282 | 1,035 | 1,189 | ||||||||||||
Fuel | 197 | 173 | 677 | 567 | ||||||||||||
Materials | 48 | 47 | 190 | 180 | ||||||||||||
Equipment rents | 34 | 41 | 142 | 173 | ||||||||||||
Depreciation and amortization | 168 | 162 | 661 | 640 | ||||||||||||
Purchased services and other (Note 2) | 244 | 215 | 1,056 | 905 | ||||||||||||
Total operating expenses | 960 | 920 | 3,761 | 3,654 | ||||||||||||
Operating income | 753 | 717 | 2,793 | 2,578 | ||||||||||||
Less: | ||||||||||||||||
Other income and charges (Note 3) | 16 | 74 | (178 | ) | (45 | ) | ||||||||||
Net interest expense | 116 | 116 | 473 | 471 | ||||||||||||
Income before income tax (recovery) expense | 621 | 527 | 2,498 | 2,152 | ||||||||||||
Income tax (recovery) expense (Note 4) | (363 | ) | 143 | 93 | 553 | |||||||||||
Net income | $ | 984 | $ | 384 | $ | 2,405 | $ | 1,599 | ||||||||
Earnings per share | ||||||||||||||||
Basic earnings per share | $ | 6.79 | $ | 2.63 | $ | 16.49 | $ | 10.69 | ||||||||
Diluted earnings per share | $ | 6.77 | $ | 2.61 | $ | 16.44 | $ | 10.63 | ||||||||
Weighted-average number of shares (millions) | ||||||||||||||||
Basic | 145.0 | 146.3 | 145.9 | 149.6 | ||||||||||||
Diluted | 145.4 | 147.3 | 146.3 | 150.5 | ||||||||||||
Dividends declared per share | $ | 0.5625 | $ | 0.5000 | $ | 2.1875 | $ | 1.8500 |
For the three months ended December 31 | For the year ended December 31 | ||||||||||||||
(in millions of Canadian dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income | $ | 984 | $ | 384 | $ | 2,405 | $ | 1,599 | |||||||
Net (loss) gain in foreign currency translation adjustments, net of hedging activities | (14 | ) | (15 | ) | 24 | 18 | |||||||||
Change in derivatives designated as cash flow hedges | 8 | 73 | 19 | (2 | ) | ||||||||||
Change in pension and post-retirement defined benefit plans | (33 | ) | (571 | ) | 80 | (434 | ) | ||||||||
Other comprehensive (loss) income before income taxes | (39 | ) | (513 | ) | 123 | (418 | ) | ||||||||
Income tax recovery (expense) on above items | 13 | 147 | (65 | ) | 96 | ||||||||||
Other comprehensive (loss) income | (26 | ) | (366 | ) | 58 | (322 | ) | ||||||||
Comprehensive income | $ | 958 | $ | 18 | $ | 2,463 | $ | 1,277 |
December 31 | December 31 | ||||||
(in millions of Canadian dollars) | 2017 | 2016 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 338 | $ | 164 | |||
Accounts receivable, net | 687 | 591 | |||||
Materials and supplies | 152 | 184 | |||||
Other current assets | 97 | 70 | |||||
1,274 | 1,009 | ||||||
Investments | 182 | 194 | |||||
Properties | 17,016 | 16,689 | |||||
Goodwill and intangible assets | 187 | 202 | |||||
Pension asset | 1,407 | 1,070 | |||||
Other assets | 69 | 57 | |||||
Total assets | $ | 20,135 | $ | 19,221 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | 1,238 | $ | 1,322 | |||
Long-term debt maturing within one year | 746 | 25 | |||||
1,984 | 1,347 | ||||||
Pension and other benefit liabilities | 749 | 734 | |||||
Other long-term liabilities | 231 | 284 | |||||
Long-term debt | 7,413 | 8,659 | |||||
Deferred income taxes | 3,321 | 3,571 | |||||
Total liabilities | 13,698 | 14,595 | |||||
Shareholders’ equity | |||||||
Share capital | 2,032 | 2,002 | |||||
Additional paid-in capital | 43 | 52 | |||||
Accumulated other comprehensive loss | (1,741 | ) | (1,799 | ) | |||
Retained earnings | 6,103 | 4,371 | |||||
6,437 | 4,626 | ||||||
Total liabilities and shareholders’ equity | $ | 20,135 | $ | 19,221 |
For the three months ended December 31 | For the year ended December 31 | ||||||||||||||
(in millions of Canadian dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Operating activities | |||||||||||||||
Net income | $ | 984 | $ | 384 | $ | 2,405 | $ | 1,599 | |||||||
Reconciliation of net income to cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 168 | 162 | 661 | 640 | |||||||||||
Deferred income taxes | (378 | ) | 87 | (210 | ) | 320 | |||||||||
Pension funding in excess of expense | (59 | ) | (33 | ) | (237 | ) | (138 | ) | |||||||
Foreign exchange loss (gain) on long-term debt (Note 3) | 14 | 74 | (186 | ) | (79 | ) | |||||||||
Other operating activities, net | (25 | ) | (68 | ) | (113 | ) | (198 | ) | |||||||
Change in non-cash working capital balances related to operations | 29 | 162 | (138 | ) | (55 | ) | |||||||||
Cash provided by operating activities | 733 | 768 | 2,182 | 2,089 | |||||||||||
Investing activities | |||||||||||||||
Additions to properties | (445 | ) | (280 | ) | (1,340 | ) | (1,182 | ) | |||||||
Proceeds from sale of properties and other assets | 13 | 29 | 42 | 116 | |||||||||||
Other | (2 | ) | (1 | ) | 3 | (3 | ) | ||||||||
Cash used in investing activities | (434 | ) | (252 | ) | (1,295 | ) | (1,069 | ) | |||||||
Financing activities | |||||||||||||||
Dividends paid | (81 | ) | (73 | ) | (310 | ) | (255 | ) | |||||||
Issuance of CP Common Shares | 6 | 7 | 45 | 21 | |||||||||||
Purchase of CP Common Shares | (13 | ) | (10 | ) | (381 | ) | (1,210 | ) | |||||||
Repayment of long-term debt, excluding commercial paper | (15 | ) | (8 | ) | (32 | ) | (38 | ) | |||||||
Net repayment of commercial paper | — | (374 | ) | — | (8 | ) | |||||||||
Settlement of forward starting swaps | — | — | (22 | ) | — | ||||||||||
Other | — | — | — | (3 | ) | ||||||||||
Cash used in financing activities | (103 | ) | (458 | ) | (700 | ) | (1,493 | ) | |||||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | — | 3 | (13 | ) | (13 | ) | |||||||||
Cash position | |||||||||||||||
Increase (decrease) in cash and cash equivalents | 196 | 61 | 174 | (486 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 142 | 103 | 164 | 650 | |||||||||||
Cash and cash equivalents at end of period | $ | 338 | $ | 164 | $ | 338 | $ | 164 | |||||||
Supplemental disclosures of cash flow information: | |||||||||||||||
Income taxes paid | $ | 61 | $ | 48 | $ | 425 | $ | 322 | |||||||
Interest paid | $ | 90 | $ | 93 | $ | 475 | $ | 488 |
(in millions of Canadian dollars, except common share amounts) | Common shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
Balance at January 1, 2017 | 146.3 | $ | 2,002 | $ | 52 | $ | (1,799 | ) | $ | 4,371 | $ | 4,626 | |||||||
Net income | — | — | — | — | 2,405 | 2,405 | |||||||||||||
Other comprehensive income | — | — | — | 58 | — | 58 | |||||||||||||
Dividends declared | — | — | — | — | (319 | ) | (319 | ) | |||||||||||
Effect of stock-based compensation expense | — | — | 3 | — | — | 3 | |||||||||||||
CP Common Shares repurchased | (1.9 | ) | (27 | ) | — | — | (354 | ) | (381 | ) | |||||||||
Shares issued under stock option plan | 0.5 | 57 | (12 | ) | — | — | 45 | ||||||||||||
Balance at December 31, 2017 | 144.9 | $ | 2,032 | $ | 43 | $ | (1,741 | ) | $ | 6,103 | $ | 6,437 | |||||||
Balance at January 1, 2016 | 153.0 | $ | 2,058 | $ | 43 | $ | (1,477 | ) | $ | 4,172 | $ | 4,796 | |||||||
Net income | — | — | — | — | 1,599 | 1,599 | |||||||||||||
Other comprehensive income | — | — | — | (322 | ) | — | (322 | ) | |||||||||||
Dividends declared | — | — | — | — | (274 | ) | (274 | ) | |||||||||||
Effect of stock-based compensation expense | — | — | 14 | — | — | 14 | |||||||||||||
CP Common Shares repurchased | (6.9 | ) | (84 | ) | — | — | (1,126 | ) | (1,210 | ) | |||||||||
Shares issued under stock option plan | 0.2 | 28 | (5 | ) | — | — | 23 | ||||||||||||
Balance at December 31, 2016 | 146.3 | $ | 2,002 | $ | 52 | $ | (1,799 | ) | $ | 4,371 | $ | 4,626 |
For the three months ended December 31 | For the year ended December 31 | ||||||||||||||
(in millions of Canadian dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Foreign exchange loss (gain) on long-term debt | $ | 14 | $ | 74 | $ | (186 | ) | $ | (79 | ) | |||||
Other foreign exchange gains | (2 | ) | — | (7 | ) | (5 | ) | ||||||||
Legal settlement | — | — | — | 25 | |||||||||||
Insurance recovery of legal settlement | — | — | (10 | ) | — | ||||||||||
Charge on hedge roll and de-designation | — | — | 13 | — | |||||||||||
Other | 4 | — | 12 | 14 | |||||||||||
Total other income and charges | $ | 16 | $ | 74 | $ | (178 | ) | $ | (45 | ) |
Fourth Quarter | Year | ||||||||||||||||||||||
Financial (millions, except per share data) | 2017 | 2016 | Total Change | % Change | 2017 | 2016 | Total Change | % Change | |||||||||||||||
Revenues | |||||||||||||||||||||||
Freight | $ | 1,667 | $ | 1,596 | $ | 71 | 4 | $ | 6,375 | $ | 6,060 | $ | 315 | 5 | |||||||||
Non-freight | 46 | 41 | 5 | 12 | 179 | 172 | 7 | 4 | |||||||||||||||
Total revenues | 1,713 | 1,637 | 76 | 5 | 6,554 | 6,232 | 322 | 5 | |||||||||||||||
Operating expenses | |||||||||||||||||||||||
Compensation and benefits | 269 | 282 | (13 | ) | (5 | ) | 1,035 | 1,189 | (154 | ) | (13 | ) | |||||||||||
Fuel | 197 | 173 | 24 | 14 | 677 | 567 | 110 | 19 | |||||||||||||||
Materials | 48 | 47 | 1 | 2 | 190 | 180 | 10 | 6 | |||||||||||||||
Equipment rents | 34 | 41 | (7 | ) | (17 | ) | 142 | 173 | (31 | ) | (18 | ) | |||||||||||
Depreciation and amortization | 168 | 162 | 6 | 4 | 661 | 640 | 21 | 3 | |||||||||||||||
Purchased services and other | 244 | 215 | 29 | 13 | 1,056 | 905 | 151 | 17 | |||||||||||||||
Total operating expenses | 960 | 920 | 40 | 4 | 3,761 | 3,654 | 107 | 3 | |||||||||||||||
Operating income | 753 | 717 | 36 | 5 | 2,793 | 2,578 | 215 | 8 | |||||||||||||||
Less: | |||||||||||||||||||||||
Other income and charges | 16 | 74 | (58 | ) | (78 | ) | (178 | ) | (45 | ) | (133 | ) | 296 | ||||||||||
Net interest expense | 116 | 116 | — | — | 473 | 471 | 2 | — | |||||||||||||||
Income before income tax (recovery) expense | 621 | 527 | 94 | 18 | 2,498 | 2,152 | 346 | 16 | |||||||||||||||
Income tax (recovery) expense | (363 | ) | 143 | (506 | ) | (354 | ) | 93 | 553 | (460 | ) | (83 | ) | ||||||||||
Net income | $ | 984 | $ | 384 | $ | 600 | 156 | $ | 2,405 | $ | 1,599 | $ | 806 | 50 | |||||||||
Operating ratio (%) | 56.1 | 56.2 | (0.1 | ) | (10) bps | 57.4 | 58.6 | (1.2 | ) | (120) bps | |||||||||||||
Basic earnings per share | $ | 6.79 | $ | 2.63 | $ | 4.16 | 158 | $ | 16.49 | $ | 10.69 | $ | 5.80 | 54 | |||||||||
Diluted earnings per share | $ | 6.77 | $ | 2.61 | $ | 4.16 | 159 | $ | 16.44 | $ | 10.63 | $ | 5.81 | 55 | |||||||||
Shares Outstanding | |||||||||||||||||||||||
Weighted average number of shares outstanding (millions) | 145.0 | 146.3 | (1.3 | ) | (1 | ) | 145.9 | 149.6 | (3.7 | ) | (2 | ) | |||||||||||
Weighted average number of diluted shares outstanding (millions) | 145.4 | 147.3 | (1.9 | ) | (1 | ) | 146.3 | 150.5 | (4.2 | ) | (3 | ) | |||||||||||
Foreign Exchange | |||||||||||||||||||||||
Average foreign exchange rate (US$/Canadian$) | 0.79 | 0.75 | 0.04 | 5 | 0.77 | 0.75 | 0.02 | 3 | |||||||||||||||
Average foreign exchange rate (Canadian$/US$) | 1.27 | 1.33 | (0.06 | ) | (5 | ) | 1.30 | 1.33 | (0.03 | ) | (2 | ) |
Fourth Quarter | Year | ||||||||||||||||||||||||||
Commodity Data(1) | 2017 | 2016 | Total Change | % Change | FX Adjusted % Change(2) | 2017 | 2016 | Total Change | % Change | FX Adjusted % Change(2) | |||||||||||||||||
Freight Revenues (millions) | |||||||||||||||||||||||||||
- Grain | $ | 425 | $ | 439 | $ | (14 | ) | (3 | ) | (1 | ) | $ | 1,532 | $ | 1,480 | $ | 52 | 4 | 5 | ||||||||
- Coal | 153 | 152 | 1 | 1 | 1 | 631 | 606 | 25 | 4 | 4 | |||||||||||||||||
- Potash | 101 | 96 | 5 | 5 | 9 | 411 | 338 | 73 | 22 | 23 | |||||||||||||||||
- Fertilizers and sulphur | 60 | 66 | (6 | ) | (9 | ) | (6 | ) | 241 | 284 | (43 | ) | (15 | ) | (14 | ) | |||||||||||
- Forest products | 63 | 63 | — | — | 3 | 265 | 275 | (10 | ) | (4 | ) | (2 | ) | ||||||||||||||
- Energy, chemicals and plastics | 247 | 214 | 33 | 15 | 20 | 898 | 852 | 46 | 5 | 7 | |||||||||||||||||
- Metals, minerals, and consumer products | 187 | 149 | 38 | 26 | 30 | 739 | 564 | 175 | 31 | 33 | |||||||||||||||||
- Automotive | 70 | 80 | (10 | ) | (13 | ) | (9 | ) | 293 | 350 | (57 | ) | (16 | ) | (15 | ) | |||||||||||
- Intermodal | 361 | 337 | 24 | 7 | 8 | 1,365 | 1,311 | 54 | 4 | 5 | |||||||||||||||||
Total Freight Revenues | $ | 1,667 | $ | 1,596 | $ | 71 | 4 | 7 | $ | 6,375 | $ | 6,060 | $ | 315 | 5 | 6 | |||||||||||
Freight Revenue per Revenue Ton-Miles (RTM) (cents) | |||||||||||||||||||||||||||
- Grain | 4.21 | 4.17 | 0.04 | 1 | 3 | 4.10 | 4.01 | 0.09 | 2 | 4 | |||||||||||||||||
- Coal | 2.82 | 2.70 | 0.12 | 4 | 5 | 2.78 | 2.73 | 0.05 | 2 | 2 | |||||||||||||||||
- Potash | 2.62 | 2.49 | 0.13 | 5 | 8 | 2.61 | 2.38 | 0.23 | 10 | 11 | |||||||||||||||||
- Fertilizers and sulphur | 5.91 | 6.68 | (0.77 | ) | (12 | ) | (9 | ) | 6.27 | 6.87 | (0.60 | ) | (9 | ) | (8 | ) | |||||||||||
- Forest products | 5.79 | 5.86 | (0.07 | ) | (1 | ) | 3 | 5.92 | 5.86 | 0.06 | 1 | 3 | |||||||||||||||
- Energy, chemicals and plastics | 4.10 | 4.53 | (0.43 | ) | (9 | ) | (6 | ) | 4.21 | 4.48 | (0.27 | ) | (6 | ) | (4 | ) | |||||||||||
- Metals, minerals, and consumer products | 6.32 | 6.59 | (0.27 | ) | (4 | ) | — | 6.44 | 6.77 | (0.33 | ) | (5 | ) | (3 | ) | ||||||||||||
- Automotive | 22.91 | 22.31 | 0.60 | 3 | 7 | 22.15 | 21.02 | 1.13 | 5 | 7 | |||||||||||||||||
- Intermodal | 5.65 | 5.41 | 0.24 | 4 | 6 | 5.62 | 5.27 | 0.35 | 7 | 7 | |||||||||||||||||
Total Freight Revenue per RTM | 4.49 | 4.48 | 0.01 | — | 3 | 4.47 | 4.46 | 0.01 | — | 1 | |||||||||||||||||
Freight Revenue per Carload | |||||||||||||||||||||||||||
- Grain | $ | 3,690 | $ | 3,659 | $ | 31 | 1 | 3 | $ | 3,477 | $ | 3,426 | $ | 51 | 1 | 3 | |||||||||||
- Coal | 2,106 | 1,932 | 174 | 9 | 10 | 2,061 | 1,984 | 77 | 4 | 4 | |||||||||||||||||
- Potash | 2,916 | 2,973 | (57 | ) | (2 | ) | 1 | 2,988 | 2,904 | 84 | 3 | 4 | |||||||||||||||
- Fertilizers and sulphur | 4,118 | 4,593 | (475 | ) | (10 | ) | (8 | ) | 4,178 | 4,769 | (591 | ) | (12 | ) | (11 | ) | |||||||||||
- Forest products | 3,974 | 4,158 | (184 | ) | (4 | ) | — | 4,036 | 4,157 | (121 | ) | (3 | ) | (1 | ) | ||||||||||||
- Energy, chemicals and plastics | 3,271 | 3,302 | (31 | ) | (1 | ) | 3 | 3,333 | 3,410 | (77 | ) | (2 | ) | — | |||||||||||||
- Metals, minerals, and consumer products | 2,911 | 2,964 | (53 | ) | (2 | ) | 2 | 2,894 | 2,888 | 6 | — | 2 | |||||||||||||||
- Automotive | 2,776 | 3,006 | (230 | ) | (8 | ) | (4 | ) | 2,785 | 2,825 | (40 | ) | (1 | ) | — | ||||||||||||
- Intermodal | 1,384 | 1,368 | 16 | 1 | 2 | 1,370 | 1,342 | 28 | 2 | 3 | |||||||||||||||||
Total Freight Revenue per Carload | $ | 2,455 | $ | 2,462 | $ | (7 | ) | — | 2 | $ | 2,420 | $ | 2,400 | $ | 20 | 1 | 2 |
(1) | In the first quarter of 2017, CP revised the grouping of revenues, and aggregated certain lines of business where “Canadian Grain” and “U.S. Grain” were aggregated into the line of business "Grain"; “Chemicals and Plastics” and “Crude” were aggregated into the line of business "Energy, Chemicals and Plastics"; and “Domestic Intermodal" and “International Intermodal” were aggregated into the line of business "Intermodal". Prior period figures have been aggregated accordingly. |
(2) | 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. |
Fourth Quarter | Year | ||||||||||||||||
Commodity Data (Continued)(1) | 2017 | 2016 | Total Change | % Change | 2017 | 2016 | Total Change | % Change | |||||||||
Millions of RTM | |||||||||||||||||
- Grain | 10,103 | 10,488 | (385 | ) | (4 | ) | 37,377 | 36,892 | 485 | 1 | |||||||
- Coal | 5,430 | 5,631 | (201 | ) | (4 | ) | 22,660 | 22,171 | 489 | 2 | |||||||
- Potash | 3,832 | 3,842 | (10 | ) | — | 15,751 | 14,175 | 1,576 | 11 | ||||||||
- Fertilizers and sulphur | 1,012 | 996 | 16 | 2 | 3,849 | 4,140 | (291 | ) | (7 | ) | |||||||
- Forest products | 1,094 | 1,072 | 22 | 2 | 4,484 | 4,691 | (207 | ) | (4 | ) | |||||||
- Energy, chemicals and plastics | 6,025 | 4,726 | 1,299 | 27 | 21,327 | 19,021 | 2,306 | 12 | |||||||||
- Metals, minerals, and consumer products | 2,956 | 2,271 | 685 | 30 | 11,468 | 8,338 | 3,130 | 38 | |||||||||
- Automotive | 305 | 362 | (57 | ) | (16 | ) | 1,321 | 1,667 | (346 | ) | (21 | ) | |||||
- Intermodal | 6,402 | 6,223 | 179 | 3 | 24,303 | 24,857 | (554 | ) | (2 | ) | |||||||
Total RTMs | 37,159 | 35,611 | 1,548 | 4 | 142,540 | 135,952 | 6,588 | 5 | |||||||||
Carloads (thousands)(2) | |||||||||||||||||
- Grain | 115.1 | 119.7 | (4.6 | ) | (4 | ) | 440.7 | 431.9 | 8.8 | 2 | |||||||
- Coal | 72.7 | 78.6 | (5.9 | ) | (8 | ) | 306.0 | 305.3 | 0.7 | — | |||||||
- Potash | 34.5 | 32.2 | 2.3 | 7 | 137.4 | 116.4 | 21.0 | 18 | |||||||||
- Fertilizers and sulphur | 14.5 | 14.4 | 0.1 | 1 | 57.7 | 59.6 | (1.9 | ) | (3 | ) | |||||||
- Forest products | 16.0 | 15.1 | 0.9 | 6 | 65.8 | 66.1 | (0.3 | ) | — | ||||||||
- Energy, chemicals and plastics | 75.5 | 64.9 | 10.6 | 16 | 269.5 | 250.0 | 19.5 | 8 | |||||||||
- Metals, minerals, and consumer products | 64.2 | 50.4 | 13.8 | 27 | 255.3 | 195.3 | 60.0 | 31 | |||||||||
- Automotive | 25.2 | 26.9 | (1.7 | ) | (6 | ) | 105.1 | 124.1 | (19.0 | ) | (15 | ) | |||||
- Intermodal | 261.3 | 246.0 | 15.3 | 6 | 996.7 | 976.2 | 20.5 | 2 | |||||||||
Total Carloads | 679.0 | 648.2 | 30.8 | 5 | 2,634.2 | 2,524.9 | 109.3 | 4 |
Fourth Quarter | Year | ||||||||||||||||||||||||||
2017 | 2016 | Total Change | % Change | FX Adjusted % Change(3) | 2017 | 2016 | Total Change | % Change | FX Adjusted % Change(3) | ||||||||||||||||||
Operating Expenses (millions) | |||||||||||||||||||||||||||
Compensation and benefits | $ | 269 | $ | 282 | $ | (13 | ) | (5 | ) | (3 | ) | $ | 1,035 | $ | 1,189 | $ | (154 | ) | (13 | ) | (12 | ) | |||||
Fuel | 197 | 173 | 24 | 14 | 19 | 677 | 567 | 110 | 19 | 22 | |||||||||||||||||
Materials | 48 | 47 | 1 | 2 | 4 | 190 | 180 | 10 | 6 | 7 | |||||||||||||||||
Equipment rents | 34 | 41 | (7 | ) | (17 | ) | (15 | ) | 142 | 173 | (31 | ) | (18 | ) | (17 | ) | |||||||||||
Depreciation and amortization | 168 | 162 | 6 | 4 | 5 | 661 | 640 | 21 | 3 | 4 | |||||||||||||||||
Purchased services and other | 244 | 215 | 29 | 13 | 16 | 1,056 | 905 | 151 | 17 | 18 | |||||||||||||||||
Total Operating Expenses | $ | 960 | $ | 920 | $ | 40 | 4 | 7 | $ | 3,761 | $ | 3,654 | $ | 107 | 3 | 4 |
(1) | In the first quarter of 2017, CP revised the grouping of revenues, and aggregated certain lines of business where “Canadian Grain” and “U.S. Grain” were aggregated into the line of business "Grain"; “Chemicals and Plastics” and “Crude” were aggregated into the line of business "Energy, Chemicals and Plastics"; and “Domestic Intermodal" and “International Intermodal” were aggregated into the line of business "Intermodal". Prior period figures have been aggregated accordingly. |
(2) | Certain figures have been revised to conform with current presentation. |
(3) | 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. |
Fourth Quarter | Year | ||||||||||||||||
2017 | 2016 (1) | Total Change | % Change | 2017 (1) | 2016 (1) | Total Change | % Change | ||||||||||
Operations Performance | |||||||||||||||||
Gross ton-miles ("GTMs") (millions) | 65,296 | 62,233 | 3,063 | 5 | 252,195 | 242,694 | 9,501 | 4 | |||||||||
Train miles (thousands) | 7,845 | 7,748 | 97 | 1 | 30,632 | 30,373 | 259 | 1 | |||||||||
Average train weight - excluding local traffic (tons) | 8,897 | 8,588 | 309 | 4 | 8,806 | 8,614 | 192 | 2 | |||||||||
Average train length - excluding local traffic (feet) | 7,276 | 7,100 | 176 | 2 | 7,214 | 7,217 | (3 | ) | — | ||||||||
Average terminal dwell (hours) | 6.9 | 6.4 | 0.5 | 8 | 6.6 | 6.7 | (0.1 | ) | (1 | ) | |||||||
Average train speed (mph)(2) | 21.9 | 22.9 | (1.0 | ) | (4 | ) | 22.6 | 23.5 | (0.9 | ) | (4 | ) | |||||
Fuel efficiency(3) | 0.984 | 0.996 | (0.012 | ) | (1 | ) | 0.980 | 0.980 | — | — | |||||||
U.S. gallons of locomotive fuel consumed (millions)(4) | 63.9 | 61.6 | 2.3 | 4 | 245.3 | 236.2 | 9.1 | 4 | |||||||||
Average fuel price (U.S. dollars per U.S. gallon) | 2.43 | 2.01 | 0.42 | 21 | 2.16 | 1.80 | 0.36 | 20 | |||||||||
Total employees (average)(5) | 12,165 | 11,803 | 362 | 3 | 12,034 | 12,082 | (48 | ) | — | ||||||||
Total employees (end of period)(5) | 12,163 | 11,653 | 510 | 4 | 12,163 | 11,653 | 510 | 4 | |||||||||
Workforce (end of period)(6) | 12,242 | 11,698 | 544 | 5 | 12,242 | 11,698 | 544 | 5 | |||||||||
Safety | |||||||||||||||||
FRA personal injuries per 200,000 employee-hours | 1.69 | 2.02 | (0.33 | ) | (16 | ) | 1.65 | 1.67 | (0.02 | ) | (1 | ) | |||||
FRA train accidents per million train miles | 0.94 | 1.19 | (0.25 | ) | (21 | ) | 0.99 | 1.12 | (0.13 | ) | (12 | ) |
(1) | Certain previously reported quarterly figures have been revised to conform with current presentation or have been updated to reflect new information as certain operating statistics are estimated and can continue to be updated as actuals settle. |
(2) | Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It excludes delay time related to customer or foreign railways, and also excludes the time and distance traveled by: i) trains used in or around CP’s yards; ii) passenger trains; and iii) trains used for repairing track. |
(3) | Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs – freight and yard. |
(4) | Includes gallons of fuel consumed from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. |
(5) | An employee is defined as an individual currently engaged in full-time or part-time employment with CP. |
(6) | Workforce is defined as total employees plus contractors and consultants. |
• | in the second quarter, a charge on hedge roll and de-designation of $13 million ($10 million after deferred tax) that unfavourably impacted Diluted EPS by 7 cents; |
• | in the second quarter, an insurance recovery of a legal settlement of $10 million ($7 million after current tax) that favourably impacted Diluted EPS by 5 cents; |
• | in the first quarter, a management transition recovery of $51 million related to the retirement of Mr. E. Hunter Harrison as CEO of CP ($39 million after deferred tax) that favourably impacted Diluted EPS by 27 cents; |
• | during the course of the year, a net deferred tax recovery of $541 million as a result of the changes in income tax rates as follows: |
• | in the fourth quarter, a deferred tax recovery of $527 million, primarily due to the U.S. tax reform, that favourably impacted Diluted EPS by $3.63; |
• | in the third quarter, a deferred tax expense of $3 million as a result of the change in the Illinois state corporate income tax rate change that unfavourably impacted Diluted EPS by 2 cents; |
• | in the second quarter, a deferred tax recovery of $17 million as a result of the change in the Saskatchewan provincial corporate income tax rate that favourably impacted Diluted EPS by 12 cents; and |
• | during the course of the year, a net non-cash gain of $186 million ($162 million after deferred tax) due to FX translation of the Company’s U.S. dollar-denominated debt as follows: |
• | in the fourth quarter, a $14 million loss ($12 million after deferred tax) that unfavourably impacted Diluted EPS by 8 cents; |
• | in the third quarter, a $105 million gain ($91 million after deferred tax) that favourably impacted Diluted EPS by 62 cents; |
• | in the second quarter, a $67 million gain ($59 million after deferred tax) that favourably impacted Diluted EPS by 40 cents; and |
• | in the first quarter, a $28 million gain ($24 million after deferred tax) that favourably impacted Diluted EPS by 16 cents. |
• | in the third quarter, a $25 million expense ($18 million after current tax) related to a legal settlement that unfavourably impacted Diluted EPS by 12 cents; and |
• | during the course of the year, a net non-cash gain of $79 million ($68 million after deferred tax) due to FX translation of the Company’s U.S. dollar-denominated debt as follows: |
• | in the fourth quarter, a $74 million loss ($64 million after deferred tax) that unfavourably impacted Diluted EPS by 43 cents; |
• | in the third quarter, a $46 million loss ($40 million after deferred tax) that unfavourably impacted Diluted EPS by 27 cents; |
• | in the second quarter, an $18 million gain ($16 million after deferred tax) that favourably impacted Diluted EPS by 10 cents; and |
• | in the first quarter, a $181 million gain ($156 million after deferred tax) that favourably impacted Diluted EPS by $1.01. |
For the three months ended December 31 | For the year ended December 31 | |||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||
Net income as reported | $ | 984 | $ | 384 | $ | 2,405 | $ | 1,599 | ||||
Less significant items (pretax): | ||||||||||||
Management transition recovery | — | — | 51 | — | ||||||||
Impact of FX translation on U.S. dollar-denominated debt | (14 | ) | (74 | ) | 186 | 79 | ||||||
Charge on hedge roll and de-designation | — | — | (13 | ) | — | |||||||
Legal settlement charge | — | — | — | (25 | ) | |||||||
Insurance recovery of legal settlement | — | — | 10 | — | ||||||||
Income tax rate changes | 527 | — | 541 | — | ||||||||
Add: | ||||||||||||
Tax effect of adjustments(1) | (2 | ) | (10 | ) | 36 | 4 | ||||||
Adjusted income | $ | 469 | $ | 448 | $ | 1,666 | $ | 1,549 |
For the three months ended December 31 | For the year ended December 31 | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Diluted earnings per share as reported | $ | 6.77 | $ | 2.61 | $ | 16.44 | $ | 10.63 | ||||
Less significant items: | ||||||||||||
Management transition recovery | — | — | 0.35 | — | ||||||||
Impact of FX translation on U.S. dollar-denominated debt | (0.09 | ) | (0.50 | ) | 1.27 | 0.53 | ||||||
Charge on hedge roll and de-designation | — | — | (0.09 | ) | — | |||||||
Legal settlement charge | — | — | — | (0.17 | ) | |||||||
Insurance recovery of legal settlement | — | — | 0.07 | — | ||||||||
Income tax rate changes | 3.63 | — | 3.70 | — | ||||||||
Add: | ||||||||||||
Tax effect of adjustments(1) | (0.01 | ) | (0.07 | ) | 0.25 | 0.02 | ||||||
Adjusted diluted earnings per share | $ | 3.22 | $ | 3.04 | $ | 11.39 | $ | 10.29 |
For the three months ended December 31 | For the year ended December 31 | |||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||
Operating income as reported | $ | 753 | $ | 717 | $ | 2,793 | $ | 2,578 | ||||
Less significant item: | ||||||||||||
Management transition recovery | — | — | 51 | — | ||||||||
Adjusted operating income | $ | 753 | $ | 717 | $ | 2,742 | $ | 2,578 |
For the three months ended December 31 | For the year ended December 31 | |||||||
2017 | 2016 | 2017 | 2016 | |||||
Operating ratio as reported | 56.1 | % | 56.2 | % | 57.4 | % | 58.6 | % |
Less significant item: | ||||||||
Management transition recovery | — | % | — | % | (0.8 | )% | — | % |
Adjusted operating ratio | 56.1 | % | 56.2 | % | 58.2 | % | 58.6 | % |
For the three months ended December 31 | For the year ended December 31 | |||||||||||
(in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||
Cash provided by operating activities | $ | 733 | $ | 768 | $ | 2,182 | $ | 2,089 | ||||
Cash used in investing activities | (434 | ) | (252 | ) | (1,295 | ) | (1,069 | ) | ||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | — | 3 | (13 | ) | (13 | ) | ||||||
Free cash | $ | 299 | $ | 519 | $ | 874 | $ | 1,007 |
For the three months ended December 31 | ||||||||||||||
(in millions) | Reported 2017 | Reported 2016 | Variance due to FX | FX Adjusted 2016 | FX Adjusted % Change | |||||||||
Freight revenues | $ | 1,667 | $ | 1,596 | $ | (38 | ) | $ | 1,558 | 7 | ||||
Non-freight revenues | 46 | 41 | (1 | ) | 40 | 15 | ||||||||
Total revenues | 1,713 | 1,637 | (39 | ) | 1,598 | 7 | ||||||||
Compensation and benefits | 269 | 282 | (5 | ) | 277 | (3 | ) | |||||||
Fuel | 197 | 173 | (7 | ) | 166 | 19 | ||||||||
Materials | 48 | 47 | (1 | ) | 46 | 4 | ||||||||
Equipment rents | 34 | 41 | (1 | ) | 40 | (15 | ) | |||||||
Depreciation and amortization | 168 | 162 | (2 | ) | 160 | 5 | ||||||||
Purchased services and other | 244 | 215 | (5 | ) | 210 | 16 | ||||||||
Total operating expenses | 960 | 920 | (21 | ) | 899 | 7 | ||||||||
Operating income | $ | 753 | $ | 717 | $ | (18 | ) | $ | 699 | 8 |
For the year ended December 31 | ||||||||||||||
(in millions) | Reported 2017 | Reported 2016 | Variance due to FX | FX Adjusted 2016 | FX Adjusted % Change | |||||||||
Freight revenues | $ | 6,375 | $ | 6,060 | $ | (67 | ) | $ | 5,993 | 6 | ||||
Non-freight revenues | 179 | 172 | (1 | ) | 171 | 5 | ||||||||
Total revenues | 6,554 | 6,232 | (68 | ) | 6,164 | 6 | ||||||||
Compensation and benefits | 1,035 | 1,189 | (9 | ) | 1,180 | (12 | ) | |||||||
Fuel | 677 | 567 | (10 | ) | 557 | 22 | ||||||||
Materials | 190 | 180 | (2 | ) | 178 | 7 | ||||||||
Equipment rents | 142 | 173 | (2 | ) | 171 | (17 | ) | |||||||
Depreciation and amortization | 661 | 640 | (3 | ) | 637 | 4 | ||||||||
Purchased services and other | 1,056 | 905 | (10 | ) | 895 | 18 | ||||||||
Total operating expenses | 3,761 | 3,654 | (36 | ) | 3,618 | 4 | ||||||||
Operating income | $ | 2,793 | $ | 2,578 | $ | (32 | ) | $ | 2,546 | 10 |
For the year ended December 31 | ||||||
(in millions) | 2017 | 2016 | ||||
Net income as reported | $ | 2,405 | $ | 1,599 | ||
Add: | ||||||
Net interest expense | 473 | 471 | ||||
Income tax expense | 93 | 553 | ||||
EBIT | 2,971 | 2,623 | ||||
Less significant items (pretax): | ||||||
Charge on hedge roll and de-designation | (13 | ) | — | |||
Management transition recovery | 51 | — | ||||
Legal settlement charge | — | (25 | ) | |||
Insurance recovery of legal settlement | 10 | — | ||||
Impact of FX translation on U.S. dollar-denominated debt | 186 | 79 | ||||
Adjusted EBIT | 2,737 | 2,569 | ||||
Less: | ||||||
Net periodic pension and other benefit cost other than current service costs | 274 | 167 | ||||
Operating lease expense | (104 | ) | (111 | ) | ||
Depreciation and amortization | (661 | ) | (640 | ) | ||
Adjusted EBITDA | $ | 3,228 | $ | 3,153 |
(in millions) | 2017 | 2016 | ||||
Long-term debt including long term debt maturing within one year as at December 31 | $ | 8,159 | $ | 8,684 | ||
Less: | ||||||
Pension plans in deficit | (278 | ) | (273 | ) | ||
Net present value of operating leases(1) | (281 | ) | (361 | ) | ||
Cash and cash equivalents | 338 | 164 | ||||
Adjusted net debt as at December 31 | $ | 8,380 | $ | 9,154 |
(in millions, except for ratios) | 2017 | 2016 | ||
Adjusted net debt as at December 31 | 8,380 | 9,154 | ||
Adjusted EBITDA for the year ended December 31 | 3,228 | 3,153 | ||
Adjusted net debt to Adjusted EBITDA ratio | 2.6 | 2.9 |
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