Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2018

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 June 30, 2018    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,196		$	513		$	—		$	1,709
Non-freight	—			31			90			(80		)	41
Total revenues	—			1,227			603			(80		)	1,750
Operating expenses
Compensation and benefits	—			237			114			—			351
Fuel	—			178			52			—			230
Materials	—			38			12			3			53
Equipment rents	—			30			3			—			33
Depreciation and amortization	—			105			67			—			172
Purchased services and other	—			205			162			(83		)	284
Total operating expenses	—			793			410			(80		)	1,123
Operating income	—			434			193			—			627
Less:
Other income and charges	5			79			(32		)	—			52
Other components of net periodic benefit (recovery) cost	—			(96		)	1			—			(95		)
Net interest (income) expense	(2		)	121			(7		)	—			112
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(3		)	330			231			—			558
Less: Income tax (recovery) expense	(1		)	99			24			—			122
Add: Equity in net earnings of subsidiaries	438			207			—			(645		)	—
Net income	$	436		$	438		$	207		$	(645	)	$	436

Interim Condensed Consolidating Statements of Income

For the three months ended June 30, 2017                 

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,129		$	469		$	—		$	1,598
Non-freight	—			34			95			(84		)	45
Total revenues	—			1,163			564			(84		)	1,643
Operating expenses
Compensation and benefits	—			234			110			1			345
Fuel	—			122			38			—			160
Materials	—			34			8			6			48
Equipment rents	—			39			(2		)	—			37
Depreciation and amortization	—			108			57			—			165
Purchased services and other	—			210			158			(91		)	277
Total operating expenses	—			747			369			(84		)	1,032
Operating income	—			416			195			—			611
Less:
Other income and charges	(5		)	(59		)	3			—			(61		)
Other components of net periodic benefit (recovery) cost	—			(69		)	1			—			(68		)
Net interest (income) expense	(9		)	139			(8		)	—			122
Income before income tax expense and equity in net earnings of subsidiaries	14			405			199			—			618
Less: Income tax expense	1			62			75			—			138
Add: Equity in net earnings of subsidiaries	467			124			—			(591		)	—
Net income	$	480		$	467		$	124		$	(591	)	$	480

Certain of these figures have been reclassified in order to be consistent with the 2018 presentation (Note 2).Interim Condensed Consolidating Statements of Income

For the six months ended June 30, 2018    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	2,351		$	983		$	—		$	3,334
Non-freight	—			58			179			(159		)	78
Total revenues	—			2,409			1,162			(159		)	3,412
Operating expenses
Compensation and benefits	—			494			229			2			725
Fuel	—			346			99			—			445
Materials	—			73			27			8			108
Equipment rents	—			61			5			—			66
Depreciation and amortization	—			209			133			—			342
Purchased services and other	—			423			305			(169		)	559
Total operating expenses	—			1,606			798			(159		)	2,245
Operating income	—			803			364			—			1,167
Less:
Other income and charges	11			127			(35		)	—			103
Other components of net periodic benefit (recovery) cost	—			(192		)	1			—			(191		)
Net interest expense (income)	6			235			(14		)	—			227
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(17		)	633			412			—			1,028
Less: Income tax (recovery) expense	(1		)	185			60			—			244
Add: Equity in net earnings of subsidiaries	800			352			—			(1,152		)	—
Net income	$	784		$	800		$	352		$	(1,152	)	$	784

Interim Condensed Consolidating Statements of Income

For the six months ended June 30, 2017    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	2,218		$	943		$	—		$	3,161
Non-freight	—			66			188			(169		)	85
Total revenues	—			2,284			1,131			(169		)	3,246
Operating expenses
Compensation and benefits	—			426			217			2			645
Fuel	—			254			76			—			330
Materials	—			68			17			12			97
Equipment rents	—			75			(2		)	—			73
Depreciation and amortization	—			217			114			—			331
Purchased services and other	—			418			320			(183		)	555
Total operating expenses	—			1,458			742			(169		)	2,031
Operating income	—			826			389			—			1,215
Less:
Other income and charges	(25		)	(66		)	2			—			(89		)
Other components of net periodic benefit (recovery) cost	—			(137		)	2			—			(135		)
Net interest (income) expense	(7		)	264			(15		)	—			242
Income before income tax expense and equity in net earnings of subsidiaries	32			765			400			—			1,197
Less: Income tax expense	2			160			124			—			286
Add: Equity in net earnings of subsidiaries	881			276			—			(1,157		)	—
Net income	$	911		$	881		$	276		$	(1,157	)	$	911

Certain of these figures have been reclassified in order to be consistent with the 2018 presentation (Note 2).Interim Condensed Consolidating Statements of Comprehensive Income

For the three months ended June 30, 2018             

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	436	$	438		$	207		$	(645	)	$	436
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(123		)	107			—			(16		)
Change in derivatives designated as cash flow hedges	—		14			—			—			14
Change in pension and post-retirement defined benefit plans	—		27			2			—			29
Other comprehensive (loss) income before income taxes	—		(82		)	109			—			27
Income tax recovery (expense) on above items	—		6			(1		)	—			5
Equity accounted investments	32		108			—			(140		)	—
Other comprehensive income	32		32			108			(140		)	32
Comprehensive income	$	468	$	470		$	315		$	(785	)	$	468

Interim Condensed Consolidating Statements of Comprehensive Income

For the three months ended June 30, 2017     

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	480	$	467		$	124		$	(591	)	$	480
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		117			(103		)	—			14
Change in derivatives designated as cash flow hedges	—		4			—			—			4
Change in pension and post-retirement defined benefit plans	—		36			1			—			37
Other comprehensive income (loss) before income taxes	—		157			(102		)	—			55
Income tax expense on above items	—		(26		)	—			—			(26		)
Equity accounted investments	29		(102		)	—			73			—
Other comprehensive income (loss)	29		29			(102		)	73			29
Comprehensive income	$	509	$	496		$	22		$	(518	)	$	509

Interim Condensed Consolidating Statements of Comprehensive Income

For the six months ended June 30, 2018             

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	784	$	800		$	352		$	(1,152	)	$	784
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(273		)	237			—			(36		)
Change in derivatives designated as cash flow hedges	—		35			—			—			35
Change in pension and post-retirement defined benefit plans	—		55			3			—			58
Other comprehensive (loss) income before income taxes	—		(183		)	240			—			57
Income tax recovery (expense) on above items	—		12			(1		)	—			11
Equity accounted investments	68		239			—			(307		)	—
Other comprehensive income	68		68			239			(307		)	68
Comprehensive income	$	852	$	868		$	591		$	(1,459	)	$	852

Interim Condensed Consolidating Statements of Comprehensive Income

For the six months ended June 30, 2017             

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	911	$	881		$	276		$	(1,157	)	$	911
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		162			(143		)	—			19
Change in derivatives designated as cash flow hedges	—		9			—			—			9
Change in pension and post-retirement defined benefit plans	—		72			3			—			75
Other comprehensive income (loss) before income taxes	—		243			(140		)	—			103
Income tax expense on above items	—		(43		)	(1		)	—			(44		)
Equity accounted investments	59		(141		)	—			82			—
Other comprehensive income (loss)	59		59			(141		)	82			59
Comprehensive income	$	970	$	940		$	135		$	(1,075	)	$	970

Interim Condensed Consolidating Balance Sheets As at June 30, 2018

(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	$	—		$	20		$	31	$	—		$	51
Accounts receivable, net	—			510			176		—			686
Accounts receivable, inter-company	114			134			205		(453		)	—
Short-term advances to affiliates	—			1,550			4,813		(6,363		)	—
Materials and supplies	—			126			34		—			160
Other current assets	—			78			81		(56		)	103
	114			2,418			5,340		(6,872		)	1,000
Long-term advances to affiliates	1,090			5			90		(1,185		)	—
Investments	—			25			168		—			193
Investments in subsidiaries	11,320			11,905			—		(23,225		)	—
Properties	—			9,220			8,396		—			17,616
Goodwill and intangible assets	—			—			196		—			196
Pension asset	—			1,616			—		—			1,616
Other assets	—			55			9		—			64
Deferred income taxes	5			—			—		(5		)	—
Total assets	$	12,529		$	25,244		$	14,199	$	(31,287	)	$	20,685
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	93		$	871		$	305	$	(56	)	$	1,213
Accounts payable, inter-company	4			315			134		(453		)	—
Short-term advances from affiliates	5,858			502			3		(6,363		)	—
Long-term debt maturing within one year	—			547			—		—			547
	5,955			2,235			442		(6,872		)	1,760
Pension and other benefit liabilities	—			669			80		—			749
Long-term advances from affiliates	—			1,180			5		(1,185		)	—
Other long-term liabilities	—			101			117		—			218
Long-term debt	—			7,882			54		—			7,936
Deferred income taxes	—			1,857			1,596		(5		)	3,448
Total liabilities	5,955			13,924			2,294		(8,062		)	14,111
Shareholders’ equity
Share capital	2,013			1,037			6,308		(7,345		)	2,013
Additional paid-in capital	45			1,650			148		(1,798		)	45
Accumulated other comprehensive (loss) income	(1,673		)	(1,674		)	655		1,019			(1,673		)
Retained earnings	6,189			10,307			4,794		(15,101		)	6,189
	6,574			11,320			11,905		(23,225		)	6,574
Total liabilities and shareholders’ equity	$	12,529		$	25,244		$	14,199	$	(31,287	)	$	20,685

Condensed Consolidating Balance Sheets

As at December 31, 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	$	—		$	241		$	97	$	—		$	338
Accounts receivable, net	—			508			179		—			687
Accounts receivable, inter-company	97			153			215		(465		)	—
Short-term advances to affiliates	500			1,004			4,996		(6,500		)	—
Materials and supplies	—			120			32		—			152
Other current assets	—			31			66		—			97
	597			2,057			5,585		(6,965		)	1,274
Long-term advances to affiliates	590			—			410		(1,000		)	—
Investments	—			27			155		—			182
Investments in subsidiaries	10,623			12,122			—		(22,745		)	—
Properties	—			8,982			8,034		—			17,016
Goodwill and intangible assets	—			—			187		—			187
Pension asset	—			1,407			—		—			1,407
Other assets	—			56			13		—			69
Deferred income taxes	3			—			—		(3		)	—
Total assets	$	11,813		$	24,651		$	14,384	$	(30,713	)	$	20,135
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	82		$	844		$	312	$	—		$	1,238
Accounts payable, inter-company	3			309			153		(465		)	—
Short-term advances from affiliates	5,291			1,185			24		(6,500		)	—
Long-term debt maturing within one year	—			746			—		—			746
	5,376			3,084			489		(6,965		)	1,984
Pension and other benefit liabilities	—			672			77		—			749
Long-term advances from affiliates	—			1,000			—		(1,000		)	—
Other long-term liabilities	—			108			123		—			231
Long-term debt	—			7,362			51		—			7,413
Deferred income taxes	—			1,802			1,522		(3		)	3,321
Total liabilities	5,376			14,028			2,262		(7,968		)	13,698
Shareholders’ equity
Share capital	2,032			1,037			6,730		(7,767		)	2,032
Additional paid-in capital	43			1,643			259		(1,902		)	43
Accumulated other comprehensive (loss) income	(1,741		)	(1,742		)	417		1,325			(1,741		)
Retained earnings	6,103			9,685			4,716		(14,401		)	6,103
	6,437			10,623			12,122		(22,745		)	6,437
Total liabilities and shareholders’ equity	$	11,813		$	24,651		$	14,384	$	(30,713	)	$	20,135

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended June 30, 2018

(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	$	83		$	501		$	328		$	(201	)	$	711
Investing activities
Additions to properties	—			(276		)	(137		)	—			(413		)
Proceeds from sale of properties and other assets	—			3			2			—			5
Advances to affiliates	—			(255		)	(7		)	262			—
Repurchase of share capital from affiliates	—			124			—			(124		)	—
Cash used in investing activities	—			(404		)	(142		)	138			(408		)
Financing activities
Dividends paid	(81		)	(81		)	(120		)	201			(81		)
Return of share capital to affiliates	—			—			(124		)	124			—
Issuance of CP Common Shares	4			—			—			—			4
Purchase of CP Common Shares	(261		)	—			—			—			(261		)
Issuance of long-term debt, excluding commercial paper	—			638			—			—			638
Repayment of long-term debt, excluding commercial paper	—			(734		)	—			—			(734		)
Net issuance of commercial paper	—			53			—			—			53
Advances from affiliates	255			7			—			(262		)	—
Cash used in financing activities	(83		)	(117		)	(244		)	63			(381		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(3		)	7			—			4
Cash position
Decrease in cash and cash equivalents	—			(23		)	(51		)	—			(74		)
Cash and cash equivalents at beginning of period	—			43			82			—			125
Cash and cash equivalents at end of period	$	—		$	20		$	31		$	—		$	51

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended June 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	$	95		$	468		$	239		$	(191	)	$	611
Investing activities
Additions to properties	—			(192		)	(154		)	—			(346		)
Proceeds from sale of properties and other assets	—			5			8			—			13
Advances to affiliates	(1,086		)	(553		)	(973		)	2,612			—
Repayment of advances to affiliates	—			2			—			(2		)	—
Capital contributions to affiliates	—			(945		)	—			945			—
Other	—			1			(1		)	—			—
Cash used in investing activities	(1,086		)	(1,682		)	(1,120		)	3,555			(333		)
Financing activities
Dividends paid	(73		)	(73		)	(118		)	191			(73		)
Issuance of share capital	—			—			945			(945		)	—
Issuance of CP Common Shares	9			—			—			—			9
Purchase of CP Common Shares	(142		)	—			—			—			(142		)
Repayment of long-term debt, excluding commercial paper	—			(9		)	—			—			(9		)
Advances from affiliates	1,197			1,415			—			(2,612		)	—
Repayment of advances from affiliates	—			—			(2		)	2			—
Settlement of forward starting swaps on de-designation	—			(22		)	—			—			(22		)
Cash provided by (used in) financing activities	991			1,311			825			(3,364		)	(237		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(2		)	(2		)	—			(4		)
Cash position
Increase (decrease) in cash and cash equivalents	—			95			(58		)	—			37
Cash and cash equivalents at beginning of period	—			83			118			—			201
Cash and cash equivalents at end of period	$	—		$	178		$	60		$	—		$	238

Interim Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2018

(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	$	148		$	893		$	463		$	(396	)	$	1,108
Investing activities
Additions to properties	—			(398		)	(256		)	—			(654		)
Proceeds from sale of properties and other assets	—			6			3			—			9
Advances to affiliates	—			(562		)	—			562			—
Repayment of advances to affiliates	—			—			495			(495		)	—
Repurchase of share capital from affiliates	—			547			—			(547		)	—
Other	—			—			(1		)	—			(1		)
Cash (used in) provided by investing activities	—			(407		)	241			(480		)	(646		)
Financing activities
Dividends paid	(163		)	(163		)	(233		)	396			(163		)
Return of share capital to affiliates	—			—			(547		)	547			—
Issuance of CP Common Shares	12			—			—			—			12
Purchase of CP Common Shares	(559		)	—			—			—			(559		)
Issuance of long-term debt, excluding commercial paper	—			638			—			—			638
Repayment of long-term debt, excluding commercial paper	—			(739		)	—			—			(739		)
Net issuance of commercial paper	—			53			—			—			53
Advances from affiliates	562			—			—			(562		)	—
Repayment of advances from affiliates	—			(495		)	—			495			—
Cash used in financing activities	(148		)	(706		)	(780		)	876			(758		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(1		)	10			—			9
Cash position
Decrease in cash and cash equivalents	—			(221		)	(66		)	—			(287		)
Cash and cash equivalents at beginning of year	—			241			97			—			338
Cash and cash equivalents at end of year	$	—		$	20		$	31		$	—		$	51

Interim Condensed Consolidating Statements of Cash Flows

For the six months ended June 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	$	158		$	553		$	503		$	(292	)	$	922
Investing activities
Additions to properties	—			(301		)	(275		)	—			(576		)
Proceeds from sale of properties and other assets	—			6			10			—			16
Advances to affiliates	(1,238		)	(551		)	(1,107		)	2,896			—
Capital contributions to affiliates	—			(1,013		)	—			1,013			—
Other	—			6			(1		)	—			5
Cash used in investing activities	(1,238		)	(1,853		)	(1,373		)	3,909			(555		)
Financing activities
Dividends paid	(146		)	(146		)	(146		)	292			(146		)
Issuance of share capital	—			—			1,013			(1,013		)	—
Issuance of CP Common Shares	37			—			—			—			37
Purchase of CP Common Shares	(142		)	—			—			—			(142		)
Repayment of long-term debt, excluding commercial paper	—			(14		)	—			—			(14		)
Advances from affiliates	1,331			1,564			1			(2,896		)	—
Settlement of forward starting swaps on de-designation	—			(22		)	—			—			(22		)
Cash provided by (used in) financing activities	1,080			1,382			868			(3,617		)	(287		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(4		)	(2		)	—			(6		)
Cash position
Increase (decrease) in cash and cash equivalents	—			78			(4		)	—			74
Cash and cash equivalents at beginning of year	—			100			64			—			164
Cash and cash equivalents at end of year	$	—		$	178		$	60		$	—		$	238