QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | ||
(Address of Principal Executive Offices) | (Zip Code) | ||
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on which Registered | ||||||
Canadian Pacific Railway Limited | ||||||||
Toronto Stock Exchange | ||||||||
BC87 | London Stock Exchange | |||||||
þ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ | Smaller Reporting Company | Emerging Growth Company | |||
PART I - FINANCIAL INFORMATION | ||
Page | ||
Item 1. | Financial Statements: | |
Interim Consolidated Statements of Income | ||
For the Three and Nine Months Ended September 30, 2020 and 2019 | ||
Interim Consolidated Statements of Comprehensive Income | ||
For the Three and Nine Months Ended September 30, 2020 and 2019 | ||
Interim Consolidated Balance Sheets | ||
As at September 30, 2020 and December 31, 2019 | ||
Interim Consolidated Statements of Cash Flows | ||
For the Three and Nine Months Ended September 30, 2020 and 2019 | ||
Interim Consolidated Statements of Changes in Shareholders' Equity | ||
For the Three and Nine Months Ended September 30, 2020 and 2019 | ||
Notes to Interim Consolidated Financial Statements | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Executive Summary | ||
Performance Indicators | ||
Financial Highlights | ||
Results of Operations | ||
Share Capital | ||
Liquidity and Capital Resources | ||
Non-GAAP Measures | ||
Off-Balance Sheet Arrangements | ||
Contractual Commitments | ||
Critical Accounting Estimates | ||
Forward-Looking Statements | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |
Item 4. | Controls and Procedures | |
PART II - OTHER INFORMATION | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signature | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars, except share and per share data) | 2020 | 2019 | 2020 | 2019 | ||||||||
Revenues (Note 3) | ||||||||||||
Freight | $ | $ | $ | $ | ||||||||
Non-freight | ||||||||||||
Total revenues | ||||||||||||
Operating expenses | ||||||||||||
Compensation and benefits | ||||||||||||
Fuel | ||||||||||||
Materials | ||||||||||||
Equipment rents | ||||||||||||
Depreciation and amortization | ||||||||||||
Purchased services and other | ||||||||||||
Total operating expenses | ||||||||||||
Operating income | ||||||||||||
Less: | ||||||||||||
Other (income) expense (Note 4) | ( | ) | ( | ) | ||||||||
Other components of net periodic benefit recovery (Note 13) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Net interest expense | ||||||||||||
Income before income tax expense | ||||||||||||
Income tax expense (Note 5) | ||||||||||||
Net income | $ | $ | $ | $ | ||||||||
Earnings per share (Note 6) | ||||||||||||
Basic earnings per share | $ | $ | $ | $ | ||||||||
Diluted earnings per share | $ | $ | $ | $ | ||||||||
Weighted-average number of shares (millions) (Note 6) | ||||||||||||
Basic | ||||||||||||
Diluted | ||||||||||||
Dividends declared per share | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Net income | $ | $ | $ | $ | ||||||||
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | ( | ) | ( | ) | ||||||||
Change in derivatives designated as cash flow hedges | ||||||||||||
Change in pension and post-retirement defined benefit plans | ||||||||||||
Other comprehensive income before income taxes | ||||||||||||
Income tax (expense) recovery on above items | ( | ) | ( | ) | ( | ) | ||||||
Other comprehensive income (Note 7) | ||||||||||||
Comprehensive income | $ | $ | $ | $ | ||||||||
September 30 | December 31 | |||||
(in millions of Canadian dollars) | 2020 | 2019 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | $ | ||||
Accounts receivable, net (Note 8) | ||||||
Materials and supplies | ||||||
Other current assets | ||||||
Investments (Note 9) | ||||||
Properties | ||||||
Goodwill and intangible assets (Note 9) | ||||||
Pension asset | ||||||
Other assets | ||||||
Total assets | $ | $ | ||||
Liabilities and shareholders’ equity | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | $ | ||||
Long-term debt maturing within one year (Note 10, 11) | ||||||
Pension and other benefit liabilities | ||||||
Other long-term liabilities | ||||||
Long-term debt (Note 10, 11) | ||||||
Deferred income taxes | ||||||
Total liabilities | ||||||
Shareholders’ equity | ||||||
Share capital | ||||||
Additional paid-in capital | ||||||
Accumulated other comprehensive loss (Note 7) | ( | ) | ( | ) | ||
Retained earnings | ||||||
Total liabilities and shareholders’ equity | $ | $ | ||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Operating activities | ||||||||||||
Net income | $ | $ | $ | $ | ||||||||
Reconciliation of net income to cash provided by operating activities: | ||||||||||||
Depreciation and amortization | ||||||||||||
Deferred income tax expense (Note 5) | ||||||||||||
Pension recovery and funding (Note 13) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Foreign exchange (gain) loss on debt and lease liabilities (Note 4) | ( | ) | ( | ) | ||||||||
Other operating activities, net | ||||||||||||
Change in non-cash working capital balances related to operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Cash provided by operating activities | ||||||||||||
Investing activities | ||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Investment in Central Maine & Québec Railway (Note 9) | ||||||||||||
Proceeds from sale of properties and other assets | ||||||||||||
Other | ( | ) | ( | ) | ( | ) | ||||||
Cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Financing activities | ||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Issuance of CP Common Shares | ||||||||||||
Purchase of CP Common Shares (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Issuance of long-term debt, excluding commercial paper (Note 10) | ||||||||||||
Repayment of long-term debt, excluding commercial paper | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Net issuance (repayment) of commercial paper (Note 10) | ( | ) | ||||||||||
Net increase in short-term borrowings (Note 10) | ||||||||||||
Other | ( | ) | ( | ) | ||||||||
Cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | ( | ) | ||||||||
Cash position | ||||||||||||
(Decrease) increase in cash and cash equivalents | ( | ) | ||||||||||
Cash and cash equivalents at beginning of period | ||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | $ | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Income taxes paid | $ | $ | $ | $ | ||||||||
Interest paid | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | |||||||||||||||||||
(in millions of Canadian dollars except per share data) | Common shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
Balance at July 1, 2020 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | ||||||||||||||||||
Other comprehensive income (Note 7) | — | ||||||||||||||||||
Dividends declared ($0.9500 per share) | — | ( | ) | ( | ) | ||||||||||||||
Effect of stock-based compensation expense | — | ||||||||||||||||||
CP Common Shares repurchased (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Balance at July 1, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | ||||||||||||||||||
Other comprehensive income (Note 7) | — | ||||||||||||||||||
Dividends declared ($0.8300 per share) | — | ( | ) | ( | ) | ||||||||||||||
Effect of stock-based compensation expense | — | ||||||||||||||||||
CP Common Shares repurchased (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
For the nine months ended September 30 | |||||||||||||||||||
(in millions of Canadian dollars except per share data) | Common shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
Balance at December 31, 2019, as previously reported | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Impact of accounting change (Note 2) | — | — | — | — | ( | ) | ( | ) | |||||||||||
Balance at January 1, 2020, as restated | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | ||||||||||||||||||
Other comprehensive income (Note 7) | — | ||||||||||||||||||
Dividends declared ($2.6100 per share) | — | ( | ) | ( | ) | ||||||||||||||
Effect of stock-based compensation expense | — | ||||||||||||||||||
CP Common Shares repurchased (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Balance at January 1, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | — | ||||||||||||||||||
Other comprehensive income (Note 7) | — | ||||||||||||||||||
Dividends declared ($2.3100 per share) | — | ( | ) | ( | ) | ||||||||||||||
Effect of stock-based compensation expense | — | ||||||||||||||||||
CP Common Shares repurchased (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Freight | ||||||||||||
Grain | $ | $ | $ | $ | ||||||||
Coal | ||||||||||||
Potash | ||||||||||||
Fertilizers and sulphur | ||||||||||||
Forest products | ||||||||||||
Energy, chemicals and plastics | ||||||||||||
Metals, minerals and consumer products | ||||||||||||
Automotive | ||||||||||||
Intermodal | ||||||||||||
Total freight revenues | ||||||||||||
Non-freight excluding leasing revenues | ||||||||||||
Revenues from contracts with customers | ||||||||||||
Leasing revenues | ||||||||||||
Total revenues | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Opening balance | $ | $ | $ | $ | ||||||||
Revenue recognized that was included in the contract liability balance at the beginning of the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Increase due to consideration received, net of revenue recognized during the period | ||||||||||||
Closing balance | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Foreign exchange (gain) loss on debt and lease liabilities | $ | ( | ) | $ | $ | $ | ( | ) | ||||
Other foreign exchange losses (gains) | ( | ) | ( | ) | ||||||||
Other | ||||||||||||
Other (income) expense | $ | ( | ) | $ | $ | $ | ( | ) | ||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Current income tax expense | $ | $ | $ | $ | ||||||||
Deferred income tax expense | ||||||||||||
Income tax expense | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||
Weighted-average basic shares outstanding | ||||||||
Dilutive effect of stock options | ||||||||
Weighted-average diluted shares outstanding | ||||||||
For the three months ended September 30 | ||||||||||||
(in millions of Canadian dollars) | Foreign currency net of hedging activities(1) | Derivatives and other(1) | Pension and post- retirement defined benefit plans(1) | Total(1) | ||||||||
Opening balance, July 1, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss before reclassifications | ( | ) | ( | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive (loss) income | ( | ) | ||||||||||
Closing balance, September 30, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Opening balance, July 1, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive income before reclassifications | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive income | ||||||||||||
Closing balance, September 30, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
(1) | Amounts are presented net of tax. |
For the nine months ended September 30 | ||||||||||||
(in millions of Canadian dollars) | Foreign currency net of hedging activities(1) | Derivatives and other(1) | Pension and post- retirement defined benefit plans(1) | Total(1) | ||||||||
Opening balance, January 1, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive income (loss) before reclassifications | ( | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive income | ||||||||||||
Closing balance, September 30, 2020 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Opening balance, January 1, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss before reclassifications | ( | ) | ( | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive income | ||||||||||||
Closing balance, September 30, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
(1) | Amounts are presented net of tax. |
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Amortization of prior service costs(1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||
Recognition of net actuarial loss(1) | ||||||||||||
Total before income tax | ||||||||||||
Income tax recovery | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Total net of income tax | $ | $ | $ | $ | ||||||||
(1) | Impacts "Other components of net periodic benefit recovery" on the Interim Consolidated Statements of Income. |
For the three months ended September 30, 2020 | For the nine months ended September 30, 2020 | |||||||||||||||||
(in millions of Canadian dollars) | Freight | Non-freight | Total | Freight | Non-freight | Total | ||||||||||||
Allowance for credit losses, opening balance(1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Current period credit loss provision, net | ||||||||||||||||||
Allowance for credit losses, closing balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) |
As at September 30, 2020 | |||||||||
(in millions of Canadian dollars) | Freight | Non-freight | Total | ||||||
Total accounts receivable | $ | $ | $ | ||||||
Allowance for credit losses | ( | ) | ( | ) | ( | ) | |||
Total accounts receivable, net | $ | $ | $ | ||||||
(in millions of Canadian dollars) | June 3, 2020 | ||
Fair value of net assets acquired: | |||
Cash and cash equivalents | $ | ||
Accounts receivable, net | |||
Properties | |||
Intangible assets | |||
Accounts payable and accrued liabilities | ( | ) | |
Other long-term liabilities | ( | ) | |
Total identifiable assets and liabilities | $ | ||
Goodwill | |||
$ | |||
Consideration: | |||
Fair value of previously held equity method investment | $ | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Number of Common Shares repurchased(1) | ||||||||||||
Weighted-average price per share(2) | $ | $ | $ | $ | ||||||||
Amount of repurchase (in millions of Canadian dollars)(2) | $ | $ | $ | $ | ||||||||
(1) | Includes shares repurchased but not yet cancelled at end of period. |
(2) | Includes brokerage fees. |
For the three months ended September 30 | ||||||||||||
Pensions | Other benefits | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Current service cost (benefits earned by employees) | $ | $ | $ | $ | ||||||||
Other components of net periodic benefit (recovery) cost: | ||||||||||||
Interest cost on benefit obligation | ||||||||||||
Expected return on fund assets | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ||||||||||||
Amortization of prior service costs | ( | ) | ( | ) | ||||||||
Total other components of net periodic benefit (recovery) cost | ( | ) | ( | ) | ||||||||
Net periodic benefit (recovery) cost | $ | ( | ) | $ | ( | ) | $ | $ | ||||
For the nine months ended September 30 | ||||||||||||
Pensions | Other benefits | |||||||||||
(in millions of Canadian dollars) | 2020 | 2019 | 2020 | 2019 | ||||||||
Current service cost (benefits earned by employees) | $ | $ | $ | $ | ||||||||
Other components of net periodic benefit (recovery) cost: | ||||||||||||
Interest cost on benefit obligation | ||||||||||||
Expected return on fund assets | ( | ) | ( | ) | ||||||||
Recognized net actuarial loss | ||||||||||||
Amortization of prior service costs | ( | ) | ( | ) | ||||||||
Total other components of net periodic benefit (recovery) cost | ( | ) | ( | ) | ||||||||
Net periodic benefit (recovery) cost | $ | ( | ) | $ | ( | ) | $ | $ | ||||
For the nine months ended September 30, 2020 | |
Expected option life (years)(1) | |
Risk-free interest rate(2) | |
Expected stock price volatility(3) | |
Expected annual dividends per share(4) | $ |
Expected forfeiture rate(5) | |
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. On July 21, 2020, the Company announced an increase in its quarterly dividend to $ |
(5) | The Company estimates forfeitures based on past experience. This rate is monitored on a periodic basis. |
(1) | Québec's Minister of Sustainable Development, Environment, Wildlife and Parks ordered various parties, including CP, to remediate the derailment site (the "Cleanup Order") and served CP with a Notice of Claim for $ |
(2) | The AGQ sued CP in the Québec Superior Court claiming $ |
(3) | A class action in the Québec Superior Court on behalf of persons and entities residing in, owning or leasing property in, operating a business in, or physically present in Lac-Mégantic at the time of the derailment was certified against CP on May 8, 2015 (the "Class Action"). Other defendants including MMAC and Mr. Thomas Harding ("Harding") were added to the Class Action on January 25, 2017. The Class Action seeks unquantified damages, including for wrongful death, personal injury, property damage, and economic loss. |
(4) |
(5) |
(6) | The MMAR U.S. bankruptcy estate representative commenced an action against CP in November 2014 in the Maine Bankruptcy Court claiming that CP failed to abide by certain regulations and seeking approximately U.S. $ |
(7) | The class and mass tort action commenced against CP in June 2015 in Texas (on behalf of Lac-Mégantic residents and wrongful death representatives) and the wrongful death and personal injury actions commenced against CP in June 2015 in Illinois and Maine, were all transferred and consolidated in Federal District Court in Maine (the “Maine Actions”). The Maine Actions allege that CP negligently misclassified and improperly packaged the petroleum crude oil. On CP’s motion, the Maine Actions were dismissed. The plaintiffs are appealing the dismissal decision, which is pending. |
(8) | The trustee for the wrongful death trust commenced Carmack Amendment claims against CP in North Dakota Federal Court, seeking to recover approximately U.S. $ |
• | Financial performance - In the third quarter of 2020, CP reported Diluted earnings per share ("EPS") of $4.41, a decrease of 1% compared to the same period of 2019 and Net income of $598 million in the third quarter of 2020, a decrease of 3% compared to the same period of 2019. These decreases were primarily due to lower Operating income in the third quarter of 2020, partially offset by foreign exchange ("FX") translation gains on debt and lease liabilities in 2020 compared to FX losses during the same period of 2019. |
• | Total revenues - Total revenues decreased by 6% in the third quarter of 2020 to $1,863 million compared to the same period of 2019. This decrease was primarily due to lower volumes as measured by revenue ton-miles ("RTMs") primarily due to the impacts of the novel strain of Coronavirus (“COVID-19”). |
• | Operating performance - CP's average train weight increased by 7% to 9,857 tons and average train length increased by 9% to 8,082 feet, compared to the same period in 2019. These increases were a result of improvements in operating plan efficiency and continued improvements in operational efficiency for Potash and Grain trains, in each case compared to the same period in 2019. These metrics are discussed further in Performance Indicators of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | On October 15, 2020, CP entered into an agreement to acquire full ownership of the Detroit River Tunnel Partnership, which owns a 1.6-mile rail tunnel linking Windsor, Ontario, and Detroit, Michigan. The purchase price for the transaction is approximately U.S. $312 million subject to customary closing adjustments. CP currently owns a 16.5 percent interest in the partnership and is its designated operator. The acquisition will reduce CP’s operating costs related to movements through the tunnel while further integrating the eastern part of our network. The transaction is currently expected to close at the end of 2020 and remains subject to customary closing conditions, including regulatory approvals. |
• | In the third quarter of 2020, the effects of the COVID-19 pandemic on consumer demand resulted in lower volumes in the following lines of business: Energy, chemicals and plastics and Metals, minerals and consumer products. The future impacts of the COVID-19 pandemic on CP’s business continue to be unknown, however the Company has put forward our current |
• | In the third quarter of 2020, CP released its first public statement on climate change, acknowledging the effects of rising global temperatures and our commitment to ongoing efforts to mitigate the impacts. The statement supports the goals of the Paris Agreement and the Pan-Canadian Framework on Clean Growth and Climate Change, which seek to limit global temperature rise to well below 2°C above pre-industrial levels. In support of this initiative, we plan to establish a science-based emissions reduction target to guide our climate action. |
• | On July 21, 2020, CP declared a quarterly dividend of $0.95 per share on the outstanding Common Shares, an increase from $0.83 per share from the prior quarter. The dividend is payable on October 26, 2020 to holders of record at the close of business on September 25, 2020. |
• | In the first six months of 2020, the effects of the COVID-19 pandemic on consumer demand resulted in lower volumes in the following lines of business: Energy, chemicals and plastics, Metals, minerals and consumer products, Intermodal, and Automotive. |
• | In the second quarter of 2020, CP completed its previously announced acquisition of Central Maine and Québec Railway |
• | The Company’s annual meeting of shareholders, held on April 21, 2020, was conducted via a virtual-only format by live webcast online for the first time. All 11 director nominees were elected. |
• | During the first quarter of 2019, the Company experienced severe winter operating conditions and an increase in the frequency and severity of casualty incidents and derailments. As a result, the Company incurred significant costs to manage severe weather conditions, as well as direct casualty costs, and higher operating costs. During this period and the subsequent network recovery the Company also experienced losses and deferrals of potential revenues. |
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
2020 | 2019(1) | % Change | 2020 | 2019(1) | % Change | |||||||
Operations Performance | ||||||||||||
Gross ton-miles (“GTMs”) (millions) | 65,997 | 71,658 | (8 | ) | 200,383 | 209,229 | (4 | ) | ||||
Train miles (thousands) | 7,247 | 8,354 | (13 | ) | 22,479 | 24,550 | (8 | ) | ||||
Average train weight - excluding local traffic (tons) | 9,857 | 9,173 | 7 | 9,644 | 9,117 | 6 | ||||||
Average train length - excluding local traffic (feet) | 8,082 | 7,446 | 9 | 7,831 | 7,382 | 6 | ||||||
Average terminal dwell (hours) | 6.7 | 5.8 | 16 | 6.5 | 6.7 | (3 | ) | |||||
Average train speed (miles per hour, or "mph") | 22.5 | 22.7 | (1 | ) | 22.1 | 22.1 | — | |||||
Locomotive productivity (GTMs / operating horsepower) | 207 | 208 | — | 207 | 200 | 4 | ||||||
Fuel efficiency (U.S. gallons of locomotive fuel consumed / 1,000 GTMs) | 0.926 | 0.927 | — | 0.940 | 0.956 | (2 | ) | |||||
Total Employees and Workforce | ||||||||||||
Total employees (average) | 12,156 | 13,203 | (8 | ) | 12,214 | 13,107 | (7 | ) | ||||
Total employees (end of period) | 12,166 | 13,104 | (7 | ) | 12,166 | 13,104 | (7 | ) | ||||
Workforce (end of period) | 12,185 | 13,134 | (7 | ) | 12,185 | 13,134 | (7 | ) | ||||
Safety Indicators(1) | ||||||||||||
FRA personal injuries per 200,000 employee-hours | 1.06 | 1.44 | (26 | ) | 1.13 | 1.45 | (22 | ) | ||||
FRA train accidents per million train-miles | 1.13 | 1.31 | (14 | ) | 1.06 | 1.29 | (18 | ) | ||||
(1) | FRA personal injuries per 200,000 employee-hours for the three and nine months ended September 30, 2019 were previously reported as 1.39 and 1.44, restated to 1.44 and 1.45, respectively in this report. FRA train accidents per million train-miles for the three and nine months ended September 30, 2019 were previously reported as 1.10 and 1.19, restated to 1.31 and 1.29, respectively in this report. These restatements reflect new information available within specified periods stipulated by the FRA but that exceed the Company's financial reporting timeline. |
• | A GTM is defined as the movement of one ton of train weight over one mile. GTMs are calculated by multiplying total train weight by the distance the train moved. Total train weight comprises the weight of the freight cars, their contents, and any inactive locomotives. An increase in GTMs indicates additional workload. GTMs decreased by 8% in the third quarter of 2020 compared to the same period of 2019. This decrease was mainly attributable to lower volumes of crude, Coal, and frac sand. This decrease was partially offset by higher volumes of Canadian grain and Potash. |
• | Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by RTMs, and/or workload, as measured by GTMs, indicate improved train productivity. Train miles decreased by 13% in the third quarter of 2020 compared to the same period of 2019. This decrease reflects the impact of an 8% decrease in workload (GTMs) as well as a 7% increase in average train weights. |
• | Average train weight is defined as the average gross weight of CP trains, both loaded and empty. This excludes trains in short-haul service, work trains used to move CP’s track equipment and materials, and the haulage of other railroads’ trains on CP’s network. An increase in average train weight indicates improved asset utilization and may also be the result of moving heavier commodities. Average train weight increased by 7% in the third quarter of 2020 compared to the same period of 2019. This increase was a result of improvements in operating plan efficiency and continued improvements in operational efficiency due to moving longer and heavier export potash and Grain trains. Improvements for Grain trains were driven by the High Efficiency Product ("HEP") train model, which is an 8,500-foot train model that features the new high-capacity grain hopper cars and increased grain carrying capacity. |
• | Average train length is defined as the average total length of CP trains, both loaded and empty. This includes all cars and locomotives on the train and is calculated as the sum of each car or locomotive's length multiplied by the distance travelled, divided by train miles. This excludes trains in short-haul service, work trains used to move CP’s track equipment and materials, and the haulage of other railroads’ trains on CP’s network. An increase in average train length indicates improved asset utilization. Average train length increased by 9% in the third quarter of 2020 compared to the same period of 2019. This increase was a result of improvements in operating plan efficiency and improvements in operational efficiency due to moving longer export potash and Grain trains. Improvements for Grain trains were driven by the 8,500-foot HEP train model. |
• | Average terminal dwell is defined as the average time a freight car resides within terminal boundaries expressed in hours. The timing starts with a train arriving at the terminal, a customer releasing the car to the Company, or a car arriving at interchange from another railroad. The timing ends when the train leaves, a customer receives the car from CP, or the freight car is transferred to another railroad. Freight cars are excluded if they are being stored at the terminal or used in track repairs. A decrease in average terminal dwell indicates improved terminal performance resulting in faster cycle times and improved railcar utilization. Average terminal dwell increased by 16% in the third quarter of 2020 compared to the same period of 2019. This increase was a result of aligning the operating plan to demand in order to maintain efficiencies in train productivity. |
• | 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 CP’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. Average train speed decreased by 1% in the third quarter of 2020 compared to the same period of 2019 as a result of increased track and roadway capital programs. |
• | 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 online. An increase in locomotive productivity indicates more efficient locomotive utilization and may also be the result of moving heavier commodities. Locomotive productivity was flat in the third quarter of 2020 compared to the same period of 2019. |
• | Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs. Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost savings and CP's commitment to corporate sustainability through a reduction of greenhouse gas emissions intensity. Fuel efficiency was flat in the third quarter of 2020 compared to the same period of 2019. |
• | GTMs decreased by 4% for the first nine months of 2020 compared to the same period of 2019. This decrease was primarily due to decreased volumes of Coal, crude, and frac sand. This decrease was partially offset by increased volumes of Canadian grain and Potash. |
• | Train miles decreased by 8% for the first nine months of 2020 compared to the same period of 2019. This decrease reflected the impact of a 4% decrease in workload (GTMs), as well as a 6% increase in average train weights. |
• | Average train weight increased by 6% for the first nine months of 2020 compared to the same period of 2019. This increase was a result of improvements in operating plan efficiency, continued improvements in operational efficiency due to moving longer and heavier export potash and Grain trains, and improved winter operating conditions in the first quarter of 2020. This increase was partially offset by lower volumes of heavier commodities such as Canadian coal. Improvements for Grain trains were driven by the 8,500-foot HEP train model. |
• | Average train length increased by 6% for the first nine months of 2020 from the same period of 2019. This increase was primarily due to improvements in operating plan efficiency and continued improvements in operational efficiency due to moving longer export potash and Grain trains. This increase was partially offset by lower volumes of commodities such as Canadian coal, which move in longer trains. Improvements for Grain trains were driven by the 8,500-foot HEP train model. |
• | Average terminal dwell decreased by 3% in the first nine months of 2020 compared to the same period of 2019. This favourable decrease was due to improved network fluidity as a result of a continued focus on velocity and terminal efficiency in the first quarter of 2020, partially offset by the alignment of the operating plan to demand in order to maintain efficiencies in train productivity in the second and third quarter of 2020. |
• | Average train speed was flat in the first nine months of 2020 compared to the same period of 2019. |
• | Locomotive productivity increased by 4% in the first nine months of 2020 compared to the same period of 2019. This increase was driven by improvements in operating plan efficiency. |
• | Fuel efficiency improved by 2% in the first nine months of 2020 compared to the same period of 2019. This increase in efficiency was primarily due to improved winter operating conditions in the first quarter of 2020 and increased train productivity. |
For the three months ended September 30 | For the nine months ended September 30 | ||||||||||||
(in millions, except per share data, percentages and ratios) | 2020 | 2019 | 2020 | 2019 | |||||||||
Financial Performance and Liquidity | |||||||||||||
Total revenues | $ | 1,863 | $ | 1,979 | $ | 5,698 | $ | 5,723 | |||||
Operating income | 779 | 869 | 2,383 | 2,234 | |||||||||
Net income | 598 | 618 | 1,642 | 1,776 | |||||||||
Adjusted income(1) | 560 | 640 | 1,720 | 1,634 | |||||||||
Basic EPS | 4.42 | 4.47 | 12.09 | 12.75 | |||||||||
Diluted EPS | 4.41 | 4.46 | 12.04 | 12.70 | |||||||||
Adjusted diluted EPS(1) | 4.12 | 4.61 | 12.62 | 11.68 | |||||||||
Dividends declared per share | 0.9500 | 0.8300 | 2.6100 | 2.3100 | |||||||||
Cash provided by operating activities | 493 | 823 | 1,817 | 1,957 | |||||||||
Cash used in investing activities | (483 | ) | (461 | ) | (1,313 | ) | (1,135 | ) | |||||
Cash used in financing activities | (100 | ) | (263 | ) | (466 | ) | (737 | ) | |||||
Free cash(1) | 6 | 363 | 497 | 821 | |||||||||
Financial Position | As at September 30, 2020 | As at December 31, 2019 | |||||||||||
Total assets | $ | 23,787 | $ | 22,367 | |||||||||
Total long-term debt, including current portion | 9,786 | 8,757 | |||||||||||
Total shareholders’ equity | 7,579 | 7,069 | |||||||||||
For the three months ended September 30 | For the nine months ended September 30 | ||||||||||||
Financial Ratios | 2020 | 2019 | 2020 | 2019 | |||||||||
Operating ratio(2) | 58.2 | % | 56.1 | % | 58.2 | % | 61.0 | % | |||||
For the twelve months ended September 30 | |||||||||||||
2020 | 2019 | ||||||||||||
Return on average shareholders' equity(3) | 31.2 | % | 32.4 | % | |||||||||
Adjusted return on invested capital ("Adjusted ROIC")(1) | 16.2 | % | 16.6 | % | |||||||||
Long-term debt to Net income ratio(4) | 4.2 | 3.9 | |||||||||||
Adjusted net debt to adjusted EBITDA ratio(1) | 2.5 | 2.4 | |||||||||||
(1) | These measures have no standardized meanings prescribed by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. These measures are defined and reconciled in Non-GAAP Measures of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(2) | Operating ratio is defined as operating expenses divided by revenues, further discussed in Results of Operations of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
(3) | Return on average shareholders' equity is defined as Net income divided by average shareholders' equity, averaged between the beginning and ending balance over a rolling 12-month period, further discussed in Results of Operations of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
(4) | Long-term debt to Net income ratio is defined as long-term debt, including long-term debt maturing within one year, divided by Net income, further discussed in Liquidity and Capital Resources of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | increased stock-based compensation primarily driven by the impact of changes in share price; |
• | lower volumes as measured by RTMs; |
• | higher casualty costs incurred in 2020; and |
• | cost inflation. |
• | liquidated damages, including customer volume commitments, and higher freight rates; |
• | the favourable impact of changes in fuel prices; and |
• | the efficiencies generated from improved operating performance and asset utilization. |
• | liquidated damages, including customer volume commitments, and higher freight rates; |
• | the efficiencies generated from improved operating performance and asset utilization; |
• | the impact of harsher winter operating conditions in 2019; and |
• | the favourable impact of changes in fuel prices. |
• | lower volumes as measured by RTMs; |
• | higher depreciation and amortization of $51 million (excluding FX); and |
• | cost inflation. |
• | liquidated damages, including customer volume commitments, and higher freight rates; |
• | the favourable impact of changes in fuel prices; and |
• | the efficiencies generated from improved operating performance and asset utilization. |
Average exchange rates (Canadian/U.S. dollar) | 2020 | 2019 | ||||
For the three months ended - September 30 | $ | 1.33 | $ | 1.32 | ||
For the nine months ended - September 30 | $ | 1.35 | $ | 1.33 | ||
Ending exchange rates (Canadian/U.S. dollar) | 2020 | 2019 | ||||
Beginning of year - January 1 | $ | 1.30 | $ | 1.36 | ||
Beginning of quarter - July 1 | $ | 1.36 | $ | 1.31 | ||
End of quarter - September 30 | $ | 1.33 | $ | 1.32 | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
High/Low exchange rates (Canadian/U.S. dollar) | 2020 | 2019 | 2020 | 2019 | ||||||||
High | $ | 1.36 | $ | 1.33 | $ | 1.45 | $ | 1.36 | ||||
Low | $ | 1.30 | $ | 1.30 | $ | 1.30 | $ | 1.30 | ||||
Average Fuel Price (U.S. dollars per U.S. gallon) | 2020 | 2019 | ||||
For the three months ended - September 30 | $ | 1.72 | $ | 2.41 | ||
For the nine months ended - September 30 | $ | 1.90 | $ | 2.48 | ||
TSX (in Canadian dollars) | 2020 | 2019 | ||||
Opening Common Share price, as at January 1 | $ | 331.03 | $ | 242.24 | ||
Ending Common Share price, as at June 30 | $ | 345.32 | $ | 308.43 | ||
Ending Common Share price, as at September 30 | $ | 405.05 | $ | 294.42 | ||
Change in Common Share price for the three months ended September 30 | $ | 59.73 | $ | (14.01 | ) | |
Change in Common Share price for the nine months ended September 30 | $ | 74.02 | $ | 52.18 | ||
NYSE (in U.S. dollars) | 2020 | 2019 | ||||
Opening Common Share price, as at January 1 | $ | 254.95 | $ | 177.62 | ||
Ending Common Share price, as at June 30 | $ | 255.34 | $ | 235.24 | ||
Ending Common Share price, as at September 30 | $ | 304.43 | $ | 222.46 | ||
Change in Common Share price for the three months ended September 30 | $ | 49.09 | $ | (12.78 | ) | |
Change in Common Share price for the nine months ended September 30 | $ | 49.48 | $ | 44.84 | ||
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Freight revenues (in millions)(1) | $ | 1,821 | $ | 1,932 | $ | (111 | ) | (6 | ) | (6 | ) | ||
Non-freight revenues (in millions) | 42 | 47 | (5 | ) | (11 | ) | (11 | ) | |||||
Total revenues (in millions) | $ | 1,863 | $ | 1,979 | $ | (116 | ) | (6 | ) | (6 | ) | ||
Carloads (in thousands) | 659.0 | 711.9 | (52.9 | ) | (7 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 36,690 | 39,172 | (2,482 | ) | (6 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,763 | $ | 2,714 | $ | 49 | 2 | 1 | |||||
Freight revenue per revenue ton-mile (in cents) | 4.96 | 4.93 | 0.03 | 1 | — | ||||||||
(1) | Freight revenues include fuel surcharge revenues of $55 million in 2020 and $119 million in 2019. Fuel surcharge revenues include recoveries of carbon taxes, levies, and obligations under cap-and-trade programs. |
(2) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Freight revenues (in millions)(1) | $ | 5,573 | $ | 5,589 | $ | (16 | ) | — | (1 | ) | |||
Non-freight revenues (in millions) | 125 | 134 | (9 | ) | (7 | ) | (7 | ) | |||||
Total revenues (in millions) | $ | 5,698 | $ | 5,723 | $ | (25 | ) | — | (1 | ) | |||
Carloads (in thousands) | 1,980.6 | 2,064.3 | (83.7 | ) | (4 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 111,635 | 114,994 | (3,359 | ) | (3 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,814 | $ | 2,707 | $ | 107 | 4 | 3 | |||||
Freight revenue per revenue ton-mile (in cents) | 4.99 | 4.86 | 0.13 | 3 | 2 | ||||||||
(1) | Freight revenues include fuel surcharge revenues of $237 million in 2020 and $352 million in 2019. Fuel surcharge revenues include carbon taxes, levies, and obligations recovered under cap-and-trade programs. |
(2) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 457 | $ | 409 | $ | 48 | 12 | 11 | |||||
Carloads (in thousands) | 124.5 | 106.6 | 17.9 | 17 | N/A | ||||||||
Revenue ton-miles (in millions) | 10,549 | 8,953 | 1,596 | 18 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,671 | $ | 3,837 | $ | (166 | ) | (4 | ) | (5 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 4.33 | 4.57 | (0.24 | ) | (5 | ) | (5 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 1,321 | $ | 1,211 | $ | 110 | 9 | 8 | |||||
Carloads (in thousands) | 343.5 | 312.5 | 31.0 | 10 | N/A | ||||||||
Revenue ton-miles (in millions) | 29,734 | 26,757 | 2,977 | 11 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,846 | $ | 3,875 | $ | (29 | ) | (1 | ) | (2 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 4.44 | 4.53 | (0.09 | ) | (2 | ) | (3 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 130 | $ | 183 | $ | (53 | ) | (29 | ) | (29 | ) | ||
Carloads (in thousands) | 63.5 | 81.2 | (17.7 | ) | (22 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 4,437 | 5,761 | (1,324 | ) | (23 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,047 | $ | 2,254 | $ | (207 | ) | (9 | ) | (10 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 2.93 | 3.18 | (0.25 | ) | (8 | ) | (8 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 411 | $ | 514 | $ | (103 | ) | (20 | ) | (20 | ) | ||
Carloads (in thousands) | 186.7 | 229.3 | (42.6 | ) | (19 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 13,209 | 16,485 | (3,276 | ) | (20 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,201 | $ | 2,242 | $ | (41 | ) | (2 | ) | (2 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 3.11 | 3.12 | (0.01 | ) | — | — | |||||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 132 | $ | 117 | $ | 15 | 13 | 13 | |||||
Carloads (in thousands) | 43.6 | 36.3 | 7.3 | 20 | N/A | ||||||||
Revenue ton-miles (in millions) | 5,036 | 4,188 | 848 | 20 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,028 | $ | 3,223 | $ | (195 | ) | (6 | ) | (6 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 2.62 | 2.79 | (0.17 | ) | (6 | ) | (6 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 390 | $ | 367 | $ | 23 | 6 | 5 | |||||
Carloads (in thousands) | 127.0 | 118.6 | 8.4 | 7 | N/A | ||||||||
Revenue ton-miles (in millions) | 14,664 | 14,003 | 661 | 5 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,071 | $ | 3,094 | $ | (23 | ) | (1 | ) | (2 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 2.66 | 2.62 | 0.04 | 2 | 1 | ||||||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 65 | $ | 66 | $ | (1 | ) | (2 | ) | (3 | ) | ||
Carloads (in thousands) | 13.9 | 14.8 | (0.9 | ) | (6 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 1,059 | 1,030 | 29 | 3 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 4,676 | $ | 4,459 | $ | 217 | 5 | 3 | |||||
Freight revenue per revenue ton-mile (in cents) | 6.14 | 6.41 | (0.27 | ) | (4 | ) | (6 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 212 | $ | 186 | $ | 26 | 14 | 12 | |||||
Carloads (in thousands) | 45.7 | 42.6 | 3.1 | 7 | N/A | ||||||||
Revenue ton-miles (in millions) | 3,387 | 2,872 | 515 | 18 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 4,639 | $ | 4,366 | $ | 273 | 6 | 5 | |||||
Freight revenue per revenue ton-mile (in cents) | 6.26 | 6.48 | (0.22 | ) | (3 | ) | (5 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 85 | $ | 78 | $ | 7 | 9 | 8 | |||||
Carloads (in thousands) | 17.9 | 18.5 | (0.6 | ) | (3 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 1,463 | 1,278 | 185 | 14 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 4,749 | $ | 4,216 | $ | 533 | 13 | 11 | |||||
Freight revenue per revenue ton-mile (in cents) | 5.81 | 6.10 | (0.29 | ) | (5 | ) | (6 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 244 | $ | 229 | $ | 15 | 7 | 5 | |||||
Carloads (in thousands) | 53.5 | 54.1 | (0.6 | ) | (1 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 4,059 | 3,746 | 313 | 8 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 4,561 | $ | 4,233 | $ | 328 | 8 | 6 | |||||
Freight revenue per revenue ton-mile (in cents) | 6.01 | 6.11 | (0.10 | ) | (2 | ) | (3 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 321 | $ | 382 | $ | (61 | ) | (16 | ) | (16 | ) | ||
Carloads (in thousands) | 63.6 | 90.8 | (27.2 | ) | (30 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 4,620 | 7,571 | (2,951 | ) | (39 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 5,047 | $ | 4,207 | $ | 840 | 20 | 19 | |||||
Freight revenue per revenue ton-mile (in cents) | 6.95 | 5.05 | 1.90 | 38 | 37 | ||||||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | |||||||
Freight revenues (in millions) | $ | 1,153 | $ | 1,043 | $ | 110 | 11 | 10 | ||||
Carloads (in thousands) | 228.2 | 257.0 | (28.8 | ) | (11 | ) | N/A | |||||
Revenue ton-miles (in millions) | 17,981 | 20,901 | (2,920 | ) | (14 | ) | N/A | |||||
Freight revenue per carload (in dollars) | $ | 5,053 | $ | 4,058 | $ | 995 | 25 | 24 | ||||
Freight revenue per revenue ton-mile (in cents) | 6.41 | 4.99 | 1.42 | 28 | 27 | |||||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 152 | $ | 201 | $ | (49 | ) | (24 | ) | (25 | ) | ||
Carloads (in thousands) | 50.8 | 62.9 | (12.1 | ) | (19 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 2,303 | 2,910 | (607 | ) | (21 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,992 | $ | 3,196 | $ | (204 | ) | (6 | ) | (7 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 6.60 | 6.91 | (0.31 | ) | (4 | ) | (5 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 474 | $ | 579 | $ | (105 | ) | (18 | ) | (19 | ) | ||
Carloads (in thousands) | 154.1 | 180.1 | (26.0 | ) | (14 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 6,951 | 8,225 | (1,274 | ) | (15 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,076 | $ | 3,215 | $ | (139 | ) | (4 | ) | (6 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 6.82 | 7.04 | (0.22 | ) | (3 | ) | (5 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 94 | $ | 87 | $ | 7 | 8 | 7 | |||||
Carloads (in thousands) | 31.2 | 29.2 | 2.0 | 7 | N/A | ||||||||
Revenue ton-miles (in millions) | 390 | 351 | 39 | 11 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,013 | $ | 2,979 | $ | 34 | 1 | — | |||||
Freight revenue per revenue ton-mile (in cents) | 24.10 | 24.79 | (0.69 | ) | (3 | ) | (4 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 215 | $ | 267 | $ | (52 | ) | (19 | ) | (21 | ) | ||
Carloads (in thousands) | 71.3 | 85.8 | (14.5 | ) | (17 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 846 | 1,125 | (279 | ) | (25 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,015 | $ | 3,112 | $ | (97 | ) | (3 | ) | (5 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 25.41 | 23.73 | 1.68 | 7 | 5 | ||||||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 385 | $ | 409 | $ | (24 | ) | (6 | ) | (6 | ) | ||
Carloads (in thousands) | 250.0 | 271.6 | (21.6 | ) | (8 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 6,833 | 7,130 | (297 | ) | (4 | ) | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 1,540 | $ | 1,506 | $ | 34 | 2 | 2 | |||||
Freight revenue per revenue ton-mile (in cents) | 5.63 | 5.74 | (0.11 | ) | (2 | ) | (2 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the nine months ended September 30 | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Freight revenues (in millions) | $ | 1,153 | $ | 1,193 | $ | (40 | ) | (3 | ) | (4 | ) | ||
Carloads (in thousands) | 770.6 | 784.3 | (13.7 | ) | (2 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 20,804 | 20,880 | (76 | ) | — | N/A | |||||||
Freight revenue per carload (in dollars) | $ | 1,496 | $ | 1,521 | $ | (25 | ) | (2 | ) | (2 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 5.54 | 5.71 | (0.17 | ) | (3 | ) | (3 | ) | |||||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
For the three months ended September 30 (in millions) | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Compensation and benefits | $ | 382 | $ | 355 | $ | 27 | 8 | 7 | |||||
Fuel | 140 | 210 | (70 | ) | (33 | ) | (34 | ) | |||||
Materials | 53 | 50 | 3 | 6 | 6 | ||||||||
Equipment rents | 39 | 33 | 6 | 18 | 15 | ||||||||
Depreciation and amortization | 195 | 185 | 10 | 5 | 5 | ||||||||
Purchased services and other | 275 | 277 | (2 | ) | (1 | ) | (1 | ) | |||||
Total operating expenses | $ | 1,084 | $ | 1,110 | $ | (26 | ) | (2 | ) | (3 | ) | ||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | the favourable impact of $51 million from lower fuel prices; |
• | lower volume variable expense; and |
• | efficiencies generated from improved operating performance and asset utilization. |
• | increased stock-based compensation primarily driven by a $41 million impact of changes in share price; |
• | cost inflation; |
• | increased operating expense associated with higher casualty costs incurred in 2020 of $11 million; and |
• | higher depreciation and amortization of $9 million (excluding FX). |
For the nine months ended September 30 (in millions) | 2020 | 2019 | Total Change | % Change | FX Adjusted % Change(1) | ||||||||
Compensation and benefits | $ | 1,127 | $ | 1,144 | $ | (17 | ) | (1 | ) | (2 | ) | ||
Fuel | 483 | 655 | (172 | ) | (26 | ) | (27 | ) | |||||
Materials | 162 | 161 | 1 | 1 | 1 | ||||||||
Equipment rents | 108 | 102 | 6 | 6 | 4 | ||||||||
Depreciation and amortization | 582 | 528 | 54 | 10 | 10 | ||||||||
Purchased services and other | 853 | 899 | (46 | ) | (5 | ) | (6 | ) | |||||
Total operating expenses | $ | 3,315 | $ | 3,489 | $ | (174 | ) | (5 | ) | (6 | ) | ||
(1) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX Adjusted % Change is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | the favourable impact of $143 million from lower fuel prices; |
• | lower volume variable expenses; |
• | efficiencies generated from improved operating performance and asset utilization; and |
• | the impact of harsher winter operating conditions in 2019. |
• | higher depreciation and amortization of $51 million (excluding FX); |
• | cost inflation; and |
• | the unfavourable impact of the change in FX of $30 million. |
• | increased stock-based compensation primarily driven by a $41 million impact of changes in share price; |
• | higher pension current service cost of $8 million; and |
• | the impact of wage and benefit inflation. |
• | labour efficiencies; |
• | lower volume variable expense as a result of decreased workload as measured by GTMs; and |
• | reduced training costs. |
• | labour efficiencies; |
• | reduced training costs; |
• | lower volume variable expense as a result of decreased workload as measured by GTMs; and |
• | the impact of weather related costs as a result of harsh winter operating conditions in the first quarter of 2019. |
• | the impact of wage and benefit inflation; |
• | higher pension current service cost of $24 million; |
• | increased stock-based compensation primarily driven by the impact of changes in share price of $15 million; and |
• | the unfavourable impact of the change in FX of $7 million. |
• | the favourable impact of $143 million from lower fuel prices; |
• | a decrease in workload, as measured by GTMs; and |
• | an improvement in fuel efficiency of 2% from improved winter operating conditions in the first quarter of 2020 and increased train productivity. |
For the three months ended September 30 (in millions) | 2020 | 2019 | Total Change | % Change | |||||||
Support and facilities | $ | 68 | $ | 70 | $ | (2 | ) | (3 | ) | ||
Track and operations | 65 | 66 | (1 | ) | (2 | ) | |||||
Intermodal | 51 | 54 | (3 | ) | (6 | ) | |||||
Equipment | 27 | 31 | (4 | ) | (13 | ) | |||||
Casualty | 31 | 24 | 7 | 29 | |||||||
Property taxes | 28 | 31 | (3 | ) | (10 | ) | |||||
Other | 5 | 1 | 4 | 400 | |||||||
Land sales | — | — | — | — | |||||||
Total Purchased services and other | $ | 275 | $ | 277 | $ | (2 | ) | (1 | ) | ||
• | lower business travel and event costs due to COVID-19, reported primarily in Support and facilities and Track and operations; |
• | efficiencies generated from improved operating performance, reported in Intermodal and Equipment; and |
• | lower property taxes. |
For the nine months ended September 30 (in millions) | 2020 | 2019 | Total Change | % Change | |||||||
Support and facilities | $ | 198 | $ | 207 | $ | (9 | ) | (4 | ) | ||
Track and operations | 210 | 215 | (5 | ) | (2 | ) | |||||
Intermodal | 154 | 165 | (11 | ) | (7 | ) | |||||
Equipment | 85 | 98 | (13 | ) | (13 | ) | |||||
Casualty | 100 | 109 | (9 | ) | (8 | ) | |||||
Property taxes | 95 | 103 | (8 | ) | (8 | ) | |||||
Other | 15 | 19 | (4 | ) | (21 | ) | |||||
Land sales | (4 | ) | (17 | ) | 13 | (76 | ) | ||||
Total Purchased services and other | $ | 853 | $ | 899 | $ | (46 | ) | (5 | ) | ||
• | reduced business travel and event costs due to COVID-19, reported in Support and facilities and Track and operations; |
• | lower snow removal and other weather related costs reported in Track and operations; |
• | a decrease in charges associated with contingencies of $10 million, reported in Other; |
• | lower property taxes; and |
• | lower expenses primarily due to the reduced number and severity of casualty incidents, reported in Casualty. |
• | the unfavourable impact of an increase in debt levels of $23 million; |
• | the unfavourable impact of the change in FX of $6 million; and |
• | a decrease in interest income of $2 million. |
Long-term debt | Outlook | ||
Standard & Poor's | |||
Long-term corporate credit | BBB+ | stable | |
Senior secured debt | A | stable | |
Senior unsecured debt | BBB+ | stable | |
Moody's | |||
Senior unsecured debt | Baa1 | stable | |
Commercial paper program | |||
Standard & Poor's | A-2 | N/A | |
Moody's | P-2 | N/A | |
(1) | Credit ratings are not recommendations to purchase, hold or sell securities and do not address the market price or suitability of a specific security for a particular investor. Credit ratings are based on the rating agencies' methodologies and may be subject to revision or withdrawal at any time by the rating agencies. |
CPRC (Subsidiary Issuer) and CPRL (Parent Guarantor) | ||||||
(in millions of Canadian dollars) | For the nine months ended September 30, 2020 | For the year ended December 31, 2019 | ||||
Total revenues | $ | 4,271 | $ | 5,662 | ||
Total operating expenses | 2,498 | 3,446 | ||||
Operating income(1) | 1,773 | 2,216 | ||||
Less: Other(2) | 203 | (13 | ) | |||
Income before income tax expense | 1,570 | 2,229 | ||||
Net income | $ | 1,138 | $ | 1,704 | ||
(1) | Includes net lease costs incurred from non-guarantor subsidiaries for the nine months ended September 30, 2020 and for the year ended December 31, 2019 of $240 million and $320 million, respectively. |
(2) | Includes Other (income) expense, Other components of net periodic benefit recovery, and Net interest expense. |
CPRC (Subsidiary Issuer) and CPRL (Parent Guarantor) | ||||||
(in millions of Canadian dollars) | As at September 30, 2020 | As at December 31, 2019 | ||||
Assets | ||||||
Current assets | $ | 900 | $ | 842 | ||
Properties | 10,855 | 10,287 | ||||
Other non-current assets | 1,548 | 1,208 | ||||
Liabilities | ||||||
Current liabilities | $ | 1,824 | $ | 1,833 | ||
Long-term debt | 8,946 | 8,145 | ||||
Other non-current liabilities | 2,870 | 2,711 | ||||
CPRC (Subsidiary Issuer) and CPRL (Parent Guarantor) | ||||||
(in millions of Canadian dollars) | For the nine months ended September 30, 2020 | For the year ended December 31, 2019 | ||||
Dividend income from non-guarantor subsidiaries | $ | 139 | $ | 158 | ||
Capital contributions to non-guarantor subsidiaries | — | (125 | ) | |||
Redemption of shares by non-guarantor subsidiaries | 45 | 1,345 | ||||
CPRC (Subsidiary Issuer) and CPRL (Parent Guarantor) | ||||||
(in millions of Canadian dollars) | As at September 30, 2020 | As at December 31, 2019 | ||||
Assets | ||||||
Accounts receivable, intercompany | $ | 267 | $ | 318 | ||
Short-term advances to affiliates | 17 | 14 | ||||
Long-term advances to affiliates | 9 | 7 | ||||
Liabilities | ||||||
Accounts payable, intercompany | $ | 162 | $ | 249 | ||
Short-term advances from affiliates | 3,762 | 3,700 | ||||
Long-term advances from affiliates | 86 | 84 | ||||
• | during the year to date, a non-cash loss of $89 million ($78 million after deferred tax) due to FX translation of debt and lease liabilities that unfavourably impacted Diluted EPS by 58 cents as follows: |
– | in the third quarter, an $40 million gain ($38 million after deferred tax) that favourably impacted Diluted EPS by 29 cents; |
– | in the second quarter, an $86 million gain ($82 million after deferred tax) that favourably impacted Diluted EPS by 59 cents; and |
– | in the first quarter, a $215 million loss ($198 million after deferred tax) that unfavourably impacted Diluted EPS by $1.44. |
• | in the fourth quarter, a deferred tax expense of $24 million as a result of a provision for an uncertain tax item of a prior period that unfavourably impacted Diluted EPS by 17 cents; |
• | in the second quarter, a deferred tax recovery of $88 million due to the change in the Alberta provincial corporate income tax rate that favourably impacted Diluted EPS by 63 cents; and |
• | during the course of the year, a net non-cash gain of $94 million ($86 million after deferred tax) due to FX translation of debt and lease liabilities that unfavourably impacted Diluted EPS by 62 cents as follows: |
– | in the fourth quarter, a $37 million gain ($32 million after deferred tax) that favourably impacted Diluted EPS by 22 cents; |
– | in the third quarter, a $25 million loss ($22 million after deferred tax) that unfavourably impacted Diluted EPS by 15 cents; |
– | in the second quarter, a $37 million gain ($34 million after deferred tax) that favourably impacted Diluted EPS by 24 cents; and |
– | in the first quarter, a $45 million gain ($42 million after deferred tax) that favourably impacted Diluted EPS by 30 cents. |
• | a non-cash loss of $113 million ($103 million after deferred tax) due to FX translation of debt that unfavourably impacted Diluted EPS by 72 cents. |
For the three months ended September 30 | For the nine months ended September 30 | For the twelve months ended December 31 | |||||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | 2019 | ||||||||||
Net income as reported | $ | 598 | $ | 618 | $ | 1,642 | $ | 1,776 | $ | 2,440 | |||||
Less significant items (pre-tax): | |||||||||||||||
Impact of FX translation gain (loss) on debt and lease liabilities | 40 | (25 | ) | (89 | ) | 57 | 94 | ||||||||
Add: | |||||||||||||||
Tax effect of adjustments(1) | 2 | (3 | ) | (11 | ) | 3 | 8 | ||||||||
Income tax rate changes | — | — | — | (88 | ) | (88 | ) | ||||||||
Provision for uncertain tax item | — | — | — | — | 24 | ||||||||||
Adjusted income | $ | 560 | $ | 640 | $ | 1,720 | $ | 1,634 | $ | 2,290 | |||||
(1) | The tax effect of adjustments was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 4.82% and 12.15% for the three and nine months ended September 30, 2020, respectively,14.23% and 5.05% for the three and nine months ended September 30, 2019, respectively, and 8.55% for the twelve months ended December 31, 2019. The applicable tax rates reflect the taxable jurisdictions and nature, being on account of capital or income, of the significant items. |
For the three months ended September 30 | For the nine months ended September 30 | For the twelve months ended December 31 | |||||||||||||
2020 | 2019 | 2020 | 2019 | 2019 | |||||||||||
Diluted earnings per share as reported | $ | 4.41 | $ | 4.46 | $ | 12.04 | $ | 12.70 | $ | 17.52 | |||||
Less significant items (pre-tax): | |||||||||||||||
Impact of FX translation gain (loss) on debt and lease liabilities | 0.30 | (0.18 | ) | (0.65 | ) | 0.41 | 0.67 | ||||||||
Add: | |||||||||||||||
Tax effect of adjustments(1) | 0.01 | (0.03 | ) | (0.07 | ) | 0.02 | 0.05 | ||||||||
Income tax rate changes | — | — | — | (0.63 | ) | (0.63 | ) | ||||||||
Provision for uncertain tax item | — | — | — | — | 0.17 | ||||||||||
Adjusted diluted earnings per share | $ | 4.12 | $ | 4.61 | $ | 12.62 | $ | 11.68 | $ | 16.44 | |||||
(1) | The tax effect of adjustments was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 4.82% and 12.15% for the three and nine months ended September 30, 2020, respectively, 14.23% and 5.05% for the three and nine months ended September 30, 2019, respectively, and 8.55% for the twelve months ended December 31, 2019. The applicable tax rates reflect the taxable jurisdictions and nature, being on account of capital or income, of the significant items. |
For the twelve months ended September 30 | ||||||
(in millions, except for percentages) | 2020 | 2019 | ||||
Net income as reported | $ | 2,306 | $ | 2,321 | ||
Average shareholders' equity | $ | 7,397 | $ | 7,172 | ||
Return on average shareholders' equity | 31.2 | % | 32.4 | % | ||
For the twelve months ended September 30 | ||||||
(in millions) | 2020 | 2019 | ||||
Net income as reported | $ | 2,306 | $ | 2,321 | ||
Add: | ||||||
Net interest expense | 458 | 450 | ||||
Tax on interest(1) | (114 | ) | (115 | ) | ||
Significant items: | ||||||
Impact of FX translation loss on debt and lease liabilities (pre-tax) | 52 | 56 | ||||
Tax on significant items(2) | (6 | ) | (7 | ) | ||
Income tax recovery from income tax rate changes | — | (88 | ) | |||
Provision for uncertain tax item | 24 | — | ||||
Adjusted return | $ | 2,720 | $ | 2,617 | ||
(1) | Tax was calculated at the adjusted annualized effective tax rate of 24.67% and 25.12% for the twelve months ended September 30, 2020 and 2019, respectively. |
(2) | Tax was calculated as the pre-tax effect of the adjustments multiplied by the applicable tax rate for the above items of 11.22% and 13.64% for the twelve months ended September 30, 2020 and 2019, respectively. |
For the twelve months ended September 30 | ||||||
(in millions) | 2020 | 2019 | ||||
Average shareholders' equity | $ | 7,397 | $ | 7,172 | ||
Average Long-term debt, including long-term debt maturing within one year | 9,385 | 8,634 | ||||
$ | 16,782 | $ | 15,806 | |||
Less: | ||||||
Income tax recovery from income tax rate changes | — | 44 | ||||
Provision for uncertain tax item | (12 | ) | — | |||
Adjusted average invested capital | $ | 16,794 | $ | 15,762 | ||
For the twelve months ended September 30 | ||||||
(in millions, except for percentages) | 2020 | 2019 | ||||
Adjusted return | $ | 2,720 | $ | 2,617 | ||
Adjusted average invested capital | $ | 16,794 | $ | 15,762 | ||
Adjusted ROIC | 16.2 | % | 16.6 | % | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||
Cash provided by operating activities | $ | 493 | $ | 823 | $ | 1,817 | $ | 1,957 | ||||
Cash used in investing activities | (483 | ) | (461 | ) | (1,313 | ) | (1,135 | ) | ||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | (4 | ) | 1 | 12 | (1 | ) | ||||||
Less: | ||||||||||||
Investment in Central Maine and Québec Railway | — | — | 19 | — | ||||||||
Free cash | $ | 6 | $ | 363 | $ | 497 | $ | 821 | ||||
For the three months ended September 30 | ||||||||||||||
(in millions) | Reported 2020 | Reported 2019 | Variance due to FX | FX Adjusted 2019 | FX Adjusted % Change | |||||||||
Freight revenues by line of business | ||||||||||||||
Grain | $ | 457 | $ | 409 | $ | 1 | $ | 410 | 11 | |||||
Coal | 130 | 183 | 1 | 184 | (29 | ) | ||||||||
Potash | 132 | 117 | — | 117 | 13 | |||||||||
Fertilizers and sulphur | 65 | 66 | 1 | 67 | (3 | ) | ||||||||
Forest products | 85 | 78 | 1 | 79 | 8 | |||||||||
Energy, chemicals and plastics | 321 | 382 | 2 | 384 | (16 | ) | ||||||||
Metals, minerals and consumer products | 152 | 201 | 1 | 202 | (25 | ) | ||||||||
Automotive | 94 | 87 | 1 | 88 | 7 | |||||||||
Intermodal | 385 | 409 | 1 | 410 | (6 | ) | ||||||||
Freight revenues | 1,821 | 1,932 | 9 | 1,941 | (6 | ) | ||||||||
Non-freight revenues | 42 | 47 | — | 47 | (11 | ) | ||||||||
Total revenues | $ | 1,863 | $ | 1,979 | $ | 9 | $ | 1,988 | (6 | ) | ||||
For the nine months ended September 30 | ||||||||||||||
(in millions) | Reported 2020 | Reported 2019 | Variance due to FX | FX Adjusted 2019 | FX Adjusted % Change | |||||||||
Freight revenues by line of business | ||||||||||||||
Grain | $ | 1,321 | $ | 1,211 | $ | 11 | $ | 1,222 | 8 | |||||
Coal | 411 | 514 | 1 | 515 | (20 | ) | ||||||||
Potash | 390 | 367 | 3 | 370 | 5 | |||||||||
Fertilizers and sulphur | 212 | 186 | 3 | 189 | 12 | |||||||||
Forest products | 244 | 229 | 4 | 233 | 5 | |||||||||
Energy, chemicals and plastics | 1,153 | 1,043 | 8 | 1,051 | 10 | |||||||||
Metals, minerals and consumer products | 474 | 579 | 9 | 588 | (19 | ) | ||||||||
Automotive | 215 | 267 | 5 | 272 | (21 | ) | ||||||||
Intermodal | 1,153 | 1,193 | 6 | 1,199 | (4 | ) | ||||||||
Freight revenues | 5,573 | 5,589 | 50 | 5,639 | (1 | ) | ||||||||
Non-freight revenues | 125 | 134 | — | 134 | (7 | ) | ||||||||
Total revenues | $ | 5,698 | $ | 5,723 | $ | 50 | $ | 5,773 | (1 | ) | ||||
For the three months ended September 30 | ||||||||||||||
(in millions) | Reported 2020 | Reported 2019 | Variance due to FX | FX Adjusted 2019 | FX Adjusted % Change | |||||||||
Compensation and benefits | $ | 382 | $ | 355 | $ | 1 | $ | 356 | 7 | |||||
Fuel | 140 | 210 | 1 | 211 | (34 | ) | ||||||||
Materials | 53 | 50 | — | 50 | 6 | |||||||||
Equipment rents | 39 | 33 | 1 | 34 | 15 | |||||||||
Depreciation and amortization | 195 | 185 | 1 | 186 | 5 | |||||||||
Purchased services and other | 275 | 277 | 1 | 278 | (1 | ) | ||||||||
Total operating expenses | $ | 1,084 | $ | 1,110 | $ | 5 | $ | 1,115 | (3 | ) | ||||
For the nine months ended September 30 | ||||||||||||||
(in millions) | Reported 2020 | Reported 2019 | Variance due to FX | FX Adjusted 2019 | FX Adjusted % Change | |||||||||
Compensation and benefits | $ | 1,127 | $ | 1,144 | $ | 7 | $ | 1,151 | (2 | ) | ||||
Fuel | 483 | 655 | 10 | 665 | (27 | ) | ||||||||
Materials | 162 | 161 | — | 161 | 1 | |||||||||
Equipment rents | 108 | 102 | 2 | 104 | 4 | |||||||||
Depreciation and amortization | 582 | 528 | 3 | 531 | 10 | |||||||||
Purchased services and other | 853 | 899 | 8 | 907 | (6 | ) | ||||||||
Total operating expenses | $ | 3,315 | $ | 3,489 | $ | 30 | $ | 3,519 | (6 | ) | ||||
(in millions, except for ratios) | 2020 | 2019 | ||||
Long-term debt including long-term debt maturing within one year as at September 30 | $ | 9,786 | $ | 8,983 | ||
Net income for the twelve months ended September 30 | $ | 2,306 | $ | 2,321 | ||
Long-term debt to Net income ratio | 4.2 | 3.9 | ||||
(in millions) | 2020 | 2019 | ||||
Long-term debt including long-term debt maturing within one year as at September 30 | $ | 9,786 | $ | 8,983 | ||
Add: | ||||||
Pension plans deficit(1) | 287 | 260 | ||||
Operating lease liabilities | 325 | 370 | ||||
Less: | ||||||
Cash and cash equivalents | 183 | 145 | ||||
Adjusted net debt as at September 30 | $ | 10,215 | $ | 9,468 | ||
(1) | Pension plans deficit is the total funded status of the Pension plans in deficit only. |
For the twelve months ended September 30 | ||||||
(in millions) | 2020 | 2019 | ||||
Net income as reported | $ | 2,306 | $ | 2,321 | ||
Add: | ||||||
Net interest expense | 458 | 450 | ||||
Income tax expense | 795 | 668 | ||||
EBIT | 3,559 | 3,439 | ||||
Less significant items (pre-tax): | ||||||
Impact of FX translation loss on debt and lease liabilities | (52 | ) | (56 | ) | ||
Adjusted EBIT | 3,611 | 3,495 | ||||
Add: | ||||||
Operating lease expense | 79 | 99 | ||||
Depreciation and amortization | 760 | 708 | ||||
Less: | ||||||
Other components of net periodic benefit recovery | 344 | 391 | ||||
Adjusted EBITDA | $ | 4,106 | $ | 3,911 | ||
(in millions, except for ratios) | 2020 | 2019 | ||||
Adjusted net debt as at September 30 | $ | 10,215 | $ | 9,468 | ||
Adjusted EBITDA for the twelve months ended September 30 | $ | 4,106 | $ | 3,911 | ||
Adjusted net debt to Adjusted EBITDA ratio | 2.5 | 2.4 | ||||
Payments due by period (in millions) | Total | 2020 | 2021 & 2022 | 2023 & 2024 | Thereafter | ||||||||||
Contractual commitments | |||||||||||||||
Interest on long-term debt and finance leases | $ | 11,423 | $ | 65 | $ | 869 | $ | 752 | $ | 9,737 | |||||
Long-term debt | 9,727 | 468 | 861 | 582 | 7,816 | ||||||||||
Finance leases | 151 | 2 | 117 | 14 | 18 | ||||||||||
Operating leases(1) | 366 | 15 | 128 | 96 | 127 | ||||||||||
Supplier purchases | 1,825 | 141 | 814 | 479 | 391 | ||||||||||
Other long-term liabilities(2) | 460 | 15 | 104 | 100 | 241 | ||||||||||
Total contractual commitments | $ | 23,952 | $ | 706 | $ | 2,893 | $ | 2,023 | $ | 18,330 | |||||
(1) | Residual value guarantees on certain leased equipment with a maximum exposure of $2 million are not included in the minimum payments shown above. |
(2) | Includes expected cash payments for environmental remediation, post-retirement benefits, workers’ compensation benefits, long-term disability benefits, pension benefit payments for the Company’s non-registered supplemental pension plan, and certain other long-term liabilities. Projected payments for post-retirement benefits, workers’ compensation benefits, and long-term disability benefits include the anticipated payments for years 2020 to 2029. Pension contributions for the Company’s registered pension plans are not included due to the volatility in calculating them. Pension payments are discussed further in Critical Accounting Estimates of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's 2019 Annual Report on Form 10-K. |
Payments due by period (in millions) | Total | 2020 | 2021 & 2022 | 2023 & 2024 | Thereafter | ||||||||||
Certain other financial commitments | |||||||||||||||
Letters of credit | $ | 61 | $ | 61 | $ | — | $ | — | $ | — | |||||
Capital commitments | 516 | 101 | 276 | 67 | 72 | ||||||||||
Total certain other financial commitments | $ | 577 | $ | 162 | $ | 276 | $ | 67 | $ | 72 | |||||
2020 | Total number of shares purchased(1) | Average price paid per share(2) | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares (or units) that may yet be purchased under the plans or programs | |||||
July 1 to July 31 | 290,891 | $ | 358.09 | 290,891 | 2,604,848 | ||||
August 1 to August 31 | 341,349 | 381.97 | 341,349 | 2,263,499 | |||||
September 1 to September 30 | 412,628 | 392.35 | 412,628 | 1,850,871 | |||||
Ending Balance | 1,044,868 | $ | 379.42 | 1,044,868 | N/A | ||||
(1) | Includes shares repurchased but not yet cancelled at quarter end. |
(2) | Includes brokerage fees. |
Exhibit | Description |
101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
The following financial information from Canadian Pacific Railway Limited's Quarterly Report on Form 10-Q for the third quarter ended September 30, 2020, formatted in Extensible Business Reporting Language (XBRL) includes: (i) the Interim Consolidated Statements of Income for the third quarters and first nine months ended September 30, 2020 and 2019; (ii) the Interim Consolidated Statements of Comprehensive Income for the third quarters and first nine months ended September 30, 2020 and 2019; (iii) the Interim Consolidated Balance Sheets at September 30, 2020, and December 31, 2019; (iv) the Interim Consolidated Statements of Cash Flows for the third quarters and first nine months ended September 30, 2020 and 2019; (v) the Interim Consolidated Statements of Changes in Shareholders’ Equity for the third quarters and first nine months ended September 30, 2020 and 2019; and (vi) the Notes to Interim Consolidated Financial Statements. | |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
CANADIAN PACIFIC RAILWAY LIMITED | |
(Registrant) | |
By: | /s/ NADEEM VELANI |
Nadeem Velani | |
Executive Vice-President and Chief Financial Officer (Principal Financial Officer) | |
1. | I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Railway Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 20, 2020 | /s/ KEITH CREEL | |
Keith Creel | ||
President and Chief Executive Officer | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Railway Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 20, 2020 | /s/ NADEEM VELANI | |
Nadeem Velani | ||
Executive Vice-President and Chief Financial Officer | ||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 20, 2020 | /s/ KEITH CREEL | |||
Keith Creel | ||||
President and Chief Executive Officer | ||||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 20, 2020 | /s/ NADEEM VELANI | |||
Nadeem Velani | ||||
Executive Vice-President and Chief Financial Officer | ||||
INTERIM CONSOLIDATED STATEMENTS OF INCOME (unaudited) - CAD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Revenues | ||||
| Total revenues | $ 1,863 | $ 1,979 | $ 5,698 | $ 5,723 |
| Operating expenses | ||||
| Compensation and benefits | 382 | 355 | 1,127 | 1,144 |
| Fuel | 140 | 210 | 483 | 655 |
| Materials | 53 | 50 | 162 | 161 |
| Equipment rents | 39 | 33 | 108 | 102 |
| Depreciation and amortization | 195 | 185 | 582 | 528 |
| Purchased services and other | 275 | 277 | 853 | 899 |
| Total operating expenses | 1,084 | 1,110 | 3,315 | 3,489 |
| Operating income | 779 | 869 | 2,383 | 2,234 |
| Less: | ||||
| Other (income) expense | (36) | 29 | 89 | (58) |
| Other components of net periodic benefit recovery | (86) | (99) | (257) | (294) |
| Net interest expense | 114 | 110 | 346 | 336 |
| Income before income tax expense | 787 | 829 | 2,205 | 2,250 |
| Income tax expense | 189 | 211 | 563 | 474 |
| Net income | $ 598 | $ 618 | $ 1,642 | $ 1,776 |
| Earnings per share | ||||
| Basic earnings per share | $ 4.42 | $ 4.47 | $ 12.09 | $ 12.75 |
| Diluted earnings per share | $ 4.41 | $ 4.46 | $ 12.04 | $ 12.70 |
| Weighted-average number of shares (millions) | ||||
| Basic | 135.2 | 138.1 | 135.9 | 139.3 |
| Diluted | 135.8 | 138.7 | 136.4 | 139.8 |
| Dividends declared per share | $ 0.9500 | $ 0.8300 | $ 2.6100 | $ 2.3100 |
| Freight | ||||
| Revenues | ||||
| Total revenues | $ 1,821 | $ 1,932 | $ 5,573 | $ 5,589 |
| Non-freight | ||||
| Revenues | ||||
| Total revenues | $ 42 | $ 47 | $ 125 | $ 134 |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net income | $ 598 | $ 618 | $ 1,642 | $ 1,776 |
| Net gain (loss) in foreign currency translation adjustments, net of hedging activities | 16 | (8) | (18) | 23 |
| Change in derivatives designated as cash flow hedges | 3 | 2 | 6 | 8 |
| Change in pension and post-retirement defined benefit plans | 44 | 20 | 134 | 61 |
| Other comprehensive income before income taxes | 63 | 14 | 122 | 92 |
| Income tax (expense) recovery on above items | (29) | 3 | (16) | (41) |
| Other comprehensive income | 34 | 17 | 106 | 51 |
| Comprehensive income | $ 632 | $ 635 | $ 1,748 | $ 1,827 |
Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | Basis of presentation These unaudited interim Consolidated Financial Statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2019 annual Consolidated Financial Statements and notes included in CP's 2019 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2019 annual Consolidated Financial Statements, except for the newly adopted accounting policy discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.
|
Accounting Changes |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Accounting Standards Update and Change in Accounting Principle [Abstract] | |
| Accounting Changes | Accounting changes Implemented in 2020 Financial Instruments - Credit Losses On January 1, 2020, the Company adopted the new Accounting Standards Update ("ASU") 2016-13, issued by the Financial Accounting Standards Board ("FASB"), and all related amendments under FASB Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses. Using a modified retrospective approach, the Company recognized a cumulative-effect adjustment to its opening retained earnings balance in the period of adoption. Accordingly, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption of ASC 326 as at January 1, 2020 was an increase in the allowance for credit losses of $1 million, with the offsets to "Deferred income taxes" and "Retained earnings" on the Company's Interim Consolidated Balance Sheet. See Note 8 for further discussion of the current period credit loss. Simplification of Financial Disclosures about Guarantors During the second quarter of 2020, the Company early adopted the Securities and Exchange Commission amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities, as specified in Rule 3-10 of Regulation S-X. The amendments simplify disclosure requirements by replacing condensed consolidating financial information (“CCFI”) with summarized financial information and expanded qualitative non-financial disclosures about the guarantees, issuers, and guarantors. This disclosure can be found in the Liquidity and Capital Resources section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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Revenues |
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| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues | Revenues The following table disaggregates the Company’s revenues from contracts with customers by major source:
Contract liabilities Contract liabilities represent payments received for performance obligations not yet satisfied and relate to deferred revenue, and are presented as components of "Accounts payable and accrued liabilities" and "Other long-term liabilities" on the Company's Interim Consolidated Balance Sheets. The following table summarizes the changes in contract liabilities:
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Other (Income) Expense |
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| Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses | Other (income) expense
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Income Taxes |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | Income taxes
The effective tax rates for the three and nine months ended September 30, 2020 were 23.97% and 25.52%, respectively, compared to 25.43% and 21.06%, respectively for the same periods of 2019. For the three months ended September 30, 2020, the effective tax rate was 25.00%, excluding the discrete item of the foreign exchange ("FX") gain of $40 million on debt and lease liabilities. For the three months ended September 30, 2019, the effective tax rate was 25.11%, excluding the discrete item of the FX loss of $25 million on debt and lease liabilities. For the nine months ended September 30, 2020, the effective tax rate was 25.00%, excluding the discrete item of the FX loss of $89 million on debt and lease liabilities. For the nine months ended September 30, 2019, the effective tax rate was 25.50%, excluding the discrete items of the FX gain of $57 million on debt and lease liabilities and an $88 million deferred income tax recovery from the revaluation of deferred income tax balances as at January 1, 2019 on the enactment of Alberta provincial corporate income tax rate decrease.
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Earnings Per Share |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | Earnings per share Basic earnings per share has been calculated using Net income for the period divided by the weighted-average number of shares outstanding during the period. The number of shares used in the earnings per share calculations are reconciled as follows:
For the three months ended September 30, 2020, there were no options excluded from the computation of diluted earnings per share (three months ended September 30, 2019 - nil). For the nine months ended September 30, 2020, there were 0.1 million options excluded from the computation of diluted earnings per share because their effects were not dilutive (nine months ended September 30, 2019 - 0.1 million).
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Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component |
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| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Accumulated Other Comprehensive Loss (AOCL) by Component | Changes in Accumulated other comprehensive loss ("AOCL") by component
Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL are as follows:
(1) Impacts "Other components of net periodic benefit recovery" on the Interim Consolidated Statements of Income.
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Accounts Receivable, Net |
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| Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts receivable, net | Accounts receivable, net Accounts receivable from customers are recognized initially at fair value and subsequently measured at amortized cost less allowance for expected credit losses. Losses on accounts receivable are estimated based on historical credit loss experience of receivables with similar risk characteristics. Historical loss experience is adjusted to reflect any management expectations that current or future conditions will differ from conditions that existed for the period over which historical information is evaluated. To determine expected credit losses, customer receivables are disaggregated by credit characteristics, type of customer service, customer line of business, and receivable aging.
Receivables are considered to be in default and are written off against the allowance for credit losses when it is probable that all remaining contractual payments due will not be collected in accordance with the terms of the customer contracts. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered.
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Business Combination Business Combination |
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| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination | Business combination On December 30, 2019, CP purchased 100% of Central Maine & Québec Railway Canada Inc. ("CMQ Canada") and Central Maine & Québec Railway U.S. ("CMQ U.S.") (together "CMQ"). The acquisition of CMQ Canada did not require regulatory approval and was accounted for as a business combination under the acquisition method of accounting on December 30, 2019. The acquisition of CMQ U.S. was subject to approval from the United States Surface Transportation Board ("STB"). From the December 30, 2019 date of purchase, all purchased shares of CMQ U.S. were held in an independent voting trust (the "Trust") pending the STB's approval of CP's application for control of CMQ U.S. Approval was granted with an effective date of June 3, 2020. Between December 30, 2019 and June 3, 2020, CP accounted for its acquisition of CMQ U.S. as an equity method investment. During this time, CP paid additional consideration for CMQ of $3 million, representing changes from the finalization of previously estimated closing date working capital. On June 3, 2020 the Trust was dissolved and CP assumed control of CMQ U.S. At this time, CP accounted for its acquisition in CMQ U.S. as a business combination using the acquisition method of accounting. Accordingly, the acquired tangible and intangible assets and assumed liabilities were recorded at their estimated fair values as at June 3, 2020 and results from operations and cash flows were consolidated prospectively. There was no material change in the acquisition-date fair value of the equity interest held by the Company in CMQ U.S. immediately before the acquisition date. Fair values were determined primarily through the use of an income approach. The purchase price allocation was prepared on a preliminary basis and is subject to change as additional information becomes available concerning the fair value and tax bases of the net assets acquired. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition. The following summarizes the estimated fair values of the acquired assets and liabilities of CMQ U.S. at June 3, 2020:
Goodwill of $51 million relates primarily to expected operating business synergies between the Company and CMQ U.S. The factors that contribute to the goodwill are revenue growth from customers which are currently not served by CP, access to new routes, and an assembled workforce. Goodwill recognized is not deductible for tax purposes. Intangible assets of $27 million reflect customer lists acquired in the purchase of CMQ U.S., and have amortization periods of 20 years. Acquired cash and cash equivalents of $22 million is presented as a reduction of cash used in investing activities in the Company's Interim Consolidated Statement of Cash Flows for the nine months ended September 30, 2020, and is presented net of finalized closing working capital adjustments for CMQ of $3 million as described above. CP has not provided pro forma information relating to the pre-acquisition period as it is not material.
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Debt |
9 Months Ended |
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Sep. 30, 2020 | |
| Debt Disclosure [Abstract] | |
| Debt | Debt Issuance of long-term debt During the three months ended March 31, 2020, the Company issued U.S. $500 million 2.050% 10-year unsecured notes due March 5, 2030 for net proceeds of U.S. $495 million ($662 million) and $300 million 3.050% 30-year unsecured notes due March 9, 2050 for net proceeds of $296 million. These notes pay interest semi-annually and carry a negative pledge. Credit facility The Company's revolving credit facility consists of a U.S. $1.0 billion tranche maturing September 27, 2024 and a U.S. $300 million tranche maturing September 27, 2021. During the three months ended March 31, 2020, the Company drew U.S. $100 million from the U.S. $300 million tranche of its revolving credit facility. During the three months ended June 30, 2020, the Company repaid this amount in full. As at September 30, 2020, the revolving credit facility was undrawn (December 31, 2019 - undrawn). The Company presents draws and repayments on its revolving credit facility in the Company's Interim Consolidated Statements of Cash Flows on a net basis. Commercial paper program The Company has a commercial paper program which enables it to issue commercial paper up to a maximum aggregate principal amount of U.S. $1.0 billion in the form of unsecured promissory notes. This commercial paper program is backed by the U.S. $1.3 billion revolving credit facility. As at September 30, 2020, the Company had total commercial paper borrowings of U.S. $345 million (December 31, 2019 - U.S. $397 million). The weighted-average interest rate on these borrowings was 0.20% (December 31, 2019 - 2.03%). The Company presents issuances and repayments of commercial paper, all of which have a maturity of less than 90 days, in the Company's Interim Consolidated Statements of Cash Flows on a net basis.
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Financial Instruments |
9 Months Ended |
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Sep. 30, 2020 | |
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Financial Instruments | 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 established by GAAP 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. The carrying value of short-term financial instruments all approximate their fair values. The carrying value of the Company’s debt and finance lease liabilities do not approximate their fair value. Their 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 period end. All measurements are classified as Level 2. The Company’s debt and finance lease liabilities, including current maturities, with a carrying value of $9,327 million at September 30, 2020 (December 31, 2019 - $8,241 million), had a fair value of $11,860 million (December 31, 2019 - $10,149 million). B. Financial risk management The effect of the Company's net investment hedge for the three and nine months ended September 30, 2020 was an unrealized FX gain of $135 million and an unrealized FX loss of $156 million, respectively (three and nine months ended September 30, 2019 - an unrealized FX loss of $68 million and an unrealized FX gain of $172 million, respectively) recognized in “Other comprehensive income”.
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Shareholders' Equity |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | Shareholders' equity On December 17, 2019, the Company announced a normal course issuer bid ("NCIB"), commencing December 20, 2019, to purchase up to 4.80 million Common Shares in the open market for cancellation on or before December 19, 2020. As at September 30, 2020, the Company had purchased 2.95 million Common Shares for $1,016 million under this NCIB. On October 19, 2018, the Company announced a NCIB, commencing October 24, 2018, to purchase up to 5.68 million Common Shares for cancellation on or before October 23, 2019. The Company completed this NCIB on October 23, 2019. All purchases were made in accordance with the respective NCIB at prevailing market prices plus brokerage fees, or such other prices that were permitted by the Toronto Stock Exchange, with consideration allocated to "Share capital" up to the average carrying amount of the shares and any excess allocated to "Retained earnings". The following table provides activities under the share repurchase programs:
(2) Includes brokerage fees.
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Pension and Other Benefits |
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| Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pensions and Other Benefits | Pension and other benefits In the three months ended September 30, 2020, the Company made contributions of $9 million (three months ended September 30, 2019 - $17 million) to its defined benefit pension plans. In the nine months ended September 30, 2020, the Company made contributions of $24 million (nine months ended September 30, 2019 - $40 million) to its defined benefit pension plans. Net periodic benefit costs for defined benefit pension plans and other benefits included the following components:
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Stock-Based Compensation |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | Stock-based compensation At September 30, 2020, the Company had several stock-based compensation plans including stock option plans, various cash-settled liability plans, and an employee share purchase plan. These plans resulted in an expense for the three and nine months ended September 30, 2020 of $56 million and $110 million, respectively (three and nine months ended September 30, 2019 - expense of $15 million and $88 million, respectively). Stock option plan In the nine months ended September 30, 2020, under CP’s stock option plans, the Company issued 215,943 options at the weighted-average price of $350.65 per share, based on the closing price on the grant date. Pursuant to the employee plan, these options may be exercised upon vesting, which is between 12 months and 48 months after the grant date, and will expire after seven years. Under the fair value method, the fair value of the stock options at grant date was approximately $15 million. The weighted-average fair value assumptions were approximately:
Performance share unit plans During the nine months ended September 30, 2020, the Company issued 97,710 Performance Share Units ("PSUs") with a grant date fair value of approximately $34 million and 10,029 Performance Deferred Share Units ("PDSUs") with a grant date fair value, including value of expected future matching units, of approximately $4 million. PSUs and PDSUs attract dividend equivalents in the form of additional units based on dividends paid on the Company’s Common Shares, and vest approximately three years after the grant date, contingent upon CP’s performance ("performance factor"). The fair value of these PSUs and PDSUs is measured periodically until settlement. Vested PSUs are settled in cash. Vested PDSUs are settled in cash pursuant to the Deferred Share Unit ("DSU") Plan and are eligible for a 25% match if the holder has not exceeded their share ownership requirements, and are paid out only when the holder ceases their employment with CP. The performance period for PSUs and PDSUs issued in the nine months ended September 30, 2020 is January 1, 2020 to December 31, 2022 and the performance factors are Return on Invested Capital ("ROIC"), Total Shareholder Return ("TSR") compared to the S&P/TSX 60 Index, and TSR compared to Class I railways. The performance period for PSUs issued in 2017 was January 1, 2017 to December 31, 2019, and the performance factors for these PSUs were ROIC, TSR compared to the S&P/TSX Capped Industrial Index, and TSR compared to S&P 1500 Road and Rail Index. The resulting payout was 193% of the outstanding units multiplied by the Company's average share price calculated using the last 30 trading days preceding December 31, 2019. In the first quarter of 2020, payouts occurred on the total outstanding awards, including dividends reinvested, totalling $76 million on 121,225 outstanding awards. Deferred share unit plan During the nine months ended September 30, 2020, the Company granted 17,356 DSUs with a grant date fair value of approximately $6 million. DSUs vest over various periods of up to 36 months and are only redeemable for a specified period after employment is terminated. During the nine months ended September 30, 2020, payouts totaling $8 million were made in respect of 25,345 vested DSUs, including dividends reinvested. The expense for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods.
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Contingencies |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
| Contingencies | Contingencies 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 September 30, 2020 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company’s business, financial position or results of operations. Legal proceedings related to Lac-Mégantic rail accident On July 6, 2013, a train carrying petroleum crude oil operated by Montréal Maine and Atlantic Railway (“MMAR”) or a subsidiary, Montréal Maine & Atlantic Canada Co. (“MMAC” and collectively the “MMA Group”), derailed in Lac-Mégantic, Québec. The derailment occurred on a section of railway owned and operated by the MMA Group and while the MMA Group exclusively controlled the train. Following the derailment, MMAC sought court protection in Canada under the Companies’ Creditors Arrangement Act and MMAR filed for bankruptcy in the U.S. Plans of arrangement were approved in both Canada and the U.S. (the “Plans”), providing for the distribution of approximately $440 million amongst those claiming derailment damages. A number of legal proceedings, set out below, were commenced in Canada and the U.S. against CP and others:
On December 11, 2017, the AGQ Action, the Class Action and the Promutuel Action were consolidated. These consolidated claims are currently scheduled for a joint liability trial commencing on or around September 13, 2021, followed by a damages trial, if necessary.
At this stage of the proceedings, any potential responsibility and the quantum of potential losses cannot be determined. Nevertheless, CP denies liability and is vigorously defending these proceedings. 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 CP’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 CP’s best estimate of all probable costs, CP’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” for the three and nine months ended September 30, 2020 was $2 million and $6 million, respectively (three and nine months ended September 30, 2019 - $2 million and $4 million, respectively). Provisions for environmental remediation costs are recorded in “Other long-term liabilities”, except for the current portion which is recorded in “Accounts payable and accrued liabilities”. The total amount provided at September 30, 2020 was $81 million (December 31, 2019 - $77 million). Payments are expected to be made over 10 years through 2029.
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Subsequent Event |
9 Months Ended |
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Sep. 30, 2020 | |
| Subsequent Events [Abstract] | |
| Subsequent Event | Subsequent event On October 15, 2020, CP and OMERS Infrastructure Management Inc. (“OMERS”) entered into a purchase agreement whereby CP will acquire the 83.5 percent ownership of the Detroit River Tunnel Partnership, currently held by certain affiliates of OMERS. CP currently owns the remaining 16.5 percent. The purchase price for the transaction is approximately U.S. $312 million subject to customary closing adjustments. The acquisition is currently expected to close at the end of 2020 and is subject to customary closing conditions, including regulatory approvals.
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Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2020 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of presentation | These unaudited interim Consolidated Financial Statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2019 annual Consolidated Financial Statements and notes included in CP's 2019 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2019 annual Consolidated Financial Statements, except for the newly adopted accounting policy discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year.
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Accounting Changes (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Accounting Standards Update and Change in Accounting Principle [Abstract] | |
| Accounting Changes | Implemented in 2020 Financial Instruments - Credit Losses On January 1, 2020, the Company adopted the new Accounting Standards Update ("ASU") 2016-13, issued by the Financial Accounting Standards Board ("FASB"), and all related amendments under FASB Accounting Standards Codification ("ASC") Topic 326, Financial Instruments - Credit Losses. Using a modified retrospective approach, the Company recognized a cumulative-effect adjustment to its opening retained earnings balance in the period of adoption. Accordingly, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption of ASC 326 as at January 1, 2020 was an increase in the allowance for credit losses of $1 million, with the offsets to "Deferred income taxes" and "Retained earnings" on the Company's Interim Consolidated Balance Sheet. See Note 8 for further discussion of the current period credit loss. Simplification of Financial Disclosures about Guarantors During the second quarter of 2020, the Company early adopted the Securities and Exchange Commission amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities, as specified in Rule 3-10 of Regulation S-X. The amendments simplify disclosure requirements by replacing condensed consolidating financial information (“CCFI”) with summarized financial information and expanded qualitative non-financial disclosures about the guarantees, issuers, and guarantors. This disclosure can be found in the Liquidity and Capital Resources section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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Accounts Receivable, Net (Policies) |
9 Months Ended |
|---|---|
Sep. 30, 2020 | |
| Accounts Receivable, after Allowance for Credit Loss [Abstract] | |
| Allowance for Credit Losses | Accounts receivable from customers are recognized initially at fair value and subsequently measured at amortized cost less allowance for expected credit losses. Losses on accounts receivable are estimated based on historical credit loss experience of receivables with similar risk characteristics. Historical loss experience is adjusted to reflect any management expectations that current or future conditions will differ from conditions that existed for the period over which historical information is evaluated. To determine expected credit losses, customer receivables are disaggregated by credit characteristics, type of customer service, customer line of business, and receivable aging.
|
| Accounts Receivable | Receivables are considered to be in default and are written off against the allowance for credit losses when it is probable that all remaining contractual payments due will not be collected in accordance with the terms of the customer contracts. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered.
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Revenues (Tables) |
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue | The following table disaggregates the Company’s revenues from contracts with customers by major source:
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| Changes in Contract Liabilities | The following table summarizes the changes in contract liabilities:
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Other (Income) Expense (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses |
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Income Taxes (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Income Tax Expense |
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Earnings Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Used in the Earnings Per Share Calculation | The number of shares used in the earnings per share calculations are reconciled as follows:
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Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Accumulated Other Comprehensive Loss (AOCL) by Component |
(1) Amounts are presented net of tax.
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| Amounts in Pension and Post-retirement Defined Benefit Plans Reclassified from AOCL | Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL are as follows:
(1) Impacts "Other components of net periodic benefit recovery" on the Interim Consolidated Statements of Income.
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Accounts Receivable, Net (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable, Allowance for Credit Loss |
(1) Opening balance at January 1, 2020 was restated as described in Note 2
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| Schedule of Accounts Receivable |
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Business Combination (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets Acquired and Liabilities Assumed | The following summarizes the estimated fair values of the acquired assets and liabilities of CMQ U.S. at June 3, 2020:
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Shareholders' Equity (Tables) |
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Activities Under Share Repurchase Program | The following table provides activities under the share repurchase programs:
(2) Includes brokerage fees.
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Pension and Other Benefits (Tables) |
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| Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Periodic Benefit Cost for Defined Benefit Pension Plans and Other Benefits | Net periodic benefit costs for defined benefit pension plans and other benefits included the following components:
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Stock-Based Compensation (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||
| Weighted-Average Fair Value Assumptions | The weighted-average fair value assumptions were approximately:
(5) The Company estimates forfeitures based on past experience. This rate is monitored on a periodic basis.
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Accounting Changes - Impact of ASC 326 Adoption (Details) - CAD ($) $ in Millions |
Sep. 30, 2020 |
Jun. 30, 2020 |
Jan. 01, 2020 |
Dec. 31, 2019 |
|---|---|---|---|---|
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
| Impact of the adoption of ASC 326 | $ (40) | $ (40) | $ (43) | |
| Cumulative Effect, Period of Adoption, Adjustment | Accounting Standards Update 2016-13 | ||||
| New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
| Impact of the adoption of ASC 326 | $ 1 |
Revenues - Contract Liabilities (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Contract with Customer, Liability [Abstract] | ||||
| Opening balance | $ 79 | $ 74 | $ 146 | $ 2 |
| Revenue recognized that was included in the contract liability balance at the beginning of the period | (25) | (8) | (95) | (2) |
| Increase due to consideration received, net of revenue recognized during the period | 5 | 4 | 8 | 70 |
| Closing balance | $ 59 | $ 70 | $ 59 | $ 70 |
Other (Income) Expense - Other Income and Expense (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Other Income and Expenses [Abstract] | ||||
| Foreign exchange (gain) loss on debt and lease liabilities | $ (40) | $ 25 | $ 89 | $ (57) |
| Other foreign exchange losses (gains) | 2 | 2 | (2) | (4) |
| Other | 2 | 2 | 2 | 3 |
| Other (income) expense | $ (36) | $ 29 | $ 89 | $ (58) |
Income Taxes - Summary of Income Tax Expense (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Tax Disclosure [Abstract] | ||||
| Current income tax expense | $ 144 | $ 115 | $ 430 | $ 358 |
| Deferred income tax expense | 45 | 96 | 133 | 116 |
| Income tax expense | $ 189 | $ 211 | $ 563 | $ 474 |
Income Taxes - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Income Tax Disclosure [Abstract] | ||||
| Effective tax rate | 23.97% | 25.43% | 25.52% | 21.06% |
| Effective tax rate, excluding discrete items | 25.00% | 25.11% | 25.00% | 25.50% |
| Foreign exchange (gain) loss on debt and lease liabilities | $ (40) | $ 25 | $ 89 | $ (57) |
| Deferred income tax recovery from rate decrease | $ (88) | |||
Earnings Per Share - Number of Shares Used in the Earnings Per Share Calculations (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Earnings Per Share [Abstract] | ||||
| Weighted-average basic shares outstanding | 135.2 | 138.1 | 135.9 | 139.3 |
| Dilutive effect of stock options | 0.6 | 0.6 | 0.5 | 0.5 |
| Weighted-average diluted shares outstanding | 135.8 | 138.7 | 136.4 | 139.8 |
Earnings Per Share - Narrative (Details) - shares shares in Millions |
9 Months Ended | |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Stock Options | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Number of options excluded from the computation of diluted earnings per share | 0.1 | 0.1 |
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component - Amounts in Pension and Post-retirement Defined Benefit Plans Reclassified from AOCL (Details) - Reclassification out of Accumulated Other Comprehensive Income [Member] - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
| Amortization of prior service costs | $ (1) | $ (1) | $ (1) | $ 0 |
| Recognition of net actuarial loss | 45 | 21 | 135 | 62 |
| Total before income tax | 44 | 20 | 134 | 62 |
| Income tax recovery | (11) | (5) | (35) | (15) |
| Total net of income tax | $ 33 | $ 15 | $ 99 | $ 47 |
Accounts Receivable, Net - Allowance for Credit Loss (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2020 |
|
| Allowance for Credit Loss [Roll Forward] | ||
| Allowance for credit losses, opening balance | $ (40) | $ (43) |
| Current period credit loss provision, net | 0 | 3 |
| Allowance for credit losses, closing balance | (40) | (40) |
| Freight | ||
| Allowance for Credit Loss [Roll Forward] | ||
| Allowance for credit losses, opening balance | (26) | (27) |
| Current period credit loss provision, net | 0 | 1 |
| Allowance for credit losses, closing balance | (26) | (26) |
| Non-freight | ||
| Allowance for Credit Loss [Roll Forward] | ||
| Allowance for credit losses, opening balance | (14) | (16) |
| Current period credit loss provision, net | 0 | 2 |
| Allowance for credit losses, closing balance | $ (14) | $ (14) |
Accounts Receivable, Net - Schedule of Accounts Receivable (Details) - CAD ($) $ in Millions |
Sep. 30, 2020 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|---|---|---|---|
| Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
| Total accounts receivable | $ 880 | ||
| Allowance for credit losses | (40) | $ (40) | $ (43) |
| Total accounts receivable, net | 840 | ||
| Freight | |||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
| Total accounts receivable | 705 | ||
| Allowance for credit losses | (26) | (26) | (27) |
| Total accounts receivable, net | 679 | ||
| Non-freight | |||
| Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
| Total accounts receivable | 175 | ||
| Allowance for credit losses | (14) | $ (14) | $ (16) |
| Total accounts receivable, net | $ 161 |
Business Combination (Details) $ in Millions |
5 Months Ended | |
|---|---|---|
|
Jun. 03, 2020
CAD ($)
|
Jun. 03, 2020
CAD ($)
|
|
| CMQ | ||
| Business Acquisition [Line Items] | ||
| Working capital adjustment | $ 3 | |
| CMQ U.S. | ||
| Business Acquisition [Line Items] | ||
| Goodwill | $ 51 | 51 |
| Intangible assets | $ 27 | 27 |
| Intangible asset amortization periods | 20 years | |
| Cash and cash equivalents | $ 22 | $ 22 |
Business Combination - Schedule of Assets Acquired and Liabilities Assumed (Details) - CMQ U.S. $ in Millions |
Jun. 03, 2020
CAD ($)
|
|---|---|
| Business Acquisition [Line Items] | |
| Cash and cash equivalents | $ 22 |
| Accounts receivables, net | 2 |
| Properties | 54 |
| Intangible assets | 27 |
| Accounts payable and accrued liabilities | (13) |
| Other long-term liabilities | (5) |
| Total identifiable assets and liabilities | 87 |
| Goodwill | 51 |
| Fair value of net assets acquired | 138 |
| Fair value of previously held equity method investment | $ 138 |
Financial Instruments - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
| Schedule of Investments [Line Items] | |||||
| Debt and finance lease liabilities, Carrying value | $ 9,327 | $ 9,327 | $ 8,241 | ||
| Debt and finance lease liabilities, Fair value | 11,860 | 11,860 | $ 10,149 | ||
| Net Investment Hedge | |||||
| Schedule of Investments [Line Items] | |||||
| Gain (loss) on net investment hedge | $ 135 | $ (68) | $ (156) | $ 172 | |
Shareholders' Equity - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 17, 2019 |
Oct. 19, 2018 |
|
| Common Shares repurchased | 1,000,000.0 | 1,600,000 | 2,700,000 | 3,200,000 | |||
| Common Shares repurchased (value) | $ 396 | $ 471 | $ 916 | $ 952 | |||
| Current Normal Course Issuer Bid (NCIB) | |||||||
| Common Shares authorized to be repurchased | 4,800,000 | ||||||
| Common Shares repurchased | 1,044,868 | 2,950,000 | 2,651,582 | ||||
| Common Shares repurchased (value) | $ 396 | $ 1,016 | $ 916 | ||||
| 2018 Normal Course Issuer Bid (NCIB) | |||||||
| Common Shares authorized to be repurchased | 5,680,000 | ||||||
| Common Shares repurchased | 1,519,540 | 3,183,461 | |||||
| Common Shares repurchased (value) | $ 471 | $ 952 | |||||
Shareholders' Equity - Activities Under Share Repurchase Program (Detail) - CAD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Number of Common Shares repurchased | 1,000,000.0 | 1,600,000 | 2,700,000 | 3,200,000 | |
| Amount of repurchase (in millions of Canadian dollars) | $ 396 | $ 471 | $ 916 | $ 952 | |
| Current Normal Course Issuer Bid (NCIB) | |||||
| Number of Common Shares repurchased | 1,044,868 | 2,651,582 | 2,950,000 | ||
| Weighted-average price per share | $ 379.42 | $ 345.56 | |||
| Amount of repurchase (in millions of Canadian dollars) | $ 396 | $ 916 | $ 1,016 | ||
| 2018 Normal Course Issuer Bid (NCIB) | |||||
| Number of Common Shares repurchased | 1,519,540 | 3,183,461 | |||
| Weighted-average price per share | $ 310.36 | $ 299.09 | |||
| Amount of repurchase (in millions of Canadian dollars) | $ 471 | $ 952 | |||
Pension and Other Benefits - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Defined Benefit Pension Plan | ||||
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Contributions made by the Company | $ 9 | $ 17 | $ 24 | $ 40 |
Stock-Based Compensation - Weighted-Average Fair Value Assumptions (Details) - CAD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Jul. 21, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Dividends declared per share | $ 0.9500 | $ 0.8300 | $ 2.6100 | $ 2.3100 | |
| Stock Options | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Expected option life (years) | 4 years 9 months | ||||
| Risk-free interest rate | 1.29% | ||||
| Expected stock price volatility | 23.11% | ||||
| Expected annual dividends per share | $ 3.8000 | $ 3.3200 | |||
| Estimated forfeiture rate | 4.40% | ||||
| Weighted-average grant date fair value per option granted during the period | $ 68.86 | ||||
| Dividends declared per share | $ 0.9500 | ||||
Contingencies - Environmental Liabilities (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
| Site Contingency [Line Items] | |||||
| Total amount provided for provisions for environmental remediation costs | $ 81 | $ 81 | $ 77 | ||
| Term for expected payments to be made | 10 years | ||||
| Purchased services and other | |||||
| Site Contingency [Line Items] | |||||
| Environmental remediation expense | $ 2 | $ 2 | $ 6 | $ 4 | |
Subsequent Event (Details) - Subsequent Event $ in Millions |
Oct. 15, 2020
USD ($)
|
|---|---|
| Subsequent Event [Line Items] | |
| Detroit River Tunnel Partnership, Current ownership percentage | 16.50% |
| Forecast | |
| Subsequent Event [Line Items] | |
| Detroit River Tunnel Partnership, Percentage of voting interests to be acquired | 83.50% |
| Purchase price for transaction | $ 312 |