CANADIAN PACIFIC RAILWAY 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File Number 001-01342
Canadian Pacific Railway Limited
(Exact name of registrant as specified in its charter)
Canada 98-0355078
(State or Other Jurisdiction
of Incorporation or Organization)
 (IRS Employer
Identification No.)
  
7550 Ogden Dale Road S.E. 
CalgaryABT2C 4X9
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (403) 319-7000
Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class Trading Symbol(s)  Name of Each Exchange on which Registered 
Common Shares, without par value, of
Canadian Pacific Railway Limited
CP New York Stock Exchange
Toronto Stock Exchange
Perpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway CompanyCP/40New York Stock Exchange
BC87London Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes  þ    No o

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 þ
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging Growth Company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
As of the close of business on July 27, 2021, there were 666,847,886 of the registrant’s Common Shares issued and outstanding.




CANADIAN PACIFIC RAILWAY LIMITED
FORM 10-Q
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Page
Item 1.Financial Statements:
Interim Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2021 and 2020
Interim Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended June 30, 2021 and 2020
Interim Consolidated Balance Sheets
As at June 30, 2021 and December 31, 2020
Interim Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30, 2021 and 2020
Interim Consolidated Statements of Changes in Shareholders' Equity
For the Three and Six Months Ended June 30, 2021 and 2020
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
Liquidity and Capital Resources
Share Capital
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




PART I

ITEM 1. FINANCIAL STATEMENTS

INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars, except share and per share data)2021202020212020
Revenues (Note 3)
Freight$2,008 $1,752 $3,926 $3,752 
Non-freight46 40 87 83 
Total revenues2,054 1,792 4,013 3,835 
Operating expenses
Compensation and benefits379 347 784 745 
Fuel218 131 424 343 
Materials54 50 113 109 
Equipment rents28 33 61 69 
Depreciation and amortization200 195 402 387 
Purchased services and other (Note 9, 10)
355 266 629 578 
Total operating expenses1,234 1,022 2,413 2,231 
Operating income820 770 1,600 1,604 
Less:
Other expense (income) (Note 4, 10)157 (86)129 125 
Merger termination fee (Note 10)
(845) (845) 
Other components of net periodic benefit recovery (Note 14)(96)(86)(191)(171)
Net interest expense101 118 211 232 
Income before income tax expense1,503 824 2,296 1,418 
Income tax expense (Note 5)
257 189 448 374 
Net income$1,246 $635 $1,848 $1,044 
Earnings per share (Note 1, 6)
Basic earnings per share$1.87 $0.94 $2.77 $1.53 
Diluted earnings per share$1.86 $0.93 $2.76 $1.53 
Weighted-average number of shares (millions) (Note 1, 6)
Basic666.7 678.2 666.6 680.8 
Diluted669.9 680.5 669.8 683.1 
Dividends declared per share (Note 1)$0.190 $0.166 0.380$0.332 
See Notes to Interim Consolidated Financial Statements.
2


INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Net income$1,246 $635 $1,848 $1,044 
Net gain (loss) in foreign currency translation adjustments, net of hedging activities10 31 20 (34)
Change in derivatives designated as cash flow hedges(97)1 (72)3 
Change in pension and post-retirement defined benefit plans52 45 105 90 
Other comprehensive (loss) income before income taxes(35)77 53 59 
Income tax (expense) recovery on above items (47)(30)13 
Other comprehensive (loss) income (Note 7)(35)30 23 72 
Comprehensive income$1,211 $665 $1,871 $1,116 
See Notes to Interim Consolidated Financial Statements.
3


INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
June 30December 31
(in millions of Canadian dollars)20212020
Assets
Current assets
Cash and cash equivalents $892 $147 
Accounts receivable, net (Note 8)
755 825 
Materials and supplies218 208 
Other current assets122 141 
1,987 1,321 
Investments197 199 
Properties20,639 20,422 
Goodwill and intangible assets366 366 
Pension asset1,119 894 
Other assets396 438 
Total assets$24,704 $23,640 
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities$1,945 $1,467 
Long-term debt maturing within one year (Note 11, 12)
872 1,186 
2,817 2,653 
Pension and other benefit liabilities 823 832 
Other long-term liabilities525 585 
Long-term debt (Note 11, 12)
7,850 8,585 
Deferred income taxes3,724 3,666 
Total liabilities15,739 16,321 
Shareholders’ equity
Share capital 2,003 1,983 
Additional paid-in capital63 55 
Accumulated other comprehensive loss (Note 7)(2,791)(2,814)
Retained earnings9,690 8,095 
8,965 7,319 
Total liabilities and shareholders’ equity$24,704 $23,640 
See Contingencies (Note 16).
See Notes to Interim Consolidated Financial Statements.
4


INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Operating activities
Net income$1,246 $635 $1,848 $1,044 
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization200 195 402 387 
Deferred income tax expense (Note 5)9 49 60 88 
Pension recovery and funding (Note 14)(65)(62)(126)(127)
Foreign exchange (gain) loss on debt and lease liabilities (Note 4)(52)(86)(85)129 
Other operating activities, net52 27 (36)(45)
Change in non-cash working capital balances related to operations564 77 473 (152)
Cash provided by operating activities1,954 835 2,536 1,324 
Investing activities
Additions to properties(416)(502)(739)(857)
Investment in Central Maine & Québec Railway 19  19 
Proceeds from sale of properties and other assets12 5 49 7 
Other(1)10 (1)1 
Cash used in investing activities(405)(468)(691)(830)
Financing activities
Dividends paid(126)(112)(253)(226)
Issuance of CP Common Shares8 5 16 29 
Purchase of CP Common Shares (Note 13)
 (44) (545)
Issuance of long-term debt, excluding commercial paper
 (1) 958 
Repayment of long-term debt, excluding commercial paper(10)(10)(31)(25)
Net repayment of commercial paper (Note 11)(872)(20)(779)(573)
Net (decrease) increase in short-term borrowings (140) 5 
Acquisition-related financing fees (Note 10)(12) (45) 
Other(4) (4)11 
Cash used in financing activities(1,016)(322)(1,096)(366)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents(1)(15)(4)16 
Cash position
Increase in cash and cash equivalents532 30 745 144 
Cash and cash equivalents at beginning of period360 247 147 133 
Cash and cash equivalents at end of period$892 $277 $892 $277 
Supplemental disclosures of cash flow information:
Income taxes paid $139 $5 $272 $144 
Interest paid$57 $63 $212 $220 
See Notes to Interim Consolidated Financial Statements.
5


INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited)
For the three months ended June 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 April 1, 2021666.6 $1,993 $58 $(2,756)$8,571 $7,866 
Net income    1,246 1,246 
Other comprehensive loss (Note 7)   (35) (35)
Dividends declared ($0.190 per share) (Note 1)    (127)(127)
Effect of stock-based compensation expense  7   7 
Shares issued under stock option plan0.2 10 (2)  8 
Balance at June 30, 2021666.8 $2,003 $63 $(2,791)$9,690 $8,965 
Balance at April 1, 2020678.1 $1,985 $51 $(2,480)$7,399 $6,955 
Net income—    635 635 
Other comprehensive income (Note 7)—   30  30 
Dividends declared ($0.166 per share) (Note 1)—    (113)(113)
Effect of stock-based compensation expense—  4   4 
CP Common Shares repurchased (Note 13)
(0.7)(3)  (49)(52)
Shares issued under stock option plan0.2 8 (2)  6 
Balance at June 30, 2020677.6 $1,990 $53 $(2,450)$7,872 $7,465 
For the six months ended June 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 January 1, 2021666.3 $1,983 $55 $(2,814)$8,095 $7,319 
Net income    1,848 1,848 
Other comprehensive income (Note 7)   23  23 
Dividends declared ($0.380 per share) (Note 1)    (253)(253)
Effect of stock-based compensation expense  12   12 
Shares issued under stock option plan0.5 20 (4)  16 
Balance at June 30, 2021666.8 $2,003 $63 $(2,791)$9,690 $8,965 
Balance at January 1, 2020685.0 $1,993 $48 $(2,522)$7,549 $7,068 
Net income—    1,044 1,044 
Other comprehensive income (Note 7)—   72  72 
Dividends declared ($0.332 per share) (Note 1)—    (225)(225)
Effect of stock-based compensation expense—  9   9 
CP Common Shares repurchased (Note 13)
(8.4)(24)  (496)(520)
Shares issued under stock option plan1.0 21 (4)  17 
Balance at June 30, 2020677.6 $1,990 $53 $(2,450)$7,872 $7,465 
See Notes to Interim Consolidated Financial Statements.
6


NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(unaudited)

1    Basis of presentation

These unaudited Interim Consolidated Financial Statements ("Interim Consolidated Financial Statements") of Canadian Pacific Railway Limited ("CPRL") and its subsidiaries (collectively, “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 2020 annual Consolidated Financial Statements and notes included in CP's 2020 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2020 annual Consolidated Financial Statements.

On April 21, 2021, the Company's shareholders approved a five-for-one share split of the Company's issued and outstanding Common Shares. On May 13, 2021, the Company's shareholders of record as of May 5, 2021 received four additional shares for every Common Share held. Ex-distribution trading in the Company’s Common Shares on a split-adjusted basis commenced on May 14, 2021. Proportional adjustments were also made to outstanding awards under the Company's stock-based compensation plans in order to reflect the share split. All outstanding Common Shares, stock-based compensation awards, and per share amounts herein have been retrospectively adjusted to reflect the share split.

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 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.

2    Accounting changes

Accounting pronouncements that became effective during the period covered by the Interim Consolidated Financial Statements did not have a material impact on the Company's Interim Consolidated Balance Sheets, Interim Consolidated Statements of Income, or Interim Consolidated Statements of Cash Flows. Likewise, accounting pronouncements issued, but not effective until after June 30, 2021, are not expected to have a material impact on the Company's Consolidated Balance Sheets, Consolidated Statements of Income, or Consolidated Statements of Cash Flows.

7


3    Revenues

The following table disaggregates the Company’s revenues from contracts with customers by major source:

For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Freight
Grain$444 $446 $892 $864 
Coal170 131 333 281 
Potash134 146 235 258 
Fertilizers and sulphur78 77 155 147 
Forest products90 81 170 159 
Energy, chemicals and plastics369 341 757 832 
Metals, minerals and consumer products180 133 339 322 
Automotive98 34 206 121 
Intermodal445 363 839 768 
Total freight revenues2,008 1,752 3,926 3,752 
Non-freight excluding leasing revenues26 25 50 54 
Revenues from contracts with customers2,034 1,777 3,976 3,806 
Leasing revenues20 15 37 29 
Total revenues$2,054 $1,792 $4,013 $3,835 

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:
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Opening balance$114 $112 $61 $146 
Revenue recognized that was included in the contract liability balance at the beginning of the period(19)(37)(23)(73)
Increase due to consideration received, net of revenue recognized during the period150 4 207 6 
Closing balance$245 $79 $245 $79 

4    Other expense (income)
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Foreign exchange (gain) loss on debt and lease liabilities$(52)$(86)$(85)$129 
Other foreign exchange (gains) losses(3)1 (2)(4)
Acquisition-related costs (Note 10)209  212  
Other3 (1)4  
Other expense (income)$157 $(86)$129 $125 

8


5    Income taxes
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Current income tax expense$248 $140 $388 $286 
Deferred income tax expense 9 49 60 88 
Income tax expense$257 $189 $448 $374 

The effective tax rates including discrete items for the three and six months ended June 30, 2021 were 17.10% and 19.50%, respectively, compared to 22.98% and 26.38%, respectively for the same periods of 2020.

For the three months ended June 30, 2021, the effective tax rate was 24.60%, excluding the discrete items of the merger termination fee of $845 million (U.S. $700 million) received in connection with the KCS' termination of the Merger Agreement, foreign exchange ("FX") gain of $52 million on debt and lease liabilities, and acquisition-related costs of $308 million.

For the three months ended June 30, 2020, the effective tax rate was 25.00%, excluding the discrete item of the FX gain of $86 million on debt and lease liabilities.

For the six months ended June 30, 2021, the effective tax rate was 24.60%, excluding the discrete items of the merger termination fee of $845 million (U.S. $700 million), FX gain of $85 million on debt and lease liabilities, and acquisition-related costs of $344 million.

For the six months ended June 30, 2020, the effective tax rate was 25.00%, excluding the discrete item of the FX loss of $129 million on debt and lease liabilities.

6    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 June 30For the six months ended June 30
(in millions)2021202020212020
Weighted-average basic shares outstanding666.7 678.2 666.6 680.8 
Dilutive effect of stock options3.2 2.3 3.2 2.3 
Weighted-average diluted shares outstanding669.9 680.5 669.8 683.1 

For the three and six months ended June 30, 2021, there were no options excluded from the computation of diluted earnings per share (three and six months June 30, 2020 - 1.1 million and 0.9 million, respectively).

9


7    Changes in Accumulated other comprehensive loss ("AOCL") by component
For the three months ended June 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, April 1, 2021$112 $(29)$(2,839)$(2,756)
Other comprehensive loss before reclassifications(2)(74) (76)
Amounts reclassified from accumulated other comprehensive loss 2 39 41 
Net other comprehensive (loss) income(2)(72)39 (35)
Closing balance, June 30, 2021$110 $(101)$(2,800)$(2,791)
Opening balance, April 1, 2020$119 $(52)$(2,547)$(2,480)
Other comprehensive loss before reclassifications(3)(2) (5)
Amounts reclassified from accumulated other comprehensive loss 2 33 35 
Net other comprehensive (loss) income(3) 33 30 
Closing balance, June 30, 2020$116 $(52)$(2,514)$(2,450)
(1)Amounts are presented net of tax.

For the six months ended June 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, 2021$112 $(48)$(2,878)$(2,814)
Other comprehensive loss before reclassifications(2)(57) (59)
Amounts reclassified from accumulated other comprehensive loss 4 78 82 
Net other comprehensive (loss) income(2)(53)78 23 
Closing balance, June 30, 2021$110 $(101)$(2,800)$(2,791)
Opening balance, January 1, 2020$112 $(54)$(2,580)$(2,522)
Other comprehensive income (loss) before reclassifications4 (2) 2 
Amounts reclassified from accumulated other comprehensive loss 4 66 70 
Net other comprehensive income4 2 66 72 
Closing balance, June 30, 2020$116 $(52)$(2,514)$(2,450)
(1)Amounts are presented net of tax.

Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL are as follows:
For the three months ended June 30For the six months ended June 30
(in millions of Canadian dollars)2021202020212020
Recognition of net actuarial loss(1)
$52 $45 $105 $90 
Income tax recovery(13)(12)(27)(24)
Total net of income tax$39 $33 $78 $66 
(1)Impacts "Other components of net periodic benefit recovery" on the Interim Consolidated Statements of Income.

10


8    Accounts receivable, net

As at June 30, 2021As at December 31, 2020
(in millions of Canadian dollars)FreightNon-freightTotalFreightNon-freightTotal
Total accounts receivable$614 $179 $793 $662 $203 $865 
Allowance for credit losses(23)(15)(38)(25)(15)(40)
Total accounts receivable, net$591 $164 $755 $637 $188 $825 

For the three months ended June 30, 2021For the three months ended June 30, 2020
(in millions of Canadian dollars)FreightNon-freightTotalFreightNon-freightTotal
Allowance for credit losses, opening balance$(24)$(15)$(39)$(27)$(14)$(41)
Current period credit loss provision, net1  1 1  1 
Allowance for credit losses, closing balance$(23)$(15)$(38)$(26)$(14)$(40)

For the six months ended June 30, 2021For the six months ended June 30, 2020
(in millions of Canadian dollars)FreightNon-freightTotalFreightNon-freightTotal
Allowance for credit losses, opening balance$(25)$(15)$(40)$(27)$(16)$(43)
Current period credit loss provision, net2