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 September 30, 2024

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 Kansas City 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., Calgary, Alberta,
Canada	T2C 4X9
(Address of principal executive offices)	(Zip Code)

(403) 319-7000

Registrant’s Telephone Number, Including Area Code:

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 Kansas City Limited		CP	New York Stock Exchange
Common Shares, without par value, of Canadian Pacific Kansas City Limited		CP	Toronto Stock Exchange
Perpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway Company		CP40	New York Stock Exchange
Perpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway Company		BC87	London 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 October 22, 2024, there were 933,344,882 of the registrant’s Common Shares issued and outstanding.

CANADIAN PACIFIC KANSAS CITY LIMITED

FORM 10-Q

TABLE OF CONTENTS

	PART I - FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements:
	Interim Consolidated Statements of Income (Unaudited)	2
	For the Three and Nine Months Ended September 30, 2024 and 2023
	Interim Consolidated Statements of Comprehensive Income (Unaudited)	3
	For the Three and Nine Months Ended September 30, 2024 and 2023
	Interim Consolidated Balance Sheets (Unaudited)	4
	As at September 30, 2024 and December 31, 2023
	Interim Consolidated Statements of Cash Flows (Unaudited)	5
	For the Three and Nine Months Ended September 30, 2024 and 2023
	Interim Consolidated Statements of Changes in Equity (Unaudited)	6
	For the Three and Nine Months Ended September 30, 2024 and 2023
	Notes to Interim Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
	Executive Summary	20
	Performance Indicators	21
	Financial Highlights	22
	Results of Operations	22
	Liquidity and Capital Resources	33
	Share Capital	37
	Non-GAAP Measures	37
	Critical Accounting Estimates	42
	Forward-Looking Statements	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	45
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signature	48

PART I

ITEM 1. FINANCIAL STATEMENTS

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	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)	2024		2023		2024		2023
Revenues (Note 3)
Freight	$	3,461	$	3,266	$	10,422	$	8,584
Non-freight	88		73		250		195
Total revenues	3,549		3,339		10,672		8,779
Operating expenses
Compensation and benefits (Note 8)	644		598		1,946		1,695
Fuel	419		430		1,343		1,153
Materials (Note 8)	99		90		290		260
Equipment rents	89		91		253		201
Depreciation and amortization (Note 8)	472		451		1,412		1,086
Purchased services and other (Note 8)	623		506		1,809		1,438
Total operating expenses	2,346		2,166		7,053		5,833
Operating income	1,203		1,173		3,619		2,946
Less:
Equity earnings of Kansas City Southern (Note 8, 9)	—		—		—		(230)
Other expense (income) (Note 8, 10)	1		13		(41)		36
Other components of net periodic benefit recovery (Note 12)	(89)		(85)		(265)		(254)
Net interest expense (Note 8)	192		207		598		565
Remeasurement loss of Kansas City Southern (Note 8)	—		—		—		7,175
Income (loss) before income tax expense (recovery)	1,099		1,038		3,327		(4,346)
Less:
Current income tax expense (Note 4)	257		255		773		674
Deferred income tax expense (recovery) (Note 4, 8)	5		3		40		(7,925)
Income tax expense (recovery) (Note 4)	262		258		813		(7,251)
Net income	$	837	$	780	$	2,514	$	2,905
Less: Net (loss) income attributable to non-controlling interest (Note 8)	—		—		(3)		1
Net income attributable to controlling shareholders	$	837	$	780	$	2,517	$	2,904
Earnings per share (Note 5)
Basic earnings per share	$	0.90	$	0.84	$	2.70	$	3.12
Diluted earnings per share	$	0.90	$	0.84	$	2.69	$	3.11
Weighted-average number of shares (millions) (Note 5)
Basic	933.2		931.5		932.8		931.1
Diluted	935.3		933.9		934.8		933.7
Dividends declared per share	$	0.19	$	0.19	$	0.57	$	0.57

See Notes to Interim Consolidated Financial Statements.

2

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	For the three months ended September 30				For the nine months ended September 30
(in millions of Canadian dollars)	2024		2023		2024		2023
Net income	$	837	$	780	$	2,514	$	2,905
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	(423)		605		577		(33)
Change in derivatives designated as cash flow hedges	1		2		5		5
Change in pension and post-retirement defined benefit plans	12		8		35		13
Other comprehensive (loss) income from equity investees	(5)		—		(7)		7
Other comprehensive (loss) income before income taxes	(415)		615		610		(8)
Income tax (expense) recovery	(7)		15		(1)		(5)
Other comprehensive (loss) income (Note 6)	(422)		630		609		(13)
Comprehensive income	$	415	$	1,410	$	3,123	$	2,892
Comprehensive (loss) income attributable to non-controlling interest (Note 6)	(15)		20		16		13
Comprehensive income attributable to controlling shareholders	$	430	$	1,390	$	3,107	$	2,879

See Notes to Interim Consolidated Financial Statements.

3

INTERIM CONSOLIDATED BALANCE SHEETS AS AT

(unaudited)

	September 30		December 31
(in millions of Canadian dollars)	2024		2023
Assets
Current assets
Cash and cash equivalents	$	463	$	464
Accounts receivable, net (Note 7)	1,941		1,887
Materials and supplies	407		400
Other current assets	261		251
	3,072		3,002
Investments	555		533
Properties	53,242		51,744
Goodwill (Note 8)	18,160		17,729
Intangible assets	2,972		2,974
Pension asset	3,604		3,338
Other assets	620		582
Total assets	$	82,225	$	79,902
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities	$	2,594	$	2,567
Long-term debt maturing within one year (Note 10, 11)	3,204		3,143
	5,798		5,710
Pension and other benefit liabilities	580		581
Other long-term liabilities	817		797
Long-term debt (Note 10, 11)	18,710		19,351
Deferred income taxes	11,240		11,052
Total liabilities	37,145		37,491
Shareholders’ equity
Share capital	25,672		25,602
Additional paid-in capital	94		88
Accumulated other comprehensive loss (Note 6)	(28)		(618)
Retained earnings	18,405		16,420
	44,143		41,492
Non-controlling interest	937		919
Total equity	45,080		42,411
Total liabilities and equity	$	82,225	$	79,902

See Contingencies (Note 14).

See Notes to Interim Consolidated Financial Statements.

4

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the three months ended September 30				For the nine months ended September 30
(in millions of Canadian dollars)	2024		2023		2024		2023
Operating activities
Net income	$	837	$	780	$	2,514	$	2,905
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization	472		451		1,412		1,086
Deferred income tax expense (recovery) (Note 4)	5		3		40		(7,925)
Pension recovery and funding (Note 12)	(79)		(76)		(230)		(231)
Equity earnings of Kansas City Southern (Note 8, 9)	—		—		—		(230)
Remeasurement loss of Kansas City Southern (Note 8)	—		—		—		7,175
Dividend from Kansas City Southern (Note 9)	—		—		—		300
Settlement of Mexican taxes (Note 4)	(2)		(75)		(2)		(75)
Settlement of foreign currency forward contract (Note 11)	—		—		(65)		—
Other operating activities, net	59		11		(9)		(8)
Changes in non-cash working capital balances related to operations	(20)		(67)		(95)		(196)
Net cash provided by operating activities	1,272		1,027		3,565		2,801
Investing activities
Additions to properties	(748)		(733)		(2,083)		(1,767)
Additions to Meridian Speedway properties	(9)		(19)		(29)		(27)
Proceeds from sale of properties and other assets	9		12		19		28
Cash acquired on control of Kansas City Southern (Note 8)	—		—		—		298
Investment in government securities	—		—		—		(267)
Other investing activities, net	(12)		(2)		9		(26)
Net cash used in investing activities	(760)		(742)		(2,084)		(1,761)
Financing activities
Dividends paid	(177)		(177)		(532)		(530)
Issuance of Common Shares	13		13		55		50
Repayment of long-term debt, excluding commercial paper (Note 10)	(89)		(12)		(309)		(1,108)
Net (repayment) issuance of commercial paper (Note 10)	(343)		(147)		(705)		403
Acquisition-related financing fees	—		(2)		—		(17)
Other financing activities, net	—		1		—		—
Net cash used in financing activities	(596)		(324)		(1,491)		(1,202)
Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents	(10)		8		9		5
Cash position
Net decrease in cash and cash equivalents	(94)		(31)		(1)		(157)
Cash and cash equivalents at beginning of period	557		325		464		451
Cash and cash equivalents at end of period	$	463	$	294	$	463	$	294
Supplemental cash flow information
Income taxes paid	$	173	$	205	$	724	$	648
Interest paid	$	157	$	152	$	563	$	570

See Notes to Interim Consolidated Financial Statements.

5

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

	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 income (loss)		Retained earnings		Total shareholders’ equity		Non-controlling interest		Total equity
Balance as at July 1, 2024		933.1	$	25,655	$	93	$	379	$	17,745	$	43,872	$	951	$	44,823
Net income		—	—		—		—		837		837		—		837
Contribution from non-controlling interest		—	—		—		—		—		—		1		1
Other comprehensive loss (Note 6)		—	—		—		(407)		—		(407)		(15)		(422)
Dividends declared ($0.19 per share)		—	—		—		—		(177)		(177)				(177)
Effect of stock-based compensation expense		—	—		4		—		—		4		—		4
Shares issued under stock option plan		0.2	17		(3)		—		—		14		—		14
Balance as at September 30, 2024		933.3	$	25,672	$	94	$	(28)	$	18,405	$	44,143	$	937	$	45,080
Balance as at July 1, 2023		931.4	$	25,563	$	88	$	(544)	$	14,972	$	40,079	$	925	$	41,004
Net income		—	—		—		—		780		780		—		780
Other comprehensive income (Note 6)		—	—		—		610		—		610		20		630
Dividends declared ($0.19 per share)		—	—		—		—		(177)		(177)		—		(177)
Effect of stock-based compensation expense		—	—		5		—		—		5		—		5
Shares issued under stock option plan		0.3	16		(3)		—		—		13		—		13
Balance as at September 30, 2023		931.7	$	25,579	$	90	$	66	$	15,575	$	41,310	$	945	$	42,255

	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 income (loss)		Retained earnings		Total shareholders’ equity		Non-controlling interest		Total equity
Balance at January 1, 2024		932.1	$	25,602	$	88	$	(618)	$	16,420	$	41,492	$	919	$	42,411
Net income (loss)		—	—		—		—		2,517		2,517		(3)		2,514
Contribution from non-controlling interest		—	—		—		—		—		—		2		2
Other comprehensive income (Note 6)		—	—		—		590		—		590		19		609
Dividends declared ($0.57 per share)		—	—		—				(532)		(532)		—		(532)
Effect of stock-based compensation expense		—	—		20		—		—		20		—		20
Shares issued under stock option plan		1.2	70		(14)		—		—		56		—		56
Balance as at September 30, 2024		933.3	$	25,672	$	94	$	(28)	$	18,405	$	44,143	$	937	$	45,080
Balance as at January 1, 2023		930.5	$	25,516	$	78	$	91	$	13,201	$	38,886	$	—	$	38,886
Net income		—	—		—		—		2,904		2,904		1		2,905
Other comprehensive (loss) income (Note 6)		—	—		—		(25)		—		(25)		12		(13)
Dividends declared ($0.57 per share)		—	—		—		—		(530)		(530)		—		(530)
Effect of stock-based compensation expense		—	—		24		—		—		24		—		24
Shares issued under stock option plan		1.2	63		(12)		—		—		51		—		51
Non-controlling interest in connection with business acquisition		—	—		—		—		—		—		932		932
Balance as at September 30, 2023		931.7	$	25,579	$	90	$	66	$	15,575	$	41,310	$	945	$	42,255

See Notes to Interim Consolidated Financial Statements.

6

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(unaudited)

1    Description of business and basis of presentation

Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning Canada, the United States ("U.S."), and Mexico. CPKC provides rail and intermodal transportation services over a network of approximately 20,000 miles, serving principal business centres across Canada, the U.S., and Mexico. The Company transports bulk commodities, merchandise, and intermodal freight. CPKC's Common Shares trade on the Toronto Stock Exchange and New York Stock Exchange under the symbol "CP".

On April 14, 2023, Canadian Pacific Railway Limited ("CPRL") assumed control of Kansas City Southern ("KCS") and changed its name to Canadian Pacific Kansas City Limited. These unaudited interim consolidated financial statements as at and for the three and nine months ended September 30, 2024 ("Interim Consolidated Financial Statements") include KCS as a consolidated subsidiary from April 14, 2023. For the period beginning on January 1, 2023 and ending on April 13, 2023, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment (see Notes 8 and 9).

These Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). They do not include all of the information required for a complete set of annual financial statements prepared in accordance with GAAP and should be read in conjunction with the Company's audited consolidated financial statements as at and for the year ended December 31, 2023 ("last annual financial statements"). Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and results of operations since the last annual financial statements. These Interim Consolidated Financial Statements have been prepared using the same significant accounting policies used in the last annual financial statements, except for the adoption of new standards, where applicable (see Note 2). Amounts are stated in Canadian dollars unless otherwise noted.

The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results.

2    Accounting changes

Recently adopted accounting standards

The accounting standards that have become effective during the three and nine months ended September 30, 2024 did not have a material impact on the Interim Consolidated Financial Statements.

Accounting standards not yet adopted

Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted.

7

3    Revenues

The following table presents disaggregated information about the Company’s revenues from contracts with customers by major source:

	For the three months ended September 30				For the nine months ended September 30
(in millions of Canadian dollars)	2024		2023		2024		2023
Grain	$	668	$	600	$	2,063	$	1,652
Coal	248		229		693		603
Potash	144		133		461		409
Fertilizers and sulphur	91		91		298		276
Forest products	198		199		603		489
Energy, chemicals and plastics	712		643		2,109		1,584
Metals, minerals and consumer products	443		455		1,347		1,128
Automotive	333		266		956		648
Intermodal	624		650		1,892		1,795
Total freight revenues	3,461		3,266		10,422		8,584
Non-freight excluding leasing revenues	42		39		148		105
Revenues from contracts with customers	3,503		3,305		10,570		8,689
Leasing revenues	46		34		102		90
Total revenues	$	3,549	$	3,339	$	10,672	$	8,779

4    Income taxes

During the nine months ended September 30, 2024, legislation was enacted to decrease the Arkansas state corporate income tax rate. As a result of this change, the Company recorded a deferred income tax recovery of $3 million related to the revaluation of deferred income tax balances.

During the three and nine months ended September 30, 2023, legislation was enacted to decrease the Iowa and Arkansas state corporate income tax rates. As a result of these changes, the Company recorded a deferred income tax recovery of $14 million related to the revaluation of deferred income tax balances.

The effective tax rates including discrete items for the three and nine months ended September 30, 2024 were 23.88% and 24.44%, respectively, compared to 24.88% and 166.83%, respectively, for the same periods of 2023.

For the three months ended September 30, 2024, the effective tax rate was 24.24%, excluding the discrete items of amortization of business acquisition fair value adjustments of $90 million, acquisition-related costs incurred by CPKC of $36 million, and adjustments to provisions and settlements of Mexican taxes of $7 million recovery recognized in "Compensation and benefits".

For the three months ended September 30, 2023, the effective tax rate was 24.96%, excluding the discrete items of amortization of business acquisition fair value adjustments of $87 million, acquisition-related costs incurred by CPKC of $24 million, a tax settlement with the Servicio de Administración Tributaria ("SAT”) (Mexican tax authority) in relation to taxation years for which audits have closed and an estimated reserve for potential future audit settlements totaling $15 million, and a deferred income tax recovery of $14 million on state corporate income tax rate changes as mentioned above.

For the nine months ended September 30, 2024, the effective tax rate was 24.75%, excluding the discrete items of amortization of business acquisition fair value adjustments of $264 million, acquisition-related costs incurred by CPKC of $90 million, adjustments to provisions and settlements of Mexican taxes of $3 million expense recognized in "Compensation and benefits", and a deferred income tax recovery of $3 million on the Arkansas state corporate income tax rate change.

For the nine months ended September 30, 2023, the effective tax rate was 24.91%, excluding the discrete items of the reversal of the deferred income tax liability on the outside basis difference of the investment in KCS of $7,832 million upon acquiring control of KCS, remeasurement loss of KCS of $7,175 million, the equity earnings of KCS of $230 million, amortization of business acquisition fair value adjustments of $162 million, acquisition-related costs incurred by CPKC of $158 million, revaluation of deferred income tax balances on unitary state apportionment changes of $51 million, an outside basis deferred income tax recovery of $23 million arising from the difference between the carrying amount of CPKC's investment in KCS for financial reporting and the underlying tax basis of this investment, a tax settlement with the SAT in relation to taxation years for

8

which audits have closed and an estimated settlement for potential future audit settlements totaling $15 million, and a deferred income tax recovery of $14 million on state corporate income tax rate changes as mentioned above.

See Note 8 for information regarding the KCS acquisition and Note 9 for information regarding the investment in KCS.

Mexican Tax Audits

There are certain Mexican subsidiaries with ongoing audits for the years 2016-2019 and 2021. As at September 30, 2024, the Company believes that it has recorded sufficient income tax reserves with respect to these income tax examinations.

Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") closed audit examinations with the SAT for the tax years 2016-2020 in September 2023. The audit examinations were for corporate income tax and value added tax (“VAT”). The settlement of these audits resulted in a payment of $75 million.

2014 Tax Assessment

CPKCM's 2014 Tax Assessment is currently in litigation before the Federal Collegiate Circuit Courts. For further detail, please see Note 14.

5    Earnings per share

	For the three months ended September 30				For the nine months ended September 30
(in millions, except per share data)	2024		2023		2024		2023
Net income attributable to controlling shareholders	$	837	$	780	$	2,517	$	2,904
Weighted-average basic shares outstanding	933.2		931.5		932.8		931.1
Dilutive effect of stock options	2.1		2.4		2.0		2.6
Weighted-average diluted shares outstanding	935.3		933.9		934.8		933.7
Earnings per share - basic	$	0.90	$	0.84	$	2.70	$	3.12
Earnings per share - diluted	$	0.90	$	0.84	$	2.69	$	3.11

For the three and nine months ended September 30, 2024, there were 0.5 million and 0.5 million stock options, respectively, excluded from the computation of diluted earnings per share because their effects were not dilutive (three and nine months ended September 30, 2023 - 0.3 million and 0.3 million, respectively).

9

6    Changes in Accumulated other comprehensive loss ("AOCL") by component

Changes in AOCL attributable to controlling shareholders, net of tax, by component are as follows:

	For the three months ended September 30
(in millions of Canadian dollars)	Foreign currency net of hedging activities		Derivatives		Pension and post- retirement defined benefit plans		Equity accounted investments		Total
Opening balance, July 1, 2024	$	1,816	$	8	$	(1,446)	$	1	$	379
Other comprehensive loss before reclassifications	(412)		—		—		(5)		(417)
Amounts reclassified from AOCL	—		1		9		—		10
Net other comprehensive (loss) income	(412)		1		9		(5)		(407)
Closing balance, September 30, 2024	$	1,404	$	9	$	(1,437)	$	(4)	$	(28)
Opening balance, July 1, 2023	$	857	$	2	$	(1,406)	$	3	$	(544)
Other comprehensive income before reclassifications	603		—		—		—		603
Amounts reclassified from AOCI	—		1		6		—		7
Net other comprehensive income	603		1		6		—		610
Closing balance, September 30, 2023	$	1,460	$	3	$	(1,400)	$	3	$	66

	For the nine months ended September 30
(in millions of Canadian dollars)	Foreign currency net of hedging activities		Derivatives		Pension and post- retirement defined benefit plans		Equity accounted investments		Total
Opening balance, January 1, 2024	$	837	$	5	$	(1,463)	$	3	$	(618)
Other comprehensive income (loss) before reclassifications	567		—		—		(7)		560
Amounts reclassified from AOCL	—		4		26		—		30
Net other comprehensive income (loss)	567		4		26		(7)		590
Closing balance, September 30, 2024	$	1,404	$	9	$	(1,437)	$	(4)	$	(28)
Opening balance, January 1, 2023	$	1,505	$	—	$	(1,410)	$	(4)	$	91
Other comprehensive (loss) income before reclassifications	(45)		—		(9)		6		(48)
Amounts reclassified from AOCI	—		3		19		1		23
Net other comprehensive (loss) income	(45)		3		10		7		(25)
Closing balance, September 30, 2023	$	1,460	$	3	$	(1,400)	$	3	$	66

7    Accounts receivable, net

(in millions of Canadian dollars)	As at September 30, 2024		As at December 31, 2023
Total accounts receivable	$	2,035	$	1,976
Allowance for credit losses	(94)		(89)
Total accounts receivable, net	$	1,941	$	1,887

8    Business acquisition

Kansas City Southern

On December 14, 2021, the Company purchased 100% of the issued and outstanding shares of KCS with the objective of creating the only single-line railroad linking the U.S., Mexico and Canada, and the Company placed the shares of KCS in a voting trust. On March 15, 2023, the U.S. Surface Transportation Board (the “STB”) approved the Company and KCS’s joint merger application, and the Company assumed control of KCS on April 14, 2023 (the "Control Date"). From December 14, 2021 to April 13, 2023, the Company recorded its investment in KCS using the equity method of accounting.

Accordingly, the Company commenced consolidation of KCS on the Control Date, accounting for the acquisition as a business combination achieved in stages. The results from operations and cash flows have been consolidated prospectively from the Control Date. The Company derecognized its previously held equity method investment in KCS of $44,402 million as of April 13, 2023 and remeasured the investment at its Control Date fair value of $37,227 million, which formed part of the purchase consideration, resulting in a remeasurement loss of $7,175 million recorded in the second quarter of 2023. In addition, and on the

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same date, a deferred income tax recovery of $7,832 million was recognized upon the derecognition of the deferred income tax liability computed on the outside basis that the Company had recognized in relation to its investment in KCS while accounted for using the equity method. The fair value of the previously held equity interest in KCS was determined by a discounted cash flow approach, which incorporated the Company’s best estimates of long-term growth rates, tax rates, discount rates, and terminal multiples.

The identifiable assets acquired, and liabilities and non-controlling interest assumed were measured at their provisional fair values at the Control Date, with certain exceptions, including income taxes, certain contingent liabilities, and contract liabilities. The provisional fair values of the tangible assets were determined using valuation techniques including, but not limited to, the market approach and the cost approach. The significant assumptions used to determine the provisional fair value of the tangible assets included, but were not limited to, a selection of comparable assets and an appropriate inflation rate. Presented with the acquired Properties are concession and related assets held under the terms of a concession from the Mexican government (the "Concession"). The Concession expires in June 2047 and is renewable under certain conditions for additional periods, each of up to 50 years.

The provisional fair values of the intangible assets were determined using valuation techniques including, but not limited to, the multi-period excess earnings method, the replacement cost method, the relief from royalty method and the income approach. The significant assumptions used to determine the provisional fair values of the intangible assets included, but were not limited to, the renewal probability and term of the Mexican concession extension, discount rates, earnings before interest, tax, depreciation, and amortization ("EBITDA") margins and terminal growth rates.

The fair value of non-controlling interest was determined using a combination of the income and market approaches to determine the fair value of Meridian Speedway LLC in which Norfolk Southern Corporation ("NSC") owns a non-controlling interest, and this fair value was allocated proportionately between KCS and NSC.

The accounting for the acquisition of KCS was completed on April 13, 2024, with the end of the measurement period and the final validation of the fair values assigned to acquired assets and assumed liabilities. This validation was completed using additional information about facts and circumstances as of the Control Date, that was obtained during the measurement period.

The following table summarizes the final purchase price allocation with the amounts recognized in respect of the identifiable assets acquired and liabilities and non-controlling interest assumed on the Control Date, as well as the fair value of the previously held equity interest in KCS and the measurement period adjustments recorded:

(in millions of Canadian dollars)	Preliminary allocation - April 14, 2023		Measurement period adjustments		Final allocation
Net assets acquired:
Cash and cash equivalents	$	298	$	—	$	298
Net working capital	51		(161)		(110)
Properties	28,748		1		28,749
Intangible assets	3,022		—		3,022
Other long-term assets	496		(6)		490
Debt including debt maturing within one year	(4,545)		—		(4,545)
Deferred income taxes	(6,984)		62		(6,922)
Other long-term liabilities	(406)		(37)		(443)
Total identifiable net assets	$	20,680	$	(141)	$	20,539
Goodwill	17,491		141		17,632
	$	38,171	$	—	$	38,171
Consideration:
Fair value of previously held equity method investment	$	37,227	$	—	$	37,227
Intercompany payable balance, net acquired	12		—		12
Fair value of non-controlling interest	932		—		932
Total	$	38,171	$	—	$	38,171

During the measurement period, adjustments were recorded as a result of new information that was obtained about facts and circumstances of certain KCS assets and liabilities as of the Control Date. New information obtained during 2023 was primarily in relation to CPKCM's value added tax assets and liabilities, as well as income and other tax positions. New information obtained during the first quarter of 2024 was primarily in relation to KCS's environmental liabilities, certain liabilities for other taxes in Mexico and legal and personal injury claims. Other adjustments recorded in relation to assets and liabilities were not significant in value. These adjustments to the Company's December 31, 2023 Consolidated Balance Sheet and March 31, 2024 Interim

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Consolidated Balance Sheet had a negligible impact to the Company's net income in 2023 and in the nine months ended September 30, 2024.

The net working capital acquired included trade receivables of $697 million and accounts payable and accrued liabilities of $1,014 million.

Intangible assets of $3,022 million consisted of contracts and customer relationships with amortization periods of nine to 22 years as well as U.S. trackage rights and the KCS brand with indefinite estimated useful lives. Included in the acquired Properties are concession rights and related assets held under the terms of a concession from the Mexican government, which have fair values totalling $9,176 million. The Concession rights and related assets are amortized over the shorter of the underlying asset lives and the estimated concession term, including one renewal period of 74 years.

Net working capital and Other long-term liabilities included environmental liabilities of $15 million and $160 million, respectively, and legal and personal injury claims of $44 million and $40 million, respectively, which are contingent on the outcome of uncertain future events. The values are measured at estimated cost and evaluated for changes in facts at the end of the reporting period.

The excess of the total consideration, over the amounts allocated to acquired assets and assumed liabilities and non-controlling interest recognized, has been recognized as goodwill of $17,632 million. Goodwill represents future synergies and an acquired assembled workforce. All of the goodwill has been assigned to the Company's single, rail transportation operating segment. None of the goodwill is expected to be deductible for income tax purposes.

In relation to certain Mexican tax liabilities identified and recorded through Goodwill during the measurement period, in the first quarter of 2024 the Company also recorded further accruals for liabilities incurred since the Control Date of $10 million, recognized as an expense within "Compensation and benefits". In the third quarter of 2024, there were adjustments to provisions and settlements of Mexican taxes of $7 million recognized as a recovery within "Compensation and benefits".

On a pro forma basis, if the Company had consolidated KCS beginning on January 1, 2022, the revenue and net income attributable to controlling shareholders of the combined entity would be as follows for the three and nine months ended September 30, 2023:

	Three Months Ended September 30, 2023				Nine Months Ended September 30, 2023
(in millions of Canadian dollars)	KCS Historical(1)		Pro Forma CPKC		KCS Historical(1)		Pro Forma CPKC
Revenue	$	—	$	3,339	$	1,351	$	10,133
Net income attributable to controlling shareholders	—		780		280		2,151

(1) KCS's historical amounts were translated into Canadian dollars at the Bank of Canada daily exchange rate for the period from January 1 to April 13, 2023 with an effective exchange rate of $1.35.

For the nine months ended September 30, 2023, the supplemental pro forma Net income attributable to controlling shareholders for the combined entity were adjusted for:

•the removal of the remeasurement loss of $7,175 million upon the derecognition of CPRL's previously held equity method investment in KCS, which included the reclassification of associated accumulated other comprehensive income to retained earnings;

•depreciation and amortization of differences between the historic carrying value and the preliminary fair value of tangible and intangible assets and investments prior to the Control Date;

•amortization of differences between the carrying amount and the fair value of debt through net interest expense prior to the Control Date;

•the elimination of intercompany transactions prior to the Control Date between the Company and KCS;

•miscellaneous amounts have been reclassified across revenue, operating expenses, and non-operating income or expense, consistent with CPKC's financial statement captions;

•the removal of equity earnings from KCS, previously recognized as an equity method investment prior to the Control Date, of $230 million for the nine months ended September 30, 2023 (see Note 9); and

•income tax adjustments including:

◦the derecognition of a deferred income tax recovery of $7,832 million for the nine months ended September 30, 2023 related to the elimination of the deferred income tax liability on the outside basis difference of the investment in KCS;

◦the derecognition of a deferred income tax recovery for the nine months ended September 30, 2023 on CPKC unitary state apportionment changes; and

◦a deferred income tax recovery prior to the Control Date on amortization of fair value adjustments to investments, properties, intangible assets, and debt.

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During the three and nine months ended September 30, 2024, the Company incurred $36 million and $90 million, in acquisition-related costs, respectively, of which:

•$11 million and $17 million were recognized in "Compensation and benefits", respectively, primarily related to retention and synergy related incentive compensation costs;

•$1 million and $5 million were recognized in "Materials", respectively; and

•$24 million and $68 million were recognized in "Purchased services and other", respectively, primarily related to system migration, relocation expenses, legal and consulting fees.

During the three and nine months ended September 30, 2023, the Company incurred $24 million and $158 million, in acquisition-related costs, respectively, of which:

•$1 million and $64 million were recognized in "Compensation and benefits", respectively, primarily related to severance costs, retention and synergy related incentive compensation costs;

•$1 million and $1 million were recognized in "Materials", respectively;

•$22 million and $87 million were recognized in "Purchased services and other", respectively, including third party purchased services, and payments made to certain communities across the combined network to address the environmental and social impacts of increased traffic as required by voluntary agreements with communities and conditions imposed by the STB pursuant to the STB's final decision approving the Company and KCS's joint merger application, including, but not limited to, payments related to new crossings, closure of existing crossings and other infrastructure projects; and

•$nil and $6 million were recognized in "Other expense (income)", respectively.

Acquisition-related costs of $nil and $11 million incurred by KCS during the three and nine months ended September 30, 2023, respectively, were included within "Equity earnings of Kansas City Southern".

During the three and nine months ended September 30, 2024, the Company recognized $89 million ($65 million after deferred income tax recovery of $24 million) and $259 million ($188 million after deferred income tax recovery of $71 million), respectively, of KCS purchase accounting representing incremental depreciation and amortization in relation to fair value adjustments to depreciable property, plant and equipment, intangible assets with definite lives, KCS’s investments, the non-controlling interest, and long-term debt, and these fair value adjustments are amortized over the related assets' remaining useful lives and the remaining terms to maturity of the debt instruments in "Net income", as follows:

•$85 million and $246 million recognized in "Depreciation and amortization", respectively;

•$nil and $2 million recognized in "Purchased services and other", respectively;

•$1 million and $2 million recognized in "Other expense (income)", respectively;

•$4 million and $14 million recognized in "Net interest expense", respectively; and

•a recovery of $1 million and $5 million recognized in "Net (loss) income attributable to non-controlling interest", respectively.

During the three and nine months ended September 30, 2023, the Company recognized $87 million ($63 million after deferred income tax recovery of $24 million) and $210 million ($166 million after deferred income tax recovery of $44 million), respectively, of KCS purchase accounting, as follows:

•$81 million and $149 million recognized in "Depreciation and amortization", respectively;

•$nil and $48 million recognized in "Equity earnings of Kansas City Southern", respectively;

•$1 million and $2 million recognized in "Other expense (income)", respectively; and

•$5 million and $11 million recognized in "Net interest expense", respectively.

9    Investment in KCS

On April 14, 2023, the Company assumed control of KCS and derecognized its equity method investment in KCS (see Note 8).

For the period January 1 to April 13, 2023, the Company recognized $230 million of equity earnings of KCS, and received dividends from KCS for the same period of $300 million. Included within the equity earnings of KCS recognized for the period was amortization (net of tax) of basis differences of $48 million, that related to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and were amortized over the related assets' remaining useful lives and the remaining terms to maturity of the debt instruments.

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The following table presents summarized financial information for KCS, on its historical cost basis:

Consolidated Statement of Income

(in millions of Canadian dollars)(1)	For the period January 1 to April 13, 2023
Total revenues	$	1,351
Total operating expenses	888
Operating income	463
Less: Other(2)	83
Income before income taxes	380
Net income	$	280

(1) Amounts translated at the average foreign exchange ("FX") rate for the period January 1 to April 13, 2023 of $1.00 USD = $1.35 CAD.

(2) Includes Equity in net earnings of KCS's affiliates, Interest expense, FX loss, and Other income, net.

10    Debt

During the nine months ended September 30, 2024, the Company repaid U.S. $48 million ($66 million) 5.41% Senior Secured Notes at maturity.

Debt repurchase

During the three and nine months ended September 30, 2024, the Company repurchased, on the open market, certain Senior Notes with principal values of U.S. $66 million ($90 million) and U.S. $176 million ($241 million), respectively. These repurchases were accounted for as debt extinguishments, with gains of $6 million and $22 million, respectively, recorded in “Other expense (income)” on the Company's Interim Consolidated Statements of Income.

Credit facility

Effective June 25, 2024, the Company entered into a third amended and restated revolving credit facility (the "facility") agreement to extend the maturity dates of its five-year U.S. $1.1 billion facility and two-year U.S. $1.1 billion facility to June 25, 2029 and June 25, 2026, respectively.

Commercial paper program                

The Company has a commercial paper program, under which it may issue up to a maximum aggregate principal amount of U.S. $1.5 billion in the form of unsecured promissory notes. This commercial paper program is backed by a U.S. $2.2 billion revolving credit facility. As at September 30, 2024, the Company had total commercial paper borrowings outstanding of U.S. $280 million ($378 million) included in "Long-term debt maturing within one year" on the Company's Interim Consolidated Balance Sheet (December 31, 2023 - U.S. $800 million). The weighted-average interest rate on these borrowings as at September 30, 2024 was 5.15% (December 31, 2023 - 5.59%). 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.

11    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 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 and term loans. The carrying value of short-term financial instruments approximate their fair value.

The carrying value of the Company’s debt does not approximate its fair value. The 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 the balance sheet date. All measurements are classified as Level 2. The Company’s long-term debt, including current maturities, with a carrying value of $21,536 million as at September 30, 2024 (December 31, 2023 - $21,437 million), had a fair value of $20,647 million (December 31, 2023 - $20,550 million).

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B. Financial risk management

FX management

Net investment hedge

The majority of the Company’s U.S. dollar-denominated long-term debt, finance lease obligations, and operating lease liabilities have been designated as a hedge of the Company's net investment in foreign subsidiaries. This designation has the effect of mitigating volatility on Net income by offsetting long-term FX gains and losses on U.S. dollar-denominated long-term debt and gains and losses on its net investment. The effect of the Company's net investment hedge included in "Other comprehensive (loss) income" for the three and nine months ended September 30, 2024 was an unrealized FX gain of $56 million and an unrealized FX loss of $88 million, respectively (three and nine months ended September 30, 2023 - unrealized FX loss of $163 million and $1 million, respectively).

Mexican Peso- U.S. dollar FX Forward contracts

The Company’s Mexican subsidiaries have net U.S. dollar-denominated monetary assets or liabilities which, for Mexican income tax purposes, are subject to periodic revaluation based on changes in the value of the Mexican peso ("Ps.") against the U.S dollar. This revaluation creates fluctuations in the Company’s Mexican income tax expense and the amount of income taxes paid in Mexican pesos. The Company also has net monetary assets or liabilities denominated in Mexican pesos that are subject to periodic re-measurement and settlement that create fluctuations within "Other expense (income)". The Company has hedged its net exposure to Mexican peso/U.S dollar fluctuations in earnings with foreign currency forward contracts. The foreign currency forward contracts involve the Company’s agreement to buy or sell pesos at an agreed-upon exchange rate on a future date.

The Company measures the foreign currency derivative contracts at fair value each period and recognizes any change in "Other expense (income)". The cash flows associated with these instruments are classified as "Operating activities" within the Interim Consolidated Statements of Cash Flows.

During the nine months ended September 30, 2024, the Company recorded a loss of $4 million related to foreign exchange currency forwards prior to settlement. As at December 31, 2023, the fair value of outstanding foreign exchange contracts included in "Accounts payable and accrued liabilities" was $60 million. As of January 12, 2024, the Company settled all outstanding foreign currency forward contracts, resulting in a cash outflow of $65 million.

Offsetting

The Company’s foreign currency forward contracts were executed with counterparties in the U.S. and were governed by International Swaps and Derivatives Association agreements that included standard netting arrangements. Asset and liability positions from contracts with the same counterparty were net settled upon maturity/expiration and presented on a net basis in the Interim Consolidated Balance Sheets prior to settlement.

12    Pension and other benefits

During the three and nine months ended September 30, 2024, the Company made contributions to its defined benefit pension plans of $5 million and $10 million, respectively (three and nine months ended September 30, 2023 - $4 million and $13 million, respectively).

Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:        

	For the three months ended September 30
	Pensions				Other benefits				Total
(in millions of Canadian dollars)	2024		2023		2024		2023		2024		2023
Current service cost	$	21	$	18	$	3	$	2	$	24	$	20
Other components of net periodic benefit (recovery) cost:
Interest cost on benefit obligation	116		122		6		5		122		127
Expected return on plan assets	(223)		(220)		—		—		(223)		(220)
Recognized net actuarial loss	10		8		—		—		10		8
Amortization of prior service costs	2		—		—		—		2		—
Total other components of net periodic benefit (recovery) cost	(95)		(90)		6		5		(89)		(85)
Net periodic benefit (recovery) cost	$	(74)	$	(72)	$	9	$	7	$	(65)	$	(65)

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	For the nine months ended September 30
	Pensions				Other benefits				Total
(in millions of Canadian dollars)	2024		2023		2024		2023		2024		2023
Current service cost	$	63	$	53	$	9	$	7	$	72	$	60
Other components of net periodic benefit (recovery) cost:
Interest cost on benefit obligation	350		365		18		16		368		381
Expected return on plan assets	(668)		(661)		—		—		(668)		(661)
Recognized net actuarial loss	30		24		—		—		30		24
Amortization of prior service costs	5		1		—		1		5		2
Total other components of net periodic benefit (recovery) cost	(283)		(271)		18		17		(265)		(254)
Net periodic benefit (recovery) cost	$	(220)	$	(218)	$	27	$	24	$	(193)	$	(194)

13    Stock-based compensation

As at September 30, 2024, the Company had several stock-based compensation plans including a stock options plan, 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, 2024 of $52 million and $120 million, respectively (three and nine months ended September 30, 2023 - expense of $13 million and $84 million, respectively).

Stock options plan

In the nine months ended September 30, 2024, under the Company’s stock options plan, the Company issued 817,609 options at the weighted-average price of $113.77 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 seven years from the grant date.

Under the fair value method, the fair value of the stock options at grant date was approximately $27 million. The weighted-average fair value assumptions were approximately:

	For the nine months ended September 30, 2024
Expected option life (years)(1)	4.75
Risk-free interest rate(2)	3.88%
Expected share price volatility(3)	28.38%
Expected annual dividends per share(4)	$0.76
Expected forfeiture rate(5)	3.12%
Weighted-average grant date fair value per option granted during the period	$33.27

(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.

(5)The Company estimates forfeitures based on past experience. This rate is monitored on a periodic basis.

Performance share unit plans

During the nine months ended September 30, 2024, the Company issued 568,159 Performance Share Units ("PSUs") with a grant date fair value of $65 million and 25,589 Performance Deferred Share Units ("PDSUs") with a grant date fair value, including the fair value of expected future matching units, of $3 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 three to four years after the grant date, contingent on the Company’s performance ("performance factor"). Vested PSUs are settled in cash. Vested PDSUs are converted into DSUs pursuant to the DSU plan, are eligible for a 25% company match if the employee has not exceeded their share ownership requirements, and are settled in cash only when the holder ceases their employment with the Company.

The performance period for 568,159 PSUs and all PDSUs granted in the nine months ended September 30, 2024 is January 1, 2024 to December 31, 2026 and the performance factors are Free Cash Flow ("FCF"), annualized earnings before interest, tax,

16

depreciation, and amortization ("EBITDA"), and Total Shareholder Return ("TSR") compared to the S&P/TSX 60 Index, TSR compared to the S&P 500 Industrials Index, and TSR compared to Class 1 Railroads.

The performance period for all of the 431,430 PSUs and 12,694 PDSUs granted in 2021 was January 1, 2021 to December 31, 2023, and the performance factors were Return on Invested Capital ("ROIC"), TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I Railways. The resulting payout was 135% of the outstanding units multiplied by the Company's average common share price calculated based on the last 30 trading days preceding December 31, 2023. In the first quarter of 2024, payouts were $54 million on 399,372 PSUs, including dividends reinvested. The 11,372 PDSUs that vested on December 31, 2023, with a fair value of $2 million, including dividends reinvested and matching units, will be paid out in future reporting periods pursuant to the DSU plan (as described above).

14    Contingencies

Litigation

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, 2024 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, results of operations, or liquidity. However, an unexpected adverse resolution of one or more of these legal actions could have a material adverse effect on the Company's business, financial position, results of operations, or liquidity in a particular quarter or fiscal year.

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 the Company and others:

(1)Québec's Minister of Sustainable Development, Environment, Wildlife and Parks ordered various parties, including the Company, to remediate the derailment site (the "Cleanup Order") and served the Company with a Notice of Claim for $95 million for those costs. The Company appealed the Cleanup Order and contested the Notice of Claim with the Administrative Tribunal of Québec. These proceedings are stayed pending determination of the Attorney General of Québec (“AGQ”) action (paragraph 2 below).

(2)The AGQ sued the Company in the Québec Superior Court claiming $409 million in damages, which was amended and reduced to $315 million (the “AGQ Action”). The AGQ Action alleges that: (i) the Company was responsible for the petroleum crude oil from its point of origin until its delivery to Irving Oil Ltd.; and (ii) the Company is vicariously liable for the acts and omissions of the MMA Group.

(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 the Company 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. On November 28, 2019, the plaintiffs' motion to discontinue their action against Harding was granted. The Class Action seeks unquantified damages, including for wrongful death, personal injury, property damage, and economic loss.

(4)Eight subrogated insurers sued the Company in the Québec Superior Court claiming approximately $16 million in damages, which was amended and reduced to approximately $15 million (the “Promutuel Action”), and two additional subrogated insurers sued the Company claiming approximately $3 million in damages (the “Royal Action”). Both actions contain similar allegations as the AGQ Action. The actions do not identify the subrogated parties. As such, the extent of any overlap between the damages claimed in these actions and under the Plans is unclear. The Royal Action is stayed pending determination of the consolidated proceedings described below.

On December 11, 2017, the AGQ Action, the Class Action and the Promutuel Action were consolidated. The joint liability trial of these consolidated claims commenced on September 21, 2021 with oral arguments ending on June 15, 2022. The Québec Superior Court issued a decision on December 14, 2022 dismissing all claims against the Company, finding that the Company’s actions were not the direct and immediate cause of the accident and the damages suffered by the plaintiffs. All three plaintiffs

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filed a declaration of appeal on January 13, 2023. The appeal was heard October 7 to 10, 2024 and the Québec Court of Appeal reserved its decision. A damages trial will follow after the disposition of all appeals, if necessary.

(5)Forty-eight plaintiffs (all individual claims joined in one action) sued the Company, MMAC, and Harding in the Québec Superior Court claiming approximately $5 million in damages for economic loss and pain and suffering, and asserting similar allegations as in the Class Action and the AGQ Action. The majority of the plaintiffs opted-out of the Class Action and all but two are also plaintiffs in litigation against the Company, described in paragraph 7 below. This action is stayed pending determination of the consolidated claims described above.

(6)The MMAR U.S. bankruptcy estate representative commenced an action against the Company in November 2014 in the Maine Bankruptcy Court claiming that the Company failed to abide by certain regulations and seeking approximately U.S. $30 million in damages for MMAR’s loss in business value according to an expert report filed by the bankruptcy estate. This action asserts that the Company knew or ought to have known that the shipper misclassified the petroleum crude oil and therefore should have refused to transport it. Summary judgment motion was argued and taken under advisement on June 9, 2022, and decision is pending. On May 23, 2023, the case management judge stayed the proceedings pending the outcome of the appeal in the Canadian consolidated claims.

(7)The class and mass tort action commenced against the Company 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 the Company 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 the Company negligently misclassified and improperly packaged the petroleum crude oil. On the Company’s motion, the Maine Actions were dismissed. The plaintiffs appealed the dismissal decision to the U.S. First Circuit Court of Appeals, which dismissed the plaintiffs' appeal on June 2, 2021. The plaintiffs further petitioned the U.S. First Circuit Court of Appeals for a rehearing, which was denied on September 8, 2021. On January 24, 2022, the plaintiffs further appealed to the U.S. Supreme Court on two bankruptcy procedural grounds. On May 31, 2022, the U.S. Supreme Court denied the petition, thereby rejecting the plaintiffs' appeal.

(8)The trustee for the wrongful death trust commenced Carmack Amendment claims against the Company in North Dakota Federal Court, seeking to recover approximately U.S. $6 million for damaged rail cars and lost crude oil and reimbursement for the settlement paid by the consignor and the consignee under the Plans (alleged to be U.S. $110 million and U.S. $60 million, respectively). The Court issued an Order on August 6, 2020 granting and denying in parts the parties' summary judgment motions which has been reviewed and confirmed following motions by the parties for clarification and reconsideration. Final briefs of dispositive motions for summary judgment and for reconsideration on tariff applicability were submitted on September 30, 2022. On January 20, 2023, the Court granted in part the Company's summary judgment motion by dismissing all claims for recovery of settlement payments but leaving for trial the determination of the value of the lost crude oil. It also dismissed the Company's motion for reconsideration on tariff applicability. The remaining issues of the value of the lost crude oil and applicability of judgment reduction provisions do not require trial, and were fully briefed in 2024. On January 5, 2024, the Court issued its decision finding that the Company is liable for approximately U.S. $3.9 million plus pre-judgment interest, but declined to determine whether judgment reduction provisions were applicable, referring the parties to a court in Maine on that issue. On January 18, 2024, the Company filed a motion for reconsideration for the Court to apply the judgment reduction provisions. On January 19, 2024, the trustee for the wrongful death trust filed a Notice of Appeal for the January 5, 2024 decision, as well as prior decisions. On February 23, 2024, the Court denied the Company’s motion for reconsideration, again referring the parties to a court in Maine to apply the judgment reduction provision. On March 6, 2024, the Company filed its notice of appeal of this latest ruling, as well as prior decisions.

At this stage of the proceedings, any potential responsibility and the quantum of potential losses cannot be determined. Nevertheless, the Company denies liability and is vigorously defending these proceedings.

Court decision related to Remington Development Corporation legal claim

On October 20, 2022, the Court of King’s Bench of Alberta issued a decision in a claim brought by Remington Development Corporation (“Remington”) against the Company and the Province of Alberta (“Alberta”) with respect to an alleged breach of contract by the Company in relation to the sale of certain properties in Calgary. In its decision, the Court found the Company had breached its contract with Remington and Alberta had induced the contract breach. The Court found the Company and Alberta liable for damages of approximately $164 million plus interest and costs, and subject to an adjustment to the acquisition value of the property. In a further decision on August 30, 2023, the Court determined that adjustment and set the total damages at $165 million plus interest and costs. On October 20, 2023, the Court determined the costs payable to Remington, however, the Court has not provided any indication of how the damages, which are currently estimated to total approximately $225 million, should be apportioned between the Company and Alberta. On November 17, 2022, the Company filed an appeal of the Court’s decision. On April 11, 2024, the Court of Appeal of Alberta stayed the judgment pending the outcome of the appeal. On September 10, 2024, the Court of Appeal of Alberta heard the Company's appeal and reserved its decision. At this time, the Company cannot reasonably estimate the amount of damages for which it is liable under the ruling of the Court.

18

2014 Tax Assessment

On April 13, 2022, the SAT delivered an audit assessment of CPKCM’s 2014 tax returns (the "2014 Assessment"). As at September 30, 2024, the 2014 Assessment was Ps.6,247 million ($430 million), which included inflation, interest, and penalties. On July 7, 2022, CPKCM filed an administrative appeal (the “Administrative Appeal”) before the SAT, seeking to revoke the 2014 Assessment and claiming that the notification of the 2014 Assessment was not legal for being made through the tax mailbox in violation