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Canadian Pacific announces 2009 results 
Jan 28, 2010 7:30:00 AM CALGARY, Jan. 28 /CNW/ -
"We have come through an extraordinary year of economic challenges and we met these with focused productivity initiatives that have delivered sustainable improvements," said Fred Green, President and CEO. "Markets remain uncertain and we will continue to drive efficiency while delivering a reliable service. We are positioned with assets and resources to respond to changes in our customers' demand." For the fourth-quarter and full year 2009, the results of the FOURTH-QUARTER 2009 COMPARED WITH FOURTH-QUARTER 2008 EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:
<<
- Total revenues were $1.1 billion, down 16 per cent from $1.3 billion
- Operating expenses were $853 million, down 17 per cent from
$1.0 billion
- Operating income decreased to $269 million from $304 million, or
12 per cent
- Operating ratio improved 120 basis points to 76.0 per cent
- Diluted earnings per share decreased to $0.94 from $1.07, or
12 per cent
>>
For the full year, 2009 net income increased slightly to $612 million from $607 million in 2008 and diluted earnings per share were $3.67, down six per cent from $3.91. FULL YEAR 2009 COMPARED WITH FULL YEAR 2008 EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:
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- Total revenues were $4.3 billion down 18 per cent from $5.2 billion
- Operating expenses were $3.4 billion a decrease of 17 per cent from
$4.1 billion
- Operating income was $900 million a decrease of 20 per cent from
$1.1 billion
- Operating ratio increased 70 basis points to 79.1 per cent from
78.4 per cent
- Diluted earnings per share were $2.76 down from $3.99, or 31 per cent
>>
2010 ASSUMPTIONS CP plans to spend in the range of $680 million to $730 million on capital programs in 2010. These planned capital investments include approximately $585 million for the renewal of track infrastructure. In December of 2009, CP made a voluntary prepayment of approximately $500 million into its defined benefit pension plans to reduce volatility in future pension funding requirements. The 2010 pension contributions are currently estimated to be between $150 and $200 million. Pension expenses in 2010 are expected to increase by approximately $50 million from 2009 primarily due to a decrease in the discount rate used to value the pension benefit obligation and the phasing in of 2008 equity losses. CP expects its tax rate to be in the 25 per cent to 27 per cent range. FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS CP had a net foreign exchange loss after tax of $1.4 million on long-term debt in the fourth quarter of 2009, compared with a gain of $22 million after tax in fourth-quarter 2008. For the full year 2009, CP had a net foreign exchange loss on long-term debt of $26 million, compared with a net foreign exchange gain of $22 million after tax for the full year 2008. As part of a consolidated financing strategy, CP structures its U.S. dollar long-term debt in different taxing jurisdictions. As well, a portion of this debt is designated as a net investment hedge against net investment in U.S. subsidiaries. Although the taxes on foreign exchange gains and losses on long-term debt generally offset one another, because they may be in different tax jurisdictions, the resulting net tax can vary significantly. In fourth-quarter 2009, CP recorded a $38 million after tax charge on the early termination of a shortline railway contract. As well, a tax rate change resulted in a $48 million gain, and an income tax settlement related to a prior year resulted in a benefit of $26 million. There were no other specified items recorded in fourth-quarter 2008. For the full year 2009, in addition to the other specified items noted above, there was a $69 million after tax gain on the sale of a partnership interest, a $68 million after tax gain on the sale of Windsor Station in Montreal, Quebec and a land sale in Western Canada. A redemption and adjustment for an improvement in fair market value of long-term floating rate notes was received in replacement of the investment in Asset-Backed Commercial Paper (ABCP) of $5 million after tax, compared to an impairment in ABCP of $35 million after tax, recorded for full year 2008. Presentation of non-GAAP earnings CP presents non-GAAP earnings measures in this news release to provide an additional basis for evaluating underlying earnings and liquidity trends in its business that can be compared with prior periods' results of operations. When foreign exchange gains and losses on long-term debt and other specified items are excluded from diluted earnings per share, income and income tax expense, these become non-GAAP measures. Additional non-GAAP measures include Operating income, Capital program and Financial data on a pro forma basis. These non-GAAP earnings measures exclude foreign currency translation effects on long-term debt and the tax thereon, which can be volatile and short term. The impact of volatile short-term rate fluctuations on foreign- denominated debt is only realized when long-term debt matures or is settled. In addition, these non-GAAP measures exclude other specified items (described below) that are not a part of CP's normal ongoing revenues and operating expenses. A reconciliation of income, excluding foreign exchange gains and losses on long-term debt and other specified items, to net income as presented in the financial statements is detailed in the attached Summary of Rail Data. Diluted earnings per share, excluding foreign exchange gains and losses on long-term debt and other specified items, is also referred to in this news release as "Adjusted diluted earnings per share". Revenues less operating expenses are referred to as "Operating income" and Additions to property is referred to as "Capital program". Other specified items are material transactions that may include, but are not limited to, restructuring and asset impairment charges, gains and losses on non-routine sales of assets, unusual income tax adjustments, and other items that do not typify normal business activities. Pro forma data provides comparable measures for periods in 2008 that preceded the Surface Transportation Board's approval of the change of control of the DM&E on October 30, 2008. Following that approval, the DM&E results are fully consolidated with CP's operations. The non-GAAP earnings measures described in this news release have no standardized meanings and are not defined by Canadian generally accepted accounting principles and, therefore, are unlikely to be comparable to similar measures presented by other companies. Note on forward-looking information This news release contains certain forward-looking statements relating but not limited to our operations, pension obligations and tax rates. Undue reliance should not be placed on forward-looking information as actual results may differ materially. By its nature, CP's forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods, timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and investments, including ABCP; and various events that could disrupt operations, including severe weather conditions, security threats and governmental response to them, and technological changes. There are factors that could cause actual results to differ from those described in the forward-looking statements contained in this news release. These more specific factors are identified and discussed elsewhere in this news release with the particular forward-looking statement in question. Except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise. About Canadian Pacific: Canadian Pacific, through the ingenuity of its employees located across Canada and in the United States, remains committed to being the safest, most fluid railway in North America. Our people are the key to delivering innovative transportation solutions to our customers and to ensuring the safe operation of our trains through the more than 1,100 communities where we operate. Come and visit us at www.cpr.ca to see how we can put our ingenuity to work for you. Canadian Pacific is proud to be the official rail freight services provider for the Vancouver 2010 Olympic and Paralympic Winter Games.
<<
CONSOLIDATED STATEMENT OF INCOME
(in millions of Canadian dollars, except per share data)
For the three months For the year
ended December 31 ended December 31
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Revenues
Freight $ 1,091.0 $ 1,257.8 $ 4,175.2 $ 4,814.8
Other 30.9 41.9 128.0 116.8
-------------------------- -------------------------
1,121.9 1,299.7 4,303.2 4,931.6
Operating expenses
Compensation and
benefits 311.8 350.2 1,275.2 1,306.1
Fuel 157.5 239.5 580.2 1,005.8
Materials 41.1 63.8 215.1 252.3
Equipment rents 45.0 45.8 184.8 182.2
Depreciation and
amortization 121.3 113.7 488.9 442.5
Purchased services
and other 176.2 199.5 658.9 701.0
-------------------------- -------------------------
852.9 1,012.5 3,403.1 3,889.9
-------------------------- -------------------------
Revenues less
operating expenses 269.0 287.2 900.1 1,041.7
Gain on sales of
partnership interest
and significant
properties - - 160.3 -
Equity income in Dakota,
Minnesota & Eastern
Railroad Corporation - 10.4 - 50.9
Less:
Loss on termination
of lease with
shortline railway
(Note 3) 54.5 - 54.5 -
Other income and
charges (Note 4) (0.4) 12.2 18.9 88.4
Net interest expense 62.8 73.8 273.1 261.1
-------------------------- -------------------------
Income before income
tax expense 152.1 211.6 713.9 743.1
Income tax (recovery)
expense (Note 5) (42.0) 23.5 101.5 135.9
-------------------------- -------------------------
Net income $ 194.1 $ 188.1 $ 612.4 $ 607.2
-------------------------- -------------------------
-------------------------- -------------------------
Basic earnings
per share $ 1.15 $ 1.22 $ 3.68 $ 3.95
-------------------------- -------------------------
-------------------------- -------------------------
Diluted earnings
per share $ 1.15 $ 1.21 $ 3.67 $ 3.91
-------------------------- -------------------------
-------------------------- -------------------------
See notes to interim consolidated financial information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions of Canadian dollars)
For the three months For the year
ended December 31 ended December 31
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Comprehensive income
Net Income $ 194.1 $ 188.1 $ 612.4 $ 607.2
Other comprehensive
income
Unrealized foreign
exchange (loss)
gain on:
Translation of the
net investment in
U.S. subsidiaries (26.7) 208.5 (246.4) 305.1
Translation of the
U.S. dollar-
denominated long-
term debt
designated as a
hedge of the net
investment in U.S.
subsidiaries 28.1 (204.7) 244.5 (297.5)
Change in derivatives
designated as cash
flow hedges:
Realized (gain) loss
on cash flow hedges
recognized in
income (0.1) (0.1) 5.0 (11.0)
Unrealized gain
(loss) on cash flow
hedges 2.1 (12.6) 2.3 (5.1)
-------------------------- -------------------------
Other comprehensive
income (loss) before
income taxes 3.4 (8.9) 5.4 (8.5)
Income tax (expense)
recovery (2.7) 31.9 (33.6) 44.8
-------------------------- -------------------------
Other comprehensive
income (loss) 0.7 23.0 (28.2) 36.3
-------------------------- -------------------------
Comprehensive income $ 194.8 $ 211.1 $ 584.2 $ 643.5
-------------------------- -------------------------
-------------------------- -------------------------
See notes to interim consolidated financial information.
CONSOLIDATED BALANCE SHEET
(in millions of Canadian dollars)
December 31 December 31
2009 2008
Restated
(see Note 2)
-------------------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 679.1 $ 117.6
Accounts receivable 441.0 647.4
Materials and supplies 132.7 215.8
Future income taxes 128.1 76.5
Other 46.5 65.7
-------------------------
1,427.4 1,123.0
Investments 156.7 151.1
Net properties 11,967.8 12,384.6
Assets held for sale - 39.6
Goodwill and intangible assets 202.3 237.2
Prepaid pension costs and other assets (Note 6) 1,777.2 1,221.8
-------------------------
Total assets $ 15,531.4 $ 15,157.3
-------------------------
-------------------------
Liabilities and shareholders' equity
Current liabilities
Short-term borrowing $ - $ 150.1
Accounts payable and accrued liabilities 917.3 1,034.9
Income and other taxes payable 31.9 42.2
Dividends payable 41.7 38.1
Long-term debt maturing within one year 392.1 44.0
-------------------------
1,383.0 1,309.3
Other long-term liabilities 790.2 865.2
Long-term debt (Note 7) 4,102.7 4,685.8
Future income taxes 2,549.5 2,527.6
Shareholders' equity
Share capital 1,746.4 1,220.8
Contributed surplus 33.5 40.2
Accumulated other comprehensive income 49.5 77.7
Retained income 4,876.6 4,430.7
-------------------------
6,706.0 5,769.4
-------------------------
-------------------------
Total liabilities and shareholders' equity $ 15,531.4 $ 15,157.3
-------------------------
-------------------------
See notes to interim consolidated financial information.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of Canadian dollars)
For the three months For the year
ended December 31 ended December 31
2009 2008 2009 2008
Restated Restated
(see Note 2) (see Note 2)
-------------------------- -------------------------
(unaudited) (unaudited)
Operating activities
Net income $ 194.1 $ 188.1 $ 612.4 $ 607.2
Reconciliation of net
income to cash
provided by operating
activities:
Depreciation and
amortization 121.3 113.7 488.9 442.5
Future income taxes
(Note 5) (27.4) 97.6 153.2 156.3
(Gain) loss in fair
value of long-term
floating rate
notes/asset-backed
commercial paper - - (6.3) 49.4
Foreign exchange
(gain) loss on
long-term debt (3.1) 3.9 (5.8) 16.3
Amortization and
accretion charges 1.5 2.7 9.5 10.1
Equity income, net
of cash received (0.4) (12.3) 0.5 (50.8)
Gain on sales of
partnership interest
and significant
properties - - (160.3) -
Net loss on
repurchase of debt - - 16.6 -
Restructuring and
environmental
remediation payments (15.2) (17.0) (45.1) (53.4)
Pension funding in
excess of expense
(Note 6) (528.7) (10.5) (589.0) (53.2)
Other operating
activities, net (29.2) 25.1 (25.8) 27.5
Change in non-cash
working capital
balances related to
operations 106.2 38.2 102.7 (132.2)
-------------------------- -------------------------
Cash (used in)
provided by
operating
activities (180.9) 429.5 551.5 1,019.7
-------------------------- -------------------------
Investing activities
Additions to
properties (153.6) (257.0) (722.4) (832.9)
Additions to assets
held for sale and
other - (9.5) - (222.5)
Additions to
investment in Dakota,
Minnesota & Eastern
Railroad Corporation - (0.3) - (8.6)
Proceeds from
sale of properties
and other assets 17.4 257.6 243.8 257.6
Other, net 15.1 (4.7) 19.9 9.7
-------------------------- -------------------------
Cash used in
investing activities (121.1) (13.9) (458.7) (796.7)
-------------------------- -------------------------
Financing activities
Dividends paid (41.6) (38.1) (162.9) (148.7)
Issuance of CP
Common Shares 9.0 1.4 513.5 19.7
Net decrease
in short-term
borrowing (57.7) (129.9) (150.1) (79.6)
Issuance of long-term
debt (Note 7) 463.2 - 872.7 1,068.7
Repayment of
long-term debt (4.8) (252.6) (618.6) (1,340.7)
Settlement of treasury
rate lock - - - (30.9)
Settlement of foreign
exchange forward on
long-term debt - - 34.1 -
-------------------------- -------------------------
Cash provided by
(used in) financing
activities 368.1 (419.2) 488.7 (511.5)
-------------------------- -------------------------
Effect of foreign exchange
fluctuations on U.S.
dollar-denominated cash
and cash equivalents (2.9) 23.3 (20.0) 28.0
-------------------------- -------------------------
Cash position
Increase (decrease) in
cash and cash
equivalents 63.2 19.7 561.5 (260.5)
Cash and cash
equivalents at
beginning of period 615.9 97.9 117.6 378.1
-------------------------- -------------------------
Cash and cash
equivalents at end
of period $ 679.1 $ 117.6 $ 679.1 $ 117.6
-------------------------- -------------------------
-------------------------- -------------------------
Certain of the comparative figures have been reclassified in order to be
consistent with the 2009 presentation.
See notes to interim consolidated financial information.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in millions of Canadian dollars)
(in millions of dollars)
-------------------------------------------------
Accumulated
Other Total
compre- Share-
Share Contributed hensive Retained holders
capital surplus income income Equity
-------------------------------------------------
Balance at December 31,
2007, as previously
reported 1,188.6 42.4 39.6 4,187.3 5,457.9
Adjustment for change
in accounting policy
(see Note 2) 1.8 (211.6) (209.8)
-------------------------------------------------
Balance at December 31,
2007, as restated 1,188.6 42.4 41.4 3,975.7 5,248.1
Net Income 607.2 607.2
Other comprehensive
income 36.3 36.3
Dividends (152.2) (152.2)
Stock compensation
expense 7.8 7.8
Shares issued under
stock option plans 32.2 (10.0) 22.2
-------------------------------------------------
Balance at December 31,
2008, as restated 1,220.8 40.2 77.7 4,430.7 5,769.4
Net Income 612.4 612.4
Other comprehensive
loss (28.2) (28.2)
Dividends (166.5) (166.5)
Shares issued 495.2 495.2
Stock compensation
(recovery) expense (1.6) (1.6)
Shares issued under
stock option plans 30.4 (5.1) 25.3
-------------------------------------------------
Balance at
December 31, 2009 1,746.4 33.5 49.5 4,876.6 6,706.0
-------------------------------------------------
-------------------------------------------------
See notes to interim consolidated financial information.
NOTES TO INTERIM CONSOLIDATED FINANCIAL INFORMATION
DECEMBER 31, 2009
(unaudited)
1 Basis of presentation
This unaudited interim consolidated financial information has been
prepared using accounting policies that are consistent with the
policies used in preparing
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