Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Financial Information

Canadian Pacific Railway Company, a 100%-owned subsidiary of Canadian Pacific Railway Limited (“CPRL”), is the issuer of certain debt securities, which are fully and unconditionally guaranteed by CPRL. The following tables present condensed consolidating financial information (“CCFI”) in accordance with Rule 3-10(c) of Regulation S-X.

Investments in subsidiaries are accounted for under the equity method when presenting the CCFI.

The tables include all adjustments necessary to reconcile the CCFI on a consolidated basis to CPRL’s consolidated financial statements for the periods presented.Interim Condensed Consolidating Statements of Income

For the three months ended March 31, 2018    

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,155		$	470		$	—		$	1,625
Non-freight	—			27			89			(79		)	37
Total revenues	—			1,182			559			(79		)	1,662
Operating expenses
Compensation and benefits	—			257			115			2			374
Fuel	—			168			47			—			215
Materials	—			35			15			5			55
Equipment rents	—			31			2			—			33
Depreciation and amortization	—			104			66			—			170
Purchased services and other	—			218			143			(86		)	275
Total operating expenses	—			813			388			(79		)	1,122
Operating income	—			369			171			—			540
Less:
Other income and charges	6			48			(3		)	—			51
Other components of net periodic benefit recovery	—			(96		)	—			—			(96		)
Net interest expense (income)	8			114			(7		)	—			115
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(14		)	303			181			—			470
Less: Income tax expense	—			86			36			—			122
Add: Equity in net earnings of subsidiaries	362			145			—			(507		)	—
Net income	$	348		$	362		$	145		$	(507	)	$	348

Interim Condensed Consolidating Statements of Income

For the three months ended March 31, 2017                 

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	1,089		$	474		$	—		$	1,563
Non-freight	—			32			93			(85		)	40
Total revenues	—			1,121			567			(85		)	1,603
Operating expenses
Compensation and benefits	—			191			108			1			300
Fuel	—			132			38			—			170
Materials	—			34			9			6			49
Equipment rents	—			36			—			—			36
Depreciation and amortization	—			109			57			—			166
Purchased services and other	—			208			162			(92		)	278
Total operating expenses	—			710			374			(85		)	999
Operating income	—			411			193			—			604
Less:
Other income and charges	(20		)	(7		)	(1		)	—			(28		)
Other components of net periodic benefit recovery	—			(67		)	—			—			(67		)
Net interest expense (income)	2			125			(7		)	—			120
Income before income tax expense and equity in net earnings of subsidiaries	18			360			201			—			579
Less: Income tax expense	1			98			49			—			148
Add: Equity in net earnings of subsidiaries	414			152			—			(566		)	—
Net income	$	431		$	414		$	152		$	(566	)	$	431

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

For the three months ended March 31, 2018             

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	348	$	362		$	145	$	(507	)	$	348
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(150		)	130		—			(20		)
Change in derivatives designated as cash flow hedges	—		21			—		—			21
Change in pension and post-retirement defined benefit plans	—		28			1		—			29
Other comprehensive (loss) income before income taxes	—		(101		)	131		—			30
Income tax recovery on above items	—		6			—		—			6
Equity accounted investments	36		131			—		(167		)	—
Other comprehensive income	36		36			131		(167		)	36
Comprehensive income	$	384	$	398		$	276	$	(674	)	$	384

Interim Condensed Consolidating Statements of Comprehensive Income

For the three months ended March 31, 2017     

(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	431	$	414		$	152		$	(566	)	$	431
Net gain (loss) in foreign currency translation adjustments, net of hedging activities	—		45			(40		)	—			5
Change in derivatives designated as cash flow hedges	—		5			—			—			5
Change in pension and post-retirement defined benefit plans	—		36			2			—			38
Other comprehensive income (loss) before income taxes	—		86			(38		)	—			48
Income tax expense on above items	—		(17		)	(1		)	—			(18		)
Equity accounted investments	30		(39		)	—			9			—
Other comprehensive income (loss)	30		30			(39		)	9			30
Comprehensive income	$	461	$	444		$	113		$	(557	)	$	461

Interim Condensed Consolidating Balance Sheets As at March 31, 2018

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	43		$	82	$	—		$	125
Accounts receivable, net	—			525			174		—			699
Accounts receivable, inter-company	104			149			205		(458		)	—
Short-term advances to affiliates	—			1,313			4,805		(6,118		)	—
Materials and supplies	—			121			33		—			154
Other current assets	—			80			143		(84		)	139
	104			2,231			5,442		(6,660		)	1,117
Long-term advances to affiliates	1,090			—			88		(1,178		)	—
Investments	—			27			159		—			186
Investments in subsidiaries	10,944			11,862			—		(22,806		)	—
Properties	—			9,016			8,218		—			17,234
Goodwill and intangible assets	—			—			192		—			192
Pension asset	—			1,507			—		—			1,507
Other assets	—			73			9		—			82
Deferred income taxes	4			—			—		(4		)	—
Total assets	$	12,142		$	24,716		$	14,108	$	(30,648	)	$	20,318
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	102		$	886		$	279	$	(84	)	$	1,183
Accounts payable, inter-company	4			305			149		(458		)	—
Short-term advances from affiliates	5,602			508			8		(6,118		)	—
Long-term debt maturing within one year	—			756			—		—			756
	5,708			2,455			436		(6,660		)	1,939
Pension and other benefit liabilities	—			670			79		—			749
Long-term advances from affiliates	—			1,178			—		(1,178		)	—
Other long-term liabilities	—			93			112		—			205
Long-term debt	—			7,549			52		—			7,601
Deferred income taxes	—			1,827			1,567		(4		)	3,390
Total liabilities	5,708			13,772			2,246		(7,842		)	13,884
Shareholders’ equity
Share capital	2,022			1,038			6,307		(7,345		)	2,022
Additional paid-in capital	45			1,648			261		(1,909		)	45
Accumulated other comprehensive (loss) income	(1,705		)	(1,705		)	547		1,158			(1,705		)
Retained earnings	6,072			9,963			4,747		(14,710		)	6,072
	6,434			10,944			11,862		(22,806		)	6,434
Total liabilities and shareholders’ equity	$	12,142		$	24,716		$	14,108	$	(30,648	)	$	20,318

Condensed Consolidating Balance Sheets

As at December 31, 2017                

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

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended March 31, 2018

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	65		$	392		$	135		$	(195	)	$	397
Investing activities
Additions to properties	—			(122		)	(119		)	—			(241		)
Proceeds from sale of properties and other assets	—			3			1			—			4
Advances to affiliates	—			(307		)	—			307			—
Repayment of advances to affiliates	—			—			502			(502		)	—
Repurchase of share capital from affiliates	—			423			—			(423		)	—
Other	—			—			(1		)	—			(1		)
Cash (used in) provided by investing activities	—			(3		)	383			(618		)	(238		)
Financing activities
Dividends paid	(82		)	(82		)	(113		)	195			(82		)
Return of share capital to affiliates	—			—			(423		)	423			—
Issuance of CP Common Shares	8			—			—			—			8
Purchase of CP Common Shares	(298		)	—			—			—			(298		)
Repayment of long-term debt, excluding commercial paper	—			(5		)	—			—			(5		)
Advances from affiliates	307			—			—			(307		)	—
Repayment of advances from affiliates	—			(502		)	—			502			—
Cash used in financing activities	(65		)	(589		)	(536		)	813			(377		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			2			3			—			5
Cash position
Decrease in cash and cash equivalents	—			(198		)	(15		)	—			(213		)
Cash and cash equivalents at beginning of period	—			241			97			—			338
Cash and cash equivalents at end of period	$	—		$	43		$	82		$	—		$	125

Interim Condensed Consolidating Statements of Cash Flows

For the three months ended March 31, 2017

(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	63		$	85		$	264		$	(101	)	$	311
Investing activities
Additions to properties	—			(109		)	(121		)	—			(230		)
Proceeds from sale of properties and other assets	—			1			2			—			3
Advances to affiliates	(152		)	—			(134		)	286			—
Capital contributions to affiliates	—			(68		)	—			68			—
Other	—			5			—			—			5
Cash used in investing activities	(152		)	(171		)	(253		)	354			(222		)
Financing activities
Dividends paid	(73		)	(73		)	(28		)	101			(73		)
Issuance of share capital	—			—			68			(68		)	—
Issuance of CP Common Shares	28			—			—			—			28
Repayment of long-term debt, excluding commercial paper	—			(5		)	—			—			(5		)
Advances from affiliates	134			149			3			(286		)	—
Cash provided by (used in) financing activities	89			71			43			(253		)	(50		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(2		)	—			—			(2		)
Cash position
(Decrease) increase in cash and cash equivalents	—			(17		)	54			—			37
Cash and cash equivalents at beginning of period	—			100			64			—			164
Cash and cash equivalents at end of period	$	—		$	83		$	118		$	—		$	201