x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) | |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | ||||
PART I - FINANCIAL INFORMATION | ||
Page | ||
Item 1. | Financial Statements: | |
Interim Consolidated Statements of Income | ||
For the Three and Nine Months Ended September 30, 2018 and 2017 | ||
Interim Consolidated Statements of Comprehensive Income | ||
For the Three and Nine Months Ended September 30, 2018 and 2017 | ||
Interim Consolidated Balance Sheets | ||
As at September 30, 2018 and December 31, 2017 | ||
Interim Consolidated Statements of Cash Flows | ||
For the Three and Nine Months Ended September 30, 2018 and 2017 | ||
Interim Consolidated Statements of Changes in Shareholders' Equity | ||
For the Nine Months Ended September 30, 2018 and 2017 | ||
Notes to Interim Consolidated Financial Statements | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Executive Summary | ||
Performance Indicators | ||
Financial Highlights | ||
Results of Operations | ||
Liquidity and Capital Resources | ||
Share Capital | ||
Non-GAAP Measures | ||
Off-Balance Sheet Arrangements | ||
Contractual Commitments | ||
Critical Accounting Estimates | ||
Forward-Looking Information | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |
Item 4. | Controls and Procedures | |
PART II - OTHER INFORMATION | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3. | Defaults Upon Senior Securities | |
Item 4. | Mine Safety Disclosures | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
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) | 2018 | 2017 | 2018 | 2017 | |||||||||
Revenues | |||||||||||||
Freight | $ | $ | $ | $ | |||||||||
Non-freight | |||||||||||||
Total revenues | |||||||||||||
Operating expenses | |||||||||||||
Compensation and benefits (Note 2, 11, 12) | |||||||||||||
Fuel | |||||||||||||
Materials | |||||||||||||
Equipment rents | |||||||||||||
Depreciation and amortization | |||||||||||||
Purchased services and other | |||||||||||||
Total operating expenses | |||||||||||||
Operating income | |||||||||||||
Less: | |||||||||||||
Other (income) expense (Note 5) | ( | ) | ( | ) | ( | ) | |||||||
Other components of net periodic benefit recovery (Note 2, 12) | ( | ) | ( | ) | ( | ) | ( | ) | |||||
Net interest expense | |||||||||||||
Income before income tax expense | |||||||||||||
Income tax expense (Note 6) | |||||||||||||
Net income | $ | $ | $ | $ | |||||||||
Earnings per share (Note 7) | |||||||||||||
Basic earnings per share | $ | $ | $ | $ | |||||||||
Diluted earnings per share | $ | $ | $ | $ | |||||||||
Weighted-average number of shares (millions) (Note 7) | |||||||||||||
Basic | |||||||||||||
Diluted | |||||||||||||
Dividends declared per share | $ | $ | $ | $ | |||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||
Net income | $ | $ | $ | $ | ||||||||
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | ( | ) | ||||||||||
Change in derivatives designated as cash flow hedges | ||||||||||||
Change in pension and post-retirement defined benefit plans | ||||||||||||
Other comprehensive income before income taxes | ||||||||||||
Income tax expense on above items | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Other comprehensive income (Note 4) | ||||||||||||
Comprehensive income | $ | $ | $ | $ | ||||||||
September 30 | December 31 | ||||||
(in millions of Canadian dollars) | 2018 | 2017 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, net | |||||||
Materials and supplies | |||||||
Other current assets | |||||||
Investments | |||||||
Properties | |||||||
Goodwill and intangible assets | |||||||
Pension asset | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and shareholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued liabilities | $ | $ | |||||
Long-term debt maturing within one year (Note 8, 10) | |||||||
Pension and other benefit liabilities | |||||||
Other long-term liabilities | |||||||
Long-term debt (Note 8, 10) | |||||||
Deferred income taxes | |||||||
Total liabilities | |||||||
Shareholders’ equity | |||||||
Share capital | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive loss (Note 4) | ( | ) | ( | ) | |||
Retained earnings | |||||||
Total liabilities and shareholders’ equity | $ | $ | |||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||
Operating activities | ||||||||||||
Net income | $ | $ | $ | $ | ||||||||
Reconciliation of net income to cash provided by operating activities: | ||||||||||||
Depreciation and amortization | ||||||||||||
Deferred income taxes (Note 6) | ||||||||||||
Pension recovery and funding (Note 12) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Foreign exchange (gain) loss on long-term debt (Note 5) | ( | ) | ( | ) | ( | ) | ||||||
Settlement of forward starting swaps on debt issuance (Note 8, 10) | ( | ) | ||||||||||
Other operating activities, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Change in non-cash working capital balances related to operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Cash provided by operating activities | ||||||||||||
Investing activities | ||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Proceeds from sale of properties and other assets | ||||||||||||
Other | ( | ) | ||||||||||
Cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Financing activities | ||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Issuance of CP Common Shares | ||||||||||||
Purchase of CP Common Shares (Note 9) | ( | ) | ( | ) | ( | ) | ||||||
Issuance of long-term debt, excluding commercial paper (Note 8) | ||||||||||||
Repayment of long-term debt, excluding commercial paper (Note 8) | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Net repayment of commercial paper (Note 8) | ( | ) | ||||||||||
Settlement of forward starting swaps on de-designation | ( | ) | ||||||||||
Cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | ( | ) | ( | ) | ||||||
Cash position | ||||||||||||
Increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ( | ) | ||||||
Cash and cash equivalents at beginning of period | ||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | $ | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Income taxes paid | $ | $ | $ | $ | ||||||||
Interest paid | $ | $ | $ | $ | ||||||||
(in millions of Canadian dollars except per share data) | Common shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders’ equity | |||||||||||||
Balance at January 1, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | |||||||||||||||||||
Other comprehensive income (Note 4) | |||||||||||||||||||
Dividends declared | ( | ) | ( | ) | |||||||||||||||
Effect of stock-based compensation expense | |||||||||||||||||||
CP Common Shares repurchased (Note 9) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Balance at January 1, 2017 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Net income | |||||||||||||||||||
Other comprehensive income (Note 4) | |||||||||||||||||||
Dividends declared | ( | ) | ( | ) | |||||||||||||||
CP Common Shares repurchased (Note 9) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Shares issued under stock option plan | ( | ) | |||||||||||||||||
Balance at September 30, 2017 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017(1) | 2018 | 2017(1) | ||||||||
Freight | ||||||||||||
Grain | $ | $ | $ | $ | ||||||||
Coal | ||||||||||||
Potash | ||||||||||||
Fertilizers and sulphur | ||||||||||||
Forest products | ||||||||||||
Energy, chemicals and plastics | ||||||||||||
Metals, minerals, and consumer products | ||||||||||||
Automotive | ||||||||||||
Intermodal | ||||||||||||
Total freight revenues | ||||||||||||
Non-freight excluding leasing revenues | ||||||||||||
Revenues from contracts with customers | ||||||||||||
Leasing revenues | ||||||||||||
Total revenues | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | ||||||||||||
(in millions of Canadian dollars) | Foreign currency net of hedging activities(1) | Derivatives and other(1) | Pension and post- retirement defined benefit plans(1) | Total(1) | ||||||||
Opening balance, July 1, 2018 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive (loss) income before reclassifications | ( | ) | ( | ) | ( | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive (loss) income | ( | ) | ||||||||||
Closing balance, September 30, 2018 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Opening balance, July 1, 2017 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss before reclassifications | ( | ) | ( | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive (loss) income | ( | ) | ||||||||||
Closing balance, September 30, 2017 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
For the nine months ended September 30 | ||||||||||||
(in millions of Canadian dollars) | Foreign currency net of hedging activities(1) | Derivatives and other(1) | Pension and post- retirement defined benefit plans(1) | Total(1) | ||||||||
Opening balance, January 1, 2018 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive income before reclassifications | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive income | ||||||||||||
Closing balance, September 30, 2018 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Opening balance, January 1, 2017 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss before reclassifications | ( | ) | ( | ) | ( | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||
Net other comprehensive (loss) income | ( | ) | ||||||||||
Closing balance, September 30, 2017 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||
Amortization of prior service costs(1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Recognition of net actuarial loss(1) | ||||||||||||
Total before income tax | ||||||||||||
Income tax recovery | ( | ) | ( | ) | ( | ) | ( | ) | ||||
Total net of income tax | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||
Foreign exchange (gain) loss on long-term debt | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
Other foreign exchange (gains) losses | ( | ) | ( | ) | ( | ) | ||||||
Insurance recovery of legal settlement | ( | ) | ||||||||||
Charge on hedge roll and de-designation | ||||||||||||
Other | ( | ) | ( | ) | ||||||||
Other (income) expense | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||
Current income tax expense | $ | $ | $ | $ | ||||||||
Deferred income tax expense | ||||||||||||
Income tax expense | $ | $ | $ | $ | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||
Weighted-average basic shares outstanding | ||||||||
Dilutive effect of stock options | ||||||||
Weighted-average diluted shares outstanding | ||||||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Number of Common Shares repurchased | ||||||||||||
Weighted-average price per share(1) | $ | $ | $ | $ | ||||||||
Amount of repurchase (in millions)(1) | $ | $ | $ | $ | ||||||||
(in millions of Canadian dollars) | September 30, 2018 | December 31, 2017 | ||||
Long-term debt (including current maturities): | ||||||
Fair value | $ | $ | ||||
Carrying value | ||||||
For the nine months ended September 30, 2018 | |
Grant price | $ |
Expected option life (years)(1) | |
Risk-free interest rate(2) | |
Expected stock price volatility(3) | |
Expected annual dividends per share(4) | $ |
Expected forfeiture rate(5) | |
Weighted-average grant date fair value per option granted during the period | $ |
(1) | Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour, or when available, specific expectations regarding future exercise behaviour, were used to estimate the expected life of the option. |
(2) | Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the option. |
(3) | Based on the historical stock price volatility of the Company’s stock over a period commensurate with the expected term of the option. |
(4) | Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. On May 10, 2018, the Company announced an increase in its quarterly dividend to $ |
(5) |
For the three months ended September 30 | |||||||||||||
Pensions | Other benefits | ||||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | |||||||||
Current service cost (benefits earned by employees) | $ | $ | $ | $ | |||||||||
Other components of net periodic benefit (recovery) cost: | |||||||||||||
Interest cost on benefit obligation | |||||||||||||
Expected return on fund assets | ( | ) | ( | ) | |||||||||
Recognized net actuarial loss | |||||||||||||
Amortization of prior service costs | ( | ) | ( | ) | |||||||||
Total other components of net periodic benefit (recovery) cost | ( | ) | ( | ) | |||||||||
Net periodic benefit (recovery) cost | $ | ( | ) | $ | ( | ) | $ | $ | |||||
For the nine months ended September 30 | |||||||||||||
Pensions | Other benefits | ||||||||||||
(in millions of Canadian dollars) | 2018 | 2017 | 2018 | 2017 | |||||||||
Current service cost (benefits earned by employees) | $ | $ | $ | $ | |||||||||
Other components of net periodic benefit (recovery) cost: | |||||||||||||
Interest cost on benefit obligation | |||||||||||||
Expected return on fund assets | ( | ) | ( | ) | |||||||||
Recognized net actuarial loss | |||||||||||||
Amortization of prior service costs | ( | ) | ( | ) | |||||||||
Total other components of net periodic benefit (recovery) cost | ( | ) | ( | ) | |||||||||
Net periodic benefit (recovery) cost | $ | ( | ) | $ | ( | ) | $ | $ | |||||
(1) | Québec's Minister of Sustainable Development, Environment, Wildlife and Parks (the "Minister") ordered various parties, including CP, to clean up the derailment site (the “Cleanup Order”). CP appealed the Cleanup Order to the Administrative Tribunal of Québec (the “TAQ”). The Minister subsequently served a Notice of Claim seeking $ |
(2) | Québec’s Attorney General sued CP in the Québec Superior Court initially claiming $ |
(3) | A class action in the Québec Superior Court on behalf of persons and entities residing in, owning or leasing property in, operating a business in or physically present in Lac-Mégantic at the time of the derailment (the “Class Action”) was certified against CP, MMAC and the train conductor, Mr. Thomas Harding ("Harding"). The Class Action seeks unquantified damages, including for wrongful death, personal injury, and property damage arising from the derailment. All known wrongful death claimants in the Class Action have opted out and, by court order, cannot re-join the Class Action. |
(4) |
(5) |
(6) | An adversary proceeding filed by the MMAR U.S. estate representative (“Estate Representative”) in Maine accuses CP of failing to abide by certain regulations (the “Adversary Proceeding”). The Estate Representative alleges that CP should not have moved the petroleum crude oil train because an inaccurate classification by the shipper was or should have been known. The Estate Representative seeks damages for MMAR’s business value (as yet unquantified) allegedly destroyed by the derailment. |
(7) | A class action and mass tort action on behalf of Lac-Mégantic residents and wrongful death representatives commenced in Texas and wrongful death and personal injury actions commenced in Illinois and Maine against CP were all removed to and consolidated in Maine (the “Maine Actions”). The Maine Actions allege that CP negligently misclassified and mis-packaged the petroleum crude oil being shipped. On CP’s motion, the Maine Actions were dismissed by the Court on several grounds. The plaintiffs are appealing the dismissal decision. |
(8) | The Trustee (the “WD Trustee”) for the wrongful death trust (the “WD Trust”), as defined and established by the Estate Representative under the Plans, asserts Carmack Amendment claims against CP in North Dakota federal court (the “Carmack Claims”). The WD Trustee seeks to recover approximately $ |
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Revenues | |||||||||||||||
Freight | $ | $ | $ | $ | $ | ||||||||||
Non-freight | ( | ) | |||||||||||||
Total revenues | ( | ) | |||||||||||||
Operating expenses | |||||||||||||||
Compensation and benefits | |||||||||||||||
Fuel | |||||||||||||||
Materials | |||||||||||||||
Equipment rents | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Purchased services and other | ( | ) | |||||||||||||
Total operating expenses | ( | ) | |||||||||||||
Operating income | |||||||||||||||
Less: | |||||||||||||||
Other (income) expense | ( | ) | ( | ) | ( | ) | |||||||||
Other components of net periodic benefit (recovery) expense | ( | ) | ( | ) | |||||||||||
Net interest (income) expense | ( | ) | ( | ) | |||||||||||
Income before income tax expense and equity in net earnings of subsidiaries | |||||||||||||||
Less: Income tax (recovery) expense | ( | ) | |||||||||||||
Add: Equity in net earnings of subsidiaries | ( | ) | |||||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Revenues | |||||||||||||||
Freight | $ | $ | $ | $ | $ | ||||||||||
Non-freight | ( | ) | |||||||||||||
Total revenues | ( | ) | |||||||||||||
Operating expenses | |||||||||||||||
Compensation and benefits | |||||||||||||||
Fuel | |||||||||||||||
Materials | |||||||||||||||
Equipment rents | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Purchased services and other | ( | ) | |||||||||||||
Total operating expenses | ( | ) | |||||||||||||
Operating income | |||||||||||||||
Less: | |||||||||||||||
Other (income) expense | ( | ) | ( | ) | ( | ) | |||||||||
Other components of net periodic benefit (recovery) expense | ( | ) | ( | ) | |||||||||||
Net interest (income) expense | ( | ) | ( | ) | |||||||||||
Income before income tax expense and equity in net earnings of subsidiaries | |||||||||||||||
Less: Income tax expense | |||||||||||||||
Add: Equity in net earnings of subsidiaries | ( | ) | |||||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Revenues | |||||||||||||||
Freight | $ | $ | $ | $ | $ | ||||||||||
Non-freight | ( | ) | |||||||||||||
Total revenues | ( | ) | |||||||||||||
Operating expenses | |||||||||||||||
Compensation and benefits | |||||||||||||||
Fuel | |||||||||||||||
Materials | |||||||||||||||
Equipment rents | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Purchased services and other | ( | ) | |||||||||||||
Total operating expenses | ( | ) | |||||||||||||
Operating income | |||||||||||||||
Less: | |||||||||||||||
Other expense (income) | ( | ) | |||||||||||||
Other components of net periodic benefit (recovery) expense | ( | ) | ( | ) | |||||||||||
Net interest expense (income) | ( | ) | |||||||||||||
(Loss) income before income tax expense and equity in net earnings of subsidiaries | ( | ) | |||||||||||||
Less: Income tax (recovery) expense | ( | ) | |||||||||||||
Add: Equity in net earnings of subsidiaries | ( | ) | |||||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Revenues | |||||||||||||||
Freight | $ | $ | $ | $ | $ | ||||||||||
Non-freight | ( | ) | |||||||||||||
Total revenues | ( | ) | |||||||||||||
Operating expenses | |||||||||||||||
Compensation and benefits | |||||||||||||||
Fuel | |||||||||||||||
Materials | |||||||||||||||
Equipment rents | ( | ) | |||||||||||||
Depreciation and amortization | |||||||||||||||
Purchased services and other | ( | ) | |||||||||||||
Total operating expenses | ( | ) | |||||||||||||
Operating income | |||||||||||||||
Less: | |||||||||||||||
Other (income) expense | ( | ) | ( | ) | ( | ) | |||||||||
Other components of net periodic benefit (recovery) expense | ( | ) | ( | ) | |||||||||||
Net interest (income) expense | ( | ) | ( | ) | |||||||||||
Income before income tax expense and equity in net earnings of subsidiaries | |||||||||||||||
Less: Income tax expense | |||||||||||||||
Add: Equity in net earnings of subsidiaries | ( | ) | |||||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | ( | ) | |||||||||||||
Change in derivatives designated as cash flow hedges | |||||||||||||||
Change in pension and post-retirement defined benefit plans | |||||||||||||||
Other comprehensive income (loss) before income taxes | ( | ) | |||||||||||||
Income tax expense on above items | ( | ) | ( | ) | |||||||||||
Equity accounted investments | ( | ) | |||||||||||||
Other comprehensive income (loss) | ( | ) | |||||||||||||
Comprehensive income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | ( | ) | |||||||||||||
Change in derivatives designated as cash flow hedges | |||||||||||||||
Change in pension and post-retirement defined benefit plans | |||||||||||||||
Other comprehensive income (loss) before income taxes | ( | ) | |||||||||||||
Income tax expense on above items | ( | ) | ( | ) | |||||||||||
Equity accounted investments | ( | ) | |||||||||||||
Other comprehensive income (loss) | ( | ) | |||||||||||||
Comprehensive income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
Net (loss) gain in foreign currency translation adjustments, net of hedging activities | ( | ) | ( | ) | |||||||||||
Change in derivatives designated as cash flow hedges | |||||||||||||||
Change in pension and post-retirement defined benefit plans | |||||||||||||||
Other comprehensive (loss) income before income taxes | ( | ) | |||||||||||||
Income tax expense on above items | ( | ) | ( | ) | ( | ) | |||||||||
Equity accounted investments | ( | ) | |||||||||||||
Other comprehensive income | ( | ) | |||||||||||||
Comprehensive income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(in millions of Canadian dollars) | CPRL (Parent Guarantor) | CPRC (Subsidiary Issuer) | Non-Guarantor Subsidiaries | Consolidating Adjustments and Eliminations | CPRL Consolidated | ||||||||||
Net income | $ | $ | $ | $ | ( | ) | $ | ||||||||
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | ( | ) | |||||||||||||
Change in derivatives designated as cash flow hedges | |||||||||||||||
Change in pension and post-retirement defined benefit plans | |||||||||||||||
Other comprehensive income (loss) before income taxes | ( | ) | |||||||||||||
Income tax expense on above items | ( | ) | ( | ) | ( | ) | |||||||||
Equity accounted investments | ( | ) | |||||||||||||
Other comprehensive income (loss) | ( | ) | |||||||||||||
Comprehensive income | $ | $ | $ | $ | ( | ) | $ | ||||||||
(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 | $ | $ | $ | $ | $ | ||||||||||
Accounts receivable, net | |||||||||||||||
Accounts receivable, intercompany | ( | ) | |||||||||||||
Short-term advances to affiliates | ( | ) | |||||||||||||
Materials and supplies | |||||||||||||||
Other current assets | ( | ) | |||||||||||||
( | ) | ||||||||||||||
Long-term advances to affiliates | ( | ) | |||||||||||||
Investments | |||||||||||||||
Investments in subsidiaries | ( | ) | |||||||||||||
Properties | |||||||||||||||
Goodwill and intangible assets | |||||||||||||||
Pension asset | |||||||||||||||
Other assets | |||||||||||||||
Deferred income taxes | ( | ) | |||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | ||||||||
Liabilities and shareholders’ equity | |||||||||||||||
Current liabilities | |||||||||||||||
Accounts payable and accrued liabilities | $ | $ | $ | $ | ( | ) | $ | ||||||||
Accounts payable, intercompany | ( | ) | |||||||||||||
Short-term advances from affiliates | ( | ) | |||||||||||||
Long-term debt maturing within one year | |||||||||||||||
( | ) | ||||||||||||||
Pension and other benefit liabilities | |||||||||||||||
Long-term advances from affiliates | ( | ) | |||||||||||||
Other long-term liabilities | |||||||||||||||
Long-term debt | |||||||||||||||
Deferred income taxes | ( | ) | |||||||||||||
Total liabilities | ( | ) | |||||||||||||
Shareholders’ equity | |||||||||||||||
Share capital | ( | ) | |||||||||||||
Additional paid-in capital | ( | ) | |||||||||||||
Accumulated other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | |||||||||
Retained earnings | ( | ) | |||||||||||||
( | ) | ||||||||||||||
Total liabilities and shareholders’ equity | $ | $ | $ | $ | ( | ) | $ | ||||||||
(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 | $ | $ | $ | $ | $ | ||||||||||
Accounts receivable, net | |||||||||||||||
Accounts receivable, intercompany | ( | ) | |||||||||||||
Short-term advances to affiliates | ( | ) | |||||||||||||
Materials and supplies | |||||||||||||||
Other current assets | |||||||||||||||
( | ) | ||||||||||||||
Long-term advances to affiliates | ( | ) | |||||||||||||
Investments | |||||||||||||||
Investments in subsidiaries | ( | ) | |||||||||||||
Properties | |||||||||||||||
Goodwill and intangible assets | |||||||||||||||
Pension asset | |||||||||||||||
Other assets | |||||||||||||||
Deferred income taxes | ( | ) | |||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | ||||||||
Liabilities and shareholders’ equity | |||||||||||||||
Current liabilities | |||||||||||||||
Accounts payable and accrued liabilities | $ | $ | $ | $ | $ | ||||||||||
Accounts payable, intercompany | ( | ) | |||||||||||||
Short-term advances from affiliates | ( | ) | |||||||||||||
Long-term debt maturing within one year | |||||||||||||||
( | ) | ||||||||||||||
Pension and other benefit liabilities | |||||||||||||||
Long-term advances from affiliates | ( | ) | |||||||||||||
Other long-term liabilities | |||||||||||||||
Long-term debt | |||||||||||||||
Deferred income taxes | ( | ) | |||||||||||||
Total liabilities | ( | ) | |||||||||||||
Shareholders’ equity | |||||||||||||||
Share capital | ( | ) | |||||||||||||
Additional paid-in capital | ( | ) | |||||||||||||
Accumulated other comprehensive (loss) income | ( | ) | ( | ) | ( | ) | |||||||||
Retained earnings | ( | ) | |||||||||||||
( | ) | ||||||||||||||
Total liabilities and shareholders’ equity | $ | $ | $ | $ | ( | ) | $ | ||||||||
(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 | $ | $ | $ | $ | ( | ) | $ | ||||||||
Investing activities | |||||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | |||||||||
Proceeds from sale of properties and other assets | |||||||||||||||
Advances to affiliates | ( | ) | |||||||||||||
Repayment of advances to affiliates | ( | ) | |||||||||||||
Repurchase of share capital from affiliates | ( | ) | |||||||||||||
Cash provided by (used in) investing activities | ( | ) | ( | ) | |||||||||||
Financing activities | |||||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Return of share capital to affiliates | ( | ) | ( | ) | |||||||||||
Issuance of CP Common Shares | |||||||||||||||
Repayment of long-term debt, excluding commercial paper | ( | ) | ( | ) | |||||||||||
Net repayment of commercial paper | ( | ) | ( | ) | |||||||||||
Advances from affiliates | ( | ) | |||||||||||||
Repayment of advances from affiliates | ( | ) | ( | ) | |||||||||||
Cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | ( | ) | |||||||||||
Cash position | |||||||||||||||
Increase in cash and cash equivalents | |||||||||||||||
Cash and cash equivalents at beginning of period | |||||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | $ | $ | ||||||||||
(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 | $ | $ | $ | $ | ( | ) | $ | ||||||||
Investing activities | |||||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | |||||||||
Proceeds from sale of properties and other assets | |||||||||||||||
Advances to affiliates | ( | ) | |||||||||||||
Repayment of advances to affiliates | ( | ) | |||||||||||||
Capital contributions to affiliates | ( | ) | |||||||||||||
Repurchase of share capital from affiliates | ( | ) | |||||||||||||
Cash provided by (used in) investing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Financing activities | |||||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Issuance of share capital | ( | ) | |||||||||||||
Return of share capital to affiliates | ( | ) | |||||||||||||
Issuance of CP Common Shares | |||||||||||||||
Purchase of CP Common Shares | ( | ) | ( | ) | |||||||||||
Repayment of long-term debt, excluding commercial paper | ( | ) | ( | ) | |||||||||||
Advances from affiliates | ( | ) | |||||||||||||
Repayment of advances from affiliates | ( | ) | ( | ) | |||||||||||
Cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | ( | ) | ( | ) | |||||||||
Cash position | |||||||||||||||
(Decrease) increase in cash and cash equivalents | ( | ) | ( | ) | |||||||||||
Cash and cash equivalents at beginning of period | |||||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | $ | $ | ||||||||||
(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 | $ | $ | $ | $ | ( | ) | $ | ||||||||
Investing activities | |||||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | |||||||||
Proceeds from sale of properties and other assets | |||||||||||||||
Advances to affiliates | ( | ) | ( | ) | |||||||||||
Repayment of advances to affiliates | ( | ) | |||||||||||||
Repurchase of share capital from affiliates | ( | ) | |||||||||||||
Other | ( | ) | ( | ) | |||||||||||
Cash provided by (used in) investing activities | ( | ) | ( | ) | |||||||||||
Financing activities | |||||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Return of share capital to affiliates | ( | ) | ( | ) | |||||||||||
Issuance of CP Common Shares | |||||||||||||||
Purchase of CP Common Shares | ( | ) | ( | ) | |||||||||||
Issuance of long-term debt, excluding commercial paper | |||||||||||||||
Repayment of long-term debt, excluding commercial paper | ( | ) | ( | ) | |||||||||||
Advances from affiliates | ( | ) | |||||||||||||
Repayment of advances from affiliates | ( | ) | ( | ) | |||||||||||
Cash used in financing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | |||||||||||||
Cash position | |||||||||||||||
Decrease in cash and cash equivalents | ( | ) | ( | ) | ( | ) | |||||||||
Cash and cash equivalents at beginning of year | |||||||||||||||
Cash and cash equivalents at end of year | $ | $ | $ | $ | $ | ||||||||||
(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 | $ | $ | $ | $ | ( | ) | $ | ||||||||
Investing activities | |||||||||||||||
Additions to properties | ( | ) | ( | ) | ( | ) | |||||||||
Proceeds from sale of properties and other assets | |||||||||||||||
Advances to affiliates | ( | ) | ( | ) | ( | ) | |||||||||
Capital contributions to affiliates | ( | ) | |||||||||||||
Repurchase of share capital from affiliates | ( | ) | |||||||||||||
Other | ( | ) | |||||||||||||
Cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Financing activities | |||||||||||||||
Dividends paid | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Issuance of share capital | ( | ) | |||||||||||||
Return of share capital to affiliates | ( | ) | |||||||||||||
Issuance of CP Common Shares | |||||||||||||||
Purchase of CP Common Shares | ( | ) | ( | ) | |||||||||||
Repayment of long-term debt, excluding commercial paper | ( | ) | ( | ) | |||||||||||
Advances from affiliates | ( | ) | |||||||||||||
Settlement of forward starting swaps on de-designation | ( | ) | ( | ) | |||||||||||
Cash provided by (used in) financing activities | ( | ) | ( | ) | |||||||||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | ( | ) | ( | ) | ( | ) | |||||||||
Cash position | |||||||||||||||
Decrease in cash and cash equivalents | ( | ) | ( | ) | |||||||||||
Cash and cash equivalents at beginning of year | |||||||||||||||
Cash and cash equivalents at end of year | $ | $ | $ | $ | $ | ||||||||||
• | Financial performance - In the third quarter of 2018, CP reported Diluted earnings per share ("EPS") of $4.35, an increase of 24% as compared to 2017. Net income was $622 million in the third quarter of 2018, an increase of 22% as compared to 2017. These increases were primarily due to higher volumes and higher income from defined benefit pension plans, partially offset by lower foreign exchange ("FX") gains on U.S. dollar-denominated debt in 2018 compared to 2017. Adjusted diluted EPS, which excludes FX on U.S. dollar-denominated debt, was $4.12 in the third quarter of 2018, an increase of 42% compared to the same period of 2017. Adjusted income was $589 million in the third quarter of 2018, an increase of 40% compared to last year. These increases were primarily due to higher volumes and higher income from defined benefit pension plans. |
• | Total revenues - Total revenues increased by 19% in the third quarter of 2018 to $1,898 million from $1,595 million in the same period of 2017. This increase was driven primarily by a 13% volume growth as measured in Revenue Ton-Miles ("RTMs"), higher fuel surcharge revenue, and the favourable impact of the change in FX. |
• | Operating performance - CP's average train speed decreased by 6% to 21.6 miles per hour and terminal dwell time increased by 5% to 6.9 hours due to higher volumes and increased delays from accelerated track and roadway capital programs in the third quarter of 2018. Average train weight increased by 2% to 9,195 tons, average train length increased by 1% to 7,345 feet, and fuel efficiency improved by 3% primarily driven by improved productivity from running longer trains as a result of volume growth. These metrics are discussed further in Performance Indicators of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | On October 17, 2018, CP announced that it intends to implement a new normal course issuer bid to repurchase, for cancellation, up to approximately 5.68 million of its Common Shares, subject to Toronto Stock Exchange acceptance. |
• | On October 4, 2018, as part of CP's Investor Day, the Company announced updates to its 2018 full-year guidance, which included estimated adjusted EPS growth in excess of 20 percent.(1) The Company also announced financial targets for 2018-2020 of volume compound annual growth rate ("CAGR") of mid-single digits measured in RTMs, double-digit CAGR in adjusted diluted EPS, continued margin improvement through cost control and operating leverage, and capital expenditures of $1.6 billion per year. These targets are based on the following key assumptions: exchange rate of 1.30 CAD/USD, On-Highway Diesel price of $3.20 USD/US gallon, pension income consistent with 2018, and an annualized effective tax rate of 25%, excluding discrete items such as foreign-exchange gains or losses on U.S. dollar-denominated debt and any effects of changes in tax rates. |
• | On September 25, 2018, the Company announced the appointment of Edward L. Monser to CP's Board of Directors effective December 17, 2018. |
• | On September 17, 2018, CP declared a quarterly dividend of $0.6500 per share on the outstanding Common Shares. The dividend is payable on October 29, 2018 to holders of record at the close of business on September 28, 2018. |
• | On May 25, 2018, Mr. John Derry resigned from his position as Vice-President of Human Resources. |
• | On May 23, 2018, the Transportation Modernization Act, also known as Bill C-49, was passed. The bill included amendments to the Canada Transportation Act and the Railway Safety Act, among other acts, to: (1) replace the existing 160 kilometer extended interswitching limit and the competitive line rate provisions with a new long-haul interswitching regime; (2) modify the existing Level of Service remedy for shippers by instructing the Agency to determine, upon receipt of a complaint, if a railway company is fulfilling its common carrier obligation to provide “adequate and suitable accommodation” of traffic, if it is satisfied that the service provided is the “highest level of service that is reasonable in the circumstances”; (3) allow the existing Service Level Agreement arbitration remedy to include the consideration of reciprocal financial penalties; (4) increase the threshold for summary Final Offer Arbitrations from $750,000 to $2 million; (5) bifurcate the Volume-Related Composite Price Index component of the annual Maximum Revenue determination for transportation of regulated grain, to encourage hopper car investment by CP and CN; and (6) mandate the installation of locomotive voice and video recorders (“LVVRs”), with statutory permission for random access by railway companies and Transport Canada to the LVVR data in order to proactively strengthen railway safety in Canada. |
• | Following the passage of Bill C-49, CP announced that it would invest more than a half-billion dollars over the next four years on new high-capacity grain hopper cars as part of its commitment to the North American agricultural sector. As a result of that multi-year investment, CP anticipated that 2018 capital expenditures would be $1.55 billion. |
• | On May 10, 2018, CP announced an increase to the Company's quarterly dividend to $0.6500 per share from $0.5625 per share. The dividend was payable on July 30, 2018 to holders of record at the close of business on June 29, 2018. |
• | Labour Disruptions - On April 18, 2018, CP received a 72-hour strike notice from the Teamsters Canada Rail Conference - Train & Engine (“TCRC”), representing approximately 3,000 conductors and locomotive engineers, and the International Brotherhood of Electrical Workers (“IBEW”), representing approximately 360 signal maintainers, of their respective plans to strike. At that time, CP commenced its work stoppage contingency plan to ensure a smooth, efficient and safe wind down of operations. |
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
2018 | 2017(1) | % Change | 2018 | 2017(1) | % Change | |||||||
Operations Performance | ||||||||||||
Gross ton-miles (“GTMs”) (millions) | 70,469 | 62,311 | 13 | 202,575 | 186,899 | 8 | ||||||
Train miles (thousands) | 8,174 | 7,444 | 10 | 23,809 | 22,786 | 4 | ||||||
Average train weight – excluding local traffic (tons) | 9,195 | 8,990 | 2 | 9,082 | 8,775 | 3 | ||||||
Average train length – excluding local traffic (feet) | 7,345 | 7,301 | 1 | 7,297 | 7,193 | 1 | ||||||
Average terminal dwell (hours) | 6.9 | 6.6 | 5 | 7.1 | 6.5 | 9 | ||||||
Average train speed (miles per hour, or "mph") | 21.6 | 23.1 | (6 | ) | 21.2 | 22.9 | (7 | ) | ||||
Fuel efficiency (U.S. gallons of locomotive fuel consumed / 1,000 GTMs) | 0.916 | 0.944 | (3 | ) | 0.952 | 0.978 | (3 | ) | ||||
Total Employees and Workforce | ||||||||||||
Total employees (average) | 12,941 | 12,149 | 7 | 12,623 | 11,990 | 5 | ||||||
Total employees (end of period) | 13,000 | 12,135 | 7 | 13,000 | 12,135 | 7 | ||||||
Workforce (end of period) | 13,029 | 12,219 | 7 | 13,029 | 12,219 | 7 | ||||||
Safety Indicators | ||||||||||||
FRA personal injuries per 200,000 employee-hours | 1.49 | 1.56 | (4 | ) | 1.49 | 1.64 | (9 | ) | ||||
FRA train accidents per million train miles | 1.12 | 0.99 | 13 | 1.11 | 1.01 | 10 | ||||||
(1) | Certain figures have been updated to reflect new information or have been revised to conform with current presentation. |
• | A GTM is defined as the movement of one ton of train weight over one mile. GTMs are calculated by multiplying total train weight by the distance the train moved. Total train weight comprises the weight of the freight cars, their contents, and any inactive locomotives. An increase in GTMs indicates additional workload. GTMs increased by 13% for the third quarter of 2018 compared to the same period of 2017. This increase was primarily due to increased volumes of crude, Intermodal, and Potash. |
• | Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles increased by 10% for the third quarter of 2018 compared to the same period of 2017. This reflects the impact of a 13% increase in workload, partially offset by improvements in train weight. |
• | Average train weight is defined as the average gross weight of CP trains, both loaded and empty. This excludes trains in short-haul service, work trains used to move CP’s track equipment and materials, and the haulage of other railroads’ trains on CP’s network. Average train weight increased by 2% for the third quarter of 2018 compared to the same period of 2017. This increase was due to continuous improvements in operating plan efficiency combined with higher volumes of heavier commodities, such as crude and Potash, compared to the same period of 2017. |
• | Average train length is defined as the average total length of CP trains, both loaded and empty. This includes all cars and locomotives on the train and is calculated as the sum of each car or locomotive's length multiplied by the distance travelled, divided by train miles. Local trains are excluded from this measure. Average train length increased by 1% for the third quarter of 2018 compared to the same period of 2017. This was a result of improvements in operating plan efficiency and increased Intermodal and Potash volumes, which move in longer trains. |
• | Average terminal dwell is defined as the average time a freight car resides within terminal boundaries expressed in hours. The timing starts with a train arriving at the terminal, a customer releasing the car to the Company, or a car arriving at interchange from another railroad. The timing ends when the train leaves, a customer receives the car from CP, or the freight car is transferred to another railroad. Freight cars are excluded if they are being stored at the terminal or used in track repairs. Average terminal dwell increased by 5% in the third quarter of 2018 compared to the same period of 2017. |
• | Average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated by dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customers or foreign railroads and excludes the time and distance travelled by: i) trains used in or around CP’s yards; ii) passenger trains; and iii) trains used for repairing track. Average train speed decreased by 6% in the third quarter of 2018 compared to the same period of 2017. This decrease was due to higher volumes and increased delays from accelerated track and roadway capital programs. |
• | Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs. Fuel efficiency improved by 3% in the third quarter of 2018 compared to the same period of 2017. This improvement in efficiency was primarily due to improved productivity from running longer trains as a result of volume growth. |
• | GTMs increased by 8% for the first nine months of 2018 compared to the same period of 2017. This increase was primarily due to increased volumes of crude, Intermodal, and Potash. |
• | Train miles increased by 4% for the first nine months of 2018 compared to the same period of 2017. This reflects the impact of higher volumes, partially offset by improvements in train weights. |
• | Average train weight increased by 3% for the first nine months of 2018 compared to the same period of 2017. This was a result of improvements in operating plan efficiency combined with higher volumes of heavier commodities, such as crude and Potash. |
• | Average train length increased by 1% for the first nine months of 2018 from the same period of 2017. This increase was primarily due to improvements in operating plan efficiency and increased Intermodal and Potash volumes, which move in longer trains. |
• | Average terminal dwell increased by 9% in the first nine months of 2018 compared to the same period of 2017. This unfavourable increase was primarily due to network disruptions from labour negotiations in the second quarter of 2018, harsher winter conditions in the first quarter of 2018, and higher volumes and increased delays from accelerated track and roadway capital programs in the third quarter of 2018. |
• | Average train speed decreased by 7% in the first nine months of 2018 compared to the same period of 2017. This decrease was primarily due to network disruptions from labour negotiations in the second quarter of 2018, harsher winter conditions in the first quarter of 2018, and higher volumes and increased delays from accelerated track and roadway capital programs in the third quarter of 2018. |
• | Fuel efficiency improved by 3% in the first nine months of 2018 compared to the same period of 2017. This improvement in efficiency was primarily due to improved productivity from running longer trains as a result of volume growth. |
For the three months ended September 30 | For the nine months ended September 30 | ||||||||||||
(in millions, except per share data, percentages and ratios) | 2018 | 2017 | 2018 | 2017 | |||||||||
Financial Performance | |||||||||||||
Revenues | $ | 1,898 | $ | 1,595 | $ | 5,310 | $ | 4,841 | |||||
Operating income(1) | 790 | 622 | 1,957 | 1,837 | |||||||||
Adjusted operating income(1)(2) | 790 | 622 | 1,957 | 1,786 | |||||||||
Net income | 622 | 510 | 1,406 | 1,421 | |||||||||
Adjusted income(2) | 589 | 422 | 1,432 | 1,197 | |||||||||
Basic EPS | 4.36 | 3.50 | 9.81 | 9.72 | |||||||||
Diluted EPS | 4.35 | 3.50 | 9.78 | 9.70 | |||||||||
Adjusted diluted EPS(2) | 4.12 | 2.90 | 9.97 | 8.17 | |||||||||
Dividends declared per share | 0.6500 | 0.5625 | 1.8625 | 1.6250 | |||||||||
Cash provided by operating activities | 673 | 527 | 1,781 | 1,449 | |||||||||
Free cash(2) | 245 | 214 | 740 | 575 | |||||||||
As at September 30, 2018 | As at December 31, 2017 | ||||||||||||
Financial Position | |||||||||||||
Total assets | $ | 21,109 | $ | 20,135 | |||||||||
Total long-term debt, including current portion | 8,286 | 8,159 | |||||||||||
Shareholders’ equity | 7,128 | 6,437 | |||||||||||
For the twelve months ended September 30 | |||||||||||||
2018 | 2017 | ||||||||||||
Financial Ratios | |||||||||||||
Return on invested capital ("ROIC")(2) | 19.4 | % | 15.9 | % | |||||||||
Adjusted ROIC(2) | 15.7 | % | 14.7 | % | |||||||||
For the three months ended September 30 | For the nine months ended September 30 | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
Operating ratio(1)(3) | 58.3 | % | 61.0 | % | 63.1 | % | 62.1 | % | |||||
Adjusted operating ratio(1)(2) | 58.3 | % | 61.0 | % | 63.1 | % | 63.1 | % | |||||
(1) | 2017 comparative period figures have been restated for the retrospective adoption of ASU 2017-07, discussed further in Item 1. Financial Statements, Note 2 Accounting changes. |
(2) | These measures have no standardized meanings prescribed by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. These measures are defined and reconciled in Non-GAAP Measures of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(3) | Operating ratio is defined as operating expenses divided by revenues, further discussed in Results of Operations of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
• | higher volumes; |
• | favourable impact of the change in FX of $15 million; and |
• | the efficiencies generated from improved operating performance and asset utilization. |
• | a management transition recovery of $51 million associated with Mr. E. Hunter Harrison's retirement as CEO of CP in 2017; |
• | cost inflation; |
• | higher depreciation expense due to a higher asset base; |
• | higher stock-based compensation driven primarily by an increase in the stock price; |
• | the unfavourable impact of the change in FX of $17 million; |
• | harsher winter operating conditions in the first quarter of 2018; and |
• | higher incentive compensation. |
• | the unfavourable impact of higher fuel prices; |
• | a management transition recovery of $51 million associated with Mr. E. Hunter Harrison's retirement as CEO of CP in 2017; |
• | cost inflation; |
• | higher depreciation expense due to a higher asset base; |
• | higher stock-based compensation driven primarily by an increase in the stock price; |
• | harsher winter operating conditions in the first quarter; and |
• | incentive compensation. |
Average exchange rates (Canadian/U.S. dollar) | 2018 | 2017 | ||||
For the three months ended - September 30 | $ | 1.31 | $ | 1.25 | ||
For the nine months ended - September 30 | $ | 1.29 | $ | 1.31 | ||
Exchange rates (Canadian/U.S. dollar) | 2018 | 2017 | ||||
Beginning of year - January 1 | $ | 1.25 | $ | 1.34 | ||
Beginning of quarter - July 1 | $ | 1.32 | $ | 1.30 | ||
End of quarter - September 30 | $ | 1.29 | $ | 1.25 | ||
Average Fuel Price (U.S. dollars per U.S. gallon) | 2018 | 2017 | ||||
For the three months ended - September 30 | $ | 2.69 | $ | 2.08 | ||
For the nine months ended - September 30 | $ | 2.72 | $ | 2.07 | ||
TSX (in Canadian dollars) | 2018 | 2017 | ||||
Opening Common Share Price, as at January 1 | $ | 229.66 | $ | 191.56 | ||
Ending Common Share Price, as at June 30 | $ | 240.92 | $ | 208.65 | ||
Ending Common Share Price, as at September 30 | $ | 273.23 | $ | 209.58 | ||
Change in Common Share Price for the three months ended September 30 | $ | 32.31 | $ | 0.93 | ||
Change in Common Share Price for the nine months ended September 30 | $ | 43.57 | $ | 18.02 | ||
NYSE (in U.S. dollars) | 2018 | 2017 | ||||
Opening Common Share Price, as at January 1 | $ | 182.76 | $ | 142.77 | ||
Ending Common Share Price, as at June 30 | $ | 183.02 | $ | 160.81 | ||
Ending Common Share Price, as at September 30 | $ | 211.94 | $ | 168.03 | ||
Change in Common Share Price for the three months ended September 30 | $ | 28.92 | $ | 7.22 | ||
Change in Common Share Price for the nine months ended September 30 | $ | 29.18 | $ | 25.26 | ||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Freight revenues (in millions)(1) | $ | 1,854 | $ | 1,547 | $ | 307 | 20 | 17 | |||||
Non-freight revenues (in millions) | 44 | 48 | (4 | ) | (8 | ) | (10 | ) | |||||
Total revenues (in millions) | $ | 1,898 | $ | 1,595 | $ | 303 | 19 | 17 | |||||
Carloads (in thousands)(3) | 702.0 | 666.4 | 35.6 | 5 | N/A | ||||||||
Revenue ton-miles (in millions) | 39,664 | 35,170 | 4,494 | 13 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 2,640 | $ | 2,321 | $ | 319 | 14 | 11 | |||||
Freight revenue per revenue ton-mile (in cents) | 4.67 | 4.40 | 0.27 | 6 | 4 | ||||||||
(1) | Freight revenues include fuel surcharge revenues of $137 million in 2018 and $52 million in 2017. 2018 and 2017 fuel surcharge revenues include carbon taxes, levies, and obligations recovered under cap-and-trade programs. |
(2) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX adjusted variance is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
(3) | Certain figures have been revised to conform with current presentation. |
• | Freight revenues were $1,854 million in the third quarter of 2018, an increase of $307 million, or 20%, from $1,547 million in the same period of 2017. This increase was primarily due to higher volumes, as measured by RTMs, of crude, Intermodal, and Potash, the favourable impact of higher fuel surcharge revenue as a result of higher fuel prices of $68 million, and the favourable impact of the change in FX of $32 million. This was partially offset by lower volumes of Coal and frac sand. |
• | RTMs are defined as the movement of one revenue-producing ton of freight over a distance of one mile. RTMs measure the relative weight and distance of rail freight moved by the Company. RTMs for the third quarter of 2018 were 39,664 million, an increase of 13% compared with 35,170 million in the same period of 2017. This increase was primarily due to increases in crude, Intermodal, and Potash, partially offset by decreases in Coal and frac sand. |
• | Non-freight revenues were $44 million in the third quarter of 2018, a decrease of $4 million, or 8%, from $48 million in the same period of 2017. This decrease was primarily due to a recovery of prior costs following the expiration of a passenger service contract in 2017. |
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Freight revenues (in millions)(1) | $ | 5,188 | $ | 4,708 | $ | 480 | 10 | 11 | |||||
Non-freight revenues (in millions) | 122 | 133 | (11 | ) | (8 | ) | (8 | ) | |||||
Total revenues (in millions) | $ | 5,310 | $ | 4,841 | $ | 469 | 10 | 11 | |||||
Carloads (in thousands)(3) | 2,029.9 | 1,955.2 | 74.7 | 4 | N/A | ||||||||
Revenue ton-miles (in millions) | 113,584 | 105,381 | 8,203 | 8 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 2,556 | $ | 2,408 | $ | 148 | 6 | 7 | |||||
Freight revenue per revenue ton-mile (in cents) | 4.57 | 4.47 | 0.10 | 2 | 3 | ||||||||
(1) | Freight revenues include fuel surcharge revenues of $351 million in 2018 and $164 million in 2017. 2018 and 2017 fuel surcharge revenues include carbon taxes, levies, and obligations recovered under cap-and-trade programs. |
(2) | FX Adjusted % Change does not have any standardized meaning prescribed by GAAP and, therefore, is unlikely to be comparable to similar measures presented by other companies. FX adjusted variance is defined and reconciled in Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
(3) | Certain figures have been revised to conform with current presentation. |
• | Freight revenues were $5,188 million in the first nine months of 2018, an increase of $480 million, or 10%, from $4,708 million in the same period of 2017. This increase was primarily due to higher volumes, as measured by RTMs, of crude, Intermodal, and Potash, and the favourable impact of higher fuel surcharge revenue as a result of higher fuel prices of $160 million. This was partially offset by the unfavourable impact of the change in FX of $39 million and lower volumes of Coal and Grain. |
• | RTMs for the first nine months of 2018 were 113,584 million, an increase of 8% compared with 105,381 million in the same period of 2017. This increase was primarily due to increases in crude, Intermodal, and Potash, partially offset by decreases in Coal and Grain. |
• | Non-freight revenues were $122 million in the first nine months of 2018, a decrease of $11 million, or 8%, from $133 million in the same period of 2017. This decrease was primarily due to a recovery of prior costs and lower passenger revenues following the expiration of a passenger service contract in 2017. |
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 384 | $ | 351 | $ | 33 | 9 | 7 | ||||
Carloads (in thousands) | 107.4 | 108.0 | (0.6 | ) | (1 | ) | N/A | |||||
Revenue ton-miles (in millions) | 9,009 | 8,627 | 382 | 4 | N/A | |||||||
Freight revenue per carload (in dollars) | $ | 3,565 | $ | 3,251 | $ | 314 | 10 | 7 | ||||
Freight revenue per revenue ton-mile (in cents) | 4.25 | 4.07 | 0.18 | 4 | 2 | |||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 1,113 | $ | 1,107 | $ | 6 | 1 | 1 | ||||
Carloads (in thousands) | 314.5 | 325.6 | (11.1 | ) | (3 | ) | N/A | |||||
Revenue ton-miles (in millions) | 26,698 | 27,274 | (576 | ) | (2 | ) | N/A | |||||
Freight revenue per carload (in dollars) | $ | 3,536 | $ | 3,402 | $ | 134 | 4 | 5 | ||||
Freight revenue per revenue ton-mile (in cents) | 4.17 | 4.06 | 0.11 | 3 | 3 | |||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 171 | $ | 165 | $ | 6 | 4 | 4 | ||||
Carloads (in thousands) | 76.8 | 81.3 | (4.5 | ) | (6 | ) | N/A | |||||
Revenue ton-miles (in millions) | 5,764 | 6,009 | (245 | ) | (4 | ) | N/A | |||||
Freight revenue per carload (in dollars) | $ | 2,234 | $ | 2,021 | $ | 213 | 11 | 9 | ||||
Freight revenue per revenue ton-mile (in cents) | 2.98 | 2.73 | 0.25 | 9 | 9 | |||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 486 | $ | 478 | $ | 8 | 2 | 2 | ||||
Carloads (in thousands) | 226.7 | 233.3 | (6.6 | ) | (3 | ) | N/A | |||||
Revenue ton-miles (in millions) | 16,657 | 17,230 | (573 | ) | (3 | ) | N/A | |||||
Freight revenue per carload (in dollars) | $ | 2,145 | $ | 2,047 | $ | 98 | 5 | 3 | ||||
Freight revenue per revenue ton-mile (in cents) | 2.92 | 2.77 | 0.15 | 5 | 5 | |||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 130 | $ | 103 | $ | 27 | 26 | 24 | |||
Carloads (in thousands) | 42.3 | 34.6 | 7.7 | 22 | N/A | ||||||
Revenue ton-miles (in millions) | 4,944 | 4,083 | 861 | 21 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,089 | $ | 2,978 | $ | 111 | 4 | 1 | |||
Freight revenue per revenue ton-mile (in cents) | 2.64 | 2.53 | 0.11 | 4 | 2 | ||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 358 | $ | 310 | $ | 48 | 15 | 17 | |||
Carloads (in thousands) | 117.4 | 102.9 | 14.5 | 14 | N/A | ||||||
Revenue ton-miles (in millions) | 13,750 | 11,919 | 1,831 | 15 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,052 | $ | 3,013 | $ | 39 | 1 | 2 | |||
Freight revenue per revenue ton-mile (in cents) | 2.61 | 2.60 | 0.01 | — | 1 | ||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||||
Freight revenues (in millions) | $ | 55 | $ | 52 | $ | 3 | 6 | 2 | |||||
Carloads (in thousands) | 13.8 | 13.8 | — | — | N/A | ||||||||
Revenue ton-miles (in millions) | 935 | 864 | 71 | 8 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 3,957 | $ | 3,814 | $ | 143 | 4 | 1 | |||||
Freight revenue per revenue ton-mile (in cents) | 5.87 | 6.08 | (0.21 | ) | (3 | ) | (6 | ) | |||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||||
Freight revenues (in millions) | $ | 171 | $ | 181 | $ | (10 | ) | (6 | ) | (4 | ) | ||
Carloads (in thousands) | 41.9 | 43.2 | (1.3 | ) | (3 | ) | N/A | ||||||
Revenue ton-miles (in millions) | 2,902 | 2,837 | 65 | 2 | N/A | ||||||||
Freight revenue per carload (in dollars) | $ | 4,084 | $ | 4,198 | $ | (114 | ) | (3 | ) | (1 | ) | ||
Freight revenue per revenue ton-mile (in cents) | 5.90 | 6.39 | (0.49 | ) | (8 | ) | (6 | ) | |||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 76 | $ | 67 | $ | 9 | 13 | 12 | |||
Carloads (in thousands) | 17.9 | 17.2 | 0.7 | 4 | N/A | ||||||
Revenue ton-miles (in millions) | 1,263 | 1,157 | 106 | 9 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 4,240 | $ | 3,870 | $ | 370 | 10 | 6 | |||
Freight revenue per revenue ton-mile (in cents) | 6.01 | 5.78 | 0.23 | 4 | 1 | ||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 211 | $ | 202 | $ | 9 | 4 | 6 | ||||
Carloads (in thousands) | 51.5 | 49.8 | 1.7 | 3 | N/A | |||||||
Revenue ton-miles (in millions) | 3,596 | 3,390 | 206 | 6 | N/A | |||||||
Freight revenue per carload (in dollars) | $ | 4,107 | $ | 4,056 | $ | 51 | 1 | 3 | ||||
Freight revenue per revenue ton-mile (in cents) | 5.88 | 5.96 | (0.08 | ) | (1 | ) | — | |||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 339 | $ | 208 | $ | 131 | 63 | 58 | |||
Carloads (in thousands) | 89.1 | 64.7 | 24.4 | 38 | N/A | ||||||
Revenue ton-miles (in millions) | 7,485 | 4,992 | 2,493 | 50 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,806 | $ | 3,227 | $ | 579 | 18 | 15 | |||
Freight revenue per revenue ton-mile (in cents) | 4.53 | 4.18 | 0.35 | 8 | 5 | ||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 874 | $ | 651 | $ | 223 | 34 | 36 | |||
Carloads (in thousands) | 242.4 | 194.0 | 48.4 | 25 | N/A | ||||||
Revenue ton-miles (in millions) | 20,047 | 15,302 | 4,745 | 31 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,606 | $ | 3,357 | $ | 249 | 7 | 9 | |||
Freight revenue per revenue ton-mile (in cents) | 4.36 | 4.26 | 0.10 | 2 | 4 | ||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 208 | $ | 192 | $ | 16 | 8 | 5 | ||||
Carloads (in thousands) | 65.0 | 68.2 | (3.2 | ) | (5 | ) | N/A | |||||
Revenue ton-miles (in millions) | 2,979 | 3,030 | (51 | ) | (2 | ) | N/A | |||||
Freight revenue per carload (in dollars) | $ | 3,206 | $ | 2,806 | $ | 400 | 14 | 11 | ||||
Freight revenue per revenue ton-mile (in cents) | 7.00 | 6.32 | 0.68 | 11 | 7 | |||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | |||||||
Freight revenues (in millions) | $ | 595 | $ | 552 | $ | 43 | 8 | 9 | ||||
Carloads (in thousands) | 189.6 | 191.1 | (1.5 | ) | (1 | ) | N/A | |||||
Revenue ton-miles (in millions) | 9,067 | 8,512 | 555 | 7 | N/A | |||||||
Freight revenue per carload (in dollars) | $ | 3,140 | $ | 2,888 | $ | 252 | 9 | 10 | ||||
Freight revenue per revenue ton-mile (in cents) | 6.57 | 6.49 | 0.08 | 1 | 2 | |||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 85 | $ | 68 | $ | 17 | 25 | 20 | |||
Carloads (in thousands) | 27.4 | 25.0 | 2.4 | 10 | N/A | ||||||
Revenue ton-miles (in millions) | 343 | 316 | 27 | 9 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 3,102 | $ | 2,737 | $ | 365 | 13 | 9 | |||
Freight revenue per revenue ton-mile (in cents) | 24.76 | 21.62 | 3.14 | 15 | 11 | ||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 247 | $ | 223 | $ | 24 | 11 | 13 | |||
Carloads (in thousands) | 83.0 | 79.9 | 3.1 | 4 | N/A | ||||||
Revenue ton-miles (in millions) | 1,047 | 1,016 | 31 | 3 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 2,970 | $ | 2,788 | $ | 182 | 7 | 8 | |||
Freight revenue per revenue ton-mile (in cents) | 23.56 | 21.92 | 1.64 | 7 | 9 | ||||||
For the three months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 406 | $ | 341 | $ | 65 | 19 | 18 | |||
Carloads (in thousands) | 262.3 | 253.6 | 8.7 | 3 | N/A | ||||||
Revenue ton-miles (in millions) | 6,942 | 6,092 | 850 | 14 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 1,545 | $ | 1,343 | $ | 202 | 15 | 14 | |||
Freight revenue per revenue ton-mile (in cents) | 5.84 | 5.59 | 0.25 | 4 | 3 | ||||||
For the nine months ended September 30 | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change | ||||||
Freight revenues (in millions) | $ | 1,133 | $ | 1,004 | $ | 129 | 13 | 13 | |||
Carloads (in thousands) | 762.9 | 735.4 | 27.5 | 4 | N/A | ||||||
Revenue ton-miles (in millions) | 19,820 | 17,901 | 1,919 | 11 | N/A | ||||||
Freight revenue per carload (in dollars) | $ | 1,485 | $ | 1,364 | $ | 121 | 9 | 9 | |||
Freight revenue per revenue ton-mile (in cents) | 5.72 | 5.61 | 0.11 | 2 | 3 | ||||||
For the three months ended September 30 (in millions) | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Compensation and benefits(1) | $ | 365 | $ | 324 | $ | 41 | 13 | 11 | |||||
Fuel | 226 | 150 | 76 | 51 | 46 | ||||||||
Materials | 47 | 45 | 2 | 4 | 4 | ||||||||
Equipment rents | 33 | 35 | (2 | ) | (6 | ) | (11 | ) | |||||
Depreciation and amortization | 174 | 162 | 12 | 7 | 6 | ||||||||
Purchased services and other | 263 | 257 | 6 | 2 | — | ||||||||
Total operating expenses(1) | $ | 1,108 | $ | 973 | $ | 135 | 14 | 12 | |||||
• | the unfavourable impact of increases in fuel price of $59 million; |
• | higher volume variable expenses; |
• | the unfavourable impact of the change in FX of $18 million; |
• | higher stock-based compensation driven primarily by an increase in the stock price; |
• | higher depreciation expense due to a higher asset base; |
• | cost inflation; and |
• | higher incentive compensation. |
For the nine months ended September 30 (in millions) | 2018 | 2017 | Total Change | % Change | FX Adjusted % Change(2) | ||||||||
Compensation and benefits(1) | $ | 1,090 | $ | 969 | $ | 121 | 12 | 13 | |||||
Fuel | 671 | 480 | 191 | 40 | 42 | ||||||||
Materials | 155 | 142 | 13 | 9 | 10 | ||||||||
Equipment rents | 99 | 108 | (9 | ) | (8 | ) | (7 | ) | |||||
Depreciation and amortization | 516 | 493 | 23 | 5 | 5 | ||||||||
Purchased services and other | 822 | 812 | 10 | 1 | 2 | ||||||||
Total operating expenses(1) | $ | 3,353 | $ | 3,004 | $ | 349 | 12 | 12 | |||||
• | the unfavourable impact of increases in fuel price of $163 million; |
• | higher volume variable expenses; |
• | a management transition recovery of $51 million associated with Mr. E. Hunter Harrison's retirement as CEO of CP in 2017; |
• | cost inflation; |
• | higher depreciation expense due to a higher asset base; |
• | higher stock-based compensation driven primarily by an increase in the stock price; |
• | harsher winter operating conditions; and |
• | higher incentive compensation. |
• | higher volume variable expenses as a result of an increase in workload as measured by GTMs; |
• | higher stock-based compensation driven primarily by an increase in the stock price; |
• | higher incentive compensation; |
• | cost inflation; and |
• | the unfavourable impact of change in FX. |
• | a management transition recovery of $51 million associated with Mr. E. Hunter Harrison's retirement as CEO of CP in 2017; |
• | higher volume variable expenses as a result of an increase in workload as measured by GTMs; |
• | cost inflation; |
• | higher stock-based compensation driven primarily by an increase in the stock price; and |
• | higher incentive compensation. |
• | the unfavourable impact of $59 million from higher fuel prices; |
• | an increase in workload, as measured by GTMs; and |
• | the unfavourable impact of the change in FX of $5 million |
• | the unfavourable impact of $163 million from higher fuel prices; |
• | an increase in workload, as measured by GTMs; and |
• | a 2017 fuel tax recovery related to prior periods of $8 million. |
For the three months ended September 30 (in millions) | 2018 | 2017 | Total Change | % Change | |||||||
Support and facilities | $ | 62 | $ | 65 | $ | (3 | ) | (5 | ) | ||
Track and operations | 60 | 58 | 2 | 3 | |||||||
Intermodal | 56 | 49 | 7 | 14 | |||||||
Equipment | 36 | 35 | 1 | 3 | |||||||
Casualty | 23 | 20 | 3 | 15 | |||||||
Property taxes | 28 | 31 | (3 | ) | (10 | ) | |||||
Other | 2 | 1 | 1 | 100 | |||||||
Land sales | (4 | ) | (2 | ) | (2 | ) | 100 | ||||
Total Purchased services and other | $ | 263 | $ | 257 | $ | 6 | 2 | ||||
• | higher intermodal expenses related to pickup and delivery, reported in Intermodal; |
• | higher rolling stock repair and wreck service costs, reported in Casualty; |
• | the unfavourable impact of the change in FX of $5 million; and |
• | the increase in locomotive maintenance due to increased volumes, reported in Equipment. |
• | the decrease in costs for locomotive warranty service agreements, reported in Equipment; |
• | lower property taxes due to an adjustment of property tax rates; |
• | higher land sales in 2018 compared to 2017; |
• | lower event and sponsorship costs, reported in Support and facilities; and |
• | lower locomotive engine overhaul expenses, due to the capital nature of overhaul activities in 2018, reported in Equipment. |
For the nine months ended September 30 (in millions) | 2018 | 2017 | Total Change | % Change | |||||||
Support and facilities | $ | 193 | $ | 201 | $ | (8 | ) | (4 | ) | ||
Track and operations | 206 | 193 | 13 | 7 | |||||||
Intermodal | 163 | 144 | 19 | 13 | |||||||
Equipment | 110 | 120 | (10 | ) | (8 | ) | |||||
Casualty | 57 | 55 | 2 | 4 | |||||||
Property taxes | 95 | 95 | — | — | |||||||
Other | 4 | 9 | (5 | ) | (56 | ) | |||||
Land sales | (6 | ) | (5 | ) | (1 | ) | 20 | ||||
Total Purchased services and other | $ | 822 | $ | 812 | $ | 10 | 1 | ||||
• | higher intermodal expenses related to pickup and delivery, reported in Intermodal; |
• | higher bad debt expenses, reported in Other; |
• | higher rolling stock repair and wreck service costs, reported in Casualty; |
• | weather related impacts including higher snow removal, reported in Track and operations and Intermodal; and |
• | costs related to labour negotiations in the second quarter of 2018, reported in Track and operations. |
• | lower locomotive engine overhaul expenses, due to the capital nature of overhaul activities in 2018, reported in Equipment; |
• | the favourable impact of the change in FX of $7 million; |
• | charges related to assets held for sale in 2017, reported in Other; and |
• | lower event and sponsorship costs, reported in Support and facilities. |
Long-term debt | Outlook | ||
Standard & Poor's | |||
Long-term corporate credit | BBB+ | stable | |
Senior secured debt | A | stable | |
Senior unsecured debt | BBB+ | stable | |
Moody's | |||
Senior unsecured debt | Baa1 | stable | |
Commercial paper program | |||
Standard & Poor's | A-2 | N/A | |
Moody's | P-2 | N/A | |
• | in the second quarter, a deferred tax recovery of $21 million due to reductions in the Missouri and Iowa state tax rates that favourably impacted Diluted EPS by 15 cents; and |
• | during the course of the year, a net non-cash loss of $55 million ($47 million after deferred tax) due to FX translation of the Company's U.S dollar-denominated debt as follows: |
• | in the third quarter, a $38 million gain ($33 million after deferred tax) that favourably impacted Diluted EPS by 23 cents; |
• | in the second quarter, a $44 million loss ($38 million after deferred tax) that unfavourably impacted Diluted EPS by 27 cents; and |
• | in the first quarter, a $49 million loss ($42 million after deferred tax) that unfavourably impacted Diluted EPS by 29 cents. |
• | in the second quarter, a charge on hedge roll and de-designation of $13 million ($10 million after deferred tax) that unfavourably impacted Diluted EPS by 7 cents; |
• | in the second quarter, an insurance recovery of a legal settlement of $10 million ($7 million after current tax) that favourably impacted Diluted EPS by 5 cents; |
• | in the first quarter, a management transition recovery of $51 million related to the retirement of Mr. E. Hunter Harrison as CEO of CP ($39 million after deferred tax) that favourably impacted Diluted EPS by 27 cents; |
• | during the course of the year, a net deferred tax recovery of $541 million as a result of changes in income tax rates as follows: |
• | in the fourth quarter, a deferred tax recovery of $527 million, primarily due to the U.S. tax reform, that favourably impacted Diluted EPS by $3.63; |
• | in the third quarter, a deferred tax expense of $3 million as a result of the change in the Illinois state corporate income tax rate that unfavourably impacted Diluted EPS by 2 cents; |
• | in the second quarter, a deferred tax recovery of $17 million as a result of the change in the Saskatchewan provincial corporate income tax rate that favourably impacted Diluted EPS by 12 cents; and |
• | during the course of the year, a net non-cash gain of $186 million ($162 million after deferred tax) due to FX translation of the Company’s U.S. dollar-denominated debt as follows: |
• | in the fourth quarter, a $14 million loss ($12 million after deferred tax) that unfavourably impacted Diluted EPS by 8 cents; |
• | in the third quarter, a $105 million gain ($91 million after deferred tax) that favourably impacted Diluted EPS by 62 cents; |
• | in the second quarter, a $67 million gain ($59 million after deferred tax) that favourably impacted Diluted EPS by 40 cents; and |
• | in the first quarter, a $28 million gain ($24 million after deferred tax) that favourably impacted Diluted EPS by 16 cents. |
• | a net non-cash loss of $74 million ($64 million after deferred tax) due to FX translation of the Company’s U.S. dollar-denominated debt as follows that unfavourably impacted Diluted EPS by 43 cents. |
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
Net income as reported | $ | 622 | $ | 510 | $ | 1,406 | $ | 1,421 | ||||
Less significant items (pretax): | ||||||||||||
Insurance recovery of legal settlement | — | — | — | 10 | ||||||||
Charge on hedge roll and de-designation | — | — | — | (13 | ) | |||||||
Management transition recovery | — | — | — | 51 | ||||||||
Impact of FX translation on U.S. dollar-denominated debt | 38 | 105 | (55 | ) | 200 | |||||||
Add: | ||||||||||||
Tax effect of adjustments(1) | 5 | 14 | (8 | ) | 38 | |||||||
Income tax rate change | — | 3 | (21 | ) | (14 | ) | ||||||
Adjusted income | $ | 589 | $ | 422 | $ | 1,432 | $ | 1,197 | ||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Diluted earnings per share as reported | $ | 4.35 | $ | 3.50 | $ | 9.78 | $ | 9.70 | ||||
Less significant items (pretax): | ||||||||||||
Insurance recovery of legal settlement | — | — | — | 0.07 | ||||||||
Charge on hedge roll and de-designation | — | — | — | (0.09 | ) | |||||||
Management transition recovery | — | — | — | 0.35 | ||||||||
Impact of FX translation on U.S. dollar-denominated debt | 0.27 | 0.72 | (0.38 | ) | 1.36 | |||||||
Add: | ||||||||||||
Tax effect of adjustments(1) | 0.04 | 0.10 | (0.04 | ) | 0.26 | |||||||
Income tax rate change | — | 0.02 | $ | (0.15 | ) | $ | (0.10 | ) | ||||
Adjusted diluted earnings per share | $ | 4.12 | $ | 2.90 | $ | 9.97 | $ | 8.17 | ||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
Operating income as reported(1) | $ | 790 | $ | 622 | $ | 1,957 | $ | 1,837 | ||||
Less significant item: | ||||||||||||
Management transition recovery | — | — | — | 51 | ||||||||
Adjusted operating income(1) | $ | 790 | $ | 622 | $ | 1,957 | $ | 1,786 | ||||
For the three months ended September 30 | For the nine months ended September 30 | |||||||
2018 | 2017 | 2018 | 2017 | |||||
Operating ratio as reported(1) | 58.3 | % | 61.0 | % | 63.1 | % | 62.1 | % |
Less significant item: | ||||||||
Management transition recovery | — | % | — | % | — | % | (1.0 | )% |
Adjusted operating ratio(1) | 58.3 | % | 61.0 | % | 63.1 | % | 63.1 | % |
For the twelve months ended September 30 | ||||||
(in millions, except for percentages) | 2018 | 2017 | ||||
Operating income as reported(1) | $ | 2,639 | $ | 2,514 | ||
Less: | ||||||
Other expense (income) | 72 | (120 | ) | |||
Other components of net periodic benefit recovery(1) | (358 | ) | (243 | ) | ||
Tax(2) | 95 | 716 | ||||
$ | 2,830 | $ | 2,161 | |||
Average of total shareholders' equity, long-term debt, long-term debt maturing within one year and short-term borrowing | 14,556 | 13,623 | ||||
ROIC | 19.4 | % | 15.9 | % | ||
For the twelve months ended September 30 | ||||||
(in millions, except for percentages) | 2018 | 2017 | ||||
Operating income as reported(1) | $ | 2,639 | $ | 2,514 | ||
Less significant item: | ||||||
Management transition recovery | — | 51 | ||||
Adjusted operating income | 2,639 | 2,463 | ||||
Less: | ||||||
Other expense (income) | 72 | (120 | ) | |||
Other components of net periodic benefit recovery(1) | (358 | ) | (243 | ) | ||
Add significant items (pretax): | ||||||
Insurance recovery of legal settlement | — | (10 | ) | |||
Charge on hedge roll and de-designation | — | 13 | ||||
Impact of FX translation on U.S. dollar-denominated debt | 69 | (126 | ) | |||
Less: | ||||||
Tax(2) | 752 | 708 | ||||
$ | 2,242 | $ | 1,995 | |||
Average for the twelve months of total shareholders' equity, long-term debt, long-term debt maturing within one year and short-term borrowing | 14,556 | 13,623 | ||||
Add: | ||||||
Impact of periodic significant items net of tax on the above average | (274 | ) | (31 | ) | ||
Adjusted average for the twelve months of total shareholders' equity, long-term debt, long-term debt maturing within one year and short-term borrowing | 14,282 | 13,592 | ||||
Adjusted ROIC(3) | 15.7 | % | 14.7 | % | ||
For the three months ended September 30 | For the nine months ended September 30 | |||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||
Cash provided by operating activities | $ | 673 | $ | 527 | $ | 1,781 | $ | 1,449 | ||||
Cash used in investing activities | (423 | ) | (306 | ) | (1,069 | ) | (861 | ) | ||||
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | (5 | ) | (7 | ) | 4 | (13 | ) | |||||
Settlement of forward starting swaps on debt issuance | — | — | 24 | — | ||||||||
Free cash | $ | 245 | $ | 214 | $ | 740 | $ | 575 | ||||
For the three months ended September 30 | ||||||||||||||
(in millions) | Reported 2018 | Reported 2017 | Variance due to FX | FX Adjusted 2017 | FX Adjusted % Change | |||||||||
Freight revenues | $ | 1,854 | $ | 1,547 | $ | 32 | $ | 1,579 | 17 | |||||
Non-freight revenues | 44 | 48 | 1 | 49 | (10 | ) | ||||||||
Total revenues | 1,898 | 1,595 | 33 | 1,628 | 17 | |||||||||
Compensation and benefits(1) | 365 | 324 | 4 | 328 | 11 | |||||||||
Fuel | 226 | 150 | 5 | 155 | 46 | |||||||||
Materials | 47 | 45 | — | 45 | 4 | |||||||||
Equipment rents | 33 | 35 | 2 | 37 | (11 | ) | ||||||||
Depreciation and amortization | 174 | 162 | 2 | 164 | 6 | |||||||||
Purchased services and other | 263 | 257 | 5 | 262 | — | |||||||||
Total operating expenses(1) | 1,108 | 973 | 18 | 991 | 12 | |||||||||
Operating income(1) | $ | 790 | $ | 622 | $ | 15 | $ | 637 | 24 | |||||
For the nine months ended September 30 | ||||||||||||||
(in millions) | Reported 2018 | Reported 2017 | Variance due to FX | FX Adjusted 2017 | FX Adjusted % Change | |||||||||
Freight revenues | $ | 5,188 | $ | 4,708 | $ | (39 | ) | $ | 4,669 | 11 | ||||
Non-freight revenues | 122 | 133 | — | 133 | (8 | ) | ||||||||
Total revenues | 5,310 | 4,841 | (39 | ) | 4,802 | 11 | ||||||||
Compensation and benefits(1) | 1,090 | 969 | (5 | ) | 964 | 13 | ||||||||
Fuel | 671 | 480 | (6 | ) | 474 | 42 | ||||||||
Materials | 155 | 142 | (1 | ) | 141 | 10 | ||||||||
Equipment rents | 99 | 108 | (1 | ) | 107 | (7 | ) | |||||||
Depreciation and amortization | 516 | 493 | (2 | ) | 491 | 5 | ||||||||
Purchased services and other | 822 | 812 | (7 | ) | 805 | 2 | ||||||||
Total operating expenses(1) | 3,353 | 3,004 | (22 | ) | 2,982 | 12 | ||||||||
Operating income(1) | $ | 1,957 | $ | 1,837 | $ | (17 | ) | $ | 1,820 | 8 | ||||
For the twelve months ended September 30 | ||||||
(in millions) | 2018 | 2017 | ||||
Net income as reported | $ | 2,390 | $ | 1,805 | ||
Add: | ||||||
Net interest expense | 455 | 473 | ||||
Income tax expense | 80 | 599 | ||||
EBIT | 2,925 | 2,877 | ||||
Less significant items (pretax): | ||||||
Insurance recovery of legal settlement | — | 10 | ||||
Charge on hedge roll and de-designation | — | (13 | ) | |||
Management transition recovery | — | 51 | ||||
Impact of FX translation on U.S. dollar-denominated debt | (69 | ) | 126 | |||
Adjusted EBIT | 2,994 | 2,703 | ||||
Less: | ||||||
Other components of net periodic benefit recovery | 358 | 243 | ||||
Operating lease expense | (87 | ) | (107 | ) | ||
Depreciation and amortization | (684 | ) | (655 | ) | ||
Adjusted EBITDA | $ | 3,407 | $ | 3,222 | ||
(in millions) | 2018 | 2017 | ||||
Long-term debt including long-term debt maturing within one year as at September 30 | $ | 8,286 | $ | 8,133 | ||
Less: | ||||||
Pension plans in deficit(1) | (276 | ) | (266 | ) | ||
Net present value of operating leases(2) | (261 | ) | (284 | ) | ||
Cash and cash equivalents | 150 | 142 | ||||
Adjusted net debt as at September 30 | $ | 8,673 | $ | 8,541 | ||
(in millions, except for ratios) | 2018 | 2017 | ||||
Adjusted net debt as at September 30 | $ | 8,673 | $ | 8,541 | ||
Adjusted EBITDA for the year ended September 30 | 3,407 | 3,222 | ||||
Adjusted net debt to Adjusted EBITDA ratio | 2.5 | 2.7 | ||||
Payments due by period (in millions) | Total | 2018 | 2019 & 2020 | 2021 & 2022 | 2023 & beyond | ||||||||||
Contractual commitments | |||||||||||||||
Interest on long-term debt and capital leases | $ | 11,503 | $ | 82 | $ | 853 | $ | 776 | $ | 9,792 | |||||
Long-term debt | 8,224 | 7 | 540 | 840 | 6,837 | ||||||||||
Capital leases | 153 | 1 | 10 | 111 | 31 | ||||||||||
Operating lease(1) | 332 | 21 | 125 | 74 | 112 | ||||||||||
Supplier purchase | 1,355 | 199 | 656 | 141 | 359 | ||||||||||
Other long-term liabilities(2) | 697 | 258 | 101 | 101 | 237 | ||||||||||
Total contractual commitments | $ | 22,264 | $ | 568 | $ | 2,285 | $ | 2,043 | $ | 17,368 | |||||
Payments due by period (in millions) | Total | 2018 | 2019 & 2020 | 2021 & 2022 | 2023 & beyond | ||||||||||
Certain other financial commitments | |||||||||||||||
Letters of credit | $ | 56 | $ | 56 | $ | — | $ | — | $ | — | |||||
Capital commitments | 723 | 185 | 291 | 81 | 166 | ||||||||||
Total certain other financial commitments | $ | 779 | $ | 241 | $ | 291 | $ | 81 | $ | 166 | |||||
Exhibit | Description |
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
The following financial information from Canadian Pacific Railway Limited's Quarterly Report on Form 10-Q for the third quarter ended September 30, 2018, formatted in Extensible Business Reporting Language (XBRL) includes: (i) the Interim Consolidated Statements of Income for the third quarters and first nine months ended September 30, 2018 and 2017; (ii) the Consolidated Statements of Comprehensive Income for the third quarters and first nine months ended September 30, 2018 and 2017; (iii) the Consolidated Balance Sheets at September 30, 2018, and December 31, 2017; (iv) the Consolidated Statements of Cash Flows for the third quarters and first nine months ended September 30, 2018 and 2017; (v) the Consolidated Statements of Changes in Shareholders’ Equity for the first nine months ended September 30, 2018 and 2017; and (vi) the Notes to Consolidated Financial Statements. | |
CANADIAN PACIFIC RAILWAY LIMITED | |
(Registrant) | |
By: | /s/ NADEEM VELANI |
Nadeem Velani | |
Executive Vice-President and Chief Financial Officer (Principal Financial Officer) | |
1. | I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Railway Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 18, 2018 | /s/ KEITH CREEL | |
Keith Creel | ||
President and Chief Executive Officer | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Railway Limited; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 18, 2018 | /s/ NADEEM VELANI | |
Nadeem Velani | ||
Executive Vice-President and Chief Financial Officer | ||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 18, 2018 | /s/ KEITH CREEL | |||
Keith Creel | ||||
President and Chief Executive Officer | ||||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 18, 2018 | /s/ NADEEM VELANI | |||
Nadeem Velani | ||||
Executive Vice-President and Chief Financial Officer | ||||
Document and Entity Information - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2018 |
Oct. 16, 2018 |
|
| Document And Entity Information [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | Sep. 30, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q3 | |
| Trading Symbol | CP | |
| Entity Registrant Name | CANADIAN PACIFIC RAILWAY LTD/CN | |
| Entity Central Index Key | 0000016875 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Current Reporting Status | Yes | |
| Entity Common Stock, Shares Outstanding | 142,601,634 | |
| Entity Emerging Growth Company | false | |
| Entity Small Business | false |
INTERIM CONSOLIDATED STATEMENTS OF INCOME (unaudited) - CAD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Revenues | ||||
| Total revenues | $ 1,898 | $ 1,595 | $ 5,310 | $ 4,841 |
| Operating expenses | ||||
| Compensation and benefits | 365 | 324 | 1,090 | 969 |
| Fuel | 226 | 150 | 671 | 480 |
| Materials | 47 | 45 | 155 | 142 |
| Equipment Rents | 33 | 35 | 99 | 108 |
| Depreciation and amortization | 174 | 162 | 516 | 493 |
| Purchased services and other | 263 | 257 | 822 | 812 |
| Total operating expenses | 1,108 | 973 | 3,353 | 3,004 |
| Operating income | 790 | 622 | 1,957 | 1,837 |
| Less: | ||||
| Other (income) expense | (47) | (105) | 56 | (194) |
| Other components of net periodic benefit recovery | (96) | (68) | (287) | (203) |
| Net interest expense | 112 | 115 | 339 | 357 |
| Income before income tax expense | 821 | 680 | 1,849 | 1,877 |
| Income tax expense | 199 | 170 | 443 | 456 |
| Net income | $ 622 | $ 510 | $ 1,406 | $ 1,421 |
| Earnings per share | ||||
| Basic earnings per share | $ 4.36 | $ 3.50 | $ 9.81 | $ 9.72 |
| Diluted earnings per share | $ 4.35 | $ 3.50 | $ 9.78 | $ 9.70 |
| Weighted-average number of shares (millions) | ||||
| Basic | 142.6 | 145.5 | 143.2 | 146.2 |
| Diluted | 143.1 | 145.8 | 143.7 | 146.6 |
| Dividends declared per share | $ 0.6500 | $ 0.5625 | $ 1.8625 | $ 1.6250 |
| Cargo and Freight [Member] | ||||
| Revenues | ||||
| Total revenues | $ 1,854 | $ 1,547 | $ 5,188 | $ 4,708 |
| Non-Freight [Member] | ||||
| Revenues | ||||
| Total revenues | $ 44 | $ 48 | $ 122 | $ 133 |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Statement of Comprehensive Income [Abstract] | ||||
| Net income | $ 622 | $ 510 | $ 1,406 | $ 1,421 |
| Net gain (loss) in foreign currency translation adjustments, net of hedging activities | 12 | 19 | (24) | 38 |
| Change in derivatives designated as cash flow hedges | 1 | 2 | 36 | 11 |
| Change in pension and post-retirement defined benefit plans | 28 | 38 | 86 | 113 |
| Other comprehensive income (loss) before income taxes | 41 | 59 | 98 | 162 |
| Income tax recovery (expense) on above items | (22) | (34) | (11) | (78) |
| Other comprehensive income (loss) | 19 | 25 | 87 | 84 |
| Comprehensive income | $ 641 | $ 535 | $ 1,493 | $ 1,505 |
Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | These unaudited interim consolidated financial statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2017 annual consolidated financial statements and notes included in CP's 2017 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2017 annual consolidated financial statements, except for the newly adopted accounting policies discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. |
Accounting Changes |
9 Months Ended |
|---|---|
Sep. 30, 2018 | |
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| Accounting Changes | Implemented in 2018 Revenue from Contracts with Customers On January 1, 2018, the Company adopted the new Accounting Standards Update ("ASU") 2014-09, issued by the Financial Accounting Standards Board ("FASB"), and all related amendments under FASB Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, using the modified retrospective method. Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company did not recognize any adjustment to the opening balance of retained earnings upon adoption of ASC Topic 606. The Company expects the impact of adoption of this new standard to be immaterial to the Company’s net income on an ongoing basis. Compensation - Retirement Benefits On January 1, 2018, the Company adopted the changes required under ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost under FASB ASC Topic 715, Retirement Benefits as issued by the FASB in March 2017. In accordance with the ASU, beginning on January 1, 2018, the Company reports the current service cost component of net periodic benefit cost in Compensation and benefits on the Company’s Consolidated Statements of Income, and reports the Other components of net periodic benefit recovery as a separate item outside of Operating income on the Company’s Consolidated Statements of Income. The Company has applied these changes in presentation retrospectively, which resulted in a decrease in Operating income of $68 million and $203 million for the three and nine months ended September 30, 2017, respectively. These changes in presentation do not result in any changes to net income or earnings per share. Details of the components of net periodic benefit costs are provided in Note 12 Pensions and other benefits. The ASU also prospectively restricts capitalization of net periodic benefit costs to the current service cost component when applicable. This restriction has no impact on the Company’s operating income or amounts capitalized because the Company has and continues to only capitalize an appropriate portion of current service cost for self-constructed properties. Derivatives and Hedging In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, under FASB ASC Topic 815, Derivatives and Hedging. This improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. These amendments also make targeted improvements to simplify the application of the hedge accounting guidance in GAAP. The amendments require the entire change in the fair value of the hedging instrument to be recorded in Other comprehensive income for effective cash flow hedges. Consequently, any ineffective portion of the change in fair value will no longer be recorded to the Consolidated Statement of Income as it arises. While the amendments are effective for public entities beginning on January 1, 2019, early adoption is permitted and the Company early adopted this ASU effective January 1, 2018. Entities are required to apply the amendments in this update to hedging relationships existing on the date of adoption, reflected as a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. Other amendments to presentation and disclosure are applied prospectively. No significant cumulative-effect adjustment was required. Accumulated Other Comprehensive Income - Reclassification In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income under FASB ASC Topic 220, Income Statement - Reporting Comprehensive Income. The current standard ASC Topic 740, Income Taxes, requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. This includes the tax effects of items in Accumulated other comprehensive income ("AOCI") that were originally recognized in Other comprehensive income, subsequently creating stranded tax effects. This ASU allows a reclassification from AOCI to Retained earnings for stranded tax effects specifically resulting from the U.S. federal government's recently enacted tax bill, the Tax Cuts and Jobs Act. The amendments are effective for public entities beginning on January 1, 2019 and early adoption is permitted. Entities are required to apply these amendments either in the period of adoption or retrospectively to each period in which the effect of the change in tax rate from the Tax Cuts and Jobs Act was recognized. The Company early adopted this ASU effective January 1, 2018, electing not to change AOCI, Retained earnings or disclosure in the Company's Interim Consolidated Financial Statements. Future changes Leases |
Revenue Recognition |
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| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Recognition | Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services. Government-imposed taxes that the Company collects concurrent with revenue-generating activities are excluded from revenue. In the normal course of business the Company does not generate any material revenue through acting as an agent for other entities. The following is a description of primary activities from which the Company generates revenue. Freight revenues The Company provides rail freight transportation services to a wide variety of customers and transports bulk commodities, merchandise freight and intermodal traffic. The Company signs service agreements with customers that dictate future services the Company is to perform for a customer at the time a bill of lading or service request is received. Each bill of lading or service request represents a separate and distinct performance obligation that the Company is obligated to satisfy. The transaction price is generally in the form of a fixed fee determined at the inception of the bill of lading or service request. The Company allocates the transaction price to each distinct performance obligation based on the estimated standalone selling price for each performance obligation. As each bill of lading or service request represents a separate and distinct performance obligation, the estimated standalone selling price is assessed at an observable price which is fair market value. Certain customer agreements include variable consideration in the form of rebates, discounts, or incentives. The expected value method is used to estimate variable consideration and is allocated to the applicable performance obligation and is recognized when the related performance obligation is satisfied. Additionally, the Company offers published rates for services through public tariffs in which a customer can request service, triggering a performance obligation of the Company. In accordance with ASC Topic 606, railway freight revenues continue to be recognized over time as services are provided based on the percentage of completed service method. Volume rebates to customers are accrued as a reduction of freight revenues based on estimated volumes and contract terms as freight service is provided. Freight revenues also include certain ancillary and other services provided in association with the performance of rail freight movements. Revenues from these activities are not material and therefore have been aggregated with the freight revenues from customer contracts with which they are associated. Non-freight revenues In accordance with ASC Topic 606, non-freight revenues, including passenger revenues, switching fees, and revenues from logistic services, continue to be recognized at the point in time the services are provided or when the performance obligations are satisfied. Non-freight revenues also include leasing revenues. Disaggregation of revenue The following table disaggregates the Company’s revenues from contracts with customers by major source:
Satisfying performance obligations Payment by customers is due upon satisfaction of performance obligations. Payment terms are such that amounts outstanding at the period end are expected to be collected within one reporting period. The Company invoices customers at the time the bill of lading or service request is processed and therefore the Company has no material unbilled receivables and no contract assets. All performance obligations not fully satisfied at period end are expected to be satisfied within the reporting period immediately following.
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Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component |
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| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Accumulated Other Comprehensive Loss (AOCL) by Component |
(1) Amounts are presented net of tax.
(1) Amounts are presented net of tax. Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL are as follows:
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Other (Income) Expense |
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| Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses |
"Other (income) expense" was previously presented as "Other income and charges" in the Company's Consolidated Statements of Income. This change in presentation has no impact on the components within this line item. |
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Income Taxes |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes |
During the nine months ended September 30, 2018, legislation was enacted to decrease the Iowa and Missouri state corporate income tax rates. As a result of these changes, the Company recorded a deferred tax recovery of $21 million in the second quarter of 2018 related to the revaluation of deferred income tax balances as at January 1, 2018. The effective tax rates for the three and nine months ended September 30, 2018, were 24.23% and 23.95%, respectively, compared to 24.95% and 24.28% for the same periods in 2017. For the three months ended September 30, 2018, the effective tax rate excluding the discrete item of the foreign exchange ("FX") gain of $38 million on the Company's U.S. dollar-denominated debt, was 24.75%. For the three months ended September 30, 2017, the effective tax rate excluding the discrete items of the FX gain of $105 million on the Company's U.S. dollar-denominated debt, and the $3 million deferred tax expense related to legislation enacted to increase the Illinois state income tax rate, was 26.50% For the nine months ended September 30, 2018, the effective tax rate excluding the discrete items of the FX loss of $55 million on the Company's U.S. dollar-denominated debt and the $21 million tax recovery described above, was 24.75%. |
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Earnings Per Share |
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| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | At September 30, 2018, the number of shares outstanding was 142.6 million (September 30, 2017 - 145.0 million). Basic earnings per share have been calculated using net income for the period divided by the weighted-average number of shares outstanding during the period. The number of shares used in earnings per share calculations is reconciled as follows:
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Debt |
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Sep. 30, 2018 | |
| Debt Disclosure [Abstract] | |
| Debt | Revolving credit facility Effective June 8, 2018, the Company amended its U.S. $2.0 billion revolving credit facility agreement dated September 26, 2014. This fifth amending agreement included, among other things, the extension of the five year maturity date from June 28, 2022 to June 28, 2023 and the cancellation of the U.S. $1.0 billion one-year plus one-year credit facility agreement. As at September 30, 2018, the remaining U.S. $1.0 billion credit facility was undrawn. Issuance of long-term debt During the second quarter of 2018, the Company issued U.S. $500 million 4.000% 10-year Notes due June 1, 2028 for net proceeds of U.S. $495 million ($638 million). These notes pay interest semi-annually and are unsecured but carry a negative pledge. In conjunction with the issuance, the Company settled a notional U.S. $500 million of forward starting floating-to-fixed interest rate swap agreements ("forward starting swaps") for a payment of U.S. $19 million ($24 million) (see Note 10). This payment was included in cash provided by operating activities consistent with the location of the related hedged item on the Company's Interim Consolidated Statements of Cash Flows. Retirement of long-term debt During the second quarter of 2018, the Company repaid U.S. $275 million 6.500% 10-year Notes at maturity for a total of U.S. $275 million ($352 million) and $375 million 6.250% 10-year Medium Term Notes at maturity for a total of $375 million. Commercial paper program The Company has a commercial paper program which enables it to issue commercial paper up to a maximum aggregate principal amount of U.S. $1.0 billion in the form of unsecured promissory notes. The commercial paper is backed by the U.S. $1.0 billion revolving credit facility. As at September 30, 2018 and December 31, 2017, the Company had no commercial paper borrowings. |
Shareholders' Equity |
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| Shareholders' Equity | On May 10, 2017, the Company announced a new normal course issuer bid ("NCIB"), commencing May 15, 2017, to purchase up to 4.38 million Common Shares for cancellation before May 14, 2018. The Company completed this NCIB on May 10, 2018. All purchases were made in accordance with the NCIB at prevalent market prices plus brokerage fees, or such other prices that were permitted by the Toronto Stock Exchange, with consideration allocated to share capital up to the average carrying amount of the shares, and any excess allocated to retained earnings. The following table describes activities under the share repurchase program:
(1) Includes brokerage fees. |
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Financial Instruments |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments | A. Fair values of financial instruments The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy established by GAAP that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market. When possible, the estimated fair value is based on quoted market prices and, if not available, it is based on estimates from third party brokers. For non-exchange-traded derivatives classified in Level 2, the Company uses standard valuation techniques to calculate fair value. Primary inputs to these techniques include observable market prices (interest, FX and commodity) and volatility, depending on the type of derivative and the nature of the underlying risk. The Company uses inputs and data used by willing market participants when valuing derivatives and considers its own credit default swap spread as well as those of its counterparties in its determination of fair value. All derivatives and long-term debt are classified as Level 2. The carrying values of financial instruments equal or approximate their fair values with the exception of long-term debt:
The estimated fair value of current and long-term borrowings has been determined based on market information where available, or by discounting future payments of principal and interest at estimated interest rates expected to be available to the Company at period end. B. Financial risk management Derivative financial instruments Derivative financial instruments may be used to selectively reduce volatility associated with fluctuations in interest rates, FX rates, the price of fuel and stock-based compensation expense. Where derivatives are designated as hedging instruments, the relationship between the hedging instruments and their associated hedged items is documented, as well as the risk management objective and strategy for the use of the hedging instruments. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the Company's Interim Consolidated Balance Sheets, commitments or forecasted transactions. At the time a derivative contract is entered into and at least quarterly thereafter, an assessment is made as to whether the derivative item is effective in offsetting the changes in fair value or cash flows of the hedged items. The derivative qualifies for hedge accounting treatment if it is effective in substantially mitigating the risk it was designed to address. It is not the Company’s intent to use financial derivatives or commodity instruments for trading or speculative purposes. FX management The Company conducts business transactions and owns assets in both Canada and the United States. As a result, the Company is exposed to fluctuations in the value of financial commitments, assets, liabilities, income or cash flows due to changes in FX rates. The Company may enter into FX risk management transactions primarily to manage fluctuations in the exchange rate between Canadian and U.S. currencies. FX exposure is primarily mitigated through natural offsets created by revenues, expenditures and balance sheet positions incurred in the same currency. Where appropriate, the Company may negotiate with customers and suppliers to reduce the net exposure. Net investment hedge The FX gains and losses on long-term debt are mainly unrealized and can only be realized when U.S. dollar-denominated long-term debt matures or is settled. The Company also has long-term FX exposure on its investment in U.S. affiliates. The majority of the Company’s U.S. dollar-denominated long-term debt has been designated as a hedge of the 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 net investment hedge recognized in “Other comprehensive income” for the three and nine months ended September 30, 2018 was an unrealized FX gain of $96 million and an unrealized FX loss of $177 million, respectively (three and nine months ended September 30, 2017 - an unrealized FX gain of $180 million and $342 million, respectively). Interest rate management The Company is exposed to interest rate risk, which is the risk that the fair value or future cash flows of a financial instrument will vary as a result of changes in market interest rates. In order to manage funding needs or capital structure goals, the Company enters into debt or capital lease agreements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions. Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt. To manage interest rate exposure, the Company accesses diverse sources of financing and manages borrowings in line with a targeted range of capital structure, debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles. In anticipation of future debt issuances, the Company may enter into forward rate agreements, that are designated as cash flow hedges, to substantially lock in all or a portion of the effective future interest expense. The Company may also enter into swap agreements, designated as fair value hedges, to manage the mix of fixed and floating rate debt. Forward starting swaps During the second quarter of 2018, the Company settled a notional U.S. $500 million of forward starting swaps related to the U.S. $500 million 4.000% 10-year Notes issued in the same period. The fair value of these derivative instruments at the time of settlement was a loss of U.S. $19 million ($24 million). The changes in fair value of the forward starting swaps for the three and nine months ended September 30, 2018 was $nil and a gain of $31 million, respectively (three and nine months ended September 30, 2017 - $nil and a loss of $12 million, respectively). This was recorded in "Accumulated other comprehensive loss”, net of tax, and is being reclassified to "Net interest expense" until the underlying hedged notes are repaid. |
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Stock-Based Compensation |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | At September 30, 2018, the Company had several stock-based compensation plans, including stock option plans, various cash settled liability plans and an employee share purchase plan. These plans resulted in an expense for the three and nine months ended September 30, 2018 of $28 million and $60 million, respectively (three and nine months ended September 30, 2017 - an expense of $11 million and $16 million, respectively). Effective January 31, 2017, Mr. E. Hunter Harrison resigned from all positions held by him at the Company, including as the Company’s Chief Executive Officer and a member of the Board of Directors of the Company. In connection with Mr. Harrison’s resignation, the Company entered into a separation agreement with Mr. Harrison. Under the terms of the separation agreement, the Company agreed to a limited waiver of Mr. Harrison’s non-competition and non-solicitation obligations. Effective January 31, 2017, pursuant to the separation agreement, Mr. Harrison forfeited certain pension and post-retirement benefits and agreed to the surrender for cancellation of 22,514 performance share units ("PSUs"), 68,612 deferred share units ("DSUs"), and 752,145 stock options. As a result of this agreement, the Company recognized a recovery of $51 million in "Compensation and benefits" in the first quarter of 2017. Of this amount, $27 million related to a recovery from cancellation of certain pension benefits. Stock option plan In the nine months ended September 30, 2018, under CP’s stock option plans, the Company issued 282,125 options at the weighted-average price of $240.91 per share, based on the closing price on the grant date. Pursuant to the employee plan, these options may be exercised upon vesting, which is between 12 months and 48 months after the grant date, and will expire after seven years. Under the fair value method, the fair value of the stock options at the grant date was approximately $16 million. The weighted-average fair value assumptions were approximately:
Performance share unit plan In the nine months ended September 30, 2018, the Company issued 161,323 PSUs with a grant date fair value of approximately $39 million. These units attract dividend equivalents in the form of additional units based on the dividends paid on the Company’s Common Shares. PSUs vest and are settled in cash or in CP Common Shares, approximately three years after the grant date, contingent upon CP’s performance ("performance factor"). The performance period for the PSUs issued in the nine months ended September 30, 2018 is January 1, 2018 to December 31, 2020. The fair value of these PSUs is measured periodically until settlement, using either a lattice-based valuation model or a Monte Carlo simulation model. The performance period for the PSUs issued in 2015 was January 1, 2015 to December 31, 2017. The performance factors for these PSUs were Operating Ratio, ROIC, TSR compared to the S&P/TSX 60 index and TSR compared to Class I railways. The resulting payout was 160% of the Company's average share price that was calculated using the last 30 trading days preceding December 31, 2017. In the first quarter of 2018, payouts occurred on the total outstanding awards, including dividends reinvested, totaling $30 million on 82,800 outstanding awards. Deferred share unit plan In the nine months ended September 30, 2018, the Company granted 13,888 DSUs with a grant date fair value of approximately $3 million. DSUs vest over various periods of up to 48 months and are only redeemable for a specified period after employment is terminated. An expense to income for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods. Restricted share unit plan |
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Pensions and Other Benefits |
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| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pensions and Other Benefits | In the three months ended September 30, 2018, the Company made contributions of $13 million (three months ended September 30, 2017 - $11 million) to its defined benefit pension plans. In the nine months ended September 30, 2018, the Company made net contributions of $25 million (nine months ended September 30, 2017 - $35 million), to its defined benefit pension plans, which is net of a $10 million refund of plan surplus (nine months ended September 30, 2017 - $nil). Net periodic benefit costs for defined benefit pension plans and other benefits recognized in the three and nine months ended September 30, 2018 included the following components:
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Contingencies |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
| Contingencies | In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending at September 30, 2018 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 financial position or results of operations. Legal proceedings related to Lac-Mégantic rail accident On July 6, 2013, a train carrying petroleum crude oil operated by Montreal Maine and Atlantic Railway (“MMAR”) or a subsidiary, Montreal 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. The previous day CP had interchanged the train to the MMA Group, and after the interchange, the MMA Group exclusively controlled the train. In the wake of the derailment, MMAC sought court protection in Canada under the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36 and MMAR filed for bankruptcy in the United States. Plans of arrangement have been approved in both Canada and the U.S. (the “Plans”). These Plans provide for the distribution of a fund of approximately $440 million amongst those claiming derailment damages. A number of legal proceedings, set out below, were commenced after the derailment in Canada and/or in the U.S. against CP and others:
The Province’s Action, the Class Action and the Promutuel Action have been consolidated and will proceed together through the litigation process in the Québec Superior Court. While each Action will remain a separate legal proceeding, there will be a trial to determine liability issues commencing mid-September 2019, and subsequently, if necessary, a trial to determine damages issues.
At this stage of the proceedings, the risk of a finding of liability and the quantum of potential losses cannot be determined. CP denies liability and is vigorously defending the above noted proceedings. Environmental liabilities Environmental remediation accruals, recorded on an undiscounted basis unless a reliable, determinable estimate as to an amount and timing of costs can be established, cover site-specific remediation programs. The accruals for environmental remediation represent CP’s best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recorded accruals include CP’s best estimate of all probable costs, CP’s total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, and as environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable. |
Condensed Consolidating Financial Information |
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| 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. For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
As at December 31, 2017
For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
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Basis of Presentation (Policies) |
9 Months Ended |
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Sep. 30, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | These unaudited interim consolidated financial statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2017 annual consolidated financial statements and notes included in CP's 2017 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2017 annual consolidated financial statements, except for the newly adopted accounting policies discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. |
Accounting Changes (Policies) |
9 Months Ended |
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Sep. 30, 2018 | |
| New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
| Accounting Changes | Implemented in 2018 Revenue from Contracts with Customers On January 1, 2018, the Company adopted the new Accounting Standards Update ("ASU") 2014-09, issued by the Financial Accounting Standards Board ("FASB"), and all related amendments under FASB Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers, using the modified retrospective method. Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company did not recognize any adjustment to the opening balance of retained earnings upon adoption of ASC Topic 606. The Company expects the impact of adoption of this new standard to be immaterial to the Company’s net income on an ongoing basis. Compensation - Retirement Benefits On January 1, 2018, the Company adopted the changes required under ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost under FASB ASC Topic 715, Retirement Benefits as issued by the FASB in March 2017. In accordance with the ASU, beginning on January 1, 2018, the Company reports the current service cost component of net periodic benefit cost in Compensation and benefits on the Company’s Consolidated Statements of Income, and reports the Other components of net periodic benefit recovery as a separate item outside of Operating income on the Company’s Consolidated Statements of Income. The Company has applied these changes in presentation retrospectively, which resulted in a decrease in Operating income of $68 million and $203 million for the three and nine months ended September 30, 2017, respectively. These changes in presentation do not result in any changes to net income or earnings per share. Details of the components of net periodic benefit costs are provided in Note 12 Pensions and other benefits. The ASU also prospectively restricts capitalization of net periodic benefit costs to the current service cost component when applicable. This restriction has no impact on the Company’s operating income or amounts capitalized because the Company has and continues to only capitalize an appropriate portion of current service cost for self-constructed properties. Derivatives and Hedging In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, under FASB ASC Topic 815, Derivatives and Hedging. This improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. These amendments also make targeted improvements to simplify the application of the hedge accounting guidance in GAAP. The amendments require the entire change in the fair value of the hedging instrument to be recorded in Other comprehensive income for effective cash flow hedges. Consequently, any ineffective portion of the change in fair value will no longer be recorded to the Consolidated Statement of Income as it arises. While the amendments are effective for public entities beginning on January 1, 2019, early adoption is permitted and the Company early adopted this ASU effective January 1, 2018. Entities are required to apply the amendments in this update to hedging relationships existing on the date of adoption, reflected as a cumulative-effect adjustment as of the beginning of the fiscal year of adoption. Other amendments to presentation and disclosure are applied prospectively. No significant cumulative-effect adjustment was required. Accumulated Other Comprehensive Income - Reclassification In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income under FASB ASC Topic 220, Income Statement - Reporting Comprehensive Income. The current standard ASC Topic 740, Income Taxes, requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date. This includes the tax effects of items in Accumulated other comprehensive income ("AOCI") that were originally recognized in Other comprehensive income, subsequently creating stranded tax effects. This ASU allows a reclassification from AOCI to Retained earnings for stranded tax effects specifically resulting from the U.S. federal government's recently enacted tax bill, the Tax Cuts and Jobs Act. The amendments are effective for public entities beginning on January 1, 2019 and early adoption is permitted. Entities are required to apply these amendments either in the period of adoption or retrospectively to each period in which the effect of the change in tax rate from the Tax Cuts and Jobs Act was recognized. The Company early adopted this ASU effective January 1, 2018, electing not to change AOCI, Retained earnings or disclosure in the Company's Interim Consolidated Financial Statements. Future changes Leases |
Revenue Recognition (Tables) |
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| Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue | The following table disaggregates the Company’s revenues from contracts with customers by major source:
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Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Changes in Accumulated Other Comprehensive Loss (AOCL) by Component |
(1) Amounts are presented net of tax.
|
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| Amounts in Pension and Post-retirement Defined Benefit Plans Reclassified from AOCL | Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL are as follows:
|
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Other (Income) Expense (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income and Expenses |
|
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Income Taxes (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Income Tax Expense |
|
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Earnings Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares Used In the Earnings Per Share Calculations | The number of shares used in earnings per share calculations is reconciled as follows:
|
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Shareholders' Equity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Activities Under Share Repurchase Program | The following table describes activities under the share repurchase program:
(1) Includes brokerage fees. |
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Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value and Carrying Value of Long-term Debt | The carrying values of financial instruments equal or approximate their fair values with the exception of long-term debt:
|
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Weighted-Average Fair Value Assumptions | The weighted-average fair value assumptions were approximately:
(5) The Company estimated forfeitures based on past experience. This rate is monitored on a periodic basis.
|
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Pensions and Other Benefits (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Periodic Benefit Cost for Defined Benefit Pension Plans and Other Benefits | Net periodic benefit costs for defined benefit pension plans and other benefits recognized in the three and nine months ended September 30, 2018 included the following components:
|
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Condensed Consolidating Financial Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interim Condensed Consolidating Statements of Income | Interim Condensed Consolidating Statements of Income For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
|
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| Interim Condensed Consolidating Statements of Comprehensive Income | Interim Condensed Consolidating Statements of Comprehensive Income For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
|
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| Interim Condensed Consolidating Balance Sheets | Interim Condensed Consolidating Balance Sheets As at September 30, 2018
As at December 31, 2017
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| Interim Condensed Consolidating Statements of Cash Flows | Interim Condensed Consolidating Statements of Cash Flows For the three months ended September 30, 2018
For the three months ended September 30, 2017
For the nine months ended September 30, 2018
For the nine months ended September 30, 2017
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Accounting Changes - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2017 |
|
| Accounting Standards Update 2017-07 [Member] | ||
| Change in Accounting Estimate [Line Items] | ||
| New Accounting Pronouncement, Effect of Adoption, Quantification | $ 68 | $ 203 |
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component - Amounts in Pension and Post-Retirement Defined Benefit Plans Reclassified from AOCL (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
| Total before income tax | $ 821 | $ 680 | $ 1,849 | $ 1,877 |
| Income tax recovery | (199) | (170) | (443) | (456) |
| Net of income tax | 622 | 510 | 1,406 | 1,421 |
| Reclassification out of Accumulated Other Comprehensive Income [Member] | ||||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
| Amortization of prior service costs | (1) | (1) | (2) | (3) |
| Recognition of net actuarial loss | 29 | 39 | 88 | 116 |
| Total before income tax | 28 | 38 | 86 | 113 |
| Income tax recovery | (9) | (10) | (24) | (30) |
| Net of income tax | $ 19 | $ 28 | $ 62 | $ 83 |
Other (Income) Expense (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Other Income and Expenses [Abstract] | ||||
| Foreign exchange (gain) loss on long-term debt | $ (38) | $ (105) | $ 55 | $ (200) |
| Other foreign exchange (gains) losses | (1) | (3) | 2 | (5) |
| Insurance recovery of legal settlement | 0 | 0 | 0 | (10) |
| Charge on hedge roll and de-designation | 0 | 0 | 0 | 13 |
| Other | (8) | 3 | (1) | 8 |
| Total other (income) expense | $ (47) | $ (105) | $ 56 | $ (194) |
Income Taxes - Summary of Income Tax Expense (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Income Tax Disclosure [Abstract] | ||||
| Current income tax expense | $ 122 | $ 93 | $ 288 | $ 288 |
| Deferred income tax expense | 77 | 77 | 155 | 168 |
| Income tax expense | $ 199 | $ 170 | $ 443 | $ 456 |
Income Taxes - Narrative (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Income Tax Disclosure [Abstract] | |||||
| Tax (recovery) expense due to changes in income tax rates | $ (21) | $ 3 | $ (21) | $ (14) | |
| Effective tax rate | 24.23% | 24.95% | 23.95% | 24.28% | |
| Foreign exchange (gain) loss on long-term debt | $ (38) | $ (105) | $ 55 | $ (200) | |
| Effective tax rate, excluding discrete items | 24.75% | 26.50% | 24.75% | 26.50% | |
| Insurance recovery of legal settlement | $ 0 | $ 0 | $ 0 | $ (10) | |
| Charge on hedge roll and de-designation | $ 0 | $ 0 | $ 0 | 13 | |
| Chief Executive Officer [Member] | |||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
| Compensation and benefits | $ (51) | ||||
Earnings Per Share - Narrative (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
| Employee Stock Options | ||||||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||
| Number of options excluded from the computation of diluted earnings per share | 0.3 | 0.3 | 0.2 | 0.3 | ||
| Share capital [Member] | ||||||
| Earnings Per Share [Abstract] | ||||||
| Number of shares outstanding | 142.6 | 145.0 | 142.6 | 145.0 | 144.9 | 146.3 |
Earnings Per Share - Number of Shares Used in Earnings Per Share Calculations (Details) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Earnings Per Share [Abstract] | ||||
| Weighted average basic shares outstanding | 142.6 | 145.5 | 143.2 | 146.2 |
| Dilutive effect of stock options | 0.5 | 0.3 | 0.5 | 0.4 |
| Weighted average diluted shares outstanding | 143.1 | 145.8 | 143.7 | 146.6 |
Debt - Revolving Credit Facility (Narrative) (Details) - USD ($) $ in Billions |
Jun. 08, 2018 |
Jun. 23, 2017 |
Sep. 30, 2018 |
|---|---|---|---|
| Revolving Credit Facility [Member] | |||
| Line of Credit Facility [Line Items] | |||
| Credit Facility, Maximum Borrowing Capacity | $ 2 | $ 1 | |
| Five year maturity credit facility, maturity date | Jun. 28, 2023 | Jun. 28, 2022 | |
| One Year Plus One Year Term Out Portion [Member] | |||
| Line of Credit Facility [Line Items] | |||
| One-year plus one-year credit facility canceled during the period | $ 1 |
Debt - Commercial Paper Program (Narrative) (Details) $ in Billions |
9 Months Ended |
|---|---|
|
Sep. 30, 2018
USD ($)
| |
| Revolving Credit Facility [Member] | |
| Debt Instrument [Line Items] | |
| Credit total available amount | $ 1 |
| Commercial Paper [Member] | |
| Debt Instrument [Line Items] | |
| Credit total available amount | $ 1 |
| Debt instrument maturity | less than 90 days |
Shareholders Equity - Narrative (Details) - shares |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2018 |
Oct. 17, 2018 |
May 10, 2017 |
|
| Normal Course Issuer Bid (NCIB) [Member] | |||
| Share repurchase expiration date | May 14, 2018 | ||
| Normal Course Issuer Bid (NCIB) [Member] | Maximum [Member] | |||
| Common shares authorized to be repurchased (in shares) | 4,380,000 | ||
| Subsequent Event [Member] | Current Normal Course Issuer Bid (NCIB) [Member] | Maximum [Member] | |||
| Common shares authorized to be repurchased (in shares) | 5,680,000 |
Shareholders' Equity - Activities Under Shares Repurchase Program (Detail) - CAD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Common Shares repurchased | $ 559 | $ 368 | ||
| Normal Course Issuer Bid (NCIB) [Member] | ||||
| Common Shares repurchased (in shares) | 0 | 1,145,400 | 2,495,962 | 1,828,300 |
| Weighted-average price per share | $ 0 | $ 196.46 | $ 223.97 | $ 201.50 |
| Common Shares repurchased | $ 0 | $ 225 | $ 559 | $ 368 |
Financial Instruments - FV and CV of Long-term Debt (Details) - CAD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
|---|---|---|
| Schedule of Investments [Line Items] | ||
| Long-term Debt, Fair value | $ 9,206 | $ 9,680 |
| Carrying Value Measurement [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term Debt, Carrying value | $ 8,286 | $ 8,159 |
Stock-Based Compensation - Weighted-Average Fair Value Assumptions (Details) - CAD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
May 10, 2018 |
Sep. 30, 2018 |
Dec. 31, 2018 |
|
| Scenario, Forecast [Member] | |||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Expected annual dividends per share | $ 2.6000 | ||
| Employee Stock Options | |||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Weighted average exercise price on the grant date (per share) | $ 240.91 | ||
| Expected option life (years) | 5 years | ||
| Risk-free interest rate | 2.22% | ||
| Expected stock price volatility | 24.81% | ||
| Expected annual dividends per share | $ 0.6500 | $ 2.3854 | |
| Estimated forfeiture rate | 4.70% | ||
| Weighted average grant date fair value of options granted during the year (per share) | $ 55.63 |
Pensions and Other Benefits - Narrative (Details) - Pension Plans, Defined Benefit [Member] - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
| Defined Benefit Plan Disclosure [Line Items] | ||||
| Contributions made by the company | $ 13 | $ 11 | $ 25 | $ 35 |
| Refund of plan surplus | $ (10) | |||
Contingencies - Environmental Liabilities (Details) - CAD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
|
| Site Contingency [Line Items] | |||||
| Total amount provided for provisions for environmental remediation costs | $ 80 | $ 80 | $ 78 | ||
| Term for expected payments to be made | 10 years | ||||
| Purchased Services and Other [Member] | |||||
| Site Contingency [Line Items] | |||||
| Environmental remediation expense | $ 2 | $ 1 | $ 4 | $ 3 | |