CANADIAN PACIFIC KANSAS CITY LTDCN
For the period ended Sep 30, 2024. Filed Oct 24, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 24, 2024
CP$92.17-1.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0000016875-24-000026
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-24.
0000016875-24-000033
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 275 previous paragraphs and 281 current paragraphs.
116 unchanged; 128 reworded; 37 added; 17 removed; 14 previous and 0 current paragraphs rearranged.
Tables are not compared: 31 previous and 31 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
Third Quarter of 2024 Results
Current report
•Diluted earnings per share ("EPS") was $0.90, an increase of 7% compared to the same period of 2023.
Current report
•Core adjusted combined diluted EPS was $0.99, an increase of 8% compared to the same period of 2023.
Current report
•Operating ratio was 66.1%, a 120 basis point increase compared to the same period of 2023.
Current report
•Core adjusted combined operating ratio was 62.9%, a 120 basis point increase compared to the same period of 2023.
Current report
Recent Developments
Current report
•On August 9, 2024, CPKC issued a notice to the Teamsters Canada Rail Conference ("TCRC") - Train and Engine ("T&E") division and TCRC - Rail Traffic Controller ("RCTC") division, of its plan to lock out employees if the TCRC leadership and the Company were unable to come to a negotiated settlement or agree to binding interest arbitration. On August 18, 2024, the TCRC - T&E division and TCRC - RCTC division issued notice to CPKC, of their plan to exercise their right to strike if the parties were unable to reach negotiated settlements. On August 22, 2024, a work stoppage commenced. The TCRC - T&E represents approximately 3,200 locomotive engineers, conductors and train and yard workers, and the TCRC - RCTC represents approximately 80 rail traffic controllers, all in Canada. On August 26, 2024, CPKC announced it restarted railway operations in Canada following the Canada Industrial Relations Board's order imposing binding interest arbitration and requiring CPKC to resume operations and TCRC employees to resume their duties.
Current report
•On December 1, 2023, CPKC and Genesee & Wyoming Inc. ("G&W") entered into an agreement in which G&W will transfer to CPKC the track and roadway assets owned by Meridian & Bigbee Railroad, L.L.C. (a G&W-owned company) located between Meridian, Mississippi and Myrtlewood, Alabama, and in exchange, CPKC will transfer certain assets and operating rights to G&W or its subsidiaries. The transaction was approved subject to certain conditions, by the United States Surface Transportation Board (the “STB”), on October 17, 2024 and the STB’s decision will be effective on November 16, 2024.
Current report
The increase in Energy, chemicals and plastics revenue in the third quarter of 2024 was primarily due to higher volumes of fuel oil, plastics, ethylene glycol, and biofuels, and increased freight revenue per RTM, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current report
•a 2023 business interruption insurance recovery of $51 million as a result of settlements reached with insurers by the Company related to a wildfire and flooding in B.C. in 2021;
Current report
•higher casualty incident cost; and
Current report
•a 2023 business interruption insurance recovery of $51 million as a result of settlements reached with insurers by the Company related to a wildfire and flooding in B.C. in 2021;
Current report
•higher casualty incident cost;
Current report
Other Expense (Income)
Current report
In the first nine months of 2024, Other income was $41 million, a change of $77 million, or 214%, from Other expense of $36 million in the same period of 2023. This change was primarily due to:
Current report
Income tax expense was $262 million in the third quarter of 2024, an increase of $4 million, or 2%, from $258 million in the same period of 2023. The increase was primarily due to higher taxable earnings.
Current report
Cash Flow
Current report
Net cash used in investing activities increased $18 million in the third quarter of 2024, compared to the same period in 2023. This increase was primarily due to an increase in capital additions.
Current report
Net cash used in financing activities increased $272 million in the third quarter of 2024, compared to the same period in 2023. The increase was primarily due to an increase in net repayments of commercial paper of $196 million in the third quarter of 2024, compared to the same period of 2023, and an increase in repayments of long term debt of $77 million in the third quarter of 2024 primarily driven by cash paid to repurchase Senior Notes of $84 million.
Current report
•during the first nine months, adjustments to provisions and settlements of Mexican taxes of $3 million expense ($4 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS as follows:
Current report
–in the third quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery ($6 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that favourably impacted Diluted EPS by 1 cent; and
Current report
•during the first nine months, acquisition-related costs of $90 million in connection with the KCS acquisition ($65 million after current income tax recovery of $25 million), including costs of $17 million recognized in "Compensation and benefits",
Current report
$5 million recognized in "Materials", and $68 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 7 cents as follows:
Current report
–in the third quarter, acquisition-related costs of $36 million in connection with the KCS acquisition ($26 million after current income tax recovery of $10 million) including costs of $11 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 3 cents;
Current report
•in the third quarter, a total current tax expense of $15 million related to a tax settlement with the SAT of $9 million and a reserve for the estimated impact of potential future audit settlements of $6 million, that unfavourably impacted Diluted EPS by 2 cents;
Current report
•during the first nine months, deferred income tax recovery of $65 million on account of changes in tax rates and apportionment, that favourably impacted Diluted EPS by 6 cents as follows:
Current report
– in the third quarter, a deferred income tax recovery of $14 million due to decreases in the Iowa and Arkansas state corporate income tax rates, that favourably impacted Diluted EPS by 2 cents; and
Current report
–in the third quarter, acquisition-related costs of $24 million ($18 million after current income tax recovery of $6 million), including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $22 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents;
Current report
•during the first nine months, KCS purchase accounting of $259 million ($188 million after deferred income tax recovery of $71 million), including costs of $246 million recognized in "Depreciation and amortization", $2 million recognized in "Purchased services and other" related to the amortization of equity investments, $14 million recognized in "Net interest expense", $2 million recognized in "Other expense (income)", and a recovery of $5 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 20 cents as follows:
Current report
–in the third quarter, KCS purchase accounting of $89 million ($65 million after deferred income tax recovery of $24 million), including costs of $85 million recognized in "Depreciation and amortization", $4 million recognized in "Net interest expense", $1 million recognized in "Other expense (income)",and a recovery of $1 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 7 cents;
Current report
–in the third quarter, KCS purchase accounting of $87 million ($63 million after deferred income tax recovery of $24 million), including costs of $81 million recognized in "Depreciation and amortization", $5 million recognized in "Net interest expense", and $1 million in recognized in "Other expense (income)", that unfavourably impacted Diluted EPS by 7 cents;
Current report
•during the first nine months, adjustments to provisions and settlements of Mexican taxes of $3 million expense recognized in "Compensation and benefits", that unfavourably impacted operating ratio by 0.1% as follows:
Current report
–in the third quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery recognized in "Compensation and benefits", that favourably impacted operating ratio by 0.2%; and
Current report
–in the third quarter, acquisition-related costs of $36 million including costs of $11 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 1.0%;
Current report
–in the third quarter, acquisition-related costs of $24 million including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $22 million recognized in "Purchased services and other", that unfavourably impacted operating ratio by 0.8%;
Current report
–in the third quarter, KCS purchase accounting of $85 million recognized in "Depreciation and amortization", that unfavourably impacted operating ratio by 2.4%;
Current report
–in the third quarter, KCS purchase accounting of $81 million that unfavourably impacted operating ratio on a combined basis by 2.4%;
Removed paragraphs (17)
Previous report
Second Quarter of 2024 Results
Previous report
The increase in Energy, chemicals and plastics revenue in the second quarter of 2024 was primarily due to higher volumes of conventional crude from Alberta to Chicago and DRUbit TMcrude from Alberta to Port Arthur, Texas, higher volumes of liquefied petroleum gas ("L.P.G.") from Alberta to southern Texas and Mexico, higher volumes of plastics, fuel oil, diluents, and ethylene glycol, the impact of the KCS acquisition, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. RTMs increased more than carloads due to moving higher volumes of conventional crude from Alberta to Chicago and DRUbit TMcrude from Alberta to Port Arthur as well as higher volumes of L.P.G. from Alberta to southern Texas and Mexico, which have longer lengths of haul.
Previous report
•increased labour efficiencies, including the impact of decreased overtime and improved crew utilization.
Previous report
•the impact of higher fuel prices of $24 million;
Previous report
This increase was partially offset by the favourable impact of an increase in fuel efficiency due to running longer and heavier trains.
Previous report
•the impact of the KCS acquisition of $28 million;
Previous report
•higher environmental management expenses;
Previous report
•higher terminal service costs; and
Previous report
•the impact of the change in FX of $9 million.
Previous report
This increase was partially offset by a reduction in casualty incident costs, lower personal injury costs and lower acquisition-related costs incurred by CPKC.
Previous report
•the impact of the change in FX of $9 million.
Previous report
•a reduction in casualty incident costs and lower personal injury costs; and
Previous report
Other (Income) Expense
Previous report
Income tax expense was $292 million in the second quarter of 2024, a change of $7,964 million, or 104%, from an income tax recovery of $7,672 million in the same period of 2023. The change was primarily due to:
Previous report
Cash used in financing activities was $464 million in the second quarter of 2024, an increase of $231 million, compared to $233 million in the same period of 2023. The increase was primarily due to net repayments of commercial paper of $157 million in the second quarter of 2024, compared to net issuances of $550 million in the same period of 2023. This increase was partially offset by $134 million (U.S. $98 million) of debt repurchases on Senior Notes in the second quarter of 2024, compared to principal repayments of $592 million (U.S. $439 million) of 3.00% 10-year Senior Notes in the same period of 2023.
Previous report
•during the first six months, acquisition-related costs of $54 million in connection with the KCS acquisition ($39 million after current tax recovery of $15 million), including costs of $6 million recognized in "Compensation and benefits", $4 million recognized in "Materials", and $44 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 4 cents as follows:
Previous report
•during the first six months ended June 30, 2024, KCS purchase accounting of $170 million ($123 million after deferred tax recovery of $47 million), including costs of $161 million recognized in "Depreciation and amortization", $2 million recognized in "Purchased services and other" related to the amortization of equity investments, $10 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and a recovery of $4 million recognized in "Net (loss) income attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 13 cents as follows:
Reworded paragraphs (128)
Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to enhance a reader’s understanding of the Company’s results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Interim Consolidated Financial Statements and the related notes as at and for the three and six months ended June 30, 2024 in Item 1. Financial Statements, other information in this report, and Item 8. Financial Statements and Supplementary Data of the Company's 2023 Annual Report on Form 10-K. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to enhance a reader’s understanding of the Company’s results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Interim Consolidated Financial Statements and the related notes as at and for the three and nine months ended September 30, 2024 in Item 1. Financial Statements, other information in this report, and Item 8. Financial Statements and Supplementary Data of the Company's 2023 Annual Report on Form 10-K. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.
Previous wording
•Total revenues -Total revenues increased by 14% in the second quarter of 2024 to $3,603 million, compared to the same period of 2023. The increase was primarily due to higher volumes as measured by revenue ton-miles ("RTMs"), the impact of the KCS acquisition, and increased freight revenue per RTM.
Current wording
•Total revenues were $3,549 million, an increase of 6% compared to the same period of 2023. The increase was primarily due to higher volumes as measured by revenue ton-miles ("RTMs") and increased freight revenue per RTM.
Previous wording
•Financial performance - In the second quarter of 2024, the Company reported Diluted earnings per share ("EPS") of $0.97, a decrease of 32% compared to the same period of 2023. Core adjusted combined diluted EPS was $1.05, an increase of 27% compared to the same period of 2023. The Company reported Operating ratio of 64.8%, a 550 basis point improvement compared to the same period of 2023. Core adjusted combined operating ratio was 61.8%, a 280 basis point improvement compared to the same period of 2023. Core adjusted combined diluted EPS and Core adjusted combined operating ratio are defined and reconciled in the Non-GAAP Measures of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
Core adjusted combined diluted EPS and Core adjusted combined operating ratio are defined and reconciled in the "Non-GAAP Measures" section of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Previous wording
AGTM 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. The increase in GTMs in the second quarter of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of Grain, Energy, chemicals and plastics, and Potash, partially offset by lower volumes of Metals, minerals and consumer products.
Current wording
AGTM 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. The increase in GTMs in the third quarter of 2024 was primarily due to higher volumes of Grain, Potash, Energy, chemicals and plastics, and international intermodal, partially offset by lower volumes of Metals, minerals and consumer products.
Previous wording
The increase in GTMs in the first six months of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of U.S. grain, Energy, chemicals and plastics, and Potash, partially offset by lower volumes of Metals, minerals and consumer products.
Current wording
The increase in GTMs in the first nine months of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of U.S. grain, Energy, chemicals and plastics, Potash, international intermodal, and Automotive, partially offset by lower volumes of Metals, minerals and consumer products.
Previous wording
Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by RTMs, and/or workload, as measured by GTMs, indicates improved train productivity. The increase in train miles in the second quarter of 2024 reflects the impact of a 9% increase in workload (GTMs), with minimal change in average train weights.
Current wording
Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by RTMs, and/or workload, as measured by GTMs, indicates improved train productivity. The increase in train miles in the third quarter of 2024 reflected the impact of a 4% increase in workload (GTMs), partially offset by a 2% increase in average train weights.
Previous wording
The increase in train miles in the first six months of 2024 reflected the impact of a 23% increase in workload (GTMs) and a 7% decrease in average train weights, which was primarily due to the impact of the KCS acquisition.
Current wording
The increase in train miles in the first nine months of 2024 reflected the impact of a 16% increase in workload (GTMs) and a 4% decrease in average train weights, which was primarily due to the impact of the KCS acquisition.
Previous wording
Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs. Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost savings. The improvement in fuel efficiency in the second quarter of 2024 was due to an improvement in horsepower utilization. The 4% increase in the first six months of 2024 was due to a decrease in average train weights by 7%, which was primarily due to lower horsepower utilization and harsher winter operating conditions in January 2024.
Current wording
Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs. Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost savings. The improvement in fuel efficiency in the third quarter of 2024 was due to an improvement in horsepower utilization. The 2% increase in the first nine months of 2024 was due to a decrease in average train weights by 4%, which was primarily due to lower horsepower utilization and harsher winter operating conditions in January 2024.
Previous wording
Anemployee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with the Company. The Company monitors employment and workforce levels in order to efficiently meet service and strategic requirements. The number of employees is a key driver to total compensation and benefits costs. The increase in the average number of total employees in the second quarter and in the first six months of 2024 were primarily due to the acquisition of KCS.
Current wording
Anemployee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with the Company. The Company monitors employment and workforce levels in order to efficiently meet service and strategic requirements. The number of employees is a key driver to total compensation and benefits costs. The average number of total employees in the third quarter was relatively unchanged. The increase in the average number of total employees in the first nine months of 2024 was primarily due to the acquisition of KCS.
Previous wording
The following table presents selected financial data related to the Company’s financial results for the three and six months ended, June 30, 2024 and the comparative periods in 2023. The financial highlights should be read in conjunction with Item 1. Financial Statements and this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current wording
The following table presents selected financial data related to the Company’s financial results for the three and nine months ended September 30, 2024 and the comparative periods in 2023.
Previous wording
(1)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 section.
Current wording
(1)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 the Non-GAAP Measures section.
Previous wording
(2)Operating ratio is defined as operating expenses divided by revenues.
Current wording
(2)Operating ratio is defined as total operating expenses divided by total revenues.
Previous wording
The Company’s revenues are primarily derived from transporting freight. Changes in freight volumes generally contribute to corresponding changes in Freight revenues and certain variable expenses such as fuel, equipment rents, and crew costs. Non- freight revenues are generated from leasing of certain assets, interline switching, and other arrangements including contracts with passenger service operators, subsurface and mineral rights agreements, and logistical services.
Current wording
The Company’s revenues are primarily derived from transporting freight. Changes in freight volumes generally contribute to corresponding changes in Freight revenues and certain variable expenses such as fuel, equipment rents, and crew costs. Non-freight revenues are generated from leasing certain assets, interline switching, and other arrangements including contracts with passenger service operators, subsurface and mineral rights agreements, and logistical services.
Previous wording
The increase in Freight revenues in the second quarter of 2024 was primarily due to higher volumes as measured by RTMs, the impact of the KCS acquisition of $160 million, and increased freight revenue per RTM. The decrease in Non-freight revenues was primarily due to lower leasing revenue, partially offset by the impact of the KCS acquisition of $4 million.
Current wording
The increase in Freight revenues in the third quarter of 2024 was primarily due to higher volumes as measured by RTMs and increased freight revenue per RTM. The increase in Non-freight revenues was primarily due to higher leasing revenues.
Previous wording
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. The increase in RTMs in the second quarter of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of Grain, Energy, chemicals and plastics, and Potash, partially offset by lower volumes of Metals, minerals and consumer products.
Current wording
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. The increase in RTMs in the third quarter of 2024 was primarily due to moving higher volumes of Grain, Potash, Energy, chemicals and plastics, and international intermodal, partially offset by lower volumes of Metals, minerals and consumer products.
Previous wording
Freight revenue per RTM is defined as freight revenue per revenue-producing ton of freight over a distance of one mile. This is an indicator of yield. The increase in freight revenue per RTM in the second quarter of 2024 was primarily due to higher freight rates and the favourable impact of the change in FX of $50 million.
Current wording
Freight revenue per RTM is defined as freight revenue per revenue-producing ton of freight over a distance of one mile. This is an indicator of yield. The increase in freight revenue per RTM in the third quarter of 2024 was primarily due to higher freight rates and the favourable impact of the change in foreign exchange "FX" of $20 million, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue of $7 million.
Previous wording
The increase in Freight revenues in the first six months of 2024 was primarily due to the impact of the KCS acquisition of $1,375 million, higher volumes as measured by RTMs, and increased freight revenue per RTM. The increase in Non-freight revenues was primarily due to higher revenue from a fibre optic agreement and the impact of the KCS acquisition of $21 million, partially offset by lower leasing revenue.
Current wording
The increase in Freight revenues in the first nine months of 2024 was primarily due to the impact of the KCS acquisition of $1,375 million, higher volumes as measured by RTMs, and increased freight revenue per RTM. The increase in Non-freight revenues was primarily due to higher revenue from a fibre optic agreement and the impact of the KCS acquisition of $21 million.
Previous wording
The increase in RTMs in the first six months of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of U.S. grain, Energy, chemicals and plastics, and Potash, partially offset by lower volumes of Metals, minerals and consumer products.
Current wording
The increase in RTMs in the first nine months of 2024 was primarily due to the impact of the KCS acquisition and higher volumes of U.S. grain, Energy, chemicals and plastics, Potash, international intermodal, and Automotive, partially offset by lower volumes of Metals, minerals and consumer products.
Previous wording
The increase in freight revenue per RTM in the first six months of 2024 was primarily due to higher freight rates and the favourable impact of the change in FX of $47 million, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue of $70 million.
Current wording
The increase in freight revenue per RTM in the first nine months of 2024 was primarily due to higher freight rates and the favourable impact of the change in FX of $67 million, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue of $77 million.
Previous wording
Freight revenues include fuel surcharge revenues associated with the Company's fuel cost adjustment program, which is designed to respond to fluctuations in fuel prices and help reduce exposure to changing fuel prices. The surcharge is applied to shippers through tariffs and by contract, within agreed-upon guidelines. This program includes recoveries of carbon taxes, levies, and obligations under cap-and-trade programs. Freight revenues included fuel surcharge revenues of $442 million in the second quarter of 2024, an increase of $39 million, or 10%, from $403 million in the same period of 2023. This increase was primarily due to the impact of the KCS acquisition, the favourable impact of the change in FX, and higher volumes, partially offset by the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program and lower fuel prices.
Current wording
Freight revenues include fuel surcharge revenues associated with the Company's fuel cost adjustment program, which is designed to respond to fluctuations in fuel prices and reduce exposure to changes in fuel prices. The surcharge is applied to shippers through tariffs and by contract, within agreed-upon guidelines. This program includes recoveries of carbon taxes, levies, and obligations under cap-and-trade programs. Freight revenues included fuel surcharge revenues of $400 million in the third quarter of 2024, a decrease of $1 million from $401 million in the same period of 2023. This decrease was primarily due to lower fuel prices, partially offset by the favourable impact from the timing of recoveries under the Company's fuel cost adjustment program, increased carbon levy surcharge revenue, and higher volumes.
Previous wording
In the first six months of 2024, fuel surcharge revenues were $854 million, an increase of $139 million, or 19%, from $715 million in the same period of 2023. This increase was primarily due to the impact of the KCS acquisition, higher volumes, and the favourable impact of the change in FX, partially offset by lower fuel prices and the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program.
Current wording
In the first nine months of 2024, fuel surcharge revenues were$1,254 million, an increase of $138 million, or 12%, from $1,116 million in the same period of 2023. This increase was primarily due to the impact of the KCS acquisition, higher volumes, increased carbon levy surcharge revenue, the favourable impact from the timing of recoveries under the Company's fuel cost adjustment program, and the favourable impact of the change in FX, partially offset by lower fuel prices.
Previous wording
The increase in Grain revenue in the second quarter of 2024 was primarily due to higher volumes of U.S. grain, primarily corn to the U.S. Pacific Northwest and Mexico, and soybeans and wheat to Mexico, higher volumes of Canadian grain to Mexico, Vancouver, British Columbia ("B.C."), and Thunder Bay, Ontario, the impact of the KCS acquisition, and increased freight revenue per RTM. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes of U.S. corn from the U.S. Midwest to the U.S. Pacific Northwest and Mexico, which have longer lengths of haul.
Current wording
The increase in Grain revenue in the third quarter of 2024 was primarily due to higher volumes of U.S. grain, primarily soybeans and wheat to Mexico and corn to the U.S. Pacific Northwest, higher volumes of Canadian grain to Mexico and Vancouver, British Columbia ("B.C."), and increased freight revenue per RTM. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased while carloads remained flat due to moving higher volumes of U.S. grain from the U.S. Midwest to Mexico and the U.S. Pacific Northwest, which have longer lengths of haul.
Previous wording
The increase in Grain revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of U.S. corn to the U.S. Pacific Northwest and Mexico, higher volumes of Canadian grain to Mexico, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by lower volumes of Canadian grain to Vancouver due to a smaller 2023-2024 crop size and the unfavourable impact of lower fuel prices on fuel surcharge revenue. RTMs increased more than carloads due to moving higher volumes of U.S. corn from the U.S. Midwest to the U.S. Pacific Northwest and Mexico, which have longer lengths of haul.
Current wording
The increase in Grain revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of U.S. corn to the U.S. Pacific Northwest and Mexico, higher volumes of U.S. soybeans and wheat and Canadian grain to Mexico, and increased freight revenue per RTM. This increase was partially offset by lower volumes of Canadian grain to Vancouver due to a smaller 2023-2024 crop size and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes of U.S. grain from the U.S. Midwest to the U.S. Pacific Northwest and Mexico, which have longer lengths of haul.
Previous wording
The increase in Coal revenue in the second quarter of 2024 was primarily due to increased freight revenue per RTM, the impact of the KCS acquisition, and higher volumes of Canadian coal to Vancouver. This increase was partially offset by lower volumes of U.S. coal driven by low natural gas prices, which decreases demand for thermal coal, and lower volumes of Canadian coal to Kamloops, B.C. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Coal revenue in the third quarter of 2024 was primarily due to increased freight revenue per RTM and higher volumes of Canadian coal to Kamloops, B.C. This increase was partially offset by lower volumes of U.S. coal primarily driven by lower natural gas prices, which decreases demand for thermal coal, lower volumes of Canadian coal to Vancouver, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates. Carloads decreased more than RTMs due to moving lower volumes of U.S. coal versus Canadian coal, which has a shorter average length of haul.
Previous wording
The increase in Coal revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of Canadian coal to Vancouver, and increased freight revenue per RTM. This increase was partially offset by lower volumes of Canadian coal to Kamloops, lower volumes of U.S. coal driven by low natural gas prices, which decreases demand for thermal coal, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Coal revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition, increased freight revenue per RTM, and higher volumes of Canadian coal to Vancouver. This increase was partially offset by lower volumes of U.S. coal driven by lower natural gas prices, which decreases demand for thermal coal, lower volumes of Canadian coal to Kamloops, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Previous wording
The increase in Potash revenue in the second quarter of 2024 was primarily due to higher volumes of export potash to the U.S. Pacific Northwest due to recovery of operations following an equipment failure at the Port of Portland, Oregon in 2023, higher volumes of export potash to Thunder Bay, and increased freight revenue per RTM. This increase was partially offset by lower volumes of export potash to Vancouver and lower volumes of domestic potash. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to moving higher volumes of export potash to the U.S. Pacific Northwest, which has a shorter length of haul, and lower volumes of export potash to Vancouver, which has a longer length of haul.
Current wording
The increase in Potash revenue in the third quarter of 2024 was primarily due to higher volumes of export potash to Vancouver and Kamloops as a result of the prior year impact of the International Longshore and Warehouse Union's ("ILWU") strike in July 2023, higher volumes of export potash to the U.S. Pacific Northwest due to recovery of operations following an equipment failure at the Port of Portland, Oregon in 2023, and higher freight rates. This increase was partially offset by decreased freight revenue per RTM, lower volumes of export potash to Chicago, Illinois, and lower volumes of domestic potash. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue. RTMs increased more than carloads due to moving higher volumes of export potash to Vancouver, which has a longer length of haul.
Previous wording
The increase in Potash revenue in the first six months of 2024 was primarily due to higher volumes of export potash to the U.S. Pacific Northwest due to recovery following an equipment failure at the Port of Portland in 2023, higher volumes of export potash to Thunder Bay, and increased freight revenue per RTM. This increase was partially offset by lower volumes of export potash to Vancouver and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to moving higher volumes of export potash to the U.S. Pacific Northwest, which has a shorter length of haul, and lower volumes of export potash to Vancouver, which has a longer length of haul.
Current wording
The increase in Potash revenue in the first nine months of 2024 was primarily due to higher volumes of export potash to the U.S. Pacific Northwest due to recovery of operations following an equipment failure at the Port of Portland in 2023, higher volumes of export potash to Thunder Bay, Ontario, and increased freight revenue per RTM. This increase was partially offset by lower volumes of export potash to Chicago, lower volumes of domestic potash, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to moving higher volumes of export potash to the U.S. Pacific Northwest, which has a shorter length of haul.
Previous wording
The increase in Fertilizers and sulphur revenue in the second quarter of 2024 was primarily due to higher volumes of dry fertilizers and sulphur moving between Chicago and Alberta, higher volumes of wet fertilizers, higher freight rates, and the favourable impact of the change in FX. Freight revenue per RTM decreased due to moving higher volumes of dry fertilizers and sulphur between Chicago and Alberta, which have longer lengths of haul.
Current wording
Fertilizers and sulphur revenue was flat in the third quarter of 2024 primarily due to higher freight rates, higher volumes of wet fertilizers, and the favourable impact of the change in FX, offset by decreased freight revenue per RTM. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue.
Previous wording
The increase in Fertilizers and sulphur revenue in the first six months of 2024 was primarily due to higher volumes of dry fertilizers and sulphur between Chicago and Alberta, the impact of the KCS acquisition, and increased freight revenue per RTM. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates. RTMs increased more than carloads due to moving higher volumes of dry fertilizers from Chicago to Alberta, which has a longer length of haul.
Current wording
The increase in Fertilizers and sulphur revenue in the first nine months of 2024 was primarily due to higher volumes of dry fertilizers and sulphur moving between Chicago and Alberta, higher volumes of wet fertilizers, the impact of the KCS acquisition, and increased freight revenue per RTM, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes of dry fertilizers and sulphur between Chicago and Alberta, which have longer lengths of haul.
Previous wording
The increase in Forest products revenue in the second quarter of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of lumber from Alberta, B.C., and Ontario to Texas and the U.S. Midwest, and increased freight revenue per RTM. This increase was partially offset by lower volumes of paperboard from Texas to Mexico and lower volumes of wood pulp from Ontario. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased while carloads decreased due to moving higher volumes of lumber from Alberta to Texas, which has a longer length of haul, and lower volumes of wood pulp from Ontario to the U.S. Northeast, which has a shorter length of haul.
Current wording
The decrease in Forest products revenue in the third quarter of 2024 was primarily due to lower volumes of paperboard and wood pulp and the unfavourable impact of lower fuel prices on fuel surcharge revenue. This decrease was partially offset by increased freight revenue per RTM and higher volumes of lumber from Alberta to Texas. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads decreased more than RTMs due to moving lower volumes of wood pulp from Ontario to the U.S. Northeast and Québec, which have shorter lengths of haul, and from moving higher volumes of lumber from Alberta to Texas, which has a longer length of haul.
Previous wording
The increase in Forest products revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of lumber from Alberta, B.C., and Ontario to the U.S. Midwest and Texas, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by lower volumes of wood pulp from Ontario, lower volumes of paperboard from Texas to Mexico, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Carloads increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul.
Current wording
The increase in Forest products revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of lumber from Alberta, B.C., and Ontario to Texas and the U.S. Midwest, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by lower volumes of wood pulp and paperboard and the unfavourable impact of lower fuel prices on fuel surcharge revenue.
Previous wording
The increase in Energy, chemicals and plastics revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of conventional crude from Alberta to Chicago and DRUbit TMcrude from Alberta to Port Arthur, higher volumes of fuel oil, plastics, and ethylene glycol, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Carloads increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul.
Current wording
The increase in Energy, chemicals and plastics revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes of fuel oil, conventional crude from Alberta to Chicago, plastics, and ethylene glycol, and increased freight revenue per RTM, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Previous wording
The increase in Metals, minerals and consumer products revenue in the second quarter of 2024 was primarily due to increased freight revenue per RTM and the impact of the KCS acquisition, partially offset by lower volumes of frac sand to the Bakken shale formation and lower volumes of steel and aggregates. Freight revenue per RTM increased primarily due to higher freight rates and the favourable impact of the change in FX. Carloads increased while RTMs decreased due to the impact of the KCS acquisition as KCS has a shorter average length of haul and moving lower volumes of frac sand to the Bakken shale formation, which has a longer length of haul.
Current wording
The decrease in Metals, minerals and consumer products revenue in the third quarter of 2024 was primarily due to lower volumes of steel and aggregates, lower volumes of frac sand to the Bakken and Permian Basin shale formations, and the unfavourable impact of lower fuel prices on fuel surcharge revenue, partially offset by increased freight revenue per RTM. Freight revenue per RTM increased due to higher freight rates. RTMs decreased more than carloads due to moving lower volumes of frac sand to the Bakken shale formation, which has a longer length of haul.
Previous wording
The increase in Metals, minerals and consumer products revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition and increased freight revenue per RTM. This increase was partially offset by lower volumes of frac sand to the Bakken and Permian Basin shale formations, lower volumes of steel, aggregates, and food and consumer products, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul and moving lower volumes of frac sand to the Bakken shale formation, which has a longer length of haul.
Current wording
The increase in Metals, minerals and consumer products revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition and increased freight revenue per RTM. This increase was partially offset by lower volumes of frac sand to the Bakken and Permian Basin shale formations, lower volumes of steel and aggregates, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul and due to moving lower volumes of frac sand to the Bakken shale formation, which has a longer length of haul.
Previous wording
The increase in Automotive revenue in the second quarter of 2024 was primarily due to higher volumes from Mexico to various locations in North America, from Vancouver to eastern Canada, and from Ontario to the U.S. Midwest, increased freight revenue per RTM, and the impact of the KCS acquisition. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes from Mexico to Canada and from Vancouver to eastern Canada, which have longer lengths of haul.
Current wording
The increase in Automotive revenue in the third quarter of 2024 was primarily due to higher volumes from Mexico to various locations in North America and from Vancouver to eastern Canada and higher freight rates, partially offset by decreased freight revenue per RTM. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue and the unfavourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes from Mexico to the U.S. Midwest and from Vancouver to eastern Canada, which have longer lengths of haul.
Previous wording
The increase in Automotive revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher volumes from Mexico to various locations in North America, from Vancouver to eastern Canada, and from Ontario to the U.S. Midwest, and increased freight revenue per RTM. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs increased more than carloads due to moving higher volumes from Mexico to Canada and from Vancouver to eastern Canada, which have longer lengths of haul.
Current wording
The increase in Automotive revenue in the first nine months of 2024 was primarily due to higher volumes from Mexico to various locations in North America, from Vancouver to eastern Canada, and from Ontario to the U.S. Midwest, the impact of the KCS acquisition, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. RTMs increased more than carloads due to moving higher volumes from Mexico to the U.S. Midwest and from Vancouver to eastern Canada, which have longer lengths of haul.
Previous wording
The decrease in Intermodal revenue in the second quarter of 2024 was primarily due to lower international intermodal volumes to and from the Port of Vancouver and from the Port of Montreal, lower domestic intermodal volumes between Mexico and Texas, and decreased freight revenue per RTM. This decrease was partially offset by higher domestic intermodal wholesales volumes, the impact of the KCS acquisition, higher freight rates, and the favourable impact of the change in FX. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue. Carloads decreased more than RTMs due to moving lower domestic intermodal volumes between Mexico and Texas, which has a shorter length of haul.
Current wording
The decrease in Intermodal revenue in the third quarter of 2024 was primarily due to decreased freight revenue per RTM and lower domestic intermodal volumes between Mexico and Texas. This decrease was partially offset by higher international intermodal volumes to and from the Port of Vancouver, B.C. due to onboarding a new customer and the prior year impact of the ILWU's strike in July 2023, higher freight rates, and the favourable impact of the change in FX. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue. Carloads decreased while RTMs increased due to moving lower domestic intermodal volumes between Mexico and Texas, which has a shorter length of haul, and moving higher international intermodal volumes to and from the Port of Vancouver, which has a longer length of haul.
Previous wording
The increase in Intermodal revenue in the first six months of 2024 was primarily due to the impact of the KCS acquisition, higher domestic intermodal wholesale volumes, higher international intermodal volumes to and from the Port of Vancouver, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by lower international intermodal volumes to and from the Port of Montreal, lower domestic intermodal volumes between Mexico and Texas, and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Carloads increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul.
Current wording
The increase in Intermodal revenue in the first nine months of 2024 was primarily due to the impact of the KCS acquisition, higher international intermodal volumes to and from the Port of Vancouver, including onboarding a new customer, higher domestic intermodal wholesale volumes, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by decreased freight revenue per RTM, lower domestic intermodal volumes between Mexico and Texas, and lower international intermodal volumes to and from the Port of Montréal, Québec. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue.
Previous wording
Compensation and benefits expense includes employee wages, salaries, fringe benefits, and stock-based compensation. The decrease in Compensation and benefits expense in the second quarter of 2024 was primarily due to:
Current wording
Compensation and benefits expense includes employee wages, salaries, fringe benefits, and stock-based compensation. The increase in Compensation and benefits expense in the third quarter of 2024 was primarily due to an increase in stock-based compensation of $39 million largely driven by the changes in the common share price and the impact of wage and benefit inflation.
Previous wording
The increase in Compensation and benefits expense in the first six months of 2024 was primarily due to the impact of the KCS acquisition of $243 million, and the impact of wage and benefit inflation.
Current wording
The increase in Compensation and benefits expense in the first nine months of 2024 was primarily due to the impact of the KCS acquisition of $243 million and the impact of wage and benefit inflation. This increase was partially offset by lower acquisition-related costs incurred by CPKC primarily due to restructuring charges of $50 million incurred by KCS in 2023.
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Previous report — wording carried elsewhere
Carloads decreased while RTMs increased due to moving lower volumes of U.S. coal, which has a shorter average length of haul, and higher volumes of Canadian coal to Vancouver, which has a longer length of haul.
Previous report — wording carried elsewhere
•lower acquisition-related costs incurred by CPKC primarily due to restructuring charges of $50 million incurred by KCS in 2023;
Previous report — wording carried elsewhere
•decrease in stock-based compensation of $29 million driven by the changes in the common share price; and
Previous report — wording carried elsewhere
This decrease was partially offset by the impact of the KCS acquisition of $31 million, and the impact of wage and benefit inflation.
Previous report — wording carried elsewhere
This increase was partially offset by lower acquisition-related costs incurred by CPKC primarily due to restructuring charges of $50 million incurred by KCS in 2023.
Previous report — wording carried elsewhere
•an increase in workload, as measured by GTMs;
Previous report — wording carried elsewhere
•the impact of the KCS acquisition of $21 million; and
Previous report — wording carried elsewhere
The increase was partially offset by:
Previous report — wording carried elsewhere
•lower acquisition-related costs incurred by CPKC.
Previous report — wording carried elsewhere
•higher current tax expense due to higher taxable earnings; and
Previous report — wording carried elsewhere
•a deferred tax recovery of $51 million, recorded in the second quarter of 2023, on the revaluation of deferred income tax balances on unitary state apportionment changes.
Previous report — wording carried elsewhere
•a deferred tax recovery of $7,832 million, recorded in the second quarter of 2023, on the derecognition of the deferred income tax liability on the outside basis difference of the investment in KCS upon acquiring control of KCS;
Previous report — wording carried elsewhere
(2)Pro forma Article 11 transaction accounting adjustments for January 1 through April 13, 2023 represent adjustments made in a manner consistent with Article 11, these include:
Previous report — wording carried elsewhere
•For April 1 through April 13, 2023 in the three months ended June 30, 2023, depreciation and amortization of differences between the historic carrying values and the fair values of KCS's tangible and intangible assets and investments prior to the Control Date that unfavourably impacted operating ratio by 0.4% and miscellaneous immaterial amounts that have been reclassified across revenue, operating expenses, and non-operating income or expense, consistent with CPKC's financial statement captions; and