CANADIAN PACIFIC KANSAS CITY LTDCN
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
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-K
Period ended 2023-12-31; filed 2024-02-27.
0000016875-24-000009
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000016875-25-000008
Item 7. 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 381 previous paragraphs and 339 current paragraphs.
121 unchanged; 133 reworded; 78 added; 113 removed; 14 previous and 7 current paragraphs rearranged.
Tables are not compared: 24 previous and 25 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 (78)
Current report
CPKC 2024 ANNUAL REPORT / 35
Current report
•Total revenues were $14,546 million, an increase of 16% compared to $12,555 million in 2023. The increase was primarily due to the impact of the KCS acquisition, higher volumes as measured by revenue ton-miles ("RTMs"), and higher freight revenue per RTM.
Current report
•Diluted earnings per share ("EPS") was $3.98, a decrease of 5% compared to $4.21 in 2023.
Current report
•Core adjusted combined diluted EPS was $4.25, an increase of 11% compared to $3.84 in 2023.
Current report
•Operating ratio was 64.4%, a 60 basis point improvement from 65.0% in 2023.
Current report
•Core adjusted combined operating ratio was 61.3%, a 70 basis point improvement from 62.0% in 2023.
Current report
•the impact of the KCS acquisition of $243 million;
Current report
•lower acquisition-related costs incurred by CPKC primarily due to restructuring charges of $50 million incurred by KCS in 2023;
Current report
•a reduction in training costs; and
Current report
•a decrease in stock-based compensation (excluding amounts included in the impact of the KCS acquisition, and acquisition-related costs) of $28 million driven by changes in payout rates and the Common Share price.
Current report
•the impact of cost inflation; and
Current report
This increase was partially offset by greater recoveries from other railways for their use of the Company's freight cars and reduced payments to other railways for the use of their freight cars.
Current report
•the impact of the KCS acquisition of $255 million;
Current report
•the unfavourable impact of the change in FX of $13 million.
Current report
•the impact of the KCS acquisition of $235 million;
Current report
•the impact of cost inflation;
Current report
•higher terminal service costs;
Current report
•higher casualty incident costs;
Current report
•higher environmental management expenses; and
Current report
•the unfavourable impact of the change in FX of $13 million.
Current report
•a one-time fee of $34 million (U.S. $25 million) received in connection with the Company's agreement to waive a departing executive's non- competition agreement with respect to their employment with Norfolk Southern Corporation;
Current report
•lower third-party locomotive costs due to insourcing and a new parts agreement embedded in Materials effective in the fourth quarter of 2024.
Current report
Other (Income) Expense
Current report
•higher equity income of $30 million due to a settlement of a property disposition by an equity investee;
Current report
•a lower loss of $35 million on FX forward contracts to sell Mexican pesos and buy U.S.dollars (see Item 8. Financial Statements and Supplementary Data, Note 17 Financial instruments for details); and
Current report
•gains on debt extinguishments of $22 million (see Item 8. Financial Statements and Supplementary Data, Note 16 Debt for details).
Current report
$7,175 million was recognized in 2023. This loss was primarily due to the outside basis tax initially recognized at the time of the Company's initial investment in KCS.
Current report
Income Tax Expense (Recovery)
Current report
•an outside basis deferred income tax recovery of $23 million, recorded in 2023, arising from the change in the carrying amount of the investment in KCS for financial reporting.
Current report
This change was partially offset by an increase in deferred income tax recovery of $68 million due to state corporate income tax rate changes.
Current report
During 2024, the Company repaid the remaining balance of U.S. $1,429 million ($2,002 million) on its 1.35% 3-year Notes. The Company also repaid U.S. $48 million ($66 million) on its 5.41% Senior Secured Notes and repurchased, on the open market, certain of its Senior Notes with principal values of U.S. $176 million ($241 million).
Current report
Cash provided by operating activities increased $1,132 million in 2024 compared to 2023. The increase was primarily due to an increase in cash generating income, including the impact of the acquisition of KCS, and an unfavourable change in working capital in 2023.
Current report
•55% to 60% is expected to be allocated to track and roadway;
Current report
Statement of Income Information
Current report
Balance Sheet Information
Current report
•during the course of the year, a deferred income tax recovery of $81 million on account of changes in tax rates, that favourably impacted Diluted EPS by 9 cents as follows:
Current report
–in the second quarter, a deferred income tax recovery of $3 million due to a decrease in the Arkansas state corporate income tax rate, that had minimal impact on Diluted EPS;
Current report
•during the course of the year, adjustments to provisions and settlements of Mexican taxes of $4 million recovery ($2 million after deferred income tax expense of $2 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS as follows:
Current report
–in the fourth 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 had minimal impact on Diluted EPS;
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
Showing the first 40 of 78 passages. Open the source sections for the rest.
Removed paragraphs (113)
Previous report
In 2023, equity earnings of KCS prior to the Control Date was $230 million and net income from KCS from the Control Date to December 31, 2023 was $682 million compared to equity earnings of KCS of $1,074 million in 2022. The lower overall contribution from KCS was primarily due to the gain on unwinding of interest rate hedges in 2022 that did not occur in 2023, partially offset by a decrease in net interest expense as a result of the completion of the debt exchange, which is further discussed in the Liquidity and Capital Resources section. In 2023, KCS contributed $963 million to CPKC's Operating income, which increased CPKC's operating ratio by 2.7%.
Previous report
•Total revenues – The Company’s total revenues increased by 42% to$12,555 million in 2023 from $8,814 million in 2022, primarily due to the impact of the KCS acquisition, increased freight revenues per revenue ton-mile ("RTM'), and higher volumes as measured by RTMs.
Previous report
savings. The decrease in fuel efficiency was mainly driven by a decrease in average train weights of 8% primarily due to the impact of the KCS acquisition as a result of the KCS network running lighter trains.
Previous report
•the impact of the KCS acquisition of $645 million, including acquisition-related costs incurred by KCS of $55 million, which were primarily comprised of restructuring charges of $50 million;
Previous report
•higher incentive compensation;
Previous report
•reduced labour efficiencies, including the impact of reduced train weights;
Previous report
•the unfavourable impact of the change in FX of $16 million;
Previous report
•higher acquisition-related costs incurred by CPKC, excluding KCS's acquisition-related costs, of $14 million, including stock-based compensation of $10 million; and
Previous report
This increase was partially offset by a reduction of $77 million in defined benefit pension current service costs and the favourable impact of changes in common share price of $12 million on stock-based compensation.
Previous report
•the impact of the KCS acquisition of $441 million;
Previous report
•the unfavourable impact of the change in FX of $42 million; and
Previous report
This increase was partially offset by the favourable impact of lower fuel prices of $221 million.
Previous report
•the impact of the KCS acquisition of $110 million;
Previous report
•greater usage of pooled freight cars;
Previous report
•reduced rental income received from other railways; and
Previous report
•slower cycle times.
Previous report
•the impact of the KCS acquisition of $629 million, including additional depreciation of $175 million and amortization of $59 million attributed to fair value adjustments to properties and intangible assets with finite lives recognized upon the acquisition of KCS;
Previous report
(1) 2023 includes KCS results from April 14 to December 31, 2023.
Previous report
•the impact of the KCS acquisition of $590 million, including acquisition-related costs incurred by KCS of $18 million, reported in Other;
Previous report
•an increased number of casualty incidents and higher personal injury costs, reported in Casualty;
Previous report
•cost inflation;
Previous report
•lower gains on land sales;
Previous report
•the unfavourable impact of the change in FX of $18 million.
Previous report
Other Expense
Previous report
•interest of $106 million incurred on debt issued under the KCS debt exchange;
Previous report
•the unfavourable impact of the change in FX of $20 million;
Previous report
•the impact of the KCS Purchase Accounting of $13 million.
Previous report
Income Tax (Recovery) Expense
Previous report
•higher current tax recoveries on acquisition-related costs of $14 million associated with the KCS acquisition incurred by legacy CP; and
Previous report
This change was partially offset by the impact of the KCS acquisition of $256 million, including current tax expense related to tax settlements of $16 million with the Servicio de Administración Tributaria ("SAT”) (Mexican tax authority) in relation to taxation years for which audits have closed and the estimated impact of potential future audit settlements, deferred tax recoveries on the amortization relating to purchase accounting fair value adjustments of $67 million, and current tax recoveries on acquisition-related costs of $7 million. In addition to the impact of the KCS acquisition, there was also an increase in income tax expense due to a higher effective tax rate and a reversal of an uncertain tax position in 2022 related to a prior period of $24 million. As a result of the KCS debt exchange an offsetting current tax expense and deferred tax recovery of $101 million is included in "income tax (recovery) expense".
Previous report
Additional information concerning stock-based compensation is included in Item 8. Financial Statements and Supplementary Data, Note 24 Stock-based compensation.
Previous report
Effective March 14, 2022, the Company extended the maturity date of the U.S. $500 million term facility to September 15, 2022. During the year ended December 31, 2022, the Company repaid in full the outstanding borrowings of U.S. $500 million ($636 million) on the term facility. The facility was automatically terminated on September 15, 2022 following the final principal repayment.
Previous report
Cash provided by operating activities was $4,137 million in 2023, a decrease of $5 million compared to $4,142 million in 2022. The decrease was primarily due to an unfavourable change in working capital driven by an increase in freight and non-freight accounts receivable along with higher tax installments paid in 2023, and the settlement of Mexican tax audits in the third and fourth quarters of 2023 compared to the same period of 2022.
Previous report
This decrease was partially offset by higher cash generating income, including the impact of the acquisition of KCS.
Previous report
Cash invested in additions to properties by KCS was $221 million for the period from January 1 to April 13, 2023 (U.S. $164 million at average exchange rate of $1.00 USD = $1.35 CAD). Expenditures mainly relate to renewal and replacement of track infrastructure and re-investment in existing locomotive fleet.
Previous report
This decrease was partially offset primarily by principal repayments of $1,000 million 1.589% 2-year Notes, $479 million (U.S. $350 million) of 4.45% 12.5-year Notes, $272 million (U.S. $199 million) of 3.85% 10-year Senior Notes, and $592 million (U.S. $439 million) of 3.00% 10-year Senior Notes, compared to principal repayments of $125 million 5.10% 10-year Medium Term Notes, $313 million (U.S. $250 million) of 4.50% 10-year Notes, and $97 million (U.S. $76 million) of the 6.99% Finance lease in 2022.
Previous report
issuer and CPKC provides a full and unconditional guarantee.
Previous report
On March 20, 2023, CPKC and CPRC announced offers to exchange any and all validly tendered (and not validly withdrawn) and accepted notes of seven series, previously issued by KCS (the “Old Notes") for notes to be issued by CPRC (the "CPRC Notes"). As of April 19, 2023, U.S. $3,014 million of Old Notes of such seven series were tendered and accepted in exchange for U.S. $3,014 million of CPRC Notes in seven corresponding series.
Previous report
Each series of CPRC Notes has the same interest rates, interest payment dates, maturity dates, and substantively the same optional redemption provisions as the corresponding series of Old Notes.
Previous report
In exchange for each U.S.$1,000 principal amount of Old Notes that was validly tendered prior to March 31, 2023 (the "Early Participation Date"), holders of Old Notes received consideration consisting of U.S.$1,000 principal amount of CPRC Notes and a cash amount of U.S.$1.00. The total consideration included an early participation premium, consisting of U.S.$30 principal amount of CPRC Notes per U.S.$1,000 principal amount of Old Notes. In exchange for each U.S.$1,000 principal amount of Old Notes that was validly tendered after the Early Participation Date but prior to the expiration of the exchange offers on April 17, 2023 (the "Expiration Date") and not validly withdrawn, holders of Old Notes received consideration consisting of U.S.$970 principal amount of CPRC Notes and a cash amount of U.S.$1.00.
Showing the first 40 of 113 passages. Open the source sections for the rest.
Reworded paragraphs (133)
Previous wording
For purposes of this report, unless the context indicates otherwise, all references herein to “CPKC”, “the Company”, “we”, “our” and “us” refer to Canadian Pacific Kansas City Limited ("CPKC") and its subsidiaries, which includes Kansas City Southern ("KCS") as a consolidated subsidiary on and from April 14, 2023 (the "Control Date"). Prior to April 14, 2023, the Company's 100% interest in KCS was reported as an equity-method investment.
Current wording
For purposes of this report, unless the context indicates otherwise, all references herein to “CPKC”, “the Company”, “we”, “our” and “us” refer to Canadian Pacific Kansas City Limited ("CPKC") and its subsidiaries, which includes Kansas City Southern ("KCS") as a consolidated subsidiary on and from April 14, 2023 (the "Control Date"). Prior to the Control Date, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment.
Previous wording
•Financial performance – In 2023, the Company reported Diluted earnings per share ("EPS") of $4.21, a 12% increase from $3.77 in 2022, and Core adjusted combined diluted EPS of $3.84, a 2% increase from $3.77 in 2022. The Company reported Operating ratio of 65.0%, a 280 basis point increase from 62.2% in 2022, and Core adjusted combined operating ratio of 62.0%, a 30 basis point increase from 61.7% in 2022. Core adjusted combined diluted EPS and Core adjusted combined operating ratio are defined and reconciled in the Non-GAAP Measures section.
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 7. 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 was primarily due to the impact of the KCS acquisition and higher volumes of Canadian grain, Coal and Automotive. This increase was partially offset by lower volumes of U.S grain, Potash, and crude.
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 was primarily due to the impact of the KCS acquisition and higher volumes of Grain, Energy, chemicals and plastics, Potash, Automotive, and Intermodal. This increase was partially offset by lower volumes of Metals, minerals and consumer products and Coal.
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 reflects the impact of a 29% increase in workload (GTMs), and an 8% decrease in average train weights, which was primarily due to the impact of the KCS acquisition.
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 reflected the impact of a 12% increase in workload (GTMs) and a 2% 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
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 decrease in 2024 fuel efficiency was primarily due to the impact of the KCS acquisition.
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 was due to the acquisition of KCS and to support anticipated volume growth.
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 increase in the average number of total employees was primarily due to the acquisition of KCS.
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, fibre optic 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 was primarily due to the impact of the KCS acquisition of $3,405 million, increased freight revenue per RTM, and higher volumes as measured by RTMs. The increase in Non-freight revenues was primarily due to the impact of the KCS acquisition of $62 million, higher interline switching revenue, higher revenue from a fibre optic agreement, and higher leasing revenue.
Current wording
The increase in Freight revenues was primarily due to the impact of the KCS acquisition of $1,375 million, higher volumes as measured by RTMs, and higher freight revenue per RTM. The increase in Non-freight revenues was primarily related to a subsurface fibre optic agreement, the impact of the KCS acquisition of $21 million, and 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 was primarily due to the impact of the KCS acquisition and higher volumes of Canadian grain, Coal, and Automotive, partially offset by lower volumes of U.S. grain, Potash, and crude. Carloads have increased more than RTMs due to the impact of the KCS acquisition as KCS has a shorter average length of haul.
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 was primarily due to the impact of the KCS acquisition and higher volumes of Grain, Energy, chemicals and plastics, Potash, Automotive, and Intermodal, partially offset by lower volumes of Metals, minerals and consumer products and Coal.
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 was primarily due to higher freight rates and the favourable impact of the change in foreign exchange ("FX") of $165 million, partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices of $200 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 was primarily due to higher freight rates and the favourable impact of the change in foreign exchange ("FX") of $94 million, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenues of $184 million.
Previous wording
The increase in Grain revenue was primarily due to the impact of the KCS acquisition, higher volumes of Canadian grain to Vancouver, British Columbia ("B.C.") and Thunder Bay, Ontario due to prior year drought conditions that impacted the 2021-2022 crop size, and increased freight revenue per RTM. This increase was partially offset by lower volumes of U.S. corn from the U.S. Midwest to western Canada primarily due to an improved Canadian harvest for the 2022-2023 crop year, lower volumes of U.S. soybeans to the U.S. Pacific Northwest driven by a strong South American crop, and the unfavourable impact of fuel surcharge revenue as a result of lower fuel prices. 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 Canadian grain to Vancouver, which has a longer length of haul.
Current wording
The increase in Grain revenue was primarily due to the impact of the KCS acquisition, higher volumes of U.S. corn to the U.S. Pacific Northwest, higher volumes of U.S. soybeans and wheat and Canadian grain to Mexico, and an increase in 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 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 was primarily due to the impact of the KCS acquisition, higher volumes of Canadian coal to Vancouver and Thunder Bay as a result of prior year production challenges at the mines, higher volumes of U.S. coal, and increased freight revenue per RTM. This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices 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 was primarily due to the impact of the KCS acquisition, an increase in freight revenue per RTM, and higher volumes of Canadian coal to Thunder Bay, Ontario and Vancouver, British Columbia ("B.C."). This increase was partially offset bylower volumes of U.S. coal, lower volumes of Canadian coal to Kamloops, B.C., 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 Canadian coal to Thunder Bay and Vancouver, which have longer lengths of haul.
Previous wording
The decrease in Potash revenue was primarily due to lower volumes of export potash to Vancouver as a result of the International Longshore and Warehouse Union's strike in July, lower volumes of export potash to the U.S. Pacific Northwest as a result of an equipment failure at the Port of Portland, Oregon, and the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices. This decrease was partially offset by increased freight revenue per RTM and higher volumes of domestic potash. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs decreased more than carloads due to moving lower volumes of export potash to Vancouver, which has a longer length of haul.
Current wording
The increase in Potash revenue 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, and an increase in freight revenue per RTM. This increase was partially offset by lower volumes of export potash to Vancouver as a result of the International Longshore and Warehouse Union's work stoppage in November 2024, lower volumes of domestic potash, lower volumes of export potash to Chicago, Illinois, 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 was primarily due to increased freight revenue per RTM, the impact of the KCS acquisition, and higher volumes of wet fertilizers. This increase was partially offset by lower volumes of dry fertilizers and the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Fertilizers and sulphur revenue 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 an increase in 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 of dry fertilizers and sulphur between Chicago and Alberta, which have longer lengths of haul.
Previous wording
The increase in Forest products revenue was primarily due to the impact of the KCS acquisition, increased freight revenue per RTM, higher volumes of paperboard from Chicago, Illinois to Alberta, higher volumes of lumber from western Canada to Texas, and higher volumes of wood pulp from Ontario. This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices, lower volumes of panel products from western Canada, and lower volumes of newsprint from Saint John, New Brunswick. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Forest products revenue was primarily due to the impact of the KCS acquisition, higher volumes of lumber from B.C. and Alberta 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 was primarily due to the impact of the KCS acquisition, higher volumes of petroleum products and plastics, and increased freight revenue per RTM. This increase was partially offset by lower volumes of crude, liquified petroleum gas ("L.P.G."), biofuels, and ethylene glycol, and the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Energy, chemicals and plastics revenue 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 an increase in freight revenue per RTM. This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue and lower volumes of DRUbit TM crude to Port Arthur, Texas. 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 was primarily due to the impact of the KCS acquisition, increased freight revenue per RTM, and higher volumes of aggregates, minerals and metals, and consumer products. This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices and lower volumes of steel. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Current wording
The increase in Metals, minerals and consumer products revenue was primarily due to the impact of the KCS acquisition and an increase in freight revenue per RTM. This increase was partially offset by lower volumes of steel, frac sand to the Bakken and Permian Basin shale formations, 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 the KCS network 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.
Previous wording
The increase in Automotive revenue was primarily due to the impact of the KCS acquisition, higher volumes from Chicago, various origins in Ontario, Vancouver, and Kansas City, Missouri to various destinations in Canada, partially due to prior year global supply chain challenges, and increased freight revenue per RTM. This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices. 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 Chicago, Ontario, and Kansas City to western Canada and higher volumes from Vancouver to eastern Canada, which have longer lengths of haul.
Current wording
The increase in Automotive revenue 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, and higher freight rates. This increase was partially offset by a decrease in freight revenue per RTM due to 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 increase in Intermodal revenue was primarily due to the impact of the KCS acquisition, higher freight rates, higher international intermodal volumes due to onboarding a new customer and higher volumes imported through the Port of Vancouver, higher domestic wholesale volumes, and the favourable impact of the change in FX. This increase was partially offset by lower intermodal ancillary revenue, lower domestic intermodal volumes due to lower cross-border volumes between Canada and the U.S. and lower retail volumes, lower international intermodal volumes to and from the Port of Saint John, New Brunswick and to and from the Port of Montréal, Québec, and the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices.
Current wording
The increase in Intermodal revenue 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, and to and from the Port of Saint John, higher domestic intermodal wholesale volumes, higher freight rates, and the favourable impact of the change in FX. This increase was partially offset by a decrease in freight revenue per RTM, lower domestic intermodal volumes between Mexico and Texas, and lower international intermodal volumes to and from the Port of Montréal. 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 international intermodal volumes to and from the Port of Vancouver, which has a longer length of haul, and moving lower domestic intermodal volumes between Mexico and Texas, which has a shorter length of haul.
Previous wording
•the impact of wage and benefit inflation;
Current wording
•the impact of wage and benefit inflation; and
Previous wording
•increased volume variable expenses as a result of an increase in workload as measured by GTMs.
Current wording
•increased volume variable expense as a result of an increase in workload as measured by GTMs.
Previous wording
Fuel expense consists mainly of fuel used by locomotives and includes provincial, state, and federal fuel taxes. The increase in Fuel expense was primarily due to:
Current wording
Fuel expense consists mainly of fuel used by locomotives and includes provincial, state, and federal fuel taxes. The increase in Fuel expense in 2024 was primarily due to the impact of the KCS acquisition of $179 million and an increase in workload, as measured by GTMs. This was partially offset by the impact of lower fuel prices of $86 million.
Previous wording
Materials expense includes the cost of material used for maintenance of track, locomotives, freight cars, and buildings, as well as software sustainment. The increase in Materials expense was primarily due to the impact of the KCS acquisition of $89 million and the unfavourable impact of inflation, partially offset by a decrease in locomotive maintenance.
Current wording
Materials expense includes the cost of materials used for the maintenance of track, locomotives, freight cars, and buildings, as well as software sustainment. The increase in Materials expense was primarily due to the impact of the KCS acquisition of $33 million and higher locomotive material costs due to a new parts agreement insourcing a subset of maintenance work with favorable offset in purchased services and other effective in the fourth quarter of 2024.
Previous wording
This increase was partially offset by greater recoveries from other railway's use of the company's locomotives.
Current wording
•lower recoveries from other railways for their use of the Company's locomotives.
Previous wording
Depreciation and amortization expense is the charge associated with the use of track and roadway, rolling stock, buildings, and other depreciable assets, including assets related to the Company's concession with the Mexican government, as well as amortization of finite life intangible assets. The increase in Depreciation and amortization expense was primarily due to:
Current wording
Depreciation and amortization expense is the charge associated with the use of track and roadway, rolling stock, buildings, and other depreciable assets, including assets related to a concession granted by the Mexican government, as well as amortization of finite life intangible assets. The increase in Depreciation and amortization expense was primarily due to:
Previous wording
•a higher depreciable asset base as a result of capital program spending in 2023 and recent years; and
Current wording
•a higher depreciable asset base as a result of capital program spending in 2024 and 2023; and
Previous wording
Purchased services and other expense encompasses a wide range of third-party costs, including expenses for joint facilities, personal injury and damage claims, environmental remediation, property taxes, contractor and consulting fees, and insurance. The increase in Purchased services and other expense was primarily due to:
Current wording
Purchased services and other expense encompasses a wide range of third-party costs, including expenses for joint facilities, personal injury and damage claims, provisions for environmental remediation, property taxes, contractor and consulting fees, and insurance premiums. The increase in Purchased services and other expense was primarily due to:
Previous wording
This increase was partially offset by a business interruption insurance recovery of $51 million, reported in Other.
Current wording
•a 2023 business interruption insurance recovery of $51 million;
Previous wording
•higher acquisition-related costs incurred by CPKC, excluding KCS's acquisition-related costs, of $19 million including payments made to certain communities across the combined network to address the environmental and societal impacts of increased traffic, reported in Other; and
Current wording
•lower acquisition-related costs incurred by CPKC, including payments made in 2023 to certain communities across the combined network to address the environmental and societal impacts of increased traffic; and
Previous wording
On April 14, 2023, the Company assumed control of KCS and subsequently ceased recognizing equity earnings of KCS.
Current wording
On April 14, 2023, the Company assumed control of KCS, and ceased recognizing equity earnings of KCS.
Previous wording
For the period from January 1 to April 13, 2023, the Company recognized $230 million (U.S. $170 million) of equity earnings of KCS, a decrease of $844 million or 79%, from $1,074 million (U.S. $820 million) in the year ended December 31, 2022. This amount is net of amortization of basis differences of $48 million (U.S. $35 million) associated with KCS purchase accounting, a decrease of$115 million or 71%, from $163 million (U.S. $125 million) in the year ended December 31, 2022, and is net of acquisition-related costs (net of tax) incurred by KCS. These basis differences relate to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and are amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments. Acquisition-related costs (net of tax) incurred by KCS in the period from January 1 to April 13, 2023 were $11 million (U.S. $8 million), a decrease of $38 million or 78%, from $49 million (U.S. $38 million) in the year ended December 31, 2022. These decreases are attributable to the derecognition of KCS as an equity investment following the acquisition of control by CPKC on April 14, 2023. Equity earnings of KCS recognized in 2022 also included KCS's gain on unwinding of interest rate hedges of $212 million, which is net of the associated purchase accounting basis difference and tax. KCS U.S. dollar historical results were translated at the average FX rate for the period from January 1 to April 13, 2023 and the year ended December 31, 2022 of $1.00 USD = $1.35 CAD and $1.00 USD = $1.30 CAD, respectively.
Current wording
The Company recognized $230 million (U.S. $170 million) of equity earnings of KCS for the period from January 1 to April 13, 2023. This amount was net of amortization of basis differences of $48 million (U.S. $35 million) associated with KCS purchase accounting, and was net of acquisition-related costs (net of tax) incurred by KCS. These basis differences related to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and were amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments. Acquisition-related costs (net of tax) incurred by KCS in the period from January 1 to April 13, 2023, were $11 million (U.S. $8 million). KCS U.S. dollar historical results were translated at the average FX rate for the period January 1 to April 13, 2023 of $1.00 USD = $1.35 CAD.
Previous wording
Other expense consists of gains and losses from the change in FX on cash and working capital, the impact of foreign currency forwards, financing costs, shareholder costs, equity earnings, and other non-operating expenditures. Other expense was $52 million in 2023, an increase of $35 million, or 206%, from $17 million in 2022. The increase was primarily due to the impact of the KCS acquisition, including foreign exchange losses on forward contracts to sell Mexican pesos and buy U.S.dollars, of $27 million, and net acquisition-related costs of $6 million driven by the KCS debt exchange. Additional information concerning the KCS debt exchange is included in Item 8. Financial Statements and Supplementary Data, Note 17 Debt.
Current wording
Other (income) expense consists of gains and losses from the change in FX on cash and working capital, the impact of foreign exchange currency forwards, financing costs, shareholder costs, equity earnings, and other non-operating expenditures. Other income was $42 million, a change of $94 million, or 181%, from Other expense of $52 million in 2023. This change was primarily due to:
Previous wording
Other components of net periodic benefit recovery are related to the Company's pension and other post-retirement and post-employment benefit plans. It includes interest cost on benefit obligation, expected return on plan assets, recognized net actuarial loss, and amortization of prior service costs. Other components of net periodic benefit recovery were $327 million in 2023, a decrease of $84 million, or 20%, from $411 million in 2022. This decrease was primarily due to an increase in interest cost on the benefit obligation of $109 million and a decrease in the expected return on plan assets of $77 million, partially offset by a decrease in recognized net actuarial losses of $103 million.
Current wording
Other components of net periodic benefit recovery are related to the Company's pension and other post-retirement and post-employment benefit plans. It includes interest cost on benefit obligation, expected return on plan assets, recognized net actuarial loss, and amortization of prior service costs. Other components of net periodic benefit recovery was $352 million in 2024, an increase of $25 million, or 8%, from $327 million in 2023. The increase was primarily due to a decrease in interest cost on the benefit obligation of $17 million and an increase in the expected return on plan assets of $9 million.
Previous wording
Net interest expense includes interest on long-term debt and finance leases. Net interest expense was $771 million in 2023, an increase of $119 million, or 18%, from $652 million in 2022. This increase was primarily due to:
Current wording
Net interest expense includes interest on long-term debt, short-term debt, and finance leases. Net interest expense was $801 million in 2024, an increase of $30 million, or 4%, from $771 million in 2023. The increase was primarily due to interest of $41 million incurred on debt previously issued by KCS and exchanged with Canadian Pacific Railway Company ("CPRC") following the acquisition of control, and higher interest on commercial paper of $19 million as a result of higher outstanding borrowings. This increase was partially offset by lower interest expense of $39 million following the repayment of maturing long-term debt.
Previous wording
On April 14, 2023, the Company assumed control of KCS and accounted for its acquisition as a business combination achieved in stages. The Company's investment in KCS was accounted for using the equity method of accounting prior to assuming control. On control, the carrying value of the previously held equity investment in KCS was remeasured to its fair value and upon derecognition, a loss of $7,175 million was recognized in the Company's Consolidated Statements of Income for the year ended December 31, 2023. This loss was primarily due to the reversal of a value equal to the deferred tax liability on the outside basis difference which was initially recognized with the investment in KCS.
Current wording
On April 14, 2023, the Company assumed control of KCS and began accounting for its acquisition as a business combination achieved in stages. Upon assuming control, the carrying value of the previously held equity investment in KCS was remeasured to its fair value and upon derecognition, a loss of
Previous wording
Income tax recovery was $6,976 million in 2023, a change of $7,604 million, or 1,211%, from an income tax expense of $628 million in 2022. This change was primarily due to:
Current wording
Income tax expense was $1,059 million in 2024, a change of $8,035 million, or 115%, from an income tax recovery of $6,976 million in 2023. The change was primarily due to:
Previous wording
•a deferred tax recovery of $7,832 million on the derecognition of the deferred tax liability on the outside basis difference of the investment in KCS upon acquiring control;
Current wording
•a deferred income tax recovery of $7,832 million in 2023 on the derecognition of the deferred income tax liability on the outside basis difference of the investment in KCS upon acquiring control;
Previous wording
•lower current tax expense due to lower taxable earnings.
Current wording
•higher current income tax expense due to higher taxable earnings;
Previous wording
•a deferred tax recovery of $58 million on the revaluation of deferred income tax balances on unitary state apportionment changes;
Current wording
•a deferred income tax recovery of $58 million, recorded in 2023, on the revaluation of deferred income tax balances on unitary state apportionment changes; and
Previous wording
The effective income tax rate for 2023 was 228.50% and 24.01% on a Core adjusted basis. The effective income tax rate for 2022 was 15.16% and 22.24% on a Core adjusted basis. The Company's 2024 Core adjusted effective tax rate is expected to be between 25.00% to 25.50%. The Core adjusted effective tax rate is a Non-GAAP measure, calculated as the effective tax rate adjusted for significant items as they are not considered indicative of future financial trends either by nature or amount nor provide comparability to past performance. The Company uses Core adjusted effective tax rate to evaluate CPKC’s operating performance and for planning and forecasting future profitability. Core adjusted effective tax rate also excludes equity earnings of KCS (net of tax) and KCS purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting. This Non-GAAP measure does not have a standardized meaning and is not defined by GAAP and, therefore, may not be comparable
Current wording
The effective income tax rate for 2024 was 22.19% and 24.14% on a Core adjusted basis. The effective income tax rate for 2023 was 228.50% and 24.01% on a Core adjusted basis. The Company's 2025 Core adjusted effective tax rate is expected to be approximately 24.50%. The Core adjusted effective tax rate is a Non-GAAP measure, calculated as the effective tax rate adjusted for significant items as they are not considered indicative of future financial trends either by nature or amount nor provide comparability to past performance. The Company uses the Core adjusted effective tax rate to evaluate CPKC’s operating performance and for planning and forecasting future profitability. Core adjusted effective tax rate also excludes equity earnings of KCS (net of tax) and KCS purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting. This Non-GAAP measure does not have a standardized meaning and is not defined by GAAP and, therefore, may not be comparable to similar measures presented by other companies. Significant items and KCS purchase accounting are discussed further in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP measures. The outlook for the Company’s 2025 Core adjusted effective income tax rate is based on certain assumptions about events and developments that may or may not materialize, or that may be offset entirely or partially by new events and developments. These assumptions are discussed further in Item 1A. Risk Factors. Refer also to "Forward-Looking Statements" below for further details.
Showing the first 40 of 133 pairs. Open the source sections for the rest.
Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
This increase was partially offset by:
Current report — wording carried from elsewhere
•the impact of the KCS acquisition of $37 million;
Current report — wording carried from elsewhere
This increase was partially offset by:
Current report — wording carried from elsewhere
•the impact of the KCS acquisition of $103 million;
Current report — wording carried from elsewhere
•30% to 35% is expected to be allocated to rolling stock, including railcars and locomotives; and
Current report — wording carried from elsewhere
•5% to 15% is expected to be allocated to buildings and other investments.
Current report — wording carried from elsewhere
Additional discussion of capital commitments can be found in Item 8. Financial Statements and Supplementary Data, Note 25 Commitments and contingencies.
Rearranged previous paragraphs (14)
Previous report — wording carried elsewhere
•an increase in workload, as measured by GTMs.
Previous report — wording carried elsewhere
•the unfavourable impact of the change in FX of $8 million.
Previous report — wording carried elsewhere
•higher interest on commercial paper of $19 million as a result of higher interest rates and higher borrowings; and
Previous report — wording carried elsewhere
This increase was partially offset by lower interest costs of $19 million following the repayment of maturing long-term debt and higher interest income of $12 million.
Previous report — wording carried elsewhere
to similar measures presented by other companies. Significant items and KCS purchase accounting are discussed further in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company’s 2024 outlook for its Core adjusted annualized effective income tax rate is based on certain assumptions about events and developments that may or may not materialize, or that may be offset entirely or partially by new events and developments. These assumptions are discussed further in Item 1A. Risk Factors.
Previous report — wording carried elsewhere
If the Company’s credit ratings were to decline to below investment-grade levels, the Company could experience a significant increase in its interest cost for new debt along with a negative effect on its ability to readily issue new debt.
Previous report — wording carried elsewhere
CPKC will be released and relieved of its obligations under the guarantees after obligations to the holders are satisfied in accordance with the terms of the respective instruments.
Previous report — wording carried elsewhere
More information on the securities under this guarantee structure can be found in Exhibit 22.1 List of Issuers and Guarantor Subsidiaries of this annual report.
Previous report — wording carried elsewhere
related costs include legal, consulting, financing fees, integration costs including third-party services and system migration, debt exchange transaction costs, community investments, fair value gain or loss on FX forward contracts and interest rate hedges, FX gain on U.S. dollar-denominated cash on hand from the issuances of long-term debt to fund the KCS acquisition, restructuring, employee retention and synergy incentive costs, and transaction and integration costs incurred by KCS. These items may not be non-recurring, and may include items that are settled in cash. Specifically, due to the magnitude of the acquisition, its significant impact to the Company’s business and complexity of integrating the acquired business and operations, the Company expects to incur acquisition-related costs beyond the year of acquisition. Management believes excluding these significant items from GAAP results provides an additional viewpoint which may give users a consistent understanding of CPKC's financial performance when performing a multi-period assessment including assessing the likelihood of future results. Accordingly, these Non-GAAP financial measures may provide additional insight to investors and other external users of CPKC's financial information.
Previous report — wording carried elsewhere
This combined measure does not purport to represent what the actual consolidated results of operations would have been had the Company obtained control of KCS and consolidation actually occurred on January 1, 2022, nor is it indicative of future results. This information is based upon assumptions
Previous report — wording carried elsewhere
(2)Pro forma Article 11 transaction accounting adjustments represent adjustments made in a manner consistent with Article 11, these include:
Previous report — wording carried elsewhere
•For the year ended December 31, 2022, depreciation and amortization of differences between the historic carrying values and the provisional fair values of KCS's tangible and intangible assets and investments prior to the Control Date that unfavourably impacted operating ratio by 2.3%, the estimated transaction costs expected to be incurred by the Company that unfavourably impacted operating ratio by 0.3%, 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.
Previous report — wording carried elsewhere
However, any change in the renewal term could result in a change in the depreciable lives of the assets and future depreciation expense. For example, if the depreciable life of the Concession rights and related assets, excluding track assets, increased (or decreased) by one year, annual depreciation expense would decrease (or increase) by approximately $2 million. The impact of a one year change in depreciable lives of the Concession’s track assets has been included in the sensitivity discussed above for the Company’s total track assets.
Previous report — wording carried elsewhere
identified and discussed in Item 1A. Risk Factors. Other risks are detailed from time to time in reports filed by the Company with securities regulators in Canada and the United States.