Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 18, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | CP | |
Entity Registrant Name | CANADIAN PACIFIC RAILWAY LTD/CN | |
Entity Central Index Key | 16,875 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 146,694,793 |
INTERIM CONSOLIDATED STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME (unaudited) - CAD shares in Millions, CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Freight | CAD 1,563 | CAD 1,548 |
Non-freight | 40 | 43 |
Total revenues | 1,603 | 1,591 |
Operating expenses | ||
Compensation and benefits | 233 | 329 |
Fuel | 170 | 125 |
Materials | 49 | 56 |
Equipment rents | 36 | 45 |
Depreciation and amortization | 166 | 162 |
Purchased services and other | 278 | 221 |
Total operating expenses | 932 | 938 |
Operating income | 671 | 653 |
Less: | ||
Other income and charges | (28) | (181) |
Net interest expense | 120 | 124 |
Income before income tax expense | 579 | 710 |
Income tax expense | 148 | 170 |
Net income | CAD 431 | CAD 540 |
Earnings per share | ||
Basic earnings per share (in CAD per share) | CAD 2.94 | CAD 3.53 |
Diluted earnings per share (in CAD per share) | CAD 2.93 | CAD 3.51 |
Weighted-average number of shares (millions) | ||
Basic (shares) | 146.5 | 153 |
Diluted (shares) | 147.1 | 153.8 |
Dividends declared per share (in CAD per share) | CAD 0.5000 | CAD 0.3500 |
INTERIM CONSOLIDATED STATEMENT3
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | CAD 431 | CAD 540 |
Net gain in foreign currency translation adjustments, net of hedging activities | 5 | 37 |
Change in derivatives designated as cash flow hedges | 5 | (47) |
Change in pension and post-retirement defined benefit plans | 38 | 47 |
Other comprehensive income before income taxes | 48 | 37 |
Income tax (expense) recovery on above items | (18) | (41) |
Other comprehensive (loss) income | 30 | (4) |
Comprehensive income | CAD 461 | CAD 536 |
INTERIM CONSOLIDATED BALANCE SH
INTERIM CONSOLIDATED BALANCE SHEETS AS AT (unaudited) - CAD CAD in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||||
Cash and cash equivalents | CAD 201 | CAD 164 | ||
Accounts receivable, net | 631 | 591 | ||
Materials and supplies | 201 | 184 | ||
Other current assets | 77 | 70 | ||
Total current assets | 1,110 | 1,009 | ||
Investments | 183 | 194 | ||
Properties | 16,661 | 16,689 | ||
Goodwill and intangible assets | 200 | 202 | ||
Pension asset | 1,165 | 1,070 | ||
Other assets | 78 | 57 | ||
Total assets | 19,397 | 19,221 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 1,148 | 1,322 | ||
Long-term debt maturing within one year | 31 | 25 | ||
Total current liabilities | 1,179 | 1,347 | ||
Pension and other benefit liabilities | 730 | 734 | ||
Other long-term liabilities | 227 | 284 | ||
Long-term debt | 8,583 | 8,659 | ||
Deferred income taxes | 3,640 | 3,571 | ||
Total liabilities | 14,359 | 14,595 | ||
Shareholders’ equity | ||||
Share capital | 2,036 | 2,002 | ||
Additional paid-in capital | 42 | 52 | ||
Accumulated other comprehensive loss | (1,769) | (1,799) | ||
Retained earnings | 4,729 | 4,371 | ||
Total Shareholders' equity | 5,038 | 4,626 | CAD 5,290 | CAD 4,796 |
Total liabilities and shareholders’ equity | CAD 19,397 | CAD 19,221 |
INTERIM CONSOLIDATED STATEMENT5
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income | CAD 431 | CAD 540 |
Reconciliation of net income to cash provided by operating activities: | ||
Depreciation and amortization | 166 | 162 |
Deferred income taxes | 67 | 93 |
Pension funding in excess of expense | (60) | (42) |
Foreign exchange (gain) loss on long-term debt | (28) | (181) |
Other operating activities, net | (85) | (66) |
Change in non-cash working capital balances related to operations | (180) | (288) |
Cash provided by operating activities | 311 | 218 |
Investing activities | ||
Additions to properties | (230) | (278) |
Proceeds from sale of properties and other assets | 3 | 60 |
Other | 5 | 0 |
Cash used in investing activities | (222) | (218) |
Financing activities | ||
Dividends paid | (73) | (54) |
Issuance of CP Common Shares | 28 | 5 |
Repayment of long-term debt | (5) | (11) |
Other | 0 | (2) |
Cash used in financing activities | (50) | (62) |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | (2) | (17) |
Cash position | ||
(Decrease) increase in cash and cash equivalents | 37 | (79) |
Cash and cash equivalents at beginning of period | 164 | 650 |
Cash and cash equivalents at end of period | 201 | 571 |
Supplemental disclosures of cash flow information: | ||
Income taxes paid | 170 | 192 |
Interest paid | CAD 150 | CAD 155 |
INTERIM CONSOLIDATED STATEMENT6
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) - CAD shares in Millions, CAD in Millions | Total | Common shares/Share capital [Member] | Additional paid-in capital [Member] | Accumulated other comprehensive loss [Member] | Retained earnings [Member] |
Beginning balance (shares) at Dec. 31, 2015 | 153 | ||||
Beginning balance at Dec. 31, 2015 | CAD 4,796 | CAD 2,058 | CAD 43 | CAD (1,477) | CAD 4,172 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 540 | 0 | 0 | 0 | 540 |
Other comprehensive (loss) income | (4) | 0 | 0 | (4) | 0 |
Dividends declared | (54) | 0 | 0 | 0 | (54) |
Effect of stock-based compensation expense | 6 | CAD 0 | 6 | 0 | 0 |
Shares issued under stock option plan (shares) | 0 | ||||
Shares issued under stock option plan | CAD 6 | CAD 7 | (1) | 0 | 0 |
Ending balance (shares) at Mar. 31, 2016 | 153 | 153 | |||
Ending balance at Mar. 31, 2016 | CAD 5,290 | CAD 2,065 | 48 | (1,481) | 4,658 |
Beginning balance (shares) at Dec. 31, 2016 | 146.3 | ||||
Beginning balance at Dec. 31, 2016 | 4,626 | CAD 2,002 | 52 | (1,799) | 4,371 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income | 431 | 0 | 0 | 0 | 431 |
Other comprehensive (loss) income | 30 | 0 | 0 | 30 | 0 |
Dividends declared | (73) | 0 | 0 | 0 | (73) |
Effect of stock-based compensation expense | (3) | CAD 0 | (3) | 0 | 0 |
Shares issued under stock option plan (shares) | 0.4 | ||||
Shares issued under stock option plan | CAD 27 | CAD 34 | (7) | 0 | 0 |
Ending balance (shares) at Mar. 31, 2017 | 146.7 | 146.7 | |||
Ending balance at Mar. 31, 2017 | CAD 5,038 | CAD 2,036 | CAD 42 | CAD (1,769) | CAD 4,729 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of presentation These unaudited interim consolidated financial statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2016 annual consolidated financial statements and notes included in CP's 2016 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2016 annual consolidated financial statements, except for the newly adopted accounting policies discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year. |
Accounting Changes
Accounting Changes | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Accounting Changes | Implemented in 2017 Compensation - Stock Compensation In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-based Payment Accounting, under FASB Accounting Standards Codification ("ASC") Topic 718. The amendments clarify the guidance relating to treatment of excess tax benefits and deficiencies, acceptable forfeiture rate policies, and treatment of cash paid by an employer when directly withholding shares for tax-withholding purposes and the requirement to treat such cash flows as a financing activity. As a result of this ASU, excess tax benefits are no longer recorded in Additional paid-in capital and instead are applied against taxes payable or recognized in the interim consolidated statement of income. This ASU was effective for CP beginning on January 1, 2017. The Company has determined that there were no significant changes to disclosure or financial statement presentation and changes in accounting for excess tax benefits and deficiencies were not material as a result of adoption. Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory under FASB ASC Topic 330. The amendments require that reporting entities measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using the first-in, first-out or average cost basis. This ASU was effective for CP beginning on January 1, 2017 and was applied prospectively. The Company determined there were no changes to disclosure, financial statement presentation, or valuation of inventory as a result of adoption. Future changes Leases In February 2016, the FASB issued ASU 2016-02, Leases under FASB ASC Topic 842 which will supersede the lease recognition and measurement requirements in Topic 840 Leases. This new standard requires recognition of right-of-use assets and lease liabilities by lessees for those leases classified as finance and operating leases with a maximum term exceeding 12 months and will be effective for public entities for fiscal years, and interim periods within those years, beginning on or after December 15, 2018. For CP this will be effective commencing January 1, 2019. Entities are required to use a modified retrospective approach to adopt this new standard meaning there will be no impact to the consolidated statements of income, however, the comparative consolidated balance sheet will be adjusted to reflect the provisions of this standard. The Company has a detailed plan to implement the new standard and is assessing contractual arrangements, through a cross functional team, that may qualify as leases under the new standard. CP is also working with a vendor to implement a lease management system which will assist in delivering the required accounting changes. The impact of the new standard will be a material increase to right of use assets and lease liabilities on the consolidated balance sheet, primarily, as a result of operating leases currently not recognized on the balance sheet. The Company does not anticipate a material impact to the consolidated statement of income and is currently evaluating the impact adoption of this new standard will have on disclosure. Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers under FASB ASC Topic 606. In March 2016, the FASB issued amendment ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations as an update under FASB ASC Topic 606. The amendments clarify the principal versus agent guidance in determining whether to recognize revenue on a gross or net basis. The guidance in Topic 606, as amended, will be effective for public entities for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. For CP this new standard will be effective commencing January 1, 2018, and CP has the option of adopting the new standard by either a full retrospective or a modified retrospective approach. CP has analyzed contracts for a significant proportion of the Company’s annual rail freight revenue, which represents greater than 95% of CP’s annual revenues, and has concluded that recognizing these revenues over time as rail freight services are performed continues to be appropriate. Further detailed reviews of a variety of specific contractual terms that could potentially represent additional performance obligations, reassessment of certain arrangements in the context of the new guidance on principal versus agent, and an assessment of required new disclosures is also currently being performed. CP is also continuing to assess whether to apply the full or modified retrospective adoption method on transition. At this time CP does not expect a material change to revenue recognition from adopting this standard. Intangibles - Goodwill and Other In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment under FASB ASC Topic 350. This is intended to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The amendments are effective for CP beginning on January 1, 2020. Entities are required to apply the amendments in this Update prospectively from the date of adoption. The Company does not anticipate that the adoption of this ASU will impact CP's financial statements as there is a sufficient excess between the fair value and carrying value of CP's goodwill. Furthermore CP expects to continue to apply the Step 0 qualitative assessment when testing for goodwill impairment. Compensation - Retirement Benefits In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost under FASB ASC Topic 715. The amendments clarify presentation requirements for net periodic pension cost and net periodic post-retirement benefit cost and require that an employer report the current service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the consolidated statement of income separately from the current service cost component and outside a subtotal of income from operations if one is presented. The amendments also restrict capitalization to the current service cost component when applicable. The amendments are effective for CP beginning on January 1, 2018. The amendments related to presentation are required to be applied retrospectively and the restrictions on capitalization of the current service cost component are applicable prospectively on the date of adoption. Adoption of this ASU will result in a $67 million and $43 million decrease in operating income for the three months ended March 31, 2017 and 2016, respectively, and an estimated corresponding full year decrease of $272 million and $167 million for the years ended December 31, 2017 and 2016, respectively. There will be no change to net income or earnings per share as a result of adoption of this new standard. The new guidance restricting capitalization of pensions to the current service cost component of net periodic benefit cost will have no impact to operating income or amounts capitalized because the Company currently only capitalizes an appropriate portion of current service cost for self-constructed properties. CP is currently assessing the disclosure requirements of this ASU. |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Changes in Accumulated Other Comprehensive Loss (AOCL) by Component | Changes in accumulated other comprehensive loss ("AOCL") by component For the three months ended March 31 (in millions of Canadian dollars) Foreign currency (1) Derivatives and other (1) Pension and post-retirement defined benefit plans (1) Total (1) Opening balance, January 1, 2017 $ 127 $ (104 ) $ (1,822 ) $ (1,799 ) Other comprehensive (loss) income before reclassifications (2 ) 2 — — Amounts reclassified from accumulated other comprehensive loss — 2 28 30 Net current-period other comprehensive (loss) income (2 ) 4 28 30 Closing balance, March 31, 2017 $ 125 $ (100 ) $ (1,794 ) $ (1,769 ) Opening balance, January 1, 2016 $ 129 $ (102 ) $ (1,504 ) $ (1,477 ) Other comprehensive (loss) income before reclassifications (4 ) (36 ) — (40 ) Amounts reclassified from accumulated other comprehensive loss — 2 34 36 Net current-period other comprehensive (loss) income (4 ) (34 ) 34 (4 ) Closing balance, March 31, 2016 $ 125 $ (136 ) $ (1,470 ) $ (1,481 ) (1) Amounts are presented net of tax. Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Amortization of prior service costs (1) $ (1 ) $ (2 ) Recognition of net actuarial loss (1) 39 49 Total before income tax 38 47 Income tax recovery (10 ) (13 ) Net of income tax $ 28 $ 34 (1) Impacts Compensation and benefits on the interim consolidated statements of income. |
Gain on Sale of Properties
Gain on Sale of Properties | 3 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Gain on Sale of Properties | Gain on sale of Arbutus Corridor In March 2016, the Company completed the sale of CP’s Arbutus Corridor (the “Arbutus Corridor”) to the City of Vancouver for gross proceeds of $55 million . The agreement allows the Company to share in future proceeds on the eventual development and/or sale of certain parcels of the Arbutus Corridor. The Company recorded a gain on sale of $50 million ( $43 million after tax) within "Purchased services and other" from the transaction during the first quarter of 2016. |
Other Income and Charges
Other Income and Charges | 3 Months Ended |
Mar. 31, 2017 | |
Other Income and Expenses [Abstract] | |
Other Income and Charges | Other income and charges For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Foreign exchange gains on long-term debt $ (28 ) $ (181 ) Net other foreign exchange gains (1 ) (7 ) Other 1 7 Total other income and charges $ (28 ) $ (181 ) |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income taxes For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Current income tax expense $ 81 $ 77 Deferred income tax expense 67 93 Income tax expense $ 148 $ 170 The effective tax rate in the first quarter is 25.60% , compared to 23.89% for the same period in 2016 . The estimated 2017 annual effective tax rate for the first quarter, excluding the discrete items of the management transition recovery of $51 million related to the retirement of the Company's Chief Executive Officer and the foreign exchange gain of $28 million ( $181 million in 2016) on the Company’s U.S. dollar-denominated debt, is 26.50% , one percent lower compared to 27.50% for the same period in 2016 . |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings per share At March 31, 2017 , the number of shares outstanding was 146.7 million ( March 31, 2016 - 153.0 million ). Basic earnings per share have been calculated using net income for the period divided by the weighted-average number of shares outstanding during the period. The number of shares used in earnings per share calculations is reconciled as follows: For the three months ended March 31 (in millions) 2017 2016 Weighted-average basic shares outstanding 146.5 153.0 Dilutive effect of stock options 0.6 0.8 Weighted-average diluted shares outstanding 147.1 153.8 For the three months ended March 31, 2017 , 502,000 options were excluded from the computation of diluted earnings per share because their effects were not dilutive (three months ended March 31, 2016 - 445,991 options). |
Financial Instruments
Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments | Financial instruments A. Fair values of financial instruments The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy established by GAAP that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market. When possible, the estimated fair value is based on quoted market prices and, if not available, estimates from third-party brokers. For non-exchange traded derivatives classified in Level 2, the Company uses standard valuation techniques to calculate fair value. Primary inputs to these techniques include observable market prices (interest, foreign exchange (FX) and commodity) and volatility, depending on the type of derivative and nature of the underlying risk. The Company uses inputs and data used by willing market participants when valuing derivatives and considers its own credit default swap spread as well as those of its counterparties in its determination of fair value. The carrying values of financial instruments equal or approximate their fair values with the exception of long-term debt which has a fair value of approximately $9,958 million ( December 31, 2016 - $9,981 million ) and a carrying value of $8,614 million ( December 31, 2016 - $8,684 million ) at March 31, 2017 . The estimated fair value of current and long-term borrowings has been determined based on market information where available, or by discounting future payments of interest and principal at estimated interest rates expected to be available to the Company at period end. All derivatives and long-term debt are classified as Level 2. B. Financial risk management Derivative financial instruments Derivative financial instruments may be used to selectively reduce volatility associated with fluctuations in interest rates, FX rates, the price of fuel and stock-based compensation expense. Where derivatives are designated as hedging instruments, the relationship between the hedging instruments and their associated hedged items is documented, as well as the risk management objective and strategy for the use of the hedging instruments. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the interim consolidated balance sheets, commitments or forecasted transactions. At the time a derivative contract is entered into, and at least quarterly thereafter, an assessment is made as to whether the derivative item is effective in offsetting the changes in fair value or cash flows of the hedged items. The derivative qualifies for hedge accounting treatment if it is effective in substantially mitigating the risk it was designed to address. It is not the Company’s intent to use financial derivatives or commodity instruments for trading or speculative purposes. FX management The Company conducts business transactions and owns assets in both Canada and the United States. As a result, the Company is exposed to fluctuations in value of financial commitments, assets, liabilities, income or cash flows due to changes in FX rates. The Company may enter into FX risk management transactions primarily to manage fluctuations in the exchange rate between Canadian and U.S. currencies. FX exposure is primarily mitigated through natural offsets created by revenues, expenditures and balance sheet positions incurred in the same currency. Where appropriate, the Company may negotiate with customers and suppliers to reduce the net exposure. Net investment hedge The FX gains and losses on long-term debt are mainly unrealized and can only be realized when U.S. dollar denominated long-term debt matures or is settled. The Company also has long-term FX exposure on its investment in U.S. affiliates. The majority of the Company’s U.S. dollar denominated long-term debt has been designated as a hedge of the net investment in foreign subsidiaries. This designation has the effect of mitigating volatility on net income by offsetting long-term FX gains and losses on U.S. dollar denominated long-term debt and gains and losses on its net investment. The effective portion recognized in “Other comprehensive income (loss)” for the three months ended March 31, 2017 was an unrealized FX gain of $46 million (three months ended March 31, 2016 - unrealized FX gain of $308 million ). There was no ineffectiveness during the three months ended March 31, 2017 (three months ended March 31, 2016 - $ nil ). Interest rate management The Company is exposed to interest rate risk, which is the risk that the fair value or future cash flows of a financial instrument will vary as a result of changes in market interest rates. In order to manage funding needs or capital structure goals, the Company enters into debt or capital lease agreements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions. Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt. To manage interest rate exposure, the Company accesses diverse sources of financing and manages borrowings in line with a targeted range of capital structure, debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles. In anticipation of future debt issuances, the Company may enter into forward rate agreements, that are designated as cash flow hedges, to substantially lock in all or a portion of the effective future interest expense. The Company may also enter into swap agreements, designated as fair value hedges, to manage the mix of fixed and floating rate debt. Forward starting swaps As at March 31, 2017 , the Company had forward starting floating-to-fixed interest rate swap agreements (“forward starting swaps”) totaling a notional U.S. $700 million to fix the benchmark rate on cash flows associated with highly probable forecasted issuances of long-term notes. The effective portion of changes in fair value on the forward starting swaps is recorded in “Accumulated other comprehensive loss”, net of tax, as cash flow hedges until the highly probable forecasted notes are issued. Subsequent to the notes issuance, amounts in “Accumulated other comprehensive loss” are reclassified to “Net interest expense”. During the second quarter of 2016, the Company rolled the notional U.S. $700 million forward starting swaps. The Company de-designated the hedging relationship for U.S. $700 million of forward starting swaps. The Company did not cash settle these swaps. There was no ineffectiveness to record upon de-designation. Concurrently the Company re-designated the forward starting swaps totaling U.S. $700 million to fix the benchmark rate on cash flows associated with a highly probable forecasted debt issuance of long-term notes. As at March 31, 2017 , the total fair value loss of $67 million ( December 31, 2016 - fair value loss of $69 million ) derived from the forward starting swaps was included in “Accounts payable and accrued liabilities”. Changes in fair value from the forward starting swaps for the three months ended March 31, 2017 was a gain of $2 million (three months ended March 31, 2016 - loss of $52 million ). The effective portion for the three months ended March 31, 2017 was a gain of $2 million (three months ended March 31, 2016 - loss of $50 million ) and is recorded in “Other comprehensive income”. For the three months ended March 31, 2017 , the ineffective portion was a loss of $ nil (three months ended March 31, 2016 - loss of $2 million ) and is recorded to “Net interest expense” on the interim consolidated statements of income. For the three months ended March 31, 2017 , a loss of $3 million related to previous forward starting swap hedges has been amortized to “Net interest expense” (three months ended March 31, 2016 - a loss of $2 million ). The Company expects that during the next 12 months $11 million of losses will be amortized to “Net interest expense”. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-based compensation At March 31, 2017 , the Company had several stock-based compensation plans, including stock option plans, various cash settled liability plans and an employee stock savings plan. These plans resulted in a recovery for the three months ended March 31, 2017 of $12 million (three months ended March 31, 2016 - expense $14 million ). Effective January 31, 2017, Mr. E. Hunter Harrison resigned from all positions held by him at the Company, including as the Company’s Chief Executive Officer and a member of the Board of Directors of the Company. In connection with Mr. Harrison’s resignation, the Company entered into a separation agreement with Mr. Harrison. Under the terms of the separation agreement, the Company has agreed to a limited waiver of Mr. Harrison’s non-competition and non-solicitation obligations. Effective January 31, 2017, pursuant to the separation agreement, Mr. Harrison forfeited certain pension and post-retirement benefits and agreed to the surrender for cancellation of 22,514 performance share units ("PSU"), 68,612 deferred share units ("DSU"), and 752,145 stock options. As a result of this agreement, the Company has recognized a recovery of $51 million in "Compensation and benefits" in the first quarter of 2017. Of this amount, $27 million relates to a recovery from cancellation of certain pension benefits. Stock option plan In the three months ended March 31, 2017 , under CP’s stock option plans, the Company issued 366,930 stock options at the weighted average price of $198.98 per share, based on the closing price on the grant date. Pursuant to the employee plan, these stock options may be exercised upon vesting, which is between 12 months and 60 months after the grant date, and will expire after 7 years. Certain stock options granted in 2017 vest upon the achievement of specific performance criteria. Under the fair value method, the value of the stock options at the grant date was approximately $17 million . The weighted average fair value assumptions were approximately: For the three months ended March 31, 2017 Grant price $198.98 Expected option life (years) (1) 5.48 Risk-free interest rate (2) 1.85% Expected stock price volatility (3) 26.95% Expected annual dividends per share (4) $2.00 Expected forfeiture rate (5) 3.0% Weighted-average grant date fair value per option granted during the period $45.78 (1) Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour, or when available, specific expectations regarding future exercise behaviour, were used to estimate the expected life of the option. (2) Based on the implied yield available on zero-coupon government issues with an equivalent remaining term at the time of the grant. (3) Based on the historical stock price volatility of the Company’s stock over a period commensurate with the expected term of the option. (4) Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. (5) The Company estimated forfeitures based on past experience. This rate is monitored on a periodic basis. Performance share unit plan In the three months ended March 31, 2017 , the Company issued 133,448 PSUs with a grant date fair value of approximately $27 million . These units attract dividend equivalents in the form of additional units based on the dividends paid on the Company’s Common Shares. PSUs vest and are settled in cash, or in CP Common Shares, approximately three years after the grant date, contingent upon CP’s performance ("performance factor"). Grant recipients who are eligible to retire and have provided six months of service during the performance period are entitled to the full award. The fair value of PSUs is measured periodically until settlement, using a lattice-based valuation model. The performance period for PSUs issued in the three months ended March 31, 2017 is January 1, 2017 to December 31, 2019. The performance factors for these PSUs are Return on Invested Capital, Total Shareholder Return ("TSR") compared to the S&P/TSX Capped Industrial Index, and TSR compared to S&P 1500 Road and Rail Index. The performance period for the PSUs issued in 2014 was January 1, 2014 to December 31, 2016. The performance factors for these PSUs were Operating Ratio, Free cash flow, TSR compared to the S&P/TSX 60 index, and TSR compared to Class 1 railways. The resulting payout was 118% of the Company's average share price that was calculated using the last 30 trading days preceding December 31, 2016 . In the three months ended March 31, 2017 , payouts occurred on the total outstanding awards, including dividends reinvested totaling $31 million on 133,728 outstanding awards. Deferred share unit (“DSU”) plan In the three months ended March 31, 2017 , the Company granted 14,055 DSUs with a grant date fair value of approximately $3 million . DSUs vest over various periods of up to 48 months and are only redeemable for a specified period after employment is terminated. An expense to income for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods. |
Pensions and Other Benefits
Pensions and Other Benefits | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Pensions and Other Benefits | Pension and other benefits In the three months ended March 31, 2017 , the Company made contributions of $12 million (three months ended March 31, 2016 - $20 million ) to its defined benefit pension plans. The elements of net periodic benefit cost for defined benefit pension plans and other benefits recognized in the quarter included the following components: For the three months ended March 31 Pensions Other benefits (in millions of Canadian dollars) 2017 2016 2017 2016 Current service cost (benefits earned by employees in the period) $ 25 $ 27 $ 3 $ 3 Interest cost on benefit obligation 113 117 5 5 Expected return on fund assets (223 ) (212 ) — — Recognized net actuarial loss 38 48 1 1 Amortization of prior service costs (1 ) (2 ) — — Net periodic benefit (recovery) cost $ (48 ) $ (22 ) $ 9 $ 9 |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending at March 31, 2017 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company’s financial position or results of operations. Legal proceedings related to Lac-Mégantic rail accident On July 6, 2013, a train carrying crude oil operated by Montreal Maine and Atlantic Railway (“MMA”) or a subsidiary, Montreal Maine & Atlantic Canada Co. (“MMAC” and collectively the “MMA Group”) derailed and exploded in Lac-Mégantic, Québec. The accident occurred on a section of railway owned and operated by the MMA Group. The previous day CP had interchanged the train to the MMA Group, and after the interchange, the MMA Group exclusively controlled the train. Following this incident, Québec's Minister of Sustainable Development, Environment, Wildlife and Parks (the "Minister") ordered the named parties to recover the contaminants and to clean up the derailment site. On August 14, 2013, the Minister added CP as a party (the “Amended Cleanup Order”). CP appealed the Amended Cleanup Order to the Administrative Tribunal of Québec. On July 5, 2016, the Minister served a Notice of Claim for nearly $95 million of compensation spent on cleanup, alleging that CP refused or neglected to undertake the work. On September 6, 2016, CP filed a contestation of the Notice of Claim with the Administrative Tribunal of Québec. In October 2016, CP and the Minister agreed to stay the tribunal proceedings pending the outcome of the Province of Québec's action, set out below. The Court's decision to stay the tribunal proceedings is pending, but de facto, the file has been suspended. Directly related to that matter, on July 6, 2015, the Province of Québec sued CP in Québec Superior Court claiming $409 million in derailment damages, including cleanup costs. The Province alleges that CP exercised custody or control over the crude oil lading and that CP was otherwise negligent. Therefore, CP is said to be solidarily (joint and severally) liable with third parties responsible for the accident. The Province filed a motion for leave to amend its complaint in September 2016, but no date has been fixed for the hearing of this motion, as most of the Attorney General of Québec's lawyers were on strike at that time and until early March 2017. While the strike has ended, the Province has yet to further advance this motion. To date, no timetable governing the conduct of this lawsuit has been ordered by the Quebec Superior Court. This proceeding appears to be duplicative of the administrative proceedings. A class action lawsuit has also been filed in the Québec Superior Court on behalf of persons and entities residing in, owning or leasing property in, operating a business in or physically present in Lac-Mégantic at the time of the derailment (the “Class Action”). That lawsuit seeks derailment damages, including for wrongful death, personal injury, and property harm. On August 16, 2013, CP was added as a defendant. On May 8, 2015, the Québec Superior Court authorized (certified) the Class Action against CP, the shipper – Western Petroleum, and the shipper’s parent – World Fuel Services (collectively, the “World Fuel Entities”). The World Fuel Entities have since settled. The plaintiffs filed a motion for leave to amend their complaint, but subsequently withdrew it. On October 24, 2016, the Quebec Superior Court authorized class action proceedings against two additional defendants in the same matter discussed above, i.e. against MMAC and Mr. Thomas Harding. On December 9, 2016, the Superior Court granted CP’s motion seeking to confirm the validity of the opt-outs from this class action by most of the estates of the deceased parties following the train derailment who had opted out to allow them to sue in the United States instead (i.e. the wrongful death cases, filed in the United States, which are further discussed). Draft Case Protocols setting out proposed timetables for the conduct of this lawsuit were submitted to the Superior Court in mid-March 2017 by both the plaintiffs and defendants. On March 27, 2017 the Superior Court adopted several of the steps included in the Case Protocol submitted by CP. Under the Case Protocol, CP’s statement of defense will be submitted by June 2 and thereafter production of documents, examinations for discovery and the exchange of expert reports by the parties is to occur between mid-2017 and the end of 2018. A trial date has yet to be fixed. On July 4, 2016, eight subrogated insurers served CP with claims of approximately $16 million . On July 11, 2016, two additional subrogated insurers served CP with claims of approximately $3 million . The lawsuits do not identify the parties to which the insurers are subrogated, and therefore the extent of claim overlap and the extent that claims will be satisfied after proof of claim review and distribution from the Plans, referred to below, is difficult to determine. These lawsuits have been stayed until June 2, 2017. In the wake of the derailment and ensuing litigation, MMAC filed for bankruptcy in Canada (the “Canadian Proceeding”) and MMA filed for bankruptcy in the United States (the “U.S. Proceeding”). Plans of arrangement have been approved in both the Canadian Proceeding and the U.S. Proceeding (the “Plans”). These Plans provide for the distribution of a fund of approximately $440 million amongst those claiming derailment damages. The Plans also provide settling parties broadly worded third-party releases and injunctions preventing lawsuits against settlement contributors. CP has not settled and therefore will not benefit from those provisions. Both Plans do, however, contain judgment reduction provisions, affording CP a credit for the greater of (i) the settlement monies received by the plaintiff(s), or (ii) the amount, in contribution or indemnity, that CP would have been entitled to charge against third parties other than MMA and MMAC, but for the Plans' releases and injunctions. CP may also have judgment reduction rights, as part of the contribution/indemnification credit, for the fault of the MMA Group. Finally, the Plans provide for a potential re-allocation of the MMA Group’s liability among plaintiffs and CP, the only non-settling party. An Adversary Proceeding filed by the MMA U.S. bankruptcy trustee (now, estate representative) against CP, Irving Oil, and the World Fuel Entities accuses CP of failing to ensure that World Fuel Entities or Irving Oil properly classified the oil lading and of not refusing to ship the misclassified oil as packaged. By that action the estate representative seeks to recover MMA’s going concern value supposedly destroyed by the derailment. The estate representative has since settled with the World Fuel Entities and Irving Oil and now bases CP misfeasance on the railroad’s failure to abide in North Dakota by a Canadian regulation. That regulation supposedly would have caused the railroads to not move the crude oil train because an inaccurate classification was supposedly suspected. In a recently amended complaint, the estate representative named a CP affiliate, Soo Line Railroad Company ("Soo Line"), and asserts that CP and Soo Line breached terms or warranties allegedly contained in the bill of lading. CP’s motion to dismiss this amended complaint was heard on December 20, 2016 and a decision is pending. In response to one of CP’s motions to withdraw the Adversary Proceedings bankruptcy reference, the estate representative maintained that Canadian law rather than U.S. law controlled. The Article III court that heard the motion found that if U.S. federal regulations governed, the case was not complex enough to warrant withdrawal. Before the bankruptcy court, CP moved to dismiss for want of personal jurisdiction, but the court denied the motion because CP had participated in the bankruptcy proceedings. Lac-Mégantic residents and wrongful death representatives commenced a class action and a mass action in Texas and wrongful death and personal injury actions in Illinois and Maine. CP removed all of these lawsuits to federal court, and a federal court thereafter consolidated those cases in Maine. These actions generally charge CP with misclassification and mis-packaging (that is, using inappropriate DOT-111 tank cars) negligence. On CP's motion, the Maine court dismissed all wrongful death and personal injury actions on several grounds on September 28, 2016. The plaintiffs’ subsequent motion for reconsideration was denied on January 9, 2017. The plaintiffs filed a notice of appeal on January 19, 2017. The appeal has yet to be docketed by the appellate court. Once docketed, and if not dismissed by the appellate court on its own motion, CP will file a motion to dismiss the appeal. If the ruling is upheld on appeal these cases will be litigated, if anywhere, in Canada. As previously mentioned, many of these plaintiffs had previously opted-out of the Quebec Class Action in order to bring their claims in the United States. CP brought a motion on December 1, 2016 to seek a declaration from the Quebec Superior Court that the plaintiffs who had opted out were precluded from opting back into the Quebec Class Action. CP’s motion was successful. Accordingly, if these plaintiffs seek to sue CP, they would have to do so in Quebec in individual actions (they could also join their individual claims in the same individual action). CP has received two damage to cargo notices of claims from the shipper of the oil, Western Petroleum. Western Petroleum submitted U.S. and Canadian notices of claims for the same damages and under the Carmack Amendment (49 U.S.C. Section 11706) Western Petroleum seeks to recover for all injuries associated with, and indemnification for, the derailment. Both jurisdictions permit a shipper to recover the value of damaged lading against any carrier in the delivery chain, subject to limitations in the carrier’s tariffs. CP’s tariffs significantly restrict shipper damage claim rights. Western Petroleum is part of the World Fuel Services Entities, and those companies settled with the trustee. In settlements with the estate representative the World Fuel Services Entities and the consignee (Irving Oil) assigned all claims against CP, if any, including Carmack Amendment claims. The estate representative has since designated a trust formed for the benefit of the wrongful death plaintiff to pursue those claims. On April 12, 2016, the Trustee (the “WD Trustee”) for a wrongful death trust (the “WD Trust”), as defined and established under the confirmed Plans, sued CP in North Dakota federal court, asserting Carmack Amendment claims. The WD Trustee maintains that the estate representative assigned Carmack Amendment claims to the WD Trustee. The Plan supposedly gave the estate representative Carmack Amendment assignment rights. The WD Trustee seeks to recover amounts for damaged rail cars (approximately $6 million ), and the settlement amounts the consignor (i.e., the shipper, the World Fuel Entities) and the consignee (Irving Oil) paid to the bankruptcy estates, alleged to be $110 million and $60 million , respectively. The WD Trustee maintains that Carmack Amendment liability extends beyond lading losses to cover all derailment related damages suffered by the World Fuel Entities or Irving Oil. CP disputes this interpretation of Carmack Amendment exposure and maintains that CP’s tariffs preclude anything except a minimal recovery. CP brought a motion to dismiss the Carmack Amendment claims. On March 24, 2017 the federal court in North Dakota dismissed, with prejudice, these claims. The court determined the claims asserted by the WD Trustee were brought too late. On March 28, 2017, the WD Trustee filed a notice of appeal to the United States Court of Appeals for the Eighth Circuit. The appeal is pending. At this early stage of the proceedings, any potential responsibility and the quantum of potential losses cannot be determined. Nevertheless, CP denies liability and intends to vigorously defend against all derailment-related proceedings. Environmental liabilities Environmental remediation accruals, recorded on an undiscounted basis unless a reliable, determinable estimate as to an amount and timing of costs can be established, cover site-specific remediation programs. The accruals for environmental remediation represent CP’s best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recorded accruals include CP’s best estimate of all probable costs, CP’s total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, and as environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable. The expense included in “Purchased services and other” for the three months ended March 31, 2017 was $1 million (three months ended March 31, 2016 - $1 million ). Provisions for environmental remediation costs are recorded in “Other long-term liabilities”, except for the current portion which is recorded in “Accounts payable and accrued liabilities”. The total amount provided at March 31, 2017 was $89 million ( December 31, 2016 - $85 million ). Payments are expected to be made over 10 years through 2026. |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Condensed Consolidating Financial Information | Condensed consolidating financial information Canadian Pacific Railway Company, a 100%-owned subsidiary of Canadian Pacific Railway Limited (“CPRL”), is the issuer of certain debt securities, which are fully and unconditionally guaranteed by CPRL. The following tables present condensed consolidating financial information (“CCFI”) in accordance with Rule 3-10(c) of Regulation S-X. Investments in subsidiaries are accounted for under the equity method when presenting the CCFI. The tables include all adjustments necessary to reconcile the CCFI on a consolidated basis to CPRL’s consolidated financial statements for the periods presented. Interim Condensed Consolidating Statements of Income For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Revenues Freight $ — $ 1,089 $ 474 $ — $ 1,563 Non-freight — 32 93 (85 ) 40 Total revenues — 1,121 567 (85 ) 1,603 Operating expenses Compensation and benefits — 124 108 1 233 Fuel — 132 38 — 170 Materials — 34 9 6 49 Equipment rents — 36 — — 36 Depreciation and amortization — 109 57 — 166 Purchased services and other — 208 162 (92 ) 278 Total operating expenses — 643 374 (85 ) 932 Operating income — 478 193 — 671 Less: Other income and charges (20 ) (7 ) (1 ) — (28 ) Net interest expense (income) 2 125 (7 ) — 120 Income before income tax expense and equity in net earnings of subsidiaries 18 360 201 — 579 Less: Income tax expense 1 98 49 — 148 Add: Equity in net earnings of subsidiaries 414 152 — (566 ) — Net income $ 431 $ 414 $ 152 $ (566 ) $ 431 Interim Condensed Consolidating Statements of Income For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Revenues Freight $ — $ 1,097 $ 451 $ — $ 1,548 Non-freight — 33 96 (86 ) 43 Total revenues — 1,130 547 (86 ) 1,591 Operating expenses Compensation and benefits — 201 126 2 329 Fuel — 103 22 — 125 Materials — 38 10 8 56 Equipment rents — 54 (9 ) — 45 Depreciation and amortization — 107 55 — 162 Purchased services and other — 136 181 (96 ) 221 Total operating expenses — 639 385 (86 ) 938 Operating income — 491 162 — 653 Less: Other income and charges (69 ) (138 ) 26 — (181 ) Net interest (income) expense (1 ) 131 (6 ) — 124 Income before income tax expense and equity in net earnings of subsidiaries 70 498 142 — 710 Less: Income tax expense 9 111 50 — 170 Add: Equity in net earnings of subsidiaries 479 92 — (571 ) — Net income $ 540 $ 479 $ 92 $ (571 ) $ 540 Interim Condensed Consolidating Statements of Comprehensive Income For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Net income $ 431 $ 414 $ 152 $ (566 ) $ 431 Net gain (loss) in foreign currency translation adjustments, net of hedging activities — 45 (40 ) — 5 Change in derivatives designated as cash flow hedges — 5 — — 5 Change in pension and post-retirement defined benefit plans — 36 2 — 38 Other comprehensive income (loss) before income taxes — 86 (38 ) — 48 Income tax expense on above items — (17 ) (1 ) — (18 ) Equity accounted investments 30 (39 ) — 9 — Other comprehensive income (loss) 30 30 (39 ) 9 30 Comprehensive income $ 461 $ 444 $ 113 $ (557 ) $ 461 Interim Condensed Consolidating Statements of Comprehensive Income For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Net income $ 540 $ 479 $ 92 $ (571 ) $ 540 Net gain (loss) in foreign currency translation — 310 (273 ) — 37 Change in derivatives designated as cash flow — (47 ) — — (47 ) Change in pension and post-retirement defined — 45 2 — 47 Other comprehensive income (loss) before income taxes — 308 (271 ) — 37 Income tax expense on above items — (41 ) — — (41 ) Equity accounted investments (4 ) (271 ) — 275 — Other comprehensive loss (4 ) (4 ) (271 ) 275 (4 ) Comprehensive income (loss) $ 536 $ 475 $ (179 ) $ (296 ) $ 536 Interim Condensed Consolidating Balance Sheets As at March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Assets Current assets Cash and cash equivalents $ — $ 83 $ 118 $ — $ 201 Accounts receivable, net — 447 184 — 631 Accounts receivable, inter-company 92 152 194 (438 ) — Short-term advances to affiliates 500 513 4,167 (5,180 ) — Materials and supplies — 167 34 — 201 Other current assets — 52 25 — 77 592 1,414 4,722 (5,618 ) 1,110 Long-term advances to affiliates 1 — 90 (91 ) — Investments — 40 143 — 183 Investments in subsidiaries 8,882 10,404 — (19,286 ) — Properties — 8,763 7,898 — 16,661 Goodwill and intangible assets — — 200 — 200 Pension asset — 1,165 — — 1,165 Other assets — 69 9 — 78 Deferred income taxes 11 — — (11 ) — Total assets $ 9,486 $ 21,855 $ 13,062 $ (25,006 ) $ 19,397 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $ 73 $ 804 $ 271 $ — $ 1,148 Accounts payable, inter-company 17 281 140 (438 ) — Short-term advances from affiliates 4,358 813 9 (5,180 ) — Long-term debt maturing within one year — 31 — — 31 4,448 1,929 420 (5,618 ) 1,179 Pension and other benefit liabilities — 656 74 — 730 Long-term advances from affiliates — 91 — (91 ) — Other long-term liabilities — 96 131 — 227 Long-term debt — 8,529 54 — 8,583 Deferred income taxes — 1,672 1,979 (11 ) 3,640 Total liabilities 4,448 12,973 2,658 (5,720 ) 14,359 Shareholders’ equity Share capital 2,036 1,037 5,891 (6,928 ) 2,036 Additional paid-in capital 42 1,637 300 (1,937 ) 42 Accumulated other comprehensive (loss) income (1,769 ) (1,770 ) 672 1,098 (1,769 ) Retained earnings 4,729 7,978 3,541 (11,519 ) 4,729 5,038 8,882 10,404 (19,286 ) 5,038 Total liabilities and shareholders’ equity $ 9,486 $ 21,855 $ 13,062 $ (25,006 ) $ 19,397 Condensed Consolidating Balance Sheets As At December 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Assets Current assets Cash and cash equivalents $ — $ 100 $ 64 $ — $ 164 Accounts receivable, net — 435 156 — 591 Accounts receivable, inter-company 90 113 206 (409 ) — Short-term advances to affiliates 500 692 4,035 (5,227 ) — Materials and supplies — 150 34 — 184 Other current assets — 38 32 — 70 590 1,528 4,527 (5,636 ) 1,009 Long-term advances to affiliates 1 — 91 (92 ) — Investments — 47 147 — 194 Investments in subsidiaries 8,513 10,249 — (18,762 ) — Properties — 8,756 7,933 — 16,689 Goodwill and intangible assets — — 202 — 202 Pension asset — 1,070 — — 1,070 Other assets 1 48 8 — 57 Deferred income taxes 11 — — (11 ) — Total assets $ 9,116 $ 21,698 $ 12,908 $ (24,501 ) $ 19,221 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $ 73 $ 945 $ 304 $ — $ 1,322 Accounts payable, inter-company 14 292 103 (409 ) — Short-term advances from affiliates 4,403 816 8 (5,227 ) — Long-term debt maturing within one year — 25 — — 25 4,490 2,078 415 (5,636 ) 1,347 Pension and other benefit liabilities — 658 76 — 734 Long-term advances from affiliates — 92 — (92 ) — Other long-term liabilities — 152 132 — 284 Long-term debt — 8,605 54 — 8,659 Deferred income taxes — 1,600 1,982 (11 ) 3,571 Total liabilities 4,490 13,185 2,659 (5,739 ) 14,595 Shareholders’ equity Share capital 2,002 1,037 5,823 (6,860 ) 2,002 Additional paid-in capital 52 1,638 298 (1,936 ) 52 Accumulated other comprehensive (loss) income (1,799 ) (1,799 ) 712 1,087 (1,799 ) Retained earnings 4,371 7,637 3,416 (11,053 ) 4,371 4,626 8,513 10,249 (18,762 ) 4,626 Total liabilities and shareholders’ equity $ 9,116 $ 21,698 $ 12,908 $ (24,501 ) $ 19,221 Interim Condensed Consolidating Statements of Cash Flows For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Cash provided by operating activities $ 63 $ 85 $ 264 $ (101 ) $ 311 Investing activities Additions to properties — (109 ) (121 ) — (230 ) Proceeds from sale of properties and other assets — 1 2 — 3 Advances to affiliates (152 ) — (134 ) 286 — Capital contributions to affiliates — (68 ) — 68 — Other — 5 — — 5 Cash used in investing activities (152 ) (171 ) (253 ) 354 (222 ) Financing activities Dividends paid (73 ) (73 ) (28 ) 101 (73 ) Issuance of share capital — — 68 (68 ) — Issuance of CP Common Shares 28 — — — 28 Repayment of long-term debt, excluding commercial paper — (5 ) — — (5 ) Advances from affiliates 134 149 3 (286 ) — Cash provided by (used in) financing activities 89 71 43 (253 ) (50 ) Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents — (2 ) — — (2 ) Cash position (Decrease) increase in cash and cash equivalents — (17 ) 54 — 37 Cash and cash equivalents at beginning of period — 100 64 — 164 Cash and cash equivalents at end of period $ — $ 83 $ 118 $ — $ 201 Interim Condensed Consolidating Statements of Cash Flows For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Cash provided by operating activities $ 23 $ 51 $ 198 $ (54 ) $ 218 Investing activities Additions to properties — (132 ) (146 ) — (278 ) Proceeds from sale of properties and other assets — 57 3 — 60 Advances to affiliates — (35 ) — 35 — Capital contributions to affiliates — (9 ) — 9 — Repurchase of share capital from affiliates — 6 — (6 ) — Cash used in investing activities — (113 ) (143 ) 38 (218 ) Financing activities Dividends paid (54 ) (54 ) — 54 (54 ) Issuance of share capital — — 9 (9 ) — Return of share capital to affiliates — — (6 ) 6 — Issuance of CP Common Shares 5 — — — 5 Repayment of long-term debt, excluding commercial paper — (4 ) (7 ) — (11 ) Advances from affiliates 26 — 9 (35 ) — Other — (2 ) — — (2 ) Cash (used in) provided by financing activities (23 ) (60 ) 5 16 (62 ) Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents — (4 ) (13 ) — (17 ) Cash position (Decrease) increase in cash and cash equivalents — (126 ) 47 — (79 ) Cash and cash equivalents at beginning of year — 502 148 — 650 Cash and cash equivalents at end of year $ — $ 376 $ 195 $ — $ 571 |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | These unaudited interim consolidated financial statements of Canadian Pacific Railway Limited (“CP”, or “the Company”), expressed in Canadian dollars, reflect management’s estimates and assumptions that are necessary for their fair presentation in conformity with generally accepted accounting principles in the United States of America (“GAAP”). They do not include all disclosures required under GAAP for annual financial statements and should be read in conjunction with the 2016 annual consolidated financial statements and notes included in CP's 2016 Annual Report on Form 10-K. The accounting policies used are consistent with the accounting policies used in preparing the 2016 annual consolidated financial statements, except for the newly adopted accounting policies discussed in Note 2. CP's operations can be affected by seasonal fluctuations such as changes in customer demand and weather-related issues. This seasonality could impact quarter-over-quarter comparisons. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary to present fairly such information. Interim results are not necessarily indicative of the results expected for the fiscal year. |
Accounting Changes | Implemented in 2017 Compensation - Stock Compensation In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-based Payment Accounting, under FASB Accounting Standards Codification ("ASC") Topic 718. The amendments clarify the guidance relating to treatment of excess tax benefits and deficiencies, acceptable forfeiture rate policies, and treatment of cash paid by an employer when directly withholding shares for tax-withholding purposes and the requirement to treat such cash flows as a financing activity. As a result of this ASU, excess tax benefits are no longer recorded in Additional paid-in capital and instead are applied against taxes payable or recognized in the interim consolidated statement of income. This ASU was effective for CP beginning on January 1, 2017. The Company has determined that there were no significant changes to disclosure or financial statement presentation and changes in accounting for excess tax benefits and deficiencies were not material as a result of adoption. Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory under FASB ASC Topic 330. The amendments require that reporting entities measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using the first-in, first-out or average cost basis. This ASU was effective for CP beginning on January 1, 2017 and was applied prospectively. The Company determined there were no changes to disclosure, financial statement presentation, or valuation of inventory as a result of adoption. Future changes Leases In February 2016, the FASB issued ASU 2016-02, Leases under FASB ASC Topic 842 which will supersede the lease recognition and measurement requirements in Topic 840 Leases. This new standard requires recognition of right-of-use assets and lease liabilities by lessees for those leases classified as finance and operating leases with a maximum term exceeding 12 months and will be effective for public entities for fiscal years, and interim periods within those years, beginning on or after December 15, 2018. For CP this will be effective commencing January 1, 2019. Entities are required to use a modified retrospective approach to adopt this new standard meaning there will be no impact to the consolidated statements of income, however, the comparative consolidated balance sheet will be adjusted to reflect the provisions of this standard. The Company has a detailed plan to implement the new standard and is assessing contractual arrangements, through a cross functional team, that may qualify as leases under the new standard. CP is also working with a vendor to implement a lease management system which will assist in delivering the required accounting changes. The impact of the new standard will be a material increase to right of use assets and lease liabilities on the consolidated balance sheet, primarily, as a result of operating leases currently not recognized on the balance sheet. The Company does not anticipate a material impact to the consolidated statement of income and is currently evaluating the impact adoption of this new standard will have on disclosure. Revenue from Contracts with Customers In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers under FASB ASC Topic 606. In March 2016, the FASB issued amendment ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations as an update under FASB ASC Topic 606. The amendments clarify the principal versus agent guidance in determining whether to recognize revenue on a gross or net basis. The guidance in Topic 606, as amended, will be effective for public entities for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. For CP this new standard will be effective commencing January 1, 2018, and CP has the option of adopting the new standard by either a full retrospective or a modified retrospective approach. CP has analyzed contracts for a significant proportion of the Company’s annual rail freight revenue, which represents greater than 95% of CP’s annual revenues, and has concluded that recognizing these revenues over time as rail freight services are performed continues to be appropriate. Further detailed reviews of a variety of specific contractual terms that could potentially represent additional performance obligations, reassessment of certain arrangements in the context of the new guidance on principal versus agent, and an assessment of required new disclosures is also currently being performed. CP is also continuing to assess whether to apply the full or modified retrospective adoption method on transition. At this time CP does not expect a material change to revenue recognition from adopting this standard. Intangibles - Goodwill and Other In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment under FASB ASC Topic 350. This is intended to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The amendments are effective for CP beginning on January 1, 2020. Entities are required to apply the amendments in this Update prospectively from the date of adoption. The Company does not anticipate that the adoption of this ASU will impact CP's financial statements as there is a sufficient excess between the fair value and carrying value of CP's goodwill. Furthermore CP expects to continue to apply the Step 0 qualitative assessment when testing for goodwill impairment. Compensation - Retirement Benefits In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost under FASB ASC Topic 715. The amendments clarify presentation requirements for net periodic pension cost and net periodic post-retirement benefit cost and require that an employer report the current service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the consolidated statement of income separately from the current service cost component and outside a subtotal of income from operations if one is presented. The amendments also restrict capitalization to the current service cost component when applicable. The amendments are effective for CP beginning on January 1, 2018. The amendments related to presentation are required to be applied retrospectively and the restrictions on capitalization of the current service cost component are applicable prospectively on the date of adoption. Adoption of this ASU will result in a $67 million and $43 million decrease in operating income for the three months ended March 31, 2017 and 2016, respectively, and an estimated corresponding full year decrease of $272 million and $167 million for the years ended December 31, 2017 and 2016, respectively. There will be no change to net income or earnings per share as a result of adoption of this new standard. The new guidance restricting capitalization of pensions to the current service cost component of net periodic benefit cost will have no impact to operating income or amounts capitalized because the Company currently only capitalizes an appropriate portion of current service cost for self-constructed properties. CP is currently assessing the disclosure requirements of this ASU. |
Changes in Accumulated Other 20
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Changes in Accumulated Other Comprehensive Loss (AOCL) by Component | Changes in accumulated other comprehensive loss ("AOCL") by component For the three months ended March 31 (in millions of Canadian dollars) Foreign currency (1) Derivatives and other (1) Pension and post-retirement defined benefit plans (1) Total (1) Opening balance, January 1, 2017 $ 127 $ (104 ) $ (1,822 ) $ (1,799 ) Other comprehensive (loss) income before reclassifications (2 ) 2 — — Amounts reclassified from accumulated other comprehensive loss — 2 28 30 Net current-period other comprehensive (loss) income (2 ) 4 28 30 Closing balance, March 31, 2017 $ 125 $ (100 ) $ (1,794 ) $ (1,769 ) Opening balance, January 1, 2016 $ 129 $ (102 ) $ (1,504 ) $ (1,477 ) Other comprehensive (loss) income before reclassifications (4 ) (36 ) — (40 ) Amounts reclassified from accumulated other comprehensive loss — 2 34 36 Net current-period other comprehensive (loss) income (4 ) (34 ) 34 (4 ) Closing balance, March 31, 2016 $ 125 $ (136 ) $ (1,470 ) $ (1,481 ) (1) Amounts are presented net of tax. |
Amounts in Pension and Post-retirement Defined Benefit Plans Reclassified from AOCL | Amounts in Pension and post-retirement defined benefit plans reclassified from AOCL For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Amortization of prior service costs (1) $ (1 ) $ (2 ) Recognition of net actuarial loss (1) 39 49 Total before income tax 38 47 Income tax recovery (10 ) (13 ) Net of income tax $ 28 $ 34 (1) Impacts Compensation and benefits on the interim consolidated statements of income. |
Other Income and Charges (Table
Other Income and Charges (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Other Income and Expenses [Abstract] | |
Other Income and Charges | For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Foreign exchange gains on long-term debt $ (28 ) $ (181 ) Net other foreign exchange gains (1 ) (7 ) Other 1 7 Total other income and charges $ (28 ) $ (181 ) |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Expense | For the three months ended March 31 (in millions of Canadian dollars) 2017 2016 Current income tax expense $ 81 $ 77 Deferred income tax expense 67 93 Income tax expense $ 148 $ 170 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Number of Shares Used In the Earnings Per Share Calculations | The number of shares used in earnings per share calculations is reconciled as follows: For the three months ended March 31 (in millions) 2017 2016 Weighted-average basic shares outstanding 146.5 153.0 Dilutive effect of stock options 0.6 0.8 Weighted-average diluted shares outstanding 147.1 153.8 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Weighted-Average Fair Value Assumptions | The weighted average fair value assumptions were approximately: For the three months ended March 31, 2017 Grant price $198.98 Expected option life (years) (1) 5.48 Risk-free interest rate (2) 1.85% Expected stock price volatility (3) 26.95% Expected annual dividends per share (4) $2.00 Expected forfeiture rate (5) 3.0% Weighted-average grant date fair value per option granted during the period $45.78 (1) Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour, or when available, specific expectations regarding future exercise behaviour, were used to estimate the expected life of the option. (2) Based on the implied yield available on zero-coupon government issues with an equivalent remaining term at the time of the grant. (3) Based on the historical stock price volatility of the Company’s stock over a period commensurate with the expected term of the option. (4) Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. (5) The Company estimated forfeitures based on past experience. This rate is monitored on a periodic basis. |
Pensions and Other Benefits (Ta
Pensions and Other Benefits (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Net Periodic Benefit Cost for Defined Benefit Pension Plans and Other Benefits | The elements of net periodic benefit cost for defined benefit pension plans and other benefits recognized in the quarter included the following components: For the three months ended March 31 Pensions Other benefits (in millions of Canadian dollars) 2017 2016 2017 2016 Current service cost (benefits earned by employees in the period) $ 25 $ 27 $ 3 $ 3 Interest cost on benefit obligation 113 117 5 5 Expected return on fund assets (223 ) (212 ) — — Recognized net actuarial loss 38 48 1 1 Amortization of prior service costs (1 ) (2 ) — — Net periodic benefit (recovery) cost $ (48 ) $ (22 ) $ 9 $ 9 |
Condensed Consolidating Finan26
Condensed Consolidating Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Interim Condensed Consolidating Statements of Income | Interim Condensed Consolidating Statements of Income For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Revenues Freight $ — $ 1,089 $ 474 $ — $ 1,563 Non-freight — 32 93 (85 ) 40 Total revenues — 1,121 567 (85 ) 1,603 Operating expenses Compensation and benefits — 124 108 1 233 Fuel — 132 38 — 170 Materials — 34 9 6 49 Equipment rents — 36 — — 36 Depreciation and amortization — 109 57 — 166 Purchased services and other — 208 162 (92 ) 278 Total operating expenses — 643 374 (85 ) 932 Operating income — 478 193 — 671 Less: Other income and charges (20 ) (7 ) (1 ) — (28 ) Net interest expense (income) 2 125 (7 ) — 120 Income before income tax expense and equity in net earnings of subsidiaries 18 360 201 — 579 Less: Income tax expense 1 98 49 — 148 Add: Equity in net earnings of subsidiaries 414 152 — (566 ) — Net income $ 431 $ 414 $ 152 $ (566 ) $ 431 Interim Condensed Consolidating Statements of Income For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Revenues Freight $ — $ 1,097 $ 451 $ — $ 1,548 Non-freight — 33 96 (86 ) 43 Total revenues — 1,130 547 (86 ) 1,591 Operating expenses Compensation and benefits — 201 126 2 329 Fuel — 103 22 — 125 Materials — 38 10 8 56 Equipment rents — 54 (9 ) — 45 Depreciation and amortization — 107 55 — 162 Purchased services and other — 136 181 (96 ) 221 Total operating expenses — 639 385 (86 ) 938 Operating income — 491 162 — 653 Less: Other income and charges (69 ) (138 ) 26 — (181 ) Net interest (income) expense (1 ) 131 (6 ) — 124 Income before income tax expense and equity in net earnings of subsidiaries 70 498 142 — 710 Less: Income tax expense 9 111 50 — 170 Add: Equity in net earnings of subsidiaries 479 92 — (571 ) — Net income $ 540 $ 479 $ 92 $ (571 ) $ 540 |
Interim Condensed Consolidating Statements of Comprehensive Income | Interim Condensed Consolidating Statements of Comprehensive Income For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Net income $ 431 $ 414 $ 152 $ (566 ) $ 431 Net gain (loss) in foreign currency translation adjustments, net of hedging activities — 45 (40 ) — 5 Change in derivatives designated as cash flow hedges — 5 — — 5 Change in pension and post-retirement defined benefit plans — 36 2 — 38 Other comprehensive income (loss) before income taxes — 86 (38 ) — 48 Income tax expense on above items — (17 ) (1 ) — (18 ) Equity accounted investments 30 (39 ) — 9 — Other comprehensive income (loss) 30 30 (39 ) 9 30 Comprehensive income $ 461 $ 444 $ 113 $ (557 ) $ 461 Interim Condensed Consolidating Statements of Comprehensive Income For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Net income $ 540 $ 479 $ 92 $ (571 ) $ 540 Net gain (loss) in foreign currency translation — 310 (273 ) — 37 Change in derivatives designated as cash flow — (47 ) — — (47 ) Change in pension and post-retirement defined — 45 2 — 47 Other comprehensive income (loss) before income taxes — 308 (271 ) — 37 Income tax expense on above items — (41 ) — — (41 ) Equity accounted investments (4 ) (271 ) — 275 — Other comprehensive loss (4 ) (4 ) (271 ) 275 (4 ) Comprehensive income (loss) $ 536 $ 475 $ (179 ) $ (296 ) $ 536 |
Interim Condensed Consolidating Balance Sheets | Interim Condensed Consolidating Balance Sheets As at March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Assets Current assets Cash and cash equivalents $ — $ 83 $ 118 $ — $ 201 Accounts receivable, net — 447 184 — 631 Accounts receivable, inter-company 92 152 194 (438 ) — Short-term advances to affiliates 500 513 4,167 (5,180 ) — Materials and supplies — 167 34 — 201 Other current assets — 52 25 — 77 592 1,414 4,722 (5,618 ) 1,110 Long-term advances to affiliates 1 — 90 (91 ) — Investments — 40 143 — 183 Investments in subsidiaries 8,882 10,404 — (19,286 ) — Properties — 8,763 7,898 — 16,661 Goodwill and intangible assets — — 200 — 200 Pension asset — 1,165 — — 1,165 Other assets — 69 9 — 78 Deferred income taxes 11 — — (11 ) — Total assets $ 9,486 $ 21,855 $ 13,062 $ (25,006 ) $ 19,397 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $ 73 $ 804 $ 271 $ — $ 1,148 Accounts payable, inter-company 17 281 140 (438 ) — Short-term advances from affiliates 4,358 813 9 (5,180 ) — Long-term debt maturing within one year — 31 — — 31 4,448 1,929 420 (5,618 ) 1,179 Pension and other benefit liabilities — 656 74 — 730 Long-term advances from affiliates — 91 — (91 ) — Other long-term liabilities — 96 131 — 227 Long-term debt — 8,529 54 — 8,583 Deferred income taxes — 1,672 1,979 (11 ) 3,640 Total liabilities 4,448 12,973 2,658 (5,720 ) 14,359 Shareholders’ equity Share capital 2,036 1,037 5,891 (6,928 ) 2,036 Additional paid-in capital 42 1,637 300 (1,937 ) 42 Accumulated other comprehensive (loss) income (1,769 ) (1,770 ) 672 1,098 (1,769 ) Retained earnings 4,729 7,978 3,541 (11,519 ) 4,729 5,038 8,882 10,404 (19,286 ) 5,038 Total liabilities and shareholders’ equity $ 9,486 $ 21,855 $ 13,062 $ (25,006 ) $ 19,397 Condensed Consolidating Balance Sheets As At December 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Assets Current assets Cash and cash equivalents $ — $ 100 $ 64 $ — $ 164 Accounts receivable, net — 435 156 — 591 Accounts receivable, inter-company 90 113 206 (409 ) — Short-term advances to affiliates 500 692 4,035 (5,227 ) — Materials and supplies — 150 34 — 184 Other current assets — 38 32 — 70 590 1,528 4,527 (5,636 ) 1,009 Long-term advances to affiliates 1 — 91 (92 ) — Investments — 47 147 — 194 Investments in subsidiaries 8,513 10,249 — (18,762 ) — Properties — 8,756 7,933 — 16,689 Goodwill and intangible assets — — 202 — 202 Pension asset — 1,070 — — 1,070 Other assets 1 48 8 — 57 Deferred income taxes 11 — — (11 ) — Total assets $ 9,116 $ 21,698 $ 12,908 $ (24,501 ) $ 19,221 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $ 73 $ 945 $ 304 $ — $ 1,322 Accounts payable, inter-company 14 292 103 (409 ) — Short-term advances from affiliates 4,403 816 8 (5,227 ) — Long-term debt maturing within one year — 25 — — 25 4,490 2,078 415 (5,636 ) 1,347 Pension and other benefit liabilities — 658 76 — 734 Long-term advances from affiliates — 92 — (92 ) — Other long-term liabilities — 152 132 — 284 Long-term debt — 8,605 54 — 8,659 Deferred income taxes — 1,600 1,982 (11 ) 3,571 Total liabilities 4,490 13,185 2,659 (5,739 ) 14,595 Shareholders’ equity Share capital 2,002 1,037 5,823 (6,860 ) 2,002 Additional paid-in capital 52 1,638 298 (1,936 ) 52 Accumulated other comprehensive (loss) income (1,799 ) (1,799 ) 712 1,087 (1,799 ) Retained earnings 4,371 7,637 3,416 (11,053 ) 4,371 4,626 8,513 10,249 (18,762 ) 4,626 Total liabilities and shareholders’ equity $ 9,116 $ 21,698 $ 12,908 $ (24,501 ) $ 19,221 |
Interim Condensed Consolidating Statements of Cash Flows | Interim Condensed Consolidating Statements of Cash Flows For the three months ended March 31, 2017 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Cash provided by operating activities $ 63 $ 85 $ 264 $ (101 ) $ 311 Investing activities Additions to properties — (109 ) (121 ) — (230 ) Proceeds from sale of properties and other assets — 1 2 — 3 Advances to affiliates (152 ) — (134 ) 286 — Capital contributions to affiliates — (68 ) — 68 — Other — 5 — — 5 Cash used in investing activities (152 ) (171 ) (253 ) 354 (222 ) Financing activities Dividends paid (73 ) (73 ) (28 ) 101 (73 ) Issuance of share capital — — 68 (68 ) — Issuance of CP Common Shares 28 — — — 28 Repayment of long-term debt, excluding commercial paper — (5 ) — — (5 ) Advances from affiliates 134 149 3 (286 ) — Cash provided by (used in) financing activities 89 71 43 (253 ) (50 ) Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents — (2 ) — — (2 ) Cash position (Decrease) increase in cash and cash equivalents — (17 ) 54 — 37 Cash and cash equivalents at beginning of period — 100 64 — 164 Cash and cash equivalents at end of period $ — $ 83 $ 118 $ — $ 201 Interim Condensed Consolidating Statements of Cash Flows For the three months ended March 31, 2016 (in millions of Canadian dollars) CPRL (Parent Guarantor) CPRC (Subsidiary Issuer) Non-Guarantor Subsidiaries Consolidating Adjustments and Eliminations CPRL Consolidated Cash provided by operating activities $ 23 $ 51 $ 198 $ (54 ) $ 218 Investing activities Additions to properties — (132 ) (146 ) — (278 ) Proceeds from sale of properties and other assets — 57 3 — 60 Advances to affiliates — (35 ) — 35 — Capital contributions to affiliates — (9 ) — 9 — Repurchase of share capital from affiliates — 6 — (6 ) — Cash used in investing activities — (113 ) (143 ) 38 (218 ) Financing activities Dividends paid (54 ) (54 ) — 54 (54 ) Issuance of share capital — — 9 (9 ) — Return of share capital to affiliates — — (6 ) 6 — Issuance of CP Common Shares 5 — — — 5 Repayment of long-term debt, excluding commercial paper — (4 ) (7 ) — (11 ) Advances from affiliates 26 — 9 (35 ) — Other — (2 ) — — (2 ) Cash (used in) provided by financing activities (23 ) (60 ) 5 16 (62 ) Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents — (4 ) (13 ) — (17 ) Cash position (Decrease) increase in cash and cash equivalents — (126 ) 47 — (79 ) Cash and cash equivalents at beginning of year — 502 148 — 650 Cash and cash equivalents at end of year $ — $ 376 $ 195 $ — $ 571 |
Accounting Changes Accounting C
Accounting Changes Accounting Changes - Narrative (Details) - Accounting Standards Update 2017-07 [Member] - CAD CAD in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Change in Accounting Estimate [Line Items] | ||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | CAD 67 | CAD 43 | CAD 167 | |
Scenario, Forecast [Member] | ||||
Change in Accounting Estimate [Line Items] | ||||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | CAD 272 |
Changes in Accumulated Other 28
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component - Changes in AOCL by Component (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Opening balance | CAD (1,799) | CAD (1,477) |
Other comprehensive (loss) income before reclassifications | 0 | (40) |
Amounts reclassified from accumulated other comprehensive income | 30 | 36 |
Net current-period other comprehensive (loss) income | 30 | (4) |
Closing balance | (1,769) | (1,481) |
Foreign currency net of hedging activities [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Opening balance | 127 | 129 |
Other comprehensive (loss) income before reclassifications | (2) | (4) |
Amounts reclassified from accumulated other comprehensive income | 0 | 0 |
Net current-period other comprehensive (loss) income | (2) | (4) |
Closing balance | 125 | 125 |
Derivatives and other [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Opening balance | (104) | (102) |
Other comprehensive (loss) income before reclassifications | 2 | (36) |
Amounts reclassified from accumulated other comprehensive income | 2 | 2 |
Net current-period other comprehensive (loss) income | 4 | (34) |
Closing balance | (100) | (136) |
Pension and post-retirement defined benefit plans [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Opening balance | (1,822) | (1,504) |
Other comprehensive (loss) income before reclassifications | 0 | 0 |
Amounts reclassified from accumulated other comprehensive income | 28 | 34 |
Net current-period other comprehensive (loss) income | 28 | 34 |
Closing balance | CAD (1,794) | CAD (1,470) |
Changes in Accumulated Other 29
Changes in Accumulated Other Comprehensive Loss ("AOCL") by Component - Amounts in Pension and Post-Retirement Defined Benefit Plans Reclassified from AOCL (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Income before income tax expense | CAD 579 | CAD 710 |
Income tax recovery | (148) | (170) |
Net income | 431 | 540 |
Reclassification out of Accumulated Other Comprehensive Income [Member] | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Amortization of prior service costs | (1) | (2) |
Recognition of net actuarial loss | 39 | 49 |
Income before income tax expense | 38 | 47 |
Income tax recovery | (10) | (13) |
Net income | CAD 28 | CAD 34 |
Gain on Sale of Properties - Ga
Gain on Sale of Properties - Gain on Sale of Arbutus Corridor (Details) - Arbutus Corridor [Member] CAD in Millions | 3 Months Ended |
Mar. 31, 2016CAD | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Proceeds from sale | CAD 55 |
Gain on sale before tax | 50 |
Gain on sale after tax | CAD 43 |
Other Income and Charges (Detai
Other Income and Charges (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Other Income and Expenses [Abstract] | ||
Foreign exchange loss on long-term debt | CAD (28) | CAD (181) |
Other foreign exchange (gains) losses | (1) | (7) |
Other | 1 | 7 |
Total other income and charges | CAD (28) | CAD (181) |
Income Taxes - Summary of Incom
Income Taxes - Summary of Income Tax Expense (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Current income tax expense | CAD 81 | CAD 77 |
Deferred income tax expense | 67 | 93 |
Income tax expense | CAD 148 | CAD 170 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Foreign exchange gain on U.S. dollar-denominated debt | CAD 28 | CAD 181 |
Estimated annual effective tax rate | 26.50% | 27.50% |
Effective tax rate | 25.60% | 23.90% |
Chief Executive Officer [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation and benefits | CAD (51) |
Earnings Per Share - Narrative
Earnings Per Share - Narrative (Details) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Line Items] | ||
Number of shares outstanding (shares) | 146,700,000 | 153,000,000 |
Stock Options [Member] | ||
Earnings Per Share [Line Items] | ||
Number of options excluded from the computation of diluted earnings per share (shares) | 502,000 | 445,991 |
Earnings Per Share - Number of
Earnings Per Share - Number of Shares Used in Earnings Per Share Calculations (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Weighted average basic shares outstanding (shares) | 146.5 | 153 |
Dilutive effect of weighted average number of stock options (shares) | 0.6 | 0.8 |
Weighted average diluted shares outstanding (shares) | 147.1 | 153.8 |
Financial Instruments (Details)
Financial Instruments (Details) $ in Millions | 3 Months Ended | ||||
Mar. 31, 2017CAD | Mar. 31, 2016CAD | Mar. 31, 2017USD ($) | Dec. 31, 2016CAD | Jun. 30, 2016USD ($) | |
Schedule of Investments [Line Items] | |||||
Fair value of long-term debt | CAD 9,958,000,000 | CAD 9,981,000,000 | |||
Gain (loss) on effective portion of derivative instrument designated as hedge | 2,000,000 | CAD (50,000,000) | |||
Derivative, Gain (Loss) | 2,000,000 | (52,000,000) | |||
Net Interest Expense [Member] | |||||
Schedule of Investments [Line Items] | |||||
Derivative ineffective portion loss | 0 | 2,000,000 | |||
Amortized Net Interest Expensed [Member] | |||||
Schedule of Investments [Line Items] | |||||
Loss amortized to net interest expense | 3,000,000 | 2,000,000 | |||
Derivative gain (loss) amortized to net interest expense | (11,000,000) | ||||
Accounts Payable and Accrued Liabilities [Member] | |||||
Schedule of Investments [Line Items] | |||||
Fair value loss | 67,000,000 | 69,000,000 | |||
Forward Starting Interest Rate Swaps [Member] | |||||
Schedule of Investments [Line Items] | |||||
Floating-to-fixed interest rate swap agreements | $ | $ 700 | $ 700 | |||
Net Investment Hedging [Member] | |||||
Schedule of Investments [Line Items] | |||||
Gain (loss) on effective portion of derivative instrument designated as hedge | 46,000,000 | 308,000,000 | |||
Amount of ineffectiveness on net investment hedges | 0 | CAD 0 | |||
Reported Value Measurement [Member] | |||||
Schedule of Investments [Line Items] | |||||
Carrying value of long-term debt | CAD 8,614,000,000 | CAD 8,684,000,000 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - CAD CAD / shares in Units, CAD in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Stock-based compensation expense | CAD (12) | CAD 14 | |
Number of options issued (shares) | 366,930 | ||
Weighted average of options issued (in CAD per share) | CAD 45.78 | ||
Chief Executive Officer [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Forfeited stock options | 752,145 | ||
Compensation and benefits | CAD (51) | ||
Pension benefits | CAD (27) | ||
Stock Options [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Weighted average of options issued (in CAD per share) | CAD 198.98 | ||
Expiration period | 7 years | ||
Grant price | CAD 17 | ||
Stock Options [Member] | Minimum [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Vesting period | 12 months | ||
Stock Options [Member] | Maximum [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Vesting period | 60 months | ||
Performance Shares [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Units issued (shares) | 133,448 | ||
Grant date fair value | CAD 27 | ||
PSU payout threshold | 118.00% | ||
PSU payout | CAD 31 | ||
Number of PSUs exercised (shares) | 133,728 | ||
Number of trading days | 30 days | ||
Performance Shares [Member] | Chief Executive Officer [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Forfeited cash settled awards | 22,514 | ||
Deferred Share Units [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Vesting period | 48 months | ||
Company granted DSUs (shares) | 14,055 | ||
Grant date fair value | CAD 3 | ||
Deferred Share Units [Member] | Chief Executive Officer [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Forfeited cash settled awards | 68,612 |
Stock-Based Compensation - Weig
Stock-Based Compensation - Weighted-Average Fair Value Assumptions (Details) | 3 Months Ended |
Mar. 31, 2017CAD / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average grant date fair value of options granted during the year (in CAD per share) | CAD 45.78 |
Expected option life (years) | 5 years 5 months 23 days |
Risk-free interest rate | 1.85% |
Expected stock price volatility | 26.95% |
Expected annual dividends per share (in CAD per share) | CAD 2 |
Estimated forfeiture rate | 3.00% |
Stock Options [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average grant date fair value of options granted during the year (in CAD per share) | CAD 198.98 |
Pensions and Other Benefits - N
Pensions and Other Benefits - Narrative (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Pension Plan [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Contributions made by the company | CAD 12 | CAD 20 |
Pensions and Other Benefits -40
Pensions and Other Benefits - Net Periodic Benefit Cost for DB Pension Plans and Other Benefits (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Pension Plans, Defined Benefit [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Current service cost (benefits earned by employees in the period) | CAD 25 | CAD 27 |
Interest cost on benefit obligation | 113 | 117 |
Expected return on fund assets | (223) | (212) |
Recognized net actuarial loss | 38 | 48 |
Amortization of prior service costs | (1) | (2) |
Net periodic benefit (recovery) cost | (48) | (22) |
Other Postretirement Benefit Plans, Defined Benefit [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Current service cost (benefits earned by employees in the period) | 3 | 3 |
Interest cost on benefit obligation | 5 | 5 |
Expected return on fund assets | 0 | 0 |
Recognized net actuarial loss | 1 | 1 |
Amortization of prior service costs | 0 | 0 |
Net periodic benefit (recovery) cost | CAD 9 | CAD 9 |
Contingencies - Legal Proceedin
Contingencies - Legal Proceedings (Details) CAD in Millions | Jul. 11, 2016CADclaim | Jul. 05, 2016CAD | Jul. 04, 2016CADclaim | Apr. 12, 2016CAD | Jul. 06, 2015CAD | Mar. 31, 2017CADclaim |
Claimed loss or damages as a result of derailment [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Amount of fund distribution | CAD 440 | |||||
Lac-Megantic Rail Accident [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Value of damages sought | CAD 409 | |||||
Lac-Megantic Rail Accident [Member] | World Fuel Entities [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Amount of fund distribution | CAD 110 | |||||
Lac-Megantic Rail Accident [Member] | Irving Oil [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Amount of fund distribution | 60 | |||||
Lac-Megantic Rail Accident [Member] | Quebec Minister of Sustainable Development and Environment [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Value of damages sought | CAD 95 | |||||
Lac-Megantic Rail Accident [Member] | Subrogated Insurance Claim [Member] | Initial Insurer Claimants [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Value of damages sought | CAD 16 | |||||
Number of notices for claims of damage to cargo | claim | 8 | |||||
Lac-Megantic Rail Accident [Member] | Subrogated Insurance Claim [Member] | Additional Insurer Claimants [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Value of damages sought | CAD 3 | |||||
Number of notices for claims of damage to cargo | claim | 2 | |||||
Lac-Megantic Rail Accident [Member] | Claimed loss or damages as a result of derailment [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Number of notices for claims of damage to cargo | claim | 2 | |||||
Lac-Megantic Rail Accident [Member] | Lost Lading Loss Recovery [Member] | The “WD Trustee” [Member] | ||||||
Commitments and Contingencies Disclosure [Line Items] | ||||||
Value of damages sought | CAD 6 |
Contingencies - Environmental L
Contingencies - Environmental Liabilities (Details) - CAD CAD in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Site Contingency [Line Items] | |||
Total amount provided for provisions for environmental remediation costs | CAD 89 | CAD 85 | |
Term for expected payments to be made | 10 years | ||
Purchased Services and Other [Member] | |||
Site Contingency [Line Items] | |||
Environmental remediation expense | CAD 1 | CAD 1 |
Condensed Consolidating Finan43
Condensed Consolidating Financial Information - Interim Condensed Consolidating Statements of Income (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Freight | CAD 1,563 | CAD 1,548 |
Non-freight | 40 | 43 |
Total revenues | 1,603 | 1,591 |
Operating expenses | ||
Compensation and benefits | 233 | 329 |
Fuel | 170 | 125 |
Materials | 49 | 56 |
Equipment rents | 36 | 45 |
Depreciation and amortization | 166 | 162 |
Purchased services and other | 278 | 221 |
Total operating expenses | 932 | 938 |
Operating income | 671 | 653 |
Less: | ||
Other income and charges | (28) | (181) |
Net interest (income) expense | 120 | 124 |
Income before income tax expense | 579 | 710 |
Less: Income tax (recovery) expense | 148 | 170 |
Add: Equity in net earnings of subsidiaries | 0 | 0 |
Net income | 431 | 540 |
Consolidating Adjustments and Eliminations [Member] | ||
Revenues | ||
Freight | 0 | 0 |
Non-freight | (85) | (86) |
Total revenues | (85) | (86) |
Operating expenses | ||
Compensation and benefits | 1 | 2 |
Fuel | 0 | 0 |
Materials | 6 | 8 |
Equipment rents | 0 | 0 |
Depreciation and amortization | 0 | 0 |
Purchased services and other | (92) | (96) |
Total operating expenses | (85) | (86) |
Operating income | 0 | 0 |
Less: | ||
Other income and charges | 0 | 0 |
Net interest (income) expense | 0 | 0 |
Income before income tax expense | 0 | 0 |
Less: Income tax (recovery) expense | 0 | 0 |
Add: Equity in net earnings of subsidiaries | (566) | (571) |
Net income | (566) | (571) |
CPRL (Parent Guarantor) [Member] | Reportable Legal Entities [Member] | ||
Revenues | ||
Freight | 0 | 0 |
Non-freight | 0 | 0 |
Total revenues | 0 | 0 |
Operating expenses | ||
Compensation and benefits | 0 | 0 |
Fuel | 0 | 0 |
Materials | 0 | 0 |
Equipment rents | 0 | 0 |
Depreciation and amortization | 0 | 0 |
Purchased services and other | 0 | 0 |
Total operating expenses | 0 | 0 |
Operating income | 0 | 0 |
Less: | ||
Other income and charges | (20) | (69) |
Net interest (income) expense | 2 | (1) |
Income before income tax expense | 18 | 70 |
Less: Income tax (recovery) expense | 1 | 9 |
Add: Equity in net earnings of subsidiaries | 414 | 479 |
Net income | 431 | 540 |
CPRC (Subsidiary Issuer) [Member] | Reportable Legal Entities [Member] | ||
Revenues | ||
Freight | 1,089 | 1,097 |
Non-freight | 32 | 33 |
Total revenues | 1,121 | 1,130 |
Operating expenses | ||
Compensation and benefits | 124 | 201 |
Fuel | 132 | 103 |
Materials | 34 | 38 |
Equipment rents | 36 | 54 |
Depreciation and amortization | 109 | 107 |
Purchased services and other | 208 | 136 |
Total operating expenses | 643 | 639 |
Operating income | 478 | 491 |
Less: | ||
Other income and charges | (7) | (138) |
Net interest (income) expense | 125 | 131 |
Income before income tax expense | 360 | 498 |
Less: Income tax (recovery) expense | 98 | 111 |
Add: Equity in net earnings of subsidiaries | 152 | 92 |
Net income | 414 | 479 |
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | ||
Revenues | ||
Freight | 474 | 451 |
Non-freight | 93 | 96 |
Total revenues | 567 | 547 |
Operating expenses | ||
Compensation and benefits | 108 | 126 |
Fuel | 38 | 22 |
Materials | 9 | 10 |
Equipment rents | 0 | (9) |
Depreciation and amortization | 57 | 55 |
Purchased services and other | 162 | 181 |
Total operating expenses | 374 | 385 |
Operating income | 193 | 162 |
Less: | ||
Other income and charges | (1) | 26 |
Net interest (income) expense | (7) | (6) |
Income before income tax expense | 201 | 142 |
Less: Income tax (recovery) expense | 49 | 50 |
Add: Equity in net earnings of subsidiaries | 0 | 0 |
Net income | CAD 152 | CAD 92 |
Condensed Consolidating Finan44
Condensed Consolidating Financial Information - Interim Condensed Consolidating Statements of Comprehensive Income (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Financial Statements, Captions [Line Items] | ||
Net income | CAD 431 | CAD 540 |
Net gain in foreign currency translation adjustments, net of hedging activities | 5 | 37 |
Change in derivatives designated as cash flow hedges | 5 | (47) |
Change in pension and post-retirement defined benefit plans | 38 | 47 |
Other comprehensive income before income taxes | 48 | 37 |
Income tax recovery on above items | (18) | (41) |
Equity accounted investments | 0 | 0 |
Other comprehensive (loss) income | 30 | (4) |
Comprehensive income | 461 | 536 |
Consolidating Adjustments and Eliminations [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Net income | (566) | (571) |
Net gain in foreign currency translation adjustments, net of hedging activities | 0 | 0 |
Change in derivatives designated as cash flow hedges | 0 | 0 |
Change in pension and post-retirement defined benefit plans | 0 | 0 |
Other comprehensive income before income taxes | 0 | 0 |
Income tax recovery on above items | 0 | 0 |
Equity accounted investments | 9 | 275 |
Other comprehensive (loss) income | 9 | 275 |
Comprehensive income | (557) | (296) |
CPRL (Parent Guarantor) [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Net income | 431 | 540 |
Net gain in foreign currency translation adjustments, net of hedging activities | 0 | 0 |
Change in derivatives designated as cash flow hedges | 0 | 0 |
Change in pension and post-retirement defined benefit plans | 0 | 0 |
Other comprehensive income before income taxes | 0 | 0 |
Income tax recovery on above items | 0 | 0 |
Equity accounted investments | 30 | (4) |
Other comprehensive (loss) income | 30 | (4) |
Comprehensive income | 461 | 536 |
CPRC (Subsidiary Issuer) [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Net income | 414 | 479 |
Net gain in foreign currency translation adjustments, net of hedging activities | 45 | 310 |
Change in derivatives designated as cash flow hedges | 5 | (47) |
Change in pension and post-retirement defined benefit plans | 36 | 45 |
Other comprehensive income before income taxes | 86 | 308 |
Income tax recovery on above items | (17) | (41) |
Equity accounted investments | (39) | (271) |
Other comprehensive (loss) income | 30 | (4) |
Comprehensive income | 444 | 475 |
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Net income | 152 | 92 |
Net gain in foreign currency translation adjustments, net of hedging activities | (40) | (273) |
Change in derivatives designated as cash flow hedges | 0 | 0 |
Change in pension and post-retirement defined benefit plans | 2 | 2 |
Other comprehensive income before income taxes | (38) | (271) |
Income tax recovery on above items | (1) | 0 |
Equity accounted investments | 0 | 0 |
Other comprehensive (loss) income | (39) | (271) |
Comprehensive income | CAD 113 | CAD (179) |
Condensed Consolidating Finan45
Condensed Consolidating Financial Information - Interim Condensed Consolidating Balance Sheets (Details) - CAD CAD in Millions | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||||
Cash and cash equivalents | CAD 201 | CAD 164 | ||
Accounts receivable, net | 631 | 591 | ||
Accounts receivable, inter-company | 0 | 0 | ||
Short-term advances to affiliates | 0 | 0 | ||
Materials and supplies | 201 | 184 | ||
Other current assets | 77 | 70 | ||
Total current assets | 1,110 | 1,009 | ||
Long-term advances to affiliates | 0 | 0 | ||
Investments | 183 | 194 | ||
Investments in subsidiaries | 0 | 0 | ||
Properties | 16,661 | 16,689 | ||
Goodwill and intangible assets | 200 | 202 | ||
Pension asset | 1,165 | 1,070 | ||
Other assets | 78 | 57 | ||
Deferred income taxes | 0 | 0 | ||
Total assets | 19,397 | 19,221 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 1,148 | 1,322 | ||
Accounts payable, inter-company | 0 | 0 | ||
Short-term advances from affiliates | 0 | 0 | ||
Long-term debt maturing within one year | 31 | 25 | ||
Total current liabilities | 1,179 | 1,347 | ||
Pension and other benefit liabilities | 730 | 734 | ||
Long-term advances from affiliates | 0 | 0 | ||
Other long-term liabilities | 227 | 284 | ||
Long-term debt | 8,583 | 8,659 | ||
Deferred income taxes | 3,640 | 3,571 | ||
Total liabilities | 14,359 | 14,595 | ||
Shareholders’ equity | ||||
Share capital | 2,036 | 2,002 | ||
Additional paid-in capital | 42 | 52 | ||
Accumulated other comprehensive (loss) income | (1,769) | (1,799) | ||
Retained earnings | 4,729 | 4,371 | ||
Total Shareholders' equity | 5,038 | 4,626 | CAD 5,290 | CAD 4,796 |
Total liabilities and shareholders’ equity | 19,397 | 19,221 | ||
Consolidating Adjustments and Eliminations [Member] | ||||
Current assets | ||||
Cash and cash equivalents | 0 | 0 | ||
Accounts receivable, net | 0 | 0 | ||
Accounts receivable, inter-company | (438) | (409) | ||
Short-term advances to affiliates | (5,180) | (5,227) | ||
Materials and supplies | 0 | 0 | ||
Other current assets | 0 | 0 | ||
Total current assets | (5,618) | (5,636) | ||
Long-term advances to affiliates | (91) | (92) | ||
Investments | 0 | 0 | ||
Investments in subsidiaries | (19,286) | (18,762) | ||
Properties | 0 | 0 | ||
Goodwill and intangible assets | 0 | 0 | ||
Pension asset | 0 | 0 | ||
Other assets | 0 | 0 | ||
Deferred income taxes | (11) | (11) | ||
Total assets | (25,006) | (24,501) | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 0 | 0 | ||
Accounts payable, inter-company | (438) | (409) | ||
Short-term advances from affiliates | (5,180) | (5,227) | ||
Long-term debt maturing within one year | 0 | 0 | ||
Total current liabilities | (5,618) | (5,636) | ||
Pension and other benefit liabilities | 0 | 0 | ||
Long-term advances from affiliates | (91) | (92) | ||
Other long-term liabilities | 0 | 0 | ||
Long-term debt | 0 | 0 | ||
Deferred income taxes | (11) | (11) | ||
Total liabilities | (5,720) | (5,739) | ||
Shareholders’ equity | ||||
Share capital | (6,928) | (6,860) | ||
Additional paid-in capital | (1,937) | (1,936) | ||
Accumulated other comprehensive (loss) income | 1,098 | 1,087 | ||
Retained earnings | (11,519) | (11,053) | ||
Total Shareholders' equity | (19,286) | (18,762) | ||
Total liabilities and shareholders’ equity | (25,006) | (24,501) | ||
CPRL (Parent Guarantor) [Member] | Reportable Legal Entities [Member] | ||||
Current assets | ||||
Cash and cash equivalents | 0 | 0 | ||
Accounts receivable, net | 0 | 0 | ||
Accounts receivable, inter-company | 92 | 90 | ||
Short-term advances to affiliates | 500 | 500 | ||
Materials and supplies | 0 | 0 | ||
Other current assets | 0 | 0 | ||
Total current assets | 592 | 590 | ||
Long-term advances to affiliates | 1 | 1 | ||
Investments | 0 | 0 | ||
Investments in subsidiaries | 8,882 | 8,513 | ||
Properties | 0 | 0 | ||
Goodwill and intangible assets | 0 | 0 | ||
Pension asset | 0 | 0 | ||
Other assets | 0 | 1 | ||
Deferred income taxes | 11 | 11 | ||
Total assets | 9,486 | 9,116 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 73 | 73 | ||
Accounts payable, inter-company | 17 | 14 | ||
Short-term advances from affiliates | 4,358 | 4,403 | ||
Long-term debt maturing within one year | 0 | 0 | ||
Total current liabilities | 4,448 | 4,490 | ||
Pension and other benefit liabilities | 0 | 0 | ||
Long-term advances from affiliates | 0 | 0 | ||
Other long-term liabilities | 0 | 0 | ||
Long-term debt | 0 | 0 | ||
Deferred income taxes | 0 | 0 | ||
Total liabilities | 4,448 | 4,490 | ||
Shareholders’ equity | ||||
Share capital | 2,036 | 2,002 | ||
Additional paid-in capital | 42 | 52 | ||
Accumulated other comprehensive (loss) income | (1,769) | (1,799) | ||
Retained earnings | 4,729 | 4,371 | ||
Total Shareholders' equity | 5,038 | 4,626 | ||
Total liabilities and shareholders’ equity | 9,486 | 9,116 | ||
CPRC (Subsidiary Issuer) [Member] | Reportable Legal Entities [Member] | ||||
Current assets | ||||
Cash and cash equivalents | 83 | 100 | ||
Accounts receivable, net | 447 | 435 | ||
Accounts receivable, inter-company | 152 | 113 | ||
Short-term advances to affiliates | 513 | 692 | ||
Materials and supplies | 167 | 150 | ||
Other current assets | 52 | 38 | ||
Total current assets | 1,414 | 1,528 | ||
Long-term advances to affiliates | 0 | 0 | ||
Investments | 40 | 47 | ||
Investments in subsidiaries | 10,404 | 10,249 | ||
Properties | 8,763 | 8,756 | ||
Goodwill and intangible assets | 0 | 0 | ||
Pension asset | 1,165 | 1,070 | ||
Other assets | 69 | 48 | ||
Deferred income taxes | 0 | 0 | ||
Total assets | 21,855 | 21,698 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 804 | 945 | ||
Accounts payable, inter-company | 281 | 292 | ||
Short-term advances from affiliates | 813 | 816 | ||
Long-term debt maturing within one year | 31 | 25 | ||
Total current liabilities | 1,929 | 2,078 | ||
Pension and other benefit liabilities | 656 | 658 | ||
Long-term advances from affiliates | 91 | 92 | ||
Other long-term liabilities | 96 | 152 | ||
Long-term debt | 8,529 | 8,605 | ||
Deferred income taxes | 1,672 | 1,600 | ||
Total liabilities | 12,973 | 13,185 | ||
Shareholders’ equity | ||||
Share capital | 1,037 | 1,037 | ||
Additional paid-in capital | 1,637 | 1,638 | ||
Accumulated other comprehensive (loss) income | (1,770) | (1,799) | ||
Retained earnings | 7,978 | 7,637 | ||
Total Shareholders' equity | 8,882 | 8,513 | ||
Total liabilities and shareholders’ equity | 21,855 | 21,698 | ||
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | ||||
Current assets | ||||
Cash and cash equivalents | 118 | 64 | ||
Accounts receivable, net | 184 | 156 | ||
Accounts receivable, inter-company | 194 | 206 | ||
Short-term advances to affiliates | 4,167 | 4,035 | ||
Materials and supplies | 34 | 34 | ||
Other current assets | 25 | 32 | ||
Total current assets | 4,722 | 4,527 | ||
Long-term advances to affiliates | 90 | 91 | ||
Investments | 143 | 147 | ||
Investments in subsidiaries | 0 | 0 | ||
Properties | 7,898 | 7,933 | ||
Goodwill and intangible assets | 200 | 202 | ||
Pension asset | 0 | 0 | ||
Other assets | 9 | 8 | ||
Deferred income taxes | 0 | 0 | ||
Total assets | 13,062 | 12,908 | ||
Current liabilities | ||||
Accounts payable and accrued liabilities | 271 | 304 | ||
Accounts payable, inter-company | 140 | 103 | ||
Short-term advances from affiliates | 9 | 8 | ||
Long-term debt maturing within one year | 0 | 0 | ||
Total current liabilities | 420 | 415 | ||
Pension and other benefit liabilities | 74 | 76 | ||
Long-term advances from affiliates | 0 | 0 | ||
Other long-term liabilities | 131 | 132 | ||
Long-term debt | 54 | 54 | ||
Deferred income taxes | 1,979 | 1,982 | ||
Total liabilities | 2,658 | 2,659 | ||
Shareholders’ equity | ||||
Share capital | 5,891 | 5,823 | ||
Additional paid-in capital | 300 | 298 | ||
Accumulated other comprehensive (loss) income | 672 | 712 | ||
Retained earnings | 3,541 | 3,416 | ||
Total Shareholders' equity | 10,404 | 10,249 | ||
Total liabilities and shareholders’ equity | CAD 13,062 | CAD 12,908 |
Condensed Consolidating Finan46
Condensed Consolidating Financial Information - Interim Condensed Consolidating Statements of Cash Flows (Details) - CAD CAD in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Financial Statements, Captions [Line Items] | ||
Cash provided by operating activities | CAD 311 | CAD 218 |
Investing activities | ||
Additions to properties | (230) | (278) |
Proceeds from sale of properties and other assets | 3 | 60 |
Advances to affiliates | 0 | 0 |
Capital contributions to affiliates | 0 | 0 |
Repurchase of share capital from affiliates | 0 | |
Payments for (Proceeds from) Other Investing Activities | 5 | 0 |
Cash used in investing activities | (222) | (218) |
Financing activities | ||
Dividends paid | (73) | (54) |
Issuance of share capital | 0 | 0 |
Return of share capital to affiliates | 0 | |
Issuance of CP Common Shares | 28 | 5 |
Repayment of long-term debt, excluding commercial paper | (5) | (11) |
Advances from affiliates | 0 | 0 |
Other | 0 | (2) |
Cash used in financing activities | (50) | (62) |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | (2) | (17) |
Cash position | ||
(Decrease) increase in cash and cash equivalents | 37 | (79) |
Cash and cash equivalents at beginning of period | 164 | 650 |
Cash and cash equivalents at end of period | 201 | 571 |
Consolidating Adjustments and Eliminations [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Cash provided by operating activities | (101) | (54) |
Investing activities | ||
Additions to properties | 0 | 0 |
Proceeds from sale of properties and other assets | 0 | 0 |
Advances to affiliates | 286 | 35 |
Capital contributions to affiliates | 68 | 9 |
Repurchase of share capital from affiliates | (6) | |
Payments for (Proceeds from) Other Investing Activities | 0 | |
Cash used in investing activities | 354 | 38 |
Financing activities | ||
Dividends paid | 101 | 54 |
Issuance of share capital | (68) | (9) |
Return of share capital to affiliates | 6 | |
Issuance of CP Common Shares | 0 | 0 |
Repayment of long-term debt, excluding commercial paper | 0 | 0 |
Advances from affiliates | (286) | (35) |
Other | 0 | |
Cash used in financing activities | (253) | 16 |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | 0 | 0 |
Cash position | ||
(Decrease) increase in cash and cash equivalents | 0 | 0 |
Cash and cash equivalents at beginning of period | 0 | 0 |
Cash and cash equivalents at end of period | 0 | 0 |
CPRL (Parent Guarantor) [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Cash provided by operating activities | 63 | 23 |
Investing activities | ||
Additions to properties | 0 | 0 |
Proceeds from sale of properties and other assets | 0 | 0 |
Advances to affiliates | (152) | 0 |
Capital contributions to affiliates | 0 | 0 |
Repurchase of share capital from affiliates | 0 | |
Payments for (Proceeds from) Other Investing Activities | 0 | |
Cash used in investing activities | (152) | 0 |
Financing activities | ||
Dividends paid | (73) | (54) |
Issuance of share capital | 0 | 0 |
Return of share capital to affiliates | 0 | |
Issuance of CP Common Shares | 28 | 5 |
Repayment of long-term debt, excluding commercial paper | 0 | 0 |
Advances from affiliates | 134 | 26 |
Other | 0 | |
Cash used in financing activities | 89 | (23) |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | 0 | 0 |
Cash position | ||
(Decrease) increase in cash and cash equivalents | 0 | 0 |
Cash and cash equivalents at beginning of period | 0 | 0 |
Cash and cash equivalents at end of period | 0 | 0 |
CPRC (Subsidiary Issuer) [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Cash provided by operating activities | 85 | 51 |
Investing activities | ||
Additions to properties | (109) | (132) |
Proceeds from sale of properties and other assets | 1 | 57 |
Advances to affiliates | 0 | (35) |
Capital contributions to affiliates | (68) | (9) |
Repurchase of share capital from affiliates | 6 | |
Payments for (Proceeds from) Other Investing Activities | 5 | |
Cash used in investing activities | (171) | (113) |
Financing activities | ||
Dividends paid | (73) | (54) |
Issuance of share capital | 0 | 0 |
Return of share capital to affiliates | 0 | |
Issuance of CP Common Shares | 0 | 0 |
Repayment of long-term debt, excluding commercial paper | (5) | (4) |
Advances from affiliates | 149 | 0 |
Other | (2) | |
Cash used in financing activities | 71 | (60) |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | (2) | (4) |
Cash position | ||
(Decrease) increase in cash and cash equivalents | (17) | (126) |
Cash and cash equivalents at beginning of period | 100 | 502 |
Cash and cash equivalents at end of period | 83 | 376 |
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Cash provided by operating activities | 264 | 198 |
Investing activities | ||
Additions to properties | (121) | (146) |
Proceeds from sale of properties and other assets | 2 | 3 |
Advances to affiliates | (134) | 0 |
Capital contributions to affiliates | 0 | 0 |
Repurchase of share capital from affiliates | 0 | |
Payments for (Proceeds from) Other Investing Activities | 0 | |
Cash used in investing activities | (253) | (143) |
Financing activities | ||
Dividends paid | (28) | 0 |
Issuance of share capital | 68 | 9 |
Return of share capital to affiliates | (6) | |
Issuance of CP Common Shares | 0 | 0 |
Repayment of long-term debt, excluding commercial paper | 0 | (7) |
Advances from affiliates | 3 | 9 |
Other | 0 | |
Cash used in financing activities | 43 | 5 |
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents | 0 | (13) |
Cash position | ||
(Decrease) increase in cash and cash equivalents | 54 | 47 |
Cash and cash equivalents at beginning of period | 64 | 148 |
Cash and cash equivalents at end of period | CAD 118 | CAD 195 |