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CPKC reports first-quarter results; celebrating one year as a combined company
CPKC reports first-quarter results; celebrating one year as a combined company
Canada NewsWire
CALGARY, AB, April 24, 2024
CALGARY, AB, April 24, 2024 /CNW/ - Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) today announced its first-quarter results, including revenues of $3.5 billion, diluted earnings per share (EPS) of $0.83 and core adjusted combined diluted EPS1, 2 of $0.93.
"One year into our historic combination, I am proud of what our dedicated family of railroaders has accomplished as we deliver on the benefits of our unrivalled network – spurring competition, increasing safety and connecting more markets for our customers," said Keith Creel, CPKC President and Chief Executive Officer. "Today's results show the success of our efforts to drive growth as the only railway connecting Canada, the United States and Mexico."
First-quarter 2024 results1
- Reported operating ratio (OR) increased by 400 basis points to 67.4 percent from 63.4 percent in Q1 2023
- Core adjusted combined OR2 increased 50 basis points to 64.0 percent from 63.5 percent in Q1 2023
- Reported diluted EPS decreased to $0.83 from $0.86 in Q1 2023
- Core adjusted combined diluted EPS2 increased three percent to $0.93 from $0.90 in Q1 2023
- Volumes, as measured in Revenue Ton-Miles3 (RTMs), increased one percent on a combined basis
- Federal Railroad Administration (FRA)-reportable train accident frequency increased to 0.89 from 0.71 in Q1 2023 on a combined basis4
- FRA-reportable personal injury frequency increased to 1.15 from 1.12 in Q1 2023 on a combined basis4
"We exited last year with strong momentum and our performance in the first quarter, combined with an improving demand environment, has us well positioned to deliver on our 2024 guidance," Creel added. "As we enter the second year of our forever story, we are focused on safely executing on the unique and undeniable opportunities this franchise creates and delivering long-term value for our employees, customers and shareholders."
1 | The results of Kansas City Southern (KCS) are included on a consolidated basis from April 14, 2023, the date we acquired control. From December 14, 2021 to April 13, 2023, we recorded our interest in KCS under the equity method of accounting. |
2 | These measures have no standardized meanings prescribed by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. For information regarding non-GAAP measures including reconciliations, see attached supplementary schedule of Non-GAAP Measures. |
3 | These operating statistics represent combined operating information to illustrate the estimated effects of the acquisition for the first quarter ended March 31, 2023, as if the acquisition closed on January 1, 2022. For the three months ended March 31, 2024, KCS was consolidated. |
4 | FRA statistics for Q1 2023 reflect Canadian Pacific (CP) and KCS results on a combined basis. In the first-quarter of 2023, CP standalone reported FRA personal injury frequency of 1.21 and FRA-reportable train accident frequency of 0.98. The first-quarter 2023 FRA-reportable personal injury frequency on a combined basis was previously reported as 1.15. This restatement reflects new information available within a specified period as stipulated by the FRA but that exceeds CPKC's financial reporting timeline. |
Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at 9:45 a.m. ET (7:45 a.m. MT) on April 24, 2024.
Conference Call Access
Canada and U.S.: 800-225-9448
International: 203-518-9708
*Conference ID: CPKCQ124
Callers should dial in 10 minutes prior to the call.
Webcast
We encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com.
A replay of the first-quarter conference call will be available through May 1, 2024, at 800-839-8705 (Canada/U.S.) or 402-220-6075 (International).â?¯
Forward looking information
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the U.S. and Canada. Forward-looking information includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "guidance", "should" or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited, to statements concerning our ability to deliver on our financial guidance for 2024, the success of our business, the realization of anticipated benefits and synergies of the CP-KCS combination, and the opportunities arising therefrom, our operations, priorities and plans, business prospects and demand for our services and growth opportunities.
The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.
Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian, U.S., Mexican and global social, economic, political, credit and business conditions; risks associated with agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures, including competition from other rail carriers, trucking companies and maritime shippers in Canada, the U.S. and Mexico; North American and global economic growth and conditions; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped via CPKC; inflation; geopolitical instability; changes in laws, regulations and government policies, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; changes in fuel prices; disruption in fuel supplies; uncertainties of investigations, proceedings or other types of claims and litigation; compliance with environmental regulations; labour disputes; changes in labour costs and labour difficulties; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; sufficiency of budgeted capital expenditures in carrying out business plans; services and infrastructure; the satisfaction by third parties of their obligations; currency and interest rate fluctuations; exchange rates; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; trade restrictions or other changes to international trade arrangements; the effects of current and future multinational trade agreements on the level of trade among Canada, the U.S. and Mexico; climate change and the market and regulatory responses to climate change; anticipated in-service dates; success of hedging activities; operational performance and reliability; customer, regulatory and other stakeholder approvals and support; regulatory and legislative decisions and actions; the adverse impact of any termination or revocation by the Mexican government of Kansas City Southern de México, S.A. de C.V.'s Concession; public opinion; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; acts of terrorism, war or other acts of violence or crime or risk of such activities; insurance coverage limitations; material adverse changes in economic and industry conditions, including the availability of short and long-term financing; the demand environment for logistics requirements and energy prices, restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions, and disruptions to global supply chains; the realization of anticipated benefits and synergies of the CP-KCS transaction and the timing thereof; the satisfaction of the conditions imposed by the U.S. Surface Transportation Board in its March 15, 2023 final decision; the success of integration plans for KCS; other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States. Reference should be made to "Item 1A – Risk Factors" and "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements" in CPKC's annual and interim reports on Form 10-K and 10-Q.
Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.
About CPKC
With its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC. CP-IR
FINANCIAL STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the three months | ||
(in millions of Canadian dollars, except share and per share data) | 2024 | 2023 |
Revenues (Note 3) | ||
Freight | $ 3,427 | $ 2,217 |
Non-freight | 93 | 49 |
Total revenues | 3,520 | 2,266 |
Operating expenses | ||
Compensation and benefits (Note 8) | 690 | 438 |
Fuel | 458 | 326 |
Materials (Note 8) | 94 | 72 |
Equipment rents | 82 | 30 |
Depreciation and amortization (Note 8) | 467 | 225 |
Purchased services and other (Note 8) | 580 | 346 |
Total operating expenses | 2,371 | 1,437 |
Operating income | 1,149 | 829 |
Less: | ||
Equity earnings of Kansas City Southern (Note 8, 9) | — | (204) |
Other (income) expense (Note 8) | (2) | 2 |
Other components of net periodic benefit recovery (Note 12) | (88) | (86) |
Net interest expense (Note 8) | 206 | 154 |
Income before income tax expense | 1,033 | 963 |
Less: | ||
Current income tax expense (Note 4) | 242 | 139 |
Deferred income tax expense (Note 4) | 17 | 24 |
Income tax expense (Note 4) | 259 | 163 |
Net income | $ 774 | $ 800 |
Less: Net loss attributable to non-controlling interest (Note 8) | (1) | — |
Net income attributable to controlling shareholders | $ 775 | $ 800 |
Earnings per share (Note 5) | ||
Basic earnings per share | $ 0.83 | $ 0.86 |
Diluted earnings per share | $ 0.83 | $ 0.86 |
Weighted-average number of shares (millions) (Note 5) | ||
Basic | 932.4 | 930.7 |
Diluted | 934.4 | 933.5 |
Dividends declared per share | $ 0.19 | $ 0.19 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
For the three months | ||
(in millions of Canadian dollars) | 2024 | 2023 |
Net income | $ 774 | $ 800 |
Net gain (loss) in foreign currency translation adjustments, net of hedging activities | 699 | (27) |
Change in derivatives designated as cash flow hedges | 1 | 2 |
Change in pension and post-retirement defined benefit plans | 12 | 8 |
Other comprehensive income from equity investees | — | 3 |
Other comprehensive income (loss) before income taxes | 712 | (14) |
Income tax recovery (expense) | 6 | (3) |
Other comprehensive income (loss) (Note 6) | 718 | (17) |
Comprehensive income | $ 1,492 | $ 783 |
Comprehensive income attributable to non-controlling interest | 22 | — |
Comprehensive income attributable to controlling shareholders | $ 1,470 | $ 783 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
March 31 | December 31 | |
(in millions of Canadian dollars) | 2024 | 2023 |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 519 | $ 464 |
Accounts receivable, net (Note 7) | 1,943 | 1,887 |
Materials and supplies | 399 | 400 |
Other current assets | 285 | 251 |
3,146 | 3,002 | |
Investments | 561 | 533 |
Properties | 52,693 | 51,744 |
Goodwill (Note 8) | 18,228 | 17,729 |
Intangible assets | 3,026 | 2,974 |
Pension asset | 3,427 | 3,338 |
Other assets | 587 | 582 |
Total assets | $ 81,668 | $ 79,902 |
Liabilities and equity | ||
Current liabilities | ||
Accounts payable and accrued liabilities | $ 2,525 | $ 2,567 |
Long-term debt maturing within one year (Note 10, 11) | 3,899 | 3,143 |
6,424 | 5,710 | |
Pension and other benefit liabilities | 583 | 581 |
Other long-term liabilities | 832 | 797 |
Long-term debt (Note 10, 11) | 18,829 | 19,351 |
Deferred income taxes | 11,239 | 11,052 |
Total liabilities | 37,907 | 37,491 |
Shareholders' equity | ||
Share capital | 25,629 | 25,602 |
Additional paid-in capital | 95 | 88 |
Accumulated other comprehensive income (loss) (Note 6) | 77 | (618) |
Retained earnings | 17,018 | 16,420 |
42,819 | 41,492 | |
Non-controlling interest | 942 | 919 |
Total equity | 43,761 | 42,411 |
Total liabilities and equity | $ 81,668 | $ 79,902 |
See Contingencies (Note 14). |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months | ||
(in millions of Canadian dollars) | 2024 | 2023 |
Operating activities | ||
Net income | $ 774 | $ 800 |
Reconciliation of net income to cash provided by operating activities: | ||
Depreciation and amortization | 467 | 225 |
Deferred income tax expense (Note 4) | 17 | 24 |
Pension recovery and funding (Note 12) | (76) | (77) |
Equity earnings of Kansas City Southern (Note 8, 9) | — | (204) |
Dividend from Kansas City Southern (Note 9) | — | 300 |
Settlement of foreign currency forward contracts (Note 11) | (65) | — |
Other operating activities, net | 1 | (47) |
Changes in non-cash working capital balances related to operations | (103) | (140) |
Net cash provided by operating activities | 1,015 | 881 |
Investing activities | ||
Additions to properties | (527) | (405) |
Additions to Meridian Speedway properties | (4) | — |
Proceeds from sale of properties and other assets | 1 | 4 |
Other investing activities, net | (12) | — |
Net cash used in investing activities | (542) | (401) |
Financing activities | ||
Dividends paid | (177) | (177) |
Issuance of Common Shares | 22 | 18 |
Repayment of long-term debt, excluding commercial paper (Note 10) | (71) | (486) |
Net repayment of commercial paper (Note 10) | (205) | — |
Net cash used in financing activities | (431) | (645) |
Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents | 13 | 4 |
Cash position | ||
Net increase (decrease) in cash and cash equivalents | 55 | (161) |
Cash and cash equivalents at beginning of period | 464 | 451 |
Cash and cash equivalents at end of period | $ 519 | $ 290 |
Supplemental cash flow information | ||
Income taxes paid | $ 242 | $ 184 |
Interest paid | $ 245 | $ 147 |
See Notes to Interim Consolidated Financial Statements. |
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
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