(Canadian Pacific issued the following on January 28, 2010.)
CALGARY, Alberta — Canadian Pacific Railway Limited (TSX/NYSE: CP) announced its fourth-quarter and full-year 2009 results today. Net income in the fourth-quarter was $194 million, an increase of three per cent from $188 million in fourth-quarter 2008 and diluted earnings per share were $1.15, down from $1.21 in fourth-quarter 2008. Foreign exchange gain and loss on long-term debt and other specified items, including a charge on the termination of a shortline railway lease, and two favourable income tax items had a net positive impact on earnings per share of $0.21. Excluding these items, adjusted diluted earnings per share were $0.94 down 12 per cent from $1.07 in fourth-quarter 2008.
“We have come through an extraordinary year of economic challenges and we met these with focused productivity initiatives that have delivered sustainable improvements,” said Fred Green, President and CEO. “Markets remain uncertain and we will continue to drive efficiency while delivering a reliable service. We are positioned with assets and resources to respond to changes in our customers’ demand.”
* Q4 2009 Earnings Release and Financial Reports
For the fourth-quarter and full year 2009, the results of the Dakota, Minnesota & Eastern Railroad (DM&E) are fully consolidated with CP’s results. For the first ten months of 2008, however, DM&E earnings were reported as equity income on one line of the income statement. In order to aid in the evaluation of the underlying earnings trends, 2008 results have also been presented on a pro forma basis, by redistributing DM&E’s operating results from an equity income basis of accounting to a line-by-line consolidation of DM&E revenues and expenses. This pro forma financial data presentation is a non-GAAP measure.
FOURTH-QUARTER 2009 COMPARED WITH FOURTH-QUARTER 2008
EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:
* Total revenues were $1.1 billion, down 16 per cent from $1.3 billion
* Operating expenses were $853 million, down 17 per cent from $1.0 billion
* Operating income decreased to $269 million from $304 million, or 12 per cent
* Operating ratio improved 120 basis points to 76.0 per cent
* Diluted earnings per share decreased to $0.94 from $1.07, or 12 per cent
For the full year, 2009 net income increased slightly to $612 million from $607 million in 2008 and diluted earnings per share were $3.67, down six per cent from $3.91.
FULL YEAR 2009 COMPARED WITH FULL YEAR 2008 EXCLUDING FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS ON A PRO FORMA BASIS:
* Total revenues were $4.3 billion down 18 per cent from $5.2 billion
* Operating expenses were $3.4 billion a decrease of 17 per cent from $4.1 billion
* Operating income was $900 million a decrease of 20 per cent from $1.1 billion
* Operating ratio increased 70 basis points to 79.1 per cent from 78.4 per cent
* Diluted earnings per share were $2.76 down from $3.99, or 31 per cent
2010 ASSUMPTIONS
CP plans to spend in the range of $680 million to $730 million on capital programs in 2010. These planned capital investments include approximately $585 million for the renewal of track infrastructure.
In December of 2009, CP made a voluntary prepayment of approximately $500 million into its defined benefit pension plans to reduce volatility in future pension funding requirements. The 2010 pension contributions are currently estimated to be between $150 and $200 million. Pension expenses in 2010 are expected to increase by approximately $50 million from 2009 primarily due to a decrease in the discount rate used to value the pension benefit obligation and the phasing in of 2008 equity losses.
CP expects its tax rate to be in the 25 per cent to 27 per cent range.
FOREIGN EXCHANGE GAIN AND LOSS ON LONG-TERM DEBT AND OTHER SPECIFIED ITEMS
CP had a net foreign exchange loss after tax of $1.4 million on long-term debt in the fourth quarter of 2009, compared with a gain of $22 million after tax in fourth-quarter 2008.
For the full year 2009, CP had a net foreign exchange loss on long-term debt of $26 million, compared with a net foreign exchange gain of $22 million after tax for the full year 2008.
As part of a consolidated financing strategy, CP structures its U.S. dollar long-term debt in different taxing jurisdictions. As well, a portion of this debt is designated as a net investment hedge against net investment in U.S. subsidiaries. Although the taxes on foreign exchange gains and losses on long-term debt generally offset one another, because they may be in different tax jurisdictions, the resulting net tax can vary significantly.
In fourth-quarter 2009, CP recorded a $38 million after tax charge on the early termination of a shortline railway contract. As well, a tax rate change resulted in a $48 million gain, and an income tax settlement related to a prior year resulted in a benefit of $26 million. There were no other specified items recorded in fourth-quarter 2008.
For the full year 2009, in addition to the other specified items noted above, there was a $69 million after tax gain on the sale of a partnership interest, a $68 million after tax gain on the sale of Windsor Station in Montreal, Quebec and a land sale in Western Canada. A redemption and adjustment for an improvement in fair market value of long-term floating rate notes was received in replacement of the investment in Asset-Backed Commercial Paper (ABCP) of $5 million after tax, compared to an impairment in ABCP of $35 million after tax, recorded for full year 2008.
About Canadian Pacific:
Canadian Pacific, through the ingenuity of its employees located across Canada and in the United States, remains committed to being the safest, most fluid railway in North America. Our people are the key to delivering innovative transportation solutions to our customers and to ensuring the safe operation of our trains through the more than 1,100 communities where we operate. Come and visit us at www.cpr.ca to see how we can put our ingenuity to work for you. Canadian Pacific is proud to be the official rail freight services provider for the Vancouver 2010 Olympic and Paralympic Winter Games.