CPKC reports first quarter results; solid demand, precision execution and a resilient network powers strong start to 2025
PR Newswire
CALGARY, AB, April 30, 2025
CALGARY, AB, April 30, 2025 /PRNewswire/ - Canadian Pacific Kansas City (TSX: CP) $(CP)$ (CPKC) today announced its first-quarter results, including revenues of $3.8 billion, diluted earnings per share (EPS) of $0.97 and core adjusted diluted EPS(1) of $1.06.
"Our talented team of world-class railroaders executed our precision scheduled operating plan to safely and efficiently move solid freight demand to start 2025, producing strong first-quarter results amidst ongoing turbulent market and macroeconomic conditions," said Keith Creel, CPKC President and Chief Executive Officer. "These first-quarter results demonstrate the power and resiliency of our unrivalled North American network."
First-quarter 2025 results
-- Revenues increased by eight percent to $3.8 billion from $3.5 billion in
Q1 2024
-- Reported operating ratio $(OR)$ decreased by 210 basis points to 65.3
percent from 67.4 percent in Q1 2024
-- Core adjusted OR1 decreased 150 basis points to 62.5 percent from 64.0
percent in Q1 2024
-- Reported diluted EPS increased 17 percent to $0.97 from $0.83 in Q1 2024
-- Core adjusted diluted EPS1 increased 14 percent to $1.06 from $0.93 in Q1
2024
-- Volumes, as measured in Revenue Ton-Miles (RTMs), increased four percent
-- Federal Railroad Administration $(FRA)$-reportable personal injury
frequency decreased to 0.98 from 1.14 in Q1 20242
-- FRA-reportable train accident frequency decreased to 0.38 from 0.90 in Q1
20242
"We remain focused on controlling what we can control, however, the increasing uncertainty created by evolving trade policies and the heightened risk of economic recession make it prudent to amend our 2025 earnings guidance at this time," said Creel. "CPKC's long-term value proposition remains unchanged. We will continue to operate safely and efficiently, as we deliver on our promise to provide premium service to our customers, bring new customer solutions and products to the market, and strengthen North American trade."
Updated 2025 Outlook
-- As a result of the ongoing tariff and trade policy uncertainty, CPKC now
expects 2025 core adjusted diluted EPS1 to increase between 10 and 14
percent versus 2024 core adjusted diluted EPS1 of $4.25.
(1) These measures have no standardized meanings prescribed by accounting
principles generally accepted in the United States of America ("GAAP")
and, therefore, may not be comparable to similar measures presented by
other companies. For information regarding non-GAAP measures including
reconciliations and forward-looking non-GAAP measures, see attached
supplementary schedule of Non-GAAP Measures.
(2) The first-quarter 2024 FRA-reportable personal injury frequency and
FRA-reportable train accident frequency have been restated to reflect new
information available within specified periods stipulated by the FRA but
that exceed CPKC's financial reporting timeline.
Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at 4:30 p.m. ET (2:30 p.m. MT) on April 30, 2025.
Conference Call Access
Canada and U.S.: 800-274-8461
International: 203-518-9814
*Conference ID: CPKCQ125
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 7, 2025, at 800-839-5125 (Canada/U.S.) or 402-220-1502 (International).
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 2025, strategic initiatives and investments, 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, anticipated financial and operational performance, business prospects and demand for our services and growth opportunities.
The forward-looking information 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, including, without limitation, those relating to regulation of rates, tariffs, import/export, trade, taxes, wages, labour and immigration; 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, without limitation, those relating to regulation of rates, tariffs, import/export, trade, wages, labour and immigration; 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 Coast 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
ended March 31
------------------------------------
(in millions of Canadian dollars, except
share and per share data) 2025 2024
======================================== ================= =================
Revenues (Note 3)
Freight $ 3,727 $ 3,427
Non-freight 68 93
---------------------------------------- ----------------- -----------------
Total revenues 3,795 3,520
---------------------------------------- ----------------- -----------------
Operating expenses
Compensation and benefits 682 690
Fuel 481 458
Materials 124 94
Equipment rents 99 82
Depreciation and amortization 504 467
Purchased services and other 588 580
---------------------------------------- ----------------- -----------------
Total operating expenses 2,478 2,371
---------------------------------------- ----------------- -----------------
Operating income 1,317 1,149
Other expense (income) 7 (2)
Other components of net periodic
benefit recovery (Note 11) (107) (88)
Net interest expense 216 206
Income before income tax expense 1,201 1,033
Current income tax expense 266 242
Deferred income tax expense 26 17
---------------------------------------- ----------------- -----------------
Income tax expense (Note 4) 292 259
---------------------------------------- ----------------- -----------------
Net income $ 909 $ 774
---------------------------------------- ----------------- -----------------
Net loss attributable to non-controlling
interest (1) (1)
---------------------------------------- ----------------- -----------------
Net income attributable to controlling
shareholders $ 910 $ 775
======================================== ================= =================
Earnings per share (Note 5)
Basic earnings per share $ 0.98 $ 0.83
Diluted earnings per share $ 0.97 $ 0.83
Weighted-average number of shares
(millions) (Note 5)
Basic 933.2 932.4
Diluted 934.3 934.4
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
ended March 31
-----------------------------
(in millions of Canadian dollars) 2025 2024
=============================================== ============== =============
Net income $ 909 $ 774
Net (loss) gain in foreign currency
translation adjustments, net of hedging
activities (29) 699
Change in derivatives designated as cash flow
hedges 1 1
Change in pension and post-retirement defined
benefit plans 3 12
Other comprehensive (loss) income before income
taxes (25) 712
Income tax (expense) recovery (3) 6
----------------------------------------------- -------------- -------------
Other comprehensive (loss) income (Note 6) (28) 718
----------------------------------------------- -------------- -------------
Comprehensive income $ 881 $ 1,492
----------------------------------------------- -------------- -------------
Comprehensive (loss) income attributable to
non-controlling interest (2) 22
----------------------------------------------- -------------- -------------
Comprehensive income attributable to
controlling shareholders $ 883 $ 1,470
=============================================== ============== =============
See Notes to Interim Consolidated Financial Statements.
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
March 31 December 31
(in millions of Canadian
dollars) 2025 2024
============================ ======================= =======================
Assets
Current assets
Cash and cash equivalents $ 695 $ 739
Accounts receivable, net
(Note 7) 2,044 1,968
Materials and supplies 466 457
Other current assets 255 220
---------------------------- ----------------------- -----------------------
3,460 3,384
Investments 588 586
Properties 56,165 56,024
Goodwill 19,333 19,350
Intangible assets 3,120 3,146
Pension asset 4,684 4,586
Other assets 690 668
---------------------------- ----------------------- -----------------------
Total assets $ 88,040 $ 87,744
============================ ======================= =======================
Liabilities and equity
Current liabilities
Accounts payable and
accrued liabilities $ 2,735 $ 2,842
Long-term debt maturing
within one year (Note 8,
9) 1,512 2,819
---------------------------- ----------------------- -----------------------
4,247 5,661
Pension and other benefit
liabilities 547 548
Other long-term liabilities 866 867
Long-term debt (Note 8, 9) 21,140 19,804
Deferred income taxes 11,997 11,974
---------------------------- ----------------------- -----------------------
Total liabilities 38,797 38,854
============================ ======================= =======================
Shareholders' equity
Share capital 25,603 25,689
Additional paid-in capital 107 94
Accumulated other
comprehensive income (Note
6) 2,653 2,680
Retained earnings 19,883 19,429
---------------------------- ----------------------- -----------------------
48,246 47,892
Non-controlling interest 997 998
---------------------------- ----------------------- -----------------------
Total equity 49,243 48,890
---------------------------- ----------------------- -----------------------
Total liabilities and equity $ 88,040 $ 87,744
============================ ======================= =======================
See Contingencies (Note 13).
See Notes to Interim Consolidated Financial Statements.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months
ended March 31
----------------------------------
(in millions of Canadian dollars) 2025 2024
========================================== ================ ================
Operating activities
Net income $ 909 $ 774
Reconciliation of net income to cash
provided by operating activities:
Depreciation and amortization 504 467
Deferred income tax expense 26 17
Pension recovery and funding (Note 11) (95) (76)
Settlement of Mexican taxes (Note 4) (11) --
Settlement of foreign currency forward
contracts (Note 9) -- (65)
Other operating activities, net (11) 1
Changes in non-cash working capital
balances related to operations (166) (103)
------------------------------------------ ---------------- ----------------
Net cash provided by operating activities 1,156 1,015
------------------------------------------ ---------------- ----------------
Investing activities
Additions to properties (711) (527)
Additions to Meridian Speedway properties (12) (4)
Proceeds from sale of properties and other
assets 11 1
Other investing activities, net (3) (12)
------------------------------------------ ---------------- ----------------
Net cash used in investing activities (715) (542)
------------------------------------------ ---------------- ----------------
Financing activities
Dividends paid (177) (177)
Issuance of Common Shares 8 22
Purchase of Common Shares (Note 10) (347) --
Repayment of long-term debt, excluding
commercial paper (Note 8) (935) (71)
Issuance of long-term debt, excluding
commercial paper (Note 8) 1,710 --
Net repayment of commercial paper (Note 8) (453) (205)
Net repayment of short term borrowings
(Note 8) (285) --
Other financing activities, net (5) --
Net cash used in financing activities (484) (431)
------------------------------------------ ---------------- ----------------
Effect of foreign currency fluctuations on
foreign-denominated cash and cash
equivalents (1) 13
------------------------------------------ ---------------- ----------------
Cash position
Net (decrease) increase in cash and cash
equivalents (44) 55
Cash and cash equivalents at beginning of
period 739 464
------------------------------------------ ---------------- ----------------
Cash and cash equivalents at end of period $ 695 $ 519
========================================== ================ ================
Supplemental cash flow information
Income taxes paid $ 237 $ 242
Interest paid $ 180 $ 245
See Notes to Interim Consolidated Financial Statements.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
For the three months ended March 31
(in millions of Common Accumulated
Canadian dollars shares Additional other Total Non-
except per share (in Share paid-in comprehensive Retained shareholders' controlling Total
data) millions) capital capital income earnings equity interest equity
================= ========= ======== ============== ====================== ========= ================ ============= ========
Balance as at
January 1, 2025 933.5 $ 25,689 $ 94 $ 2,680 $ 19,429 $ 47,892 $ 998 $ 48,890
Net income (loss) -- -- -- -- 910 910 (1) 909
Contribution from
non-controlling
interest -- -- -- -- -- -- 1 1
Other
comprehensive
loss (Note 6) -- -- -- (27) -- (27) (1) (28)
Dividends
declared ($0.19
per share) -- -- -- -- (177) (177) -- (177)
Effect of
stock-based
compensation
expense -- -- 16 -- -- 16 -- 16
Common Shares
repurchased
(Note 10) (3.3) (96) -- -- (279) (375) -- (375)
Shares issued
under stock
option plan 0.2 10 (3) -- -- 7 -- 7
Balance as at
March 31, 2025 930.4 $ 25,603 $ 107 $ 2,653 $ 19,883 $ 48,246 $ 997 $ 49,243
================== ========= ======== ============== ====================== ========= ================ ============= ========
Balance as at
January 1, 2024 932.1 $ 25,602 $ 88 $ (618) $ 16,420 $ 41,492 $ 919 $ 42,411
Net income (loss) -- -- -- -- 775 775 (1) 774
Contribution from
non-controlling
interest -- -- -- -- -- -- 1 1
Other
comprehensive
income (Note 6) -- -- -- 695 -- 695 23 718
Dividends
declared ($0.19
per share) -- -- -- -- (177) (177) -- (177)
Effect of
stock-based
compensation
expense -- -- 13 -- -- 13 -- 13
Shares issued
under stock
option plan 0.5 27 (6) -- -- 21 -- 21
Balance as at
March 31, 2024 932.6 $ 25,629 $ 95 $ 77 $ 17,018 $ 42,819 $ 942 $ 43,761
------------------ --------- -------- -------------- ---------------------- --------- ---------------- ------------- --------
See Notes to Interim Consolidated Financial Statements.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(unaudited)
1 Description of business and basis of presentation
Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning Canada, the United States ("U.S."), and Mexico. CPKC provides rail and intermodal transportation services over a network of approximately 20,000 miles, serving principal business centres across Canada, the U.S., and Mexico. The Company transports bulk commodities, merchandise, and intermodal freight. CPKC's Common Shares ("Common Shares") trade on the Toronto Stock Exchange and New York Stock Exchange under the symbol "CP".
These unaudited interim consolidated financial statements ("Interim Consolidated Financial Statements") have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). They do not include all of the information required for a complete set of annual financial statements prepared in accordance with GAAP and should be read in conjunction with the Company's audited consolidated financial statements as at and for the year ended December 31, 2024 ("last annual consolidated financial statements"). Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and results of operations since the last annual consolidated financial statements. These Interim Consolidated Financial Statements have been prepared using the same significant accounting policies used in the last annual consolidated financial statements. Amounts are stated in Canadian dollars unless otherwise noted.
The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results.
Operating segment
The Company only has one operating segment: rail transportation. The Company's measure of segment profit is reported on the Interim Consolidated Statements of Income as "Net income attributable to controlling shareholders". CPKC's significant segment expenses are consistent with the expenses presented on the Interim Consolidated Statements of Income.
2 Accounting changes
Recently adopted accounting standards
The accounting standards that have become effective during the three months ended March 31, 2025 did not have a material impact on the Interim Consolidated Financial Statements.
Accounting standards not yet adopted
Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted.
3 Revenues
The following table presents disaggregated information about the Company's revenues from contracts with customers by major source:
For the three months
ended March 31
----------------------------------
(in millions of Canadian dollars) 2025 2024
======================================== ================ ================
Grain $ 788 $ 730
Coal 257 209
Potash 156 137
Fertilizers and sulphur 114 104
Forest products 217 202
Energy, chemicals and plastics 758 702
Metals, minerals and consumer products 448 440
Automotive 315 265
Intermodal 674 638
---------------------------------------- ---------------- ----------------
Total freight revenues 3,727 3,427
Non-freight excluding leasing revenues 41 63
---------------------------------------- ---------------- ----------------
Revenues from contracts with customers 3,768 3,490
Leasing revenues 27 30
---------------------------------------- ---------------- ----------------
Total revenues $ 3,795 $ 3,520
======================================== ================ ================
4 Income taxes
The effective income tax rate including discrete items for the three months ended March 31, 2025 was 24.32%, compared to 25.09% for the same period of 2024.
For the three months ended March 31, 2025, the effective income tax rate was 24.50%, excluding the discrete items of amortization of business acquisition fair value adjustments of $94 million, and acquisition-related costs incurred by the Company of $20 million.
For the three months ended March 31, 2024, the effective income tax rate was 25.00%, excluding the discrete items of amortization of business acquisition fair value adjustments of $86 million, acquisition-related costs incurred by CPKC of $26 million, and adjustments to provisions for Mexican taxes of $10 million recognized in "Compensation and benefits".
Mexican Tax Settlements
During the three months ended March 31, 2025, the company received final audit letters for Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") for 2021 and a payment of $11 million was made in respect of that year.
2014 Tax Assessment
CPKCM's 2014 Tax Assessment is currently in litigation before the Federal Collegiate Circuit Courts (see Note 13).
5 Earnings per share
For the three months
ended March 31
(in millions, except per share data) 2025 2024
========================================== ================ ================
Net income attributable to controlling
shareholders $ 910 $ 775
------------------------------------------ ---------------- ----------------
Weighted-average basic shares outstanding 933.2 932.4
Dilutive effect of stock options 1.1 2.0
------------------------------------------ ---------------- ----------------
Weighted-average diluted shares
outstanding 934.3 934.4
------------------------------------------ ---------------- ----------------
Earnings per share - basic $ 0.98 $ 0.83
------------------------------------------ ---------------- ----------------
Earnings per share - diluted $ 0.97 $ 0.83
========================================== ================ ================
For the three months ended March 31, 2025, there were 1.5 million stock options excluded from the computation of diluted earnings per share because their effects were not dilutive (three months ended March 31, 2024 - 0.3 million).
6 Changes in Accumulated other comprehensive income ("AOCI") by component
Changes in AOCI attributable to controlling shareholders, net of tax, by component are as follows:
For the three months ended March 31
-------------------------------------------------------------------------------------------------------------------------
Foreign currency Pension and post- Equity
(in millions of net of hedging retirement defined accounted
Canadian dollars) activities Derivatives benefit plans investments Total
================== ========================== ===================== =========================== ======================= ================
Opening balance,
January 1, 2025 $ 3,413 $ 10 $ (738) $ (5) $ 2,680
Other
comprehensive
loss before
reclassifications (28) -- -- -- (28)
Amounts
reclassified from
AOCI -- -- 1 -- 1
------------------ -------------------------- --------------------- --------------------------- ----------------------- ----------------
Net other
comprehensive
(loss) income (28) -- 1 -- (27)
------------------ -------------------------- --------------------- --------------------------- ----------------------- ----------------
Balance as at
March 31, 2025 $ 3,385 $ 10 $ (737) $ (5) $ 2,653
================== ========================== ===================== =========================== ======================= ================
Opening balance,
January 1, 2024 $ 837 $ 5 $ (1,463) $ 3 $ (618)
Other
comprehensive
income before
reclassifications 685 -- -- -- 685
Amounts
reclassified from
AOCI -- 1 9 -- 10
------------------ -------------------------- --------------------- --------------------------- ----------------------- ----------------
Net other
comprehensive
income 685 1 9 -- 695
------------------ -------------------------- --------------------- --------------------------- ----------------------- ----------------
Balance as at
March 31, 2024 $ 1,522 $ 6 $ (1,454) $ 3 $ 77
================== ========================== ===================== =========================== ======================= ================
7 Accounts receivable, net
(in millions of Canadian dollars) As at March 31, 2025 As at December 31, 2024 ================ ========================================= ======================================= Total accounts receivable $ 2,150 $ 2,066 Allowance for credit losses (106) (98) ---------------- ----------------------------------------- --------------------------------------- Total accounts receivable, net $ 2,044 $ 1,968 ================ ========================================= =======================================
8 Debt
During the three months ended March 31, 2025, the Company repaid, at maturity, the remaining balance of U.S. $642 million ($930 million) on its 2.90% 10-year Notes.
Issuance of long-term debt
During the three months ended March 31, 2025, the Company issued U.S. $600 million 4.80% 5-year unsecured notes due March 30, 2030 for net proceeds of approximately U.S. $596 million ($857 million) and U.S. $600 million 5.20% 10-year unsecured notes due March 30, 2035 for net proceeds of approximately U.S. $593 million ($853 million). These notes pay interest semi-annually and carry a negative pledge.
Term credit facility
During the three months ended March 31, 2025, the Company entered into, and fully repaid, a U.S. $500 million unsecured non-revolving term credit facility (the "term facility"). The Company presents draws and repayments on its term facility in the Interim Consolidated Statements of Cash Flows on a net basis.
Credit facility
The Company's revolving credit facility agreement (the "facility") consists of a five-year U.S. $1.1 billion tranche maturing June 25, 2029 and a two-year U.S. $1.1 billion tranche maturing June 25, 2026. As at December 31, 2024 the Company had U.S. $200 million drawn from the two-year U.S. $1.1 billion tranche, which was subsequently repaid in full during the first quarter of 2025. As at March 31, 2025, the facility was undrawn (December 31, 2024 - U.S. $200 million ($288 million)). The Company presents draws and repayments on the facility in the Interim Consolidated Statements of Cash Flows on a net basis.
Commercial paper program
The Company has a commercial paper program, under which it may issue up to a maximum aggregate principal amount of U.S. $1.5 billion in the form of unsecured promissory notes. This commercial paper program is backed by a U.S. $2.2 billion revolving credit facility. As at March 31, 2025, the Company had total commercial paper borrowings outstanding of U.S. $786 million ($1,129 million) included in "Long-term debt maturing within one year" on the Company's Interim Consolidated Balance Sheets (December 31, 2024 - U.S. $1,102 million ($1,586 million)). The weighted-average interest rate on these borrowings as at March 31, 2025 was 4.60% (December 31, 2024 - 4.75%). The Company presents issuances and repayments of commercial paper, all of which have a maturity of less than 90 days, in the Interim Consolidated Statements of Cash Flows on a net basis.
9 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 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.
The Company's short-term financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term borrowings, including commercial paper and term loans. The carrying value of short-term financial instruments approximate their fair value.
The carrying value of the Company's debt does not approximate its fair value. The estimated fair value has been determined based on market information, where available, or by discounting future payments of principal and interest at estimated interest rates expected to be available to the Company at the balance sheet date. All measurements are classified as Level 2. The Company's long-term debt, including current maturities, with a carrying value of $21,523 million as at March 31, 2025 (December 31, 2024 - $20,749 million), had a fair value of $19,853 million (December 31, 2024 - $18,911 million).
B. Financial risk management
FX management
Net investment hedge
The majority of the Company's U.S. dollar-denominated long-term debt, finance lease obligations, and operating lease liabilities have been designated as a hedge of the Company's 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 effect of the Company's net investment hedge included in "Other comprehensive (loss) income" for the three months ended March 31, 2025 was an unrealized FX gain of $6 million (three months ended March 31, 2024 - unrealized FX loss of $103 million).
Mexican Peso- U.S. dollar FX Forward contracts
The Company's Mexican subsidiaries have net U.S. dollar-denominated monetary assets or liabilities which, for Mexican income tax purposes, are subject to periodic revaluation based on changes in the value of the Mexican peso ("Ps.") against the U.S dollar. This revaluation creates fluctuations in the Company's Mexican income tax expense and the amount of income taxes paid in Mexican pesos. The Company also has monetary assets or liabilities denominated in Mexican pesos that are subject to periodic re-measurement and settlement that create fluctuations within "Other expense (income)". Until January 2024, the Company had hedged its net exposure to Ps./U.S. dollar fluctuations in earnings with foreign currency forward contracts. The foreign currency forward contracts involved the Company's agreement to buy or sell Ps. at an agreed-upon exchange rate on a future date.
The Company measured the foreign currency derivative contracts at fair value each period and recognized any change in "Other expense (income)". The cash flows associated with these instruments were classified as "Operating activities" in the Interim Consolidated Statements of Cash Flows. The Company's foreign currency forward contracts were executed with counterparties in the U.S. and were governed by International Swaps and Derivatives Association agreements that included standard netting arrangements.
On January 12, 2024, the Company settled all outstanding foreign currency forward contracts, resulting in a cash outflow of $65 million. During the three months ended March 31, 2025, the Company recorded $nil related to foreign exchange currency forwards (three months ended March 31, 2024 - loss of $4 million). As of March 31, 2025 the Company had no outstanding foreign currency forward contracts (December 31, 2024 - $nil).
10 Share repurchases
On February 27, 2025, the Company announced a normal course issuer bid ("NCIB"), commencing March 3, 2025, to purchase up to 37.3 million Common Shares in the open market for cancellation on or before March 2, 2026. All purchases were made in accordance with the respective NCIB at prevailing market prices plus brokerage fees, with consideration allocated to "Share capital" up to the average carrying amount of the shares and any excess allocated to "Retained earnings".
In accordance with Canadian federal income tax legislation, the Company has accrued for a two percent tax on the fair market value of shares repurchased (net of qualifying issuances of equity) as a direct cost of common share repurchases recorded in Shareholders' equity. The Company has accrued a liability of $7 million for the tax due on the net share repurchases made in the first three months of 2025, payable within the first quarter of the following year.
The following table provides activities under the share repurchase program:
For the three months ended
March 31 2025
================================================== ==========================
Number of Common Shares repurchased(1) 3,480,658
Weighted-average price per share(2) $107.68
Amount of repurchase (in millions of Canadian
dollars)(2) $375
================================================== ==========================
(1) Includes shares repurchased but not yet cancelled at end of period.
(2) Includes brokerage fees and applicable tax on share repurchases.
11 Pension and other benefits
During the three months ended March 31, 2025, the Company made contributions to its defined benefit pension plans of $4 million (three months ended March 31, 2024 - $3 million).
Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:
For the three months ended March 31
------------------------------------------------------------------------------------------------------------
Pensions Other benefits Total
(in millions of
Canadian
dollars) 2025 2024 2025 2024 2025 2024
================ ================ ================ ================= ================= ================ ================
Current service
cost $ 21 $ 21 $ 3 $ 3 $ 24 $ 24
Other components
of net periodic
benefit
(recovery)
cost:
Interest cost
on benefit
obligation 117 117 5 6 122 123
Expected return
on plan
assets (232) (223) -- -- (232) (223)
Recognized net
actuarial
loss 2 10 -- -- 2 10
Amortization of
prior service
costs 1 2 -- -- 1 2
---------------- ---------------- ---------------- ----------------- ----------------- ---------------- ----------------
Total other
components of
net periodic
benefit
(recovery)
cost (112) (94) 5 6 (107) (88)
---------------- ---------------- ---------------- ----------------- ----------------- ---------------- ----------------
Net periodic
benefit
(recovery)
cost $ (91) $ (73) $ 8 $ 9 $ (83) $ (64)
================ ================ ================ ================= ================= ================ ================
12 Stock-based compensation
As at March 31, 2025, the Company had several stock-based compensation plans including a stock options plan, various cash-settled liability plans, and an employee share purchase plan. These plans resulted in an expense for the three months ended March 31, 2025 of $34 million (three months ended March 31, 2024 - expense of $59 million).
Stock options plan
In the three months ended March 31, 2025, under the Company's stock options plan, the Company issued 967,335 options at the weighted-average price of $110.48 per share, based on the closing price on the grant date. Pursuant to the employee plan, these options may be exercised upon vesting, which is between 12 months and 48 months after the grant date, and will expire seven years from the grant date.
Under the fair value method, the fair value of the stock options at the grant date was approximately $28 million.
Performance share unit plans
During the three months ended March 31, 2025, the Company issued 594,802 Performance Share Units ("PSUs") with a grant date fair value of $66 million and 24,149 Performance Deferred Share Units ("PDSUs") with a grant date fair value, including the fair value of expected future matching units, of $3 million. PSUs and PDSUs attract dividend equivalents in the form of additional units based on dividends paid on the Company's Common Shares, and vest three to four years after the grant date, contingent on the Company's performance ("performance factor"). Vested PSUs are settled in cash. Vested PDSUs are converted into DSUs pursuant to the DSU plan, are eligible for a 25% Company match if the employee has not exceeded their Common Share ownership requirements, and are settled in cash only when the holder ceases their employment with the Company.
The performance period for all PSUs and all PDSUs granted in the three months ended March 31, 2025 is January 1, 2025 to December 31, 2027 and the performance factors are Free Cash Flow ("FCF") and Total Shareholder Return ("TSR"), compared to the S&P/TSX 60 Index, TSR compared to the S&P 500 Industrials Index, and TSR compared to Class I railways.
The performance period for all of the 415,660 PSUs and 13,506 PDSUs granted in 2022 was January 1, 2022 to December 31, 2024, and the performance factors were FCF, Adjusted net debt to Adjusted EBITDA Modifier, TSR compared to the S&P/TSX 60 Index, and TSR compared to the S&P 500 Industrials Index. The resulting payout was 120% of the outstanding units multiplied by the Company's average common share price calculated based on the last 30 trading days preceding December 31, 2024. In the first quarter of 2025, payouts were $48 million on 381,759 PSUs, including dividends reinvested. The 9,774 PDSUs that vested on December 31, 2024, with a fair value of $2 million, including dividends reinvested and matching units, will be paid out in future reporting periods pursuant to the DSU plan (as described above).
13 Contingencies
Litigation
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, 2025 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 business, financial position, results of operations, or liquidity. However, an unexpected adverse resolution of one or more of these legal actions could have a material adverse effect on the Company's business, financial position, results of operations, or liquidity in a particular quarter or fiscal year.
Legal proceedings related to Lac-Mégantic rail accident
On July 6, 2013, a train carrying petroleum crude oil operated by Montréal Maine and Atlantic Railway ("MMAR") or a subsidiary, Montréal Maine & Atlantic Canada Co. ("MMAC" and collectively the "MMA Group"), derailed in Lac-Mégantic, Québec. The derailment occurred on a section of railway owned and operated by the MMA Group and while the MMA Group exclusively controlled the train.
Following the derailment, MMAC sought court protection in Canada under the Companies' Creditors Arrangement Act and MMAR filed for bankruptcy in the U.S. Plans of arrangement were approved in both Canada and the U.S. (the "Plans"), providing for the distribution of approximately $440 million amongst those claiming derailment damages.
A number of legal proceedings, set out below, were commenced in Canada and the U.S. against the Company and others:
(1) Québec's Minister of Sustainable Development, Environment, Wildlife and Parks ordered various parties, including the Company, to remediate the derailment site (the "Cleanup Order") and served the Company with a Notice of Claim for $95 million for those costs. The Company appealed the Cleanup Order and contested the Notice of Claim with the Administrative Tribunal of Québec. These proceedings are stayed pending determination of the Attorney General of Québec ("AGQ") action (paragraph 2 below).
(2) The AGQ sued the Company in the Québec Superior Court claiming $409 million in damages, which was further amended and reduced to $231 million (the "AGQ Action"). The AGQ Action alleges that: (i) the Company was responsible for the petroleum crude oil from its point of origin until its delivery to Irving Oil Ltd.; and (ii) the Company is vicariously liable for the acts and omissions of the MMA Group.
(3) A class action 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 was certified against the Company on May 8, 2015 (the "Class Action"). Other defendants including MMAC and Mr. Thomas Harding ("Harding") were added to the Class Action on January 25, 2017. On November 28, 2019, the plaintiffs' motion to discontinue their action against Harding was granted. The Class Action seeks unquantified damages, including for wrongful death, personal injury, property damage, and economic loss.
(4) Eight subrogated insurers sued the Company in the Québec Superior Court claiming approximately $16 million in damages, which was amended and reduced to approximately $14 million (the "Promutuel Action"), and two additional subrogated insurers sued the Company claiming approximately $3 million in damages (the "Royal Action"). Both actions contain similar allegations as the AGQ Action. The actions do not identify the subrogated parties. As such, the extent of any overlap between the damages claimed in these actions and under the Plans is unclear. The Royal Action is stayed pending determination of the consolidated proceedings described below.
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