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CANADIAN PACIFIC KANSAS CITY LTD/CN 8-K Report (Oct 30, 2003)

Filing Date
Filed October 30, 2003
Period End
October 30, 2003
Security
CP
In the record · 2016–202610-K2010-Q328-K361

CP filed 20 annual reports (10-K), 32 quarterly reports (10-Q) and 361 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Feb ’17Feb ’17
  2. Material agreement8-K · Oct ’19Oct ’19
  3. Deal closed8-K · Dec ’21Dec ’21
  4. Material agreement8-K · Aug ’25Aug ’25

01—Abstract

Summary

Summary of the 6-K filed October 30, 2003. Cited figures are marked; the original filing is the authoritative source.

Canadian Pacific Railway (CP) reported third-quarter 2003 net income of $95 milliona (diluted EPS $0.59), up 45% from $65 million a year earlier, though excluding foreign exchange losses on long-term debt, income fell to $99 million from $108 million.

Revenue was essentially flat at $904 millionb versus $917 million, as a 13% appreciation of the Canadian dollar cut revenue by $53 million and operating income by $17 million. Excluding the currency effect, freight revenue grew about 5%, driven by grain, intermodal, and sulphur/fertilizer volumes. Operating income fell 7% to $209 million and the operating ratio widened to 76.9% from 75.6%.

Year-to-date results were weaker. Nine-month net income declined to $226 millionc from $370 million, and diluted EPS fell to $1.42 from $2.33. The decline reflects a $228.5 million pre-tax special charge ($150 million after tax) for a workforce reduction of 820 positions, a write-down of the Delaware & Hudson (Northeastern U.S.) operations, and a supply-chain subsidiary write-off, as well as a $72 million tax benefit recorded in 2002 that did not recur.

Excluding the special charge and FX gains on debt, nine-month operating ratio deteriorated to 80.8%d from 77.2%, pressured by fuel costs up 14%, higher insurance premiums, and a seven-week traffic controller strike. Management emphasized a fourth-quarter rebound, citing a larger Canadian grain crop, robust intermodal activity, and expanded capacity from new locomotives, about 2,800 additional grain cars, and accelerated track work.

Coal volumes, which were down 3% year-to-date, are expected to recover. Balance sheet metrics show long-term debt rising to $3.45 billion from $2.92 billion, largely from a $193.5 million consolidation of a variable interest entity holding rail cars and new debt issuance, while cash increased to $360 million.

02—Key points

Key Highlights

  1. Q3 2003 net income rose 45% to $95 million ($0.59 diluted EPS), but excluding FX on long-term debt, income fell to $99 million from $108 million
  2. Q3 revenue slipped 1.4% to $904 million; excluding currency effects, freight revenue grew about 5% on higher volumes
  3. Q3 operating ratio worsened to 76.9% from 75.6%, with operating income down 7% to $209 million
  4. Nine-month net income fell 39% to $226 million, reflecting a $150 million after-tax special charge for 820 job cuts and the Northeastern U.S. (D&H) asset write-down
  5. Stronger Canadian dollar (up 13% year over year in Q3) reduced quarterly revenue by $53 million and operating income by $17 million
  6. Fourth-quarter outlook is positive, with a larger grain crop, strong intermodal, and expected coal recovery supported by added locomotives, grain cars, and double-stack cars
  7. Long-term debt increased to $3.45 billion from $2.92 billion, partly from consolidating a $193.5 million rail-car variable interest entity

03—Questions

Frequently Asked Questions

  1. Why did net income rise 45% in Q3 2003 if operations were weaker?

    The increase is largely due to foreign exchange. CP recorded only a $3.9 million FX loss on long-term debt in Q3 2003, versus $46.9 million in Q3 2002. Excluding that item, net income was $99 million, down from $108 million, and operating income fell 7%.

  2. What was the special charge in 2003 and what does it involve?

    CP recorded a $228.5 million pre-tax ($150 million after-tax) special charge in Q2 2003. It includes a $105.5 million accrual to eliminate 820 positions through 2005, a $116.1 million write-down of Delaware & Hudson's assets in the Northeastern U.S., and a $6.9 million write-off of two non-core investments.

  3. How did the stronger Canadian dollar affect results?

    A 13% appreciation in Q3 reduced revenue by $53 million and expenses by $36 million, for a net $17 million hit to operating income. Year-to-date, the 10% appreciation reduced revenue by $112 million and operating income by $32 million. CP reports in Canadian dollars, and much of its revenue is U.S.-dollar denominated.

  4. What drove the operating ratio deterioration and what is management's outlook?

    Fuel costs rose sharply with crude prices up 15% in Q3 and 14% higher fuel expense year to date. Insurance premiums, derailment costs, and track maintenance also weighed on results, along with a seven-week traffic controller strike. Management expects a Q4 rebound from a larger grain crop, intermodal strength, and a coal recovery, supported by added capacity.

04—Continue

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