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CANADIAN PACIFIC KANSAS CITY LTD/CN 8-K Report (Aug 6, 2004)

Filing Date
Filed August 6, 2004
Period End
August 6, 2004
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 August 6, 2004. Cited figures are marked; the original filing is the authoritative source.

Canadian Pacific Railway's August 6, 2004 Form 6-K furnishes its Q2 2004 earnings release, interim financial statements, MD&A, and an updated earnings coverage exhibit tied to a US$750 milliona base shelf prospectus.

Q2 2004 revenue rose 10% to C$1,004.7 millionb, operating income before special items rose 19% to C$220.6 million, and the operating ratio improved 1.7 points to 78.0%. Volumes drove growth: carloads rose 9% and revenue ton-miles rose 11%, led by bulk commodities, intermodal, and industrial products. Reported net income rose to C$83.7 million (diluted EPS C$0.53) from C$34.1 million, but the comparison is flattered by a C$215.1 million pre-tax special charge in Q2 2003.

Excluding foreign exchange losses on long-term debt and that 2003 charge, income rose 23% to C$104 millionc and diluted EPS was C$0.65 versus C$0.53. For the first half, underlying diluted EPS was C$0.89, up from C$0.76, while reported H1 net income fell to C$107.2 million because of a foreign exchange loss on U.S.-dollar debt, compared with a gain a year earlier. Management reiterated 2004 guidance for underlying diluted EPS growth of 5% to 10% over restated 2003 EPS of C$2.07, despite higher fuel prices, and noted a normalized tax rate of 32% to 34%.

Capital spending is projected at C$670 milliond to C$710 million, and the company expects to remain highly exposed to the Canadian dollar and fuel costs. Net debt to net debt plus equity was 47.0%, and the company declared a quarterly dividend of C$0.1325 per share. Investors should note the filing is a Canadian-GAAP, Canadian-dollar disclosure and that the earnings excluding FX and special items are non-GAAP measures.

02—Key points

Key Highlights

  1. Q2 2004 revenue rose 10% to C$1,004.7 million, with bulk commodities contributing nearly two-thirds of the increase.
  2. Operating ratio improved 1.7 points to 78.0% in Q2 2004 (82.2% for H1), with operating income before special items up 19% to C$220.6 million.
  3. Reported Q2 diluted EPS of C$0.53 (up from C$0.22); excluding FX on long-term debt and the 2003 special charge, diluted EPS rose 23% to C$0.65.
  4. H1 2004 reported net income fell to C$107.2 million from C$136.0 million due to a C$33.3 million pre-tax FX loss on long-term debt versus a gain a year earlier.
  5. Full-year 2004 guidance: underlying diluted EPS growth of 5% to 10% over restated 2003 EPS of C$2.07, despite higher fuel prices.
  6. Volumes grew strongly: carloads up 9% and revenue ton-miles up 11% in Q2, with grain, coal, sulphur/fertilizers and intermodal leading.
  7. Capital spending projected at C$670–710 million for 2004; quarterly dividend declared at C$0.1325 per share, and net debt to total capital at 47.0%.

03—Questions

Frequently Asked Questions

  1. How did CPR's underlying earnings perform in Q2 2004?

    Excluding foreign exchange losses on long-term debt and the 2003 special charge, income rose 23% to C$104 million, and diluted EPS rose to C$0.65 from C$0.53. Operating income before special items grew 19% to C$220.6 million, driven by higher freight volumes and improved operating efficiency.

  2. Why did reported net income rise so sharply in Q2 2004?

    Q2 2003 included a C$215.1 million pre-tax special charge for labour restructuring and asset impairment, which depressed that year's results. Q2 2004 had no special charge, although it included a C$20.0 million pre-tax foreign exchange loss on long-term debt, compared with a C$98.3 million gain in Q2 2003.

  3. What is the company's 2004 earnings outlook?

    CPR expects diluted EPS, excluding FX on long-term debt and other specified items, to grow 5% to 10% over restated 2003 EPS of C$2.07. The outlook assumes a near-normal Canadian grain crop, oil at about US$37 per barrel, an exchange rate of C$1.34 per U.S. dollar, and a normalized tax rate of 32% to 34%, including the impact of Ontario's tax rate increase.

  4. What are the main risks to the outlook?

    Key risks include fuel price volatility (roughly C$9 million of added fuel expense per US$1 rise in WTI before hedging), Canadian dollar strength, which reduces U.S.-dollar revenues and operating income, and weather or grain-crop variability. Management also cites capacity constraints, a dispute with its largest coal customer, and a pending Quebec loan guarantee that could be called. Labour contracts with the CAW and IBEW expire at the end of 2004.

  5. How is the balance sheet and cash position?

    At June 30, 2004, cash and short-term investments were C$305.4 million, total assets were C$10.4 billion, and shareholders' equity was C$3.7 billion. Net debt to net debt plus equity was 47.0%, and interest coverage on long-term debt was 3.2 times after special items. Cash from operations was C$352.0 million in H1, and free cash after dividends was negative C$11.3 million for the period.

04—Continue

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