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CANADIAN PACIFIC KANSAS CITY LTD/CN 8-K Report (Oct 26, 2004)

Filing Date
Filed October 26, 2004
Period End
October 26, 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 October 26, 2004. Cited figures are marked; the original filing is the authoritative source.

Canadian Pacific Railway (CP) furnished a 6-K on October 26, 2004 containing its third-quarter 2004 earnings release.

Reported net income was C$177 milliona ($1.11 per diluted share), versus C$91 million ($0.57) in Q3 2003. The result was flattered by an after-tax C$73 million foreign exchange gain on long-term debt. Excluding FX on long-term debt, income rose 9% to C$104 million ($0.65 per diluted share) from C$95 million ($0.60).

Operating income grew 8% to C$219 millionb, revenue rose C$85 million across nearly all business lines (grain was the exception, delayed by a late harvest), and the operating ratio was 77.9% versus 77.5%, a modest deterioration as higher fuel prices, crew training costs and a return to normal incentive compensation pushed expenses up C$70 million. For the first nine months of 2004, net income was C$284 million ($1.79 per diluted share), and earnings excluding FX and the prior-year special charge were C$245 million ($1.54), up from $1.36. Year-to-date operating ratio, excluding the 2003 special charge, improved 0.5 points to 80.7%.

Intermodal, on pace to become a C$1 billionc business line in 2004, and coal were the main growth drivers. Management also noted that its fuel surcharge program recovered about three-quarters of the price-related fuel cost increase in the quarter, though record oil prices remain a headwind. The company reaffirmed its 2004 outlook, guiding to 5% to 10% growth in diluted EPS excluding FX and other specified items over restated 2003 EPS of $2.07, based on oil averaging US$50 per barrel and an exchange rate of C$1.29 per U.S. dollar in Q4.

The release also restated 2003 comparatives for new asset retirement obligation and stock option expensing rules, which reduced Q3 2003 net income by C$4 milliond. Investors should note that headline EPS is heavily influenced by currency-driven debt revaluation, so the underlying non-GAAP growth rate is the better guide to operating performance.

02—Key points

Key Highlights

  1. Q3 2004 net income of C$177M ($1.11 diluted EPS), up from C$91M ($0.57), but including a C$73M after-tax FX gain on long-term debt
  2. Excluding FX on long-term debt, Q3 income rose 9% to C$104M ($0.65 per diluted share) from $0.60
  3. Operating income up 8% to C$219M; revenue up C$85M (9.4%) with growth in all business lines except grain
  4. Operating ratio of 77.9% in Q3 vs. 77.5% a year earlier, as fuel, crew training and incentive compensation costs rose
  5. Year-to-date operating ratio excluding 2003 special charge improved 0.5 points to 80.7%; intermodal on pace to reach C$1 billion
  6. 2004 guidance reaffirmed: diluted EPS excluding FX and specified items to grow 5% to 10% over restated 2003 EPS of $2.07
  7. Fuel surcharge program recovered about three-quarters of Q3 price-related fuel cost increases; 2003 comparatives restated for ARO and stock option accounting

03—Questions

Frequently Asked Questions

  1. Why did reported net income more than double in Q3 2004?

    Reported net income of C$177 million compared with C$91 million, but about C$73 million of the increase came from an after-tax foreign exchange gain on U.S.-dollar-denominated long-term debt, which fluctuates with the Canadian dollar. Excluding that item, income rose 9% to C$104 million.

  2. How is the underlying business performing?

    Operating income grew 8% to C$219 million on revenue growth of C$85 million, with volumes up in six of seven business lines. Higher fuel prices, temporary crew-training costs and a return to normal incentive pay pushed operating expenses up C$70 million, leaving the operating ratio slightly worse at 77.9%.

  3. What is management's 2004 outlook?

    CPR expects continued strong freight volumes through year-end, including a near-normal grain crop delayed by a late harvest. It projects diluted EPS excluding FX and specified items to grow 5% to 10% over restated 2003 EPS of $2.07, assuming oil averages US$50 per barrel and the exchange rate is C$1.29 per U.S. dollar in Q4.

  4. What risks are highlighted in the release?

    Record world oil prices are the main cost challenge, though the improved fuel surcharge program is offsetting much of the increase. Currency movements create earnings volatility through debt revaluation, and the release refers investors to the annual report and annual information form for a full list of risk factors.

  5. Why were 2003 figures restated, and does it matter for comparisons?

    The restatement adopts new Canadian GAAP rules for asset retirement obligations (effective 2004) and expensing of stock options (2003). The combined effect reduced Q3 2003 net income by C$4 million, or $0.03 per basic share, so year-over-year comparisons use the restated base and are only modestly affected.

04—Continue

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