01—Abstract
Summary
Summary of the 6-K filed March 30, 2007. Cited figures are marked; the original filing is the authoritative source.
This Form 6-K, furnished by Canadian Pacific Railway Limited (CP) in March 2007, is primarily a shareholder-meeting package rather than a material event filing.
It contains the Notice of the May 11, 2007 Annual Meeting, the Management Proxy Circular (director elections, auditor appointment via PricewaterhouseCoopers LLP, and executive and director compensation), a form of proxy, and the 2006 Annual Report. Pages 8 through 92 of the annual report are filed separately on the Form 40-F, and the rest is furnished here. The most investor-relevant content is the 2006 financial performance.
CP reported record results: revenues of C$4,583.2 milliona (up 4.4%), operating ratio improved to 75.4% from 77.2%, net income of C$796.3 million (boosted by a C$176 million one-time tax benefit from rate cuts), GAAP diluted EPS of C$5.02, and adjusted diluted EPS of C$3.95 (up 20%). Free cash was C$244.9 million. Management guided 2007 for EPS growth of 9% to 13%, revenue growth of 4% to 6%, free cash after dividends above C$250 million, and capital spending of C$885 to C$895 million.
Governance items include the retirement of director J.R. Nininger, the first-time nomination of Krystyna Hoeg, a new CEO (Fred Green, appointed May 2006), a new CFO (M.R.
Lambert, hired October 2006), and a 2007 share repurchase authorization of up to 5.5 million shares. Shareholders of record as of March 22, 2007 are entitled to vote, and CP had 155,527,229 shares outstanding as of March 2, 2007.
02—Key points
Key Highlights
- Record 2006 results: revenues of C$4,583.2M (+4.4%), operating ratio improved to 75.4% from 77.2%, and adjusted diluted EPS of C$3.95 (+20%).
- GAAP net income of C$796.3M and diluted EPS of C$5.02 were inflated by a one-time C$176M future income tax benefit from Canadian and provincial corporate tax rate reductions.
- Free cash rose to C$244.9M in 2006 from C$92.0M in 2005, supported by lower capital spending and proceeds from the Latta subdivision sale.
- 2007 guidance: EPS growth of 9% to 13%, revenue growth of 4% to 6%, free cash after dividends above C$250M, and capital spending of C$885M to C$895M.
- Board changes: Dr. J.R. Nininger retires at the May 11, 2007 meeting, and Krystyna T. Hoeg stands for election for the first time. The annual meeting also includes auditor appointment (PricewaterhouseCoopers LLP) and the 2006 financial statements.
- Capital return: CP repurchased about 5.0M shares in 2006 at an average of C$57.27, and announced intent to buy up to 5.5M shares in 2007 subject to regulatory approval; the dividend was raised to C$0.225 per quarter.
- Shareholder voting: 155.5M shares outstanding at March 2, 2007, with a March 22, 2007 record date. Only the 2006 annual report pages not filed on Form 40-F are furnished here.
03—Questions
Frequently Asked Questions
Why did CP file this 6-K in March 2007?
The filing furnishes the materials for the May 11, 2007 annual shareholder meeting, including the notice, management proxy circular, form of proxy, and the 2006 Annual Report, to the SEC under its foreign private issuer reporting requirements.
How strong were CP's 2006 earnings, and what drove them?
Adjusted diluted EPS rose 20% to C$3.95, and the operating ratio improved to a record 75.4%. Drivers included higher freight rates, strong grain volumes, productivity gains from the Integrated Operating Plan, and restructuring savings. Coal and potash volumes weakened, and the Canadian dollar's strength reduced results. GAAP EPS of C$5.02 was boosted by a one-time C$176M tax benefit.
What are the key 2007 financial targets?
Management guided to EPS growth of 9% to 13%, revenue growth of 4% to 6%, and free cash after dividends above C$250M. Planned capital spending is C$885M to C$895M, including investment for a new Toyota plant in Ontario.
What shareholder votes are scheduled for the May 2007 meeting?
Shareholders will receive the 2006 financial statements, elect directors (Dr. Nininger is retiring; Krystyna Hoeg is a new nominee), and appoint PricewaterhouseCoopers LLP as auditors through the 2008 annual meeting. Holders of record as of March 22, 2007 may vote.
Does CP have significant shareholder concentration or capital return plans?
No holder owned 10% or more of the shares as of March 2, 2007. CP plans a further normal course issuer bid for up to 5.5M shares in 2007, subject to regulatory approval, and raised its quarterly dividend to C$0.225 for payment in April 2007.
04—Continue