Q1 2017 presentation final
- 2. FORWARD LOOKING STATEMENTS The following investor presentation contains certain forward-looking information within the meaning of applicable securities laws relating, but not limited, to Canadian Pacific’s operations, priorities and plans, anticipated financial performance, business prospects, planned capital expenditures, programs and strategies. This forward-looking information also 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 such as “anticipate”, “believe”, “expect”, “plan” or similar words suggesting future outcomes. Undue reliance should not be placed on forward-looking information as actual results may differ materially from the forward-looking information. Forward-looking information is not a guarantee of future performance. By its nature, CP’s forward-looking information involves numerous assumptions, 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; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; inflation; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions and discount rates on the financial position of pension plans and including long-term floating rate notes; and investments, various events that could disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and governmental response to them, and technological changes. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CP with securities regulators in Canada and the United States. Reference should be made to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in CP’s annual and quarterly reports filed on Form 10-K and 10-Q, respectively. Forward-looking information is based on current expectations, estimates and projections and it is possible that predictions, forecasts, projections, and other forms of forward-looking information will not be achieved by CP. Except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise.
- 3. NOTE ON NON-GAAP MEASURES Except where noted, all figures are in millions of Canadian dollars. Financial information is prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), unless otherwise noted. CP presents non-GAAP earnings information in this presentation to provide a basis for evaluating underlying earnings trends that can be compared with the prior period's results. It should be noted that CP’s non-GAAP earnings as described in this presentation, have no standardized meanings and are not defined by U.S. GAAP and, therefore, are unlikely to be comparable to similar measures presented by other companies. For further information regarding non-GAAP measures see the Non- GAAP Measures supplement to the press release on our website at www.cpr.ca.
- 5. Q1 HIGHLIGHTS DELIVERING IN A CHALLENGING OPERATING ENVIRONMENT (1) For a full description and reconciliation of Non-GAAP Measures see CP’s Q1 2017 Earnings Release on www.cpr.ca ADJUSTED DILUTED EPS(1) ADJUSTED OPERATING RATIO(1) 61.3% $2.50 Solid Start to the Year Volumes in line with our expectations RTMs have recently inflected positive Seamless Transition A testament to our bench strength and operating model The First 90 Days Engaging with key stakeholders Solidifying the team REVENUES $1.6B
- 7. REVENUE PERFORMANCE 9% 3% 23% -25% -3% -11% 32% -14% 5% Grain Coal Potash Fertilizers & sulphur Forest products Energy, chemicals & plastics Metals, minerals, consumer Automotive Intermodal FX-adjusted revenue variance(1) -71% FREIGHT REVENUE +1%VS Q1 2016 (1) For a full reconciliation of FX-adjusted revenue variances, please see CP’s Q1 2017 Earnings Release on www.cpr.ca RTMs: flat Freight Revenue per RTM: +1% • FX: -2% • Fuel: +2% • Price & mix: +1%
- 9. (1) For a full reconciliation of FX-adjusted variances, please see CP’s Q1 2017 Earnings Release on www.cpr.ca (2) Adjusting to exclude $51 million of management transition cost recoveries in Q1 2017 (3) For a full description and reconciliation of Non-GAAP Measures see CP’s Q1 2017 Earnings Release on www.cpr.ca FINANCIAL PERFORMANCE First Quarter FX-Adjusted (In millions, except percentages and per share data) 2017 2016 Change % Change % (1) Total revenues $ 1,603 $ 1,591 1 3 Operating expenses Compensation and benefits 233 329 (29) (28) Fuel 170 125 36 39 Materials 49 56 (13) (11) Equipment rents 36 45 (20) (18) Depreciation and amortization 166 162 2 4 Purchased services and other 278 221 26 29 Total operating expenses 932 938 (1) 1 Adjusted total operating expenses(2) 983 938 5 7 Operating income 671 653 3 6 Adjusted operating income(2) 620 653 (5) (3) Other income and charges (28) (181) (85) Net interest expense 120 124 (3) Income tax expense 148 170 (13) Net income 431 540 (20) Adjusted income(3) 368 384 (4) Diluted earnings per share $2.93 $3.51 (17) Adjusted diluted earnings per share(3) $2.50 $2.50 — Operating ratio 58.1% 58.9% (80) bps Adjusted operating ratio(3) 61.3% 58.9% 240 bps