CPKC delivers strong fourth-quarter results; positioned to accelerate growth in 2025

Full-year 2024 results³

• Reported operating ratio (OR) decreased by 60 basis points to 64.4 percent from 65.0 percent in 2023
• Core adjusted combined OR¹ decreased by 70 basis points to 61.3 percent from 62.0 percent in 2023
• Reported diluted EPS decreased to $3.98 from $4.21 in 2023
• Core adjusted combined diluted EPS¹ increased 11 percent to $4.25 from $3.84 in 2023
• FRA-reportable personal injury frequency decreased to 0.95 from 1.15 in 2023^{2, 4}
• FRA-reportable train accident frequency increased to 1.01 from 0.99 in 2023⁴

In 2024, for the second consecutive year, CPKC led the industry with the lowest FRA-reportable train accident frequency among Class 1 railroads, building on Canadian Pacific's legacy of 17 consecutive years of industry leadership.

"Looking forward to 2025, we expect another year of strong earnings growth consistent with CPKC's multi-year guidance provided at our 2023 Investor Day," Creel added. "We continue to do what we said we would do, staying focused on safety and growth. The opportunities ahead of us are unique as we have the team, the network and the capacity to deliver strong results for all stakeholders."

Full-year 2025 Guidance

• CPKC expects core adjusted diluted EPS¹ to increase between 12 and 18 percent versus 2024 core adjusted combined diluted EPS¹ of $4.25
• Mid-single digit volume growth, as measured in Revenue Ton Miles
• Capital expenditures of $2.9 billion, with the increase compared to 2024 driven by a higher expected USD/CAD FX rate
• Other components of net periodic benefit recovery will increase by $76 million from $352 million in 2024

Conference Call Details
CPKC will discuss its results with the financial community in a conference call beginning at 4:30 p.m. ET (2:30 p.m. MT) on Jan. 29, 2025.

Conference Call Access
Canada and U.S.: 800-343-4849
International: 203-518-9848
*Conference ID: CPKCQ424
Callers should dial in 10 minutes prior to the call.

Webcast
We encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com. 

A replay of the fourth-quarter conference call will be available by phone through Feb. 5, 2025, at 800-839-3516 (Canada/U.S.) or 402-220-7238 (International).

Forward-looking information
This news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the U.S. and Canada. Forward-looking information 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 or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "guidance", "should" or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited, to statements concerning our ability to deliver on our financial guidance for 2025, strategic initiatives and investments, the success of our business, the realization of anticipated benefits and synergies of the CP-KCS combination, and the opportunities arising therefrom, our operations, priorities and plans, anticipated financial and operational performance, business prospects and demand for our services and growth opportunities.

The forward-looking information in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty.

Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves 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 and strategic opportunities; general Canadian, U.S., Mexican and global social, economic, political, credit and business conditions; risks associated with agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures, including competition from other rail carriers, trucking companies and maritime shippers in Canada, the U.S. and Mexico; North American and global economic growth and conditions; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped via CPKC; inflation; geopolitical instability; changes in laws, regulations and government policies, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; changes in fuel prices; disruption in fuel supplies; uncertainties of investigations, proceedings or other types of claims and litigation; compliance with environmental regulations; labour disputes; changes in labour costs and labour difficulties; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; sufficiency of budgeted capital expenditures in carrying out business plans; services and infrastructure; the satisfaction by third parties of their obligations; currency and interest rate fluctuations; exchange rates; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; trade restrictions or other changes to international trade arrangements; the effects of current and future multinational trade agreements on the level of trade among Canada, the U.S. and Mexico; climate change and the market and regulatory responses to climate change; anticipated in-service dates; success of hedging activities; operational performance and reliability; customer, regulatory and other stakeholder approvals and support; regulatory and legislative decisions and actions; the adverse impact of any termination or revocation by the Mexican government of Kansas City Southern de México, S.A. de C.V.'s Concession; public opinion; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; acts of terrorism, war or other acts of violence or crime or risk of such activities; insurance coverage limitations; material adverse changes in economic and industry conditions, including the availability of short and long-term financing; the demand environment for logistics requirements and energy prices, restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions, and disruptions to global supply chains; the realization of anticipated benefits and synergies of the CP-KCS transaction and the timing thereof; the satisfaction of the conditions imposed by the U.S. Surface Transportation Board in its March 15, 2023 final decision; the success of integration plans for KCS; other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States. Reference should be made to "Item 1A - Risk Factors" and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Statements" in CPKC's annual and interim reports on Form 10-K and 10-Q.

Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise.

About CPKC
With its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC. CP-IR

FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)

NOTES TO CONSOLIDATED FINANCIAL INFORMATION
December 31, 2024
(unaudited)

1    Description of business and basis of presentation

Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning Canada, the United States ("U.S."), and Mexico. CPKC provides rail and intermodal transportation services over a network of approximately 20,000 miles, serving principal business centres across Canada, the U.S., and Mexico. The Company transports bulk commodities, merchandise, and intermodal freight. CPKC's Common Shares trade on the Toronto Stock Exchange and New York Stock Exchange under the symbol "CP".

On April 14, 2023, Canadian Pacific Railway Limited ("CPRL") assumed control of Kansas City Southern ("KCS") and changed its name to Canadian Pacific Kansas City Limited. This unaudited consolidated financial information includes KCS as a consolidated subsidiary from April 14, 2023. For the period beginning on January 1, 2023 and ending on April 13, 2023, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment.

This unaudited consolidated financial information, expressed in Canadian dollars, reflects management's estimates and assumptions that are necessary for its fair presentation in conformity with accounting principles generally accepted in the U.S.  ("GAAP"). It does not include all disclosures required under GAAP for annual or interim financial statements. In management's opinion, all adjustments (consisting of normal and recurring adjustments) considered necessary for fair presentation have been included.

The accounting policies used in preparing this unaudited consolidated financial information are consistent with the accounting policies used in preparing the Company's Consolidated Financial Statements and related notes in Item 8. Financial Statements and Supplementary Data of the Company's 2023 Annual Report on Form 10-K, and should be read in conjunction with such financial statements and related notes.

2    Income taxes

During the fourth quarter and year ended December 31, 2024, the Company recorded a deferred income tax recovery of $78 million as a result of a decrease in the corporate income tax rate in the state of Louisiana.

During the fourth quarter and year ended December 31, 2023, the Company recorded deferred income tax recoveries of $7 million and $58 million, respectively, for the revaluation of deferred income tax balances on unitary state apportionment changes.

3    Business acquisition

The acquisition of KCS was completed on April 14, 2023. The Company continues to incur expenses related to this acquisition including consulting, legal, and integration costs, and recognizes incremental expense associated with the amortization of fair value adjustments associated with purchase accounting ("KCS purchase accounting").

During the fourth quarter and year ended December 31, 2024, the Company incurred $22 million and $112 million in acquisition-related costs, respectively, of which:

• $1 million and $18 million were recognized in "Compensation and benefits", respectively, primarily related to retention and synergy-related incentive compensation costs;
• $1 million and $6 million were recognized in "Materials", respectively; and
• $20 million and $88 million were recognized in "Purchased services and other", respectively, primarily related to system migration, legal and consulting fees, and relocation expenses.

During the fourth quarter and year ended December 31, 2023, the Company incurred $32 million and $190 million in acquisition-related costs, respectively, of which:

• $7 million and $71 million were recognized in "Compensation and benefits", respectively, primarily related to restructuring costs, retention and synergy-related incentive compensation costs;
• $1 million and $2 million were recognized in "Materials", respectively;
• $24 million and $111 million were recognized in "Purchased services and other", respectively, including third party purchased services, and payments made to certain communities across the combined network to address the environmental and social impacts of increased traffic as required by voluntary agreements with communities and conditions imposed by the U.S. Surface Transportation Board (the "STB") pursuant to the STB's final decision approving the Company and KCS's joint merger application, including, but not limited to, payments related to new crossings, closure of existing crossings and other infrastructure projects; and
• $nil and $6 million, were recognized in "Other (income) expense", respectively.

KCS incurred acquisition-related costs of $11 million between January 1, 2023 and April 13, 2023, which were included in "Equity earnings of Kansas City Southern".

During the fourth quarter and year ended December 31, 2024, the Company recognized $93 million ($68 million after deferred income tax recovery of $25 million) and $352 million ($256 million after deferred income tax recovery of $96 million), respectively, of KCS purchase accounting, as follows:

• $87 million and $333 million recognized in "Depreciation and amortization", respectively;
• $1 million and $3 million recognized in "Purchased services and others", respectively;
• $1 million and $3 million recognized in "Other (income) expense", respectively;
• $6 million and $20 million recognized in "Net interest expense", respectively; and
• a recovery of $2 million and $7 million recognized in "Net loss attributable to non-controlling interest", respectively.

During the fourth quarter and year ended December 31, 2023, the Company recognized $87 million ($62 million after deferred income tax recovery of $25 million) and $297 million ($228 million after deferred income tax recovery of $69 million), respectively, of KCS purchase accounting, as follows:

• $85 million and $234 million recognized in "Depreciation and amortization", respectively;
• $1 million and $1 million recognized in "Purchased services and others", respectively;
• $nil and $48 million recognized in "Equity earnings of Kansas City Southern", respectively;
• $nil and $2 million recognized in "Other (income) expense", respectively;
• $6 million and $17 million recognized in "Net interest expense", respectively; and
• a recovery of $5 million and $5 million recognized in "Net loss attributable to non-controlling interest", respectively.

4    Debt

During the fourth quarter of 2024, the Company repaid, at maturity, the remaining balance of U.S. $1,429 million ($2,002 million) on its 1.35% 3-year Notes.

During the year ended December 31, 2024, the Company also repaid, at maturity, U.S. $48 million ($66 million) of its 5.41% senior secured Notes. The Company also repurchased, on the open market, certain of its senior Notes with principal values of U.S. $176 million ($241 million). These repurchases were accounted for as debt extinguishments, with gains of $22 million recorded in "Other (income) expense" on the Company's Consolidated Statements of Income.

Credit facility

Effective June 25, 2024, the Company entered into a third amended and restated revolving credit facility (the "facility") agreement to extend the maturity dates of its five-year U.S. $1.1 billion tranche and two-year U.S. $1.1 billion tranche to June 25, 2029 and June 25, 2026, respectively. As at December 31, 2024, the Company had U.S. $200 million ($288 million) drawn from the two-year U.S. $1.1 billion tranche (December 31, 2023 - undrawn) and was undrawn on the five-year U.S. $1.1 billion tranche (December 31, 2023 - undrawn). The interest rate on these borrowings is 5.57%. These borrowings are included in "Long-term debt maturing within one year" on the Company's Consolidated Balance Sheets.

Commercial paper program

The Company has a commercial paper program, under which it may issue up to a maximum aggregate principal amount of U.S. $1.5 billion in the form of unsecured promissory notes. This commercial paper program is backed by a U.S. $2.2 billion revolving credit facility. As at December 31, 2024, the Company had total commercial paper borrowings outstanding of U.S. $1,102 million ($1,586 million) included in "Long-term debt maturing within one year" on the Company's Consolidated Balance Sheets (December 31, 2023 - U.S. $800 million ($1,058 million)). The weighted-average interest rate on these borrowings as at December 31, 2024 was 4.75% (December 31, 2023 - 5.59%). The Company presents issuances and repayments of commercial paper, all of which have a maturity of less than 90 days, in the Company's Consolidated Statements of Cash Flows, on a net basis.

Summary of Rail Data⁽¹⁾