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What changed in CANADIAN PACIFIC KANSAS CITY LTD/CN's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CANADIAN PACIFIC KANSAS CITY LTD/CN's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+464 added−524 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in CANADIAN PACIFIC KANSAS CITY LTD/CN's 2024 10-K

464 paragraphs added · 524 removed · 369 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

103 edited+21 added−27 removed41 unchanged
Biggest changeGovernment Regulation The Company’s railway operations are subject to extensive federal laws, regulations, and rules in the countries in which it operates, which directly affect how operations and business activities are managed. 10 / CPKC 2023 ANNUAL REPORT Canada The Company’s rail operations in Canada are subject to economic regulation by the Canadian Transportation Agency (the "Agency”) pursuant to authorities under the CTA.
Biggest changeOperating income is typically lowest in the first quarter due to lower freight revenues and higher operating costs associated with winter conditions. 10 / CPKC 2024 ANNUAL REPORT Government Regulation The Company’s railway operations are subject to extensive federal laws, regulations, and rules in the countries in which it operates, which directly affect how operations and business activities are managed.
The Company's Grain network is unique among railways in North America as it is strategically positioned in the heart of grain-producing regions of western Canada and the Northern Plains of the U.S.
The Company's network is unique among railways in North America as it is strategically positioned in the heart of grain-producing regions of western Canada and the northern plains of the U.S.
The Company works closely with the Port of Montréal, a major year-round East Coast gateway to Europe, to serve markets primarily in Canada and the U.S. Midwest. Import traffic from the Port of Lázaro Cárdenas is primarily destined for Mexico.
Import traffic from the Port of Lázaro Cárdenas is primarily destined for Mexico. The Company works closely with the Port of Montréal, a major year-round East Coast gateway to Europe, to serve markets primarily in Canada and the U.S. Midwest.
Under this plan, the Company routinely examines and prioritizes railway assets, physical and cyber vulnerabilities, and threats, as well as tests and revises measures to provide essential railway security; ◦ The Company’s Public Safety Communication Centre ("PSCC") operates 24 hours a day.
Under this plan, the Company routinely examines and prioritizes railway assets, physical and cyber vulnerabilities, and threats, as well as tests and revises measures to provide essential railway security; and ◦ The Company’s Public Safety Communication Centre ("PSCC") operates 24 hours a day.
The Company's access to the Port of Saint John provides the fastest rail service from the East Coast to western Canadian and U.S. markets for import from and export to Europe, South America, and Asia. Fuel Cost Adjustment Program The short-term volatility in fuel prices may adversely or positively impact revenues.
The Company's access to the Port of Saint John provides the fastest rail service from the East Coast to Canadian and U.S. markets for import from and export to Asia, Europe, and South America. Fuel Cost Adjustment Program The short-term volatility in fuel prices may adversely or positively impact revenues.
Non-union employees also complete annual performance reviews with development action plans with their leaders to set individual goals tied to the Company's five foundations and track progress against Company expectations as well as career development goals. Additionally, the Company offers a robust set of leadership development programs to support employees career growth.
Non-union employees also complete annual performance reviews with development action plans with their leaders to set individual goals tied to the Company's five foundations and track progress against Company expectations as well as career development goals. Additionally, the Company offers a robust set of leadership development programs to support employees' career growth.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data, Note 28 Segmented and geographic information. Lines of Business The Company transports freight consisting of bulk commodities, merchandise, and intermodal traffic. Bulk commodities, which typically move in large volumes across long distances, include Grain, Coal, Potash, and Fertilizers and sulphur.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data, Note 27 Segmented and geographic information. Lines of Business The Company transports freight consisting of bulk commodities, merchandise, and intermodal traffic. Bulk commodities, which typically move in large volumes across long distances, include Grain, Coal, Potash, and Fertilizers and sulphur.
Seasonality Volumes and revenues from certain goods are stronger during different periods of the year. First-quarter revenues are typically lower mainly due to winter weather conditions, which results in reduced capacity under the winter operating plan with train length restrictions, the closure of the Port of Thunder Bay, and reduced transportation of retail goods.
Seasonality Volumes and revenues from certain goods are higher during different periods of the year. First-quarter revenues are typically lower mainly due to winter weather conditions which results in reduced capacity under the winter operating plan with train length restrictions, the closure of the Port of Thunder Bay, and reduced transportation of retail goods.
To lead our focus on decarbonization, in 2022 we established a Carbon Reduction Task Force, composed of the Company’s industry-leading engineers and operations experts. Reporting to the Sustainability Steering Committee, the Carbon Reduction Task Force evaluates, recommends, and implements climate action measures to reduce GHG emissions and drive performance in the direction of our science-based targets.
To lead our focus on decarbonization, in 2022 we established a Carbon Reduction Task Force, composed of the Company’s engineers and operations experts. Reporting to the Sustainability Steering Committee, the Carbon Reduction Task Force evaluates, recommends, and implements climate action measures to reduce GHG emissions and drive performance in the direction of our science-based targets.
Although the Company provides a breakdown of revenue by business line, the overall financial and operational performance of the Company is analyzed as one segment due to the integrated nature of the rail network. Additional information regarding the Company's business and operations, including revenue and financial information, and information by geographic location is presented in Item 7.
Although the Company provides a breakdown of revenue by business line, the overall financial and operational performance of the Company is analyzed as one segment due to the integrated nature of the rail network. Additional information regarding the Company's business and operations, including revenue and financial information, and information by geographic location is presented in Part II, Item 7.
As part of this commitment, Corporate Security is responsible for overseeing: the security of the international supply chain and its requisite programs; providing training and awareness to employees and contractors; assessing the risk and vulnerability of the Company’s properties; establishing appropriate countermeasures to secure and protect the Company’s properties and assets; and engage with customers and the public.
As part of this commitment, Corporate Security is responsible for: overseeing the security of the international supply chain and its requisite programs; providing training and awareness to employees and contractors; assessing the risk and vulnerability of the Company’s properties; establishing appropriate countermeasures to secure and protect the Company’s properties and assets; and engaging with customers and the public.
Sustainability Governance The Company has established a clear governance structure to effectively communicate and respond to relevant ESG topics, while striving to be proactive in implementing its sustainability commitments and practices. The Board of Directors, through its committees, is responsible for the monitoring and oversight of the Company's key risks and strategies on sustainability topics.
Sustainability Governance The Company has established a clear governance structure to effectively communicate and respond to relevant sustainability topics, while striving to be proactive in implementing its sustainability commitments and practices. The Board of Directors, through its committees, is responsible for the monitoring and oversight of the Company's key risks, strategies, and sustainability topics.
Revenues are typically strongest in the fourth quarter, primarily as a result of the transportation of grain after the harvest, fall fertilizer programs, and increased demand for retail goods moved by rail. Operating income is also affected by seasonal fluctuations.
Revenues are typically highest in the fourth quarter primarily as a result of the transportation of grain after the harvest, fall fertilizer programs, and increased demand for retail goods moved by rail. Operating income is also affected by seasonal fluctuations.
The Company has established an environmental audit program aimed at conducting thorough, systematic, and routine assessments of its facilities to ensure compliance with legal requirements and adherence to accepted industry standards, accompanied by a corrective action follow-up process and senior management review. The Company focuses on key strategies, identifying tactics and actions to support and operationalize our environmental commitments.
The Company has established an environmental audit program aimed at conducting thorough, systematic, and routine assessments of its facilities to comply with legal requirements and adherence to accepted industry standards, accompanied by a corrective action follow-up process and senior management review. The Company focuses on key strategies, identifying tactics and actions to support and operationalize our environmental commitments.
All references to websites (including our website) contained herein do not constitute incorporation by reference of information contained on such websites and such information should not be considered part of this document. 16 / CPKC 2023 ANNUAL REPORT
All references to websites (including our website) contained herein do not constitute incorporation by reference of information contained on such websites and such information should not be considered part of this document. 16 / CPKC 2024 ANNUAL REPORT
For purposes of this annual report, unless the context indicates otherwise, all references herein to “CPKC”, “the Company”, “we”, “our” and “us” refer to Canadian Pacific Kansas City Limited and its subsidiaries, which includes KCS as a consolidated subsidiary on and from April 14, 2023.
For the purposes of this annual report, unless the context indicates otherwise, all references herein to “CPKC”, “the Company”, “we”, “our” and “us” refer to Canadian Pacific Kansas City Limited and its subsidiaries, which includes KCS as a consolidated subsidiary from April 14, 2023 ("Control Date").
CPKCM holds a concession from the Mexican government until June 2047, which is renewable under certain conditions for additional periods of up to 50 years (the "Concession").
CPKCM holds a concession from the Mexican government until June 2047, which is renewable under certain conditions, for additional periods, each up to 50 years (the "Concession").
Merchandise freight consists of industrial and consumer products, such as Forest products, Energy, chemicals and plastics, Metals, minerals and consumer products, and Automotive. Intermodal traffic consists largely of retail goods in overseas containers that can be transported by train, ship and truck, and in domestic containers that can be moved by train and truck.
Merchandise freight consists of industrial and consumer products, such as Forest products, Energy, chemicals and plastics, Metals, minerals and consumer products, and Automotive. Intermodal traffic consists largely of retail goods in overseas containers that are transported by train, ship, and truck, and in domestic containers that are moved by train and truck.
The majority of the Company’s domestic intermodal business originates in Canada, where the Company markets its services directly to retailers and manufacturers and maintains direct relationships with its customers. In the U.S. and Mexico, the Company’s service is delivered mainly through intermodal marketing companies.
The majority of the Company’s domestic intermodal business originates in Canada, where the Company markets its services directly to retailers and manufacturers and maintains direct relationships with its customers. In the U.S. and Mexico, the Company’s services are delivered mainly through intermodal marketing companies.
The Company’s environmental strategies include: • Implementing measures to minimize or prevent environmental impacts from our operations and facilities, and to ensure compliance with applicable environmental laws and regulations; • Maintaining an Environmental Management System to provide consistent, effective guidance and resources to the Company's employees in regard to the management of air emissions, dangerous goods and waste materials, emergency preparedness and response, petroleum products management, and water and wastewater systems; • Reducing environmental and safety risk through business processes to identify and mitigate potential environmental impacts related to all the Company's operations and activities; • Ensuring that new or altered operations and other business activities are evaluated, planned, permitted in accordance with applicable regulations, and executed to mitigate environmental risk; • Engaging with relevant stakeholders to consider and discuss the Company’s environmental management practices and environmental issues and concerns associated with our operations; • Employing best practices, proven technologies, and safe operating standards for activities involving elevated environmental risk; and • Planning and preparing for emergency responses to ensure all appropriate steps are taken in the event of a derailment, spill, or other incident involving a release to the environment.
The Company’s environmental strategies include: • Implementing measures designed to minimize or prevent environmental impacts from our operations and facilities, and to comply with applicable environmental laws and regulations; • Maintaining an Environmental Management System designed to provide consistent, effective guidance and resources to the Company's employees in regard to the management of air emissions, dangerous goods and waste materials, emergency preparedness and response, petroleum products management, and water and wastewater systems; • Aiming to reduce environmental and safety risk through business processes to identify and mitigate potential environmental impacts related to all the Company's operations and activities; • Verifying that new or altered operations and other business activities are evaluated, planned, permitted in accordance with applicable regulations, and executed to mitigate environmental risk; • Engaging with relevant stakeholders to consider and discuss the Company’s environmental management practices and environmental issues and concerns associated with our operations; • Employing best practices, proven technologies, and safe operating standards for activities involving elevated environmental risk; and • Planning and preparing for emergency responses to identify the appropriate steps to be taken in the event of a derailment, spill, or other incident involving a release to the environment.
The Company's Police Services operate on the Company's rail network as well as in areas where the Company has non-railway operations; 12 / CPKC 2023 ANNUAL REPORT • The Company's Corporate Security department is committed to providing a safe and secure work environment for the Company’s employees, contractors, visitors, and other authorized persons on the Company's property, and to protecting the Company’s assets, operations, information, the public and the environment from damage, interference, and undue liability.
The Company's Police Services operate on the Company's rail network as well as in areas where the Company has non-railway operations; • The Company's Corporate Security department is committed to providing a safe and secure work environment for the Company’s employees, contractors, visitors, and other authorized persons on the Company's property, and to protecting the Company’s assets, operations, information, the public and the environment from damage, interference, and undue liability.
CPKC 2023 ANNUAL REPORT / 15 Our strategy involves delivering specialized training, best practices, and skill-broadening opportunities to all employees. The Company offers a variety of training opportunities, including, but not limited to, technical/on-the-job training, role-specific offerings as well as optional courses. Training includes instructor-led in-person and virtual classes, blended, e-learning and self-directed online learning.
Our strategy involves delivering specialized training, best practices, and skill-broadening opportunities to all employees. The Company offers a variety of training opportunities, including, but not limited to, technical/on-the-job training, role-specific offerings as well as optional courses. Training includes instructor-led in-person and virtual classes, blended, e-learning, and self-directed online learning.
As such, fuel surcharge revenues are a function of freight volumes and fuel prices. Fuel surcharge revenues accounted for approximately 13% of the Company's Freight revenues in 2023. The Company is also subject to carbon taxation systems and levies in some jurisdictions in which it operates, the costs of which are passed on to the shipper.
As such, fuel surcharge revenues are a function of freight volumes and fuel prices. Fuel surcharge revenues accounted for approximately 12% of the Company's Freight revenues in 2024. The Company is also subject to carbon taxation systems and levies in some jurisdictions in which it operates, the costs of which are passed on to the shipper.
In June 2023, the Company announced a consolidated 2030 locomotive GHG emissions reduction target using the SBTi’s sectoral-based approach for freight railroads and a well-below 2⁰C global warming scenario. The consolidated 2030 target for the Company's combined locomotive operations was validated by the SBTi.
In June 2023, the Company announced a consolidated 2030 locomotive GHG emissions reduction target using the Science Based Targets Initiative’s ("SBTi") sectoral-based approach for freight railroads and a well-below 2⁰C global warming scenario. The consolidated 2030 target for the Company's combined locomotive operations was validated by the SBTi.
Bulk traffic predominantly moves in unit train service moving from one origin to one destination by a single train without reclassification.
Bulk traffic predominantly moves in unit train service moving from one origin to one destination by a single train.
During the remainder of the Concession period, CPKCM is required to pay the Mexican government an CPKC 2023 ANNUAL REPORT / 11 annual concession duty equal to 1.25% of gross revenues. The ARTF may request information to verify CPKCM´s compliance with the Concession and any applicable regulatory framework.
During the remainder of the Concession period, CPKCM is required to pay the Mexican government an annual concession duty equal to 1.25% of gross revenues. The ARTF may request information to verify CPKCM´s compliance with the Concession and any applicable regulatory framework.
The Company also strives to advance implementation of our climate strategy by exploring carbon reduction opportunities that are aligned to the demands of our business. For example, the Company is building North America’s first line-haul hydrogen-powered locomotive using fuel cells and batteries to power the locomotive’s electric traction motors.
The Company also strives to advance implementation of our climate strategy by exploring carbon reduction opportunities that are aligned to the demands of our business. For example, the Company has developed North America’s first line-haul hydrogen-powered freight locomotive using fuel cells and batteries to power the locomotive’s electric traction motors.
The following chart shows the percentage of the Company’s total Freight revenues derived from each of the three major business lines in 2023: 2023 Freight Revenues CPKC 2023 ANNUAL REPORT / 5 BULK The Company's Bulk business represented approximately 35% of total Freight revenues in 2023. Bulk includes the Grain, Coal, Potash, and Fertilizer and sulphur lines of business.
The following chart shows the percentage of the Company’s total Freight revenues derived from each of the three major lines of business in 2024: 2024 Freight Revenues CPKC 2024 ANNUAL REPORT / 5 BULK The Company's Bulk business represented approximately 35% of total Freight revenues in 2024. Bulk includes the Grain, Coal, Potash, and Fertilizers and sulphur lines of business.
Climate and Other Environmental, Social and Governance ("ESG") Related Laws and Regulations In recent years, federal, state and international lawmakers and regulators have increased their focus on companies’ risk oversight, disclosures and practices in connection with climate change and other ESG matters.
Climate and Other Environmental, Social, and Sustainability Related Laws and Regulations In recent years, federal, provincial, state and international lawmakers and regulators have increased their focus on companies’ risk oversight, disclosures and practices in connection with climate change and other environmental, social, and sustainability matters.
The Company encourages all employees to take an active role in their career planning and development. We believe that investing in our employees leads to improved workplace morale and fosters a supportive working environment. Diversity and Inclusion Diversity is one of our core values.
CPKC 2024 ANNUAL REPORT / 15 The Company encourages all employees to take an active role in their career planning and development. We believe that investing in our employees leads to improved workplace morale and fosters a supportive working environment. Diversity and Inclusion Diversity is one of our core values.
In 2023, the Company launched the Mexico Midwest Express ("MMX") Series premium intermodal service to provide the first truck-competitive, single-line rail service option between the U.S. Midwest and Mexico. International Intermodal The Company's international business represented approximately 44% of Intermodal revenues and 9% of total freight revenues in 2023.
In 2023, the Company launched the Mexico Midwest Express ("MMX") Series premium intermodal service to provide the first truck-competitive, single-line rail service option between the U.S. Midwest and Mexico. International Intermodal The Company's international intermodal business represented approximately 45% of Intermodal revenues and 8% of total Freight revenues in 2024.
The Company’s international intermodal business consists primarily of containerized traffic moving between the Port of Vancouver; the Port of Montréal, Québec; the Port of Lázaro Cárdenas, Michoacán; the Port of Saint John, New Brunswick; and inland points across North America. Import traffic from the Port of Vancouver is mainly long-haul business destined for eastern Canada and the U.S. Midwest.
The Company’s international intermodal business consists primarily of containerized traffic moving between the Port of Vancouver, the Port of Lázaro Cárdenas, the Port of Montréal, the Port of Saint John, and inland points across North America. Import traffic from the Port of Vancouver is mainly long-haul business destined for eastern Canada and the U.S. Midwest.
Forest products traffic primarily includes pulp and paper as well as lumber and panel products shipped from key producing areas in the U.S. Gulf Coast, B.C., the U.S. Southeast, Ontario, and Alberta to destinations throughout North America including the U.S. Midwest, Mexico, the U.S. Southeast, the U.S. Gulf Coast, and the U.S. Northeast.
Forest products traffic primarily includes pulp and paper as well as lumber and panel products from key production areas in the U.S. Gulf Coast, B.C., the U.S. Southeast, Ontario, and Alberta to destinations throughout North America including the U.S. Midwest, Mexico, eastern U.S., and the U.S. Gulf Coast.
Domestic intermodal freight consists primarily of manufactured consumer products that are predominantly moved in 53-foot containers within North America. International intermodal freight moves in marine containers to and from ports and North American inland markets.
The Company's Intermodal freight revenues are generated from domestic and international movements. Domestic intermodal freight consists primarily of manufactured consumer products that are predominantly moved in 53-foot containers within North America. International intermodal freight moves in marine containers to and from ports and North American inland markets.
Please see “Legal and Regulatory Risks” in Item 1A. Risk Factors for further discussion. The Company has implemented an Environmental Management System to facilitate the reduction of environmental risk. Specific environmental programs are in place and designed to address areas such as locomotive air emissions, GHG reporting, management of vegetation, wastewater, chemicals and waste, storage tanks, and fueling facilities.
Risk Factors for further discussion. The Company has implemented an Environmental Management System to facilitate the reduction of environmental risk. Specific environmental programs are in place and designed to address areas such as locomotive air emissions, GHG reporting, management of vegetation, wastewater, chemicals and waste, storage tanks, and fueling facilities.
This increase was primarily due to the impact of the KCS acquisition, the favourable impact from the timing of recoveries under the Company's fuel cost adjustment program, the favourable impact of the change in foreign exchange ("FX"), and higher volumes, partially offset by lower fuel prices.
This increase was primarily due to the impact of the KCS acquisition, increased carbon levy surcharge revenue, higher volumes, and the favourable impact of the change in foreign exchange ("FX"), partially offset by lower fuel prices and the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program.
As a railway law enforcement agency, the Company's Police Services have a central headquarters that oversees police officers assigned to field offices responsible for railway police operations across its network.
As a railway law enforcement agency, the Company's Police Services have a central headquarters that 12 / CPKC 2024 ANNUAL REPORT oversees police officers assigned to field offices responsible for railway police operations across its network.
Significant Customers For each of the years ended December 31, 2023 and 2022, the Company's revenues and operations were not dependent on any major customers. Competition The Company is in the ground transportation and logistics business. The Company sees competition in this segment from other railways, motor carriers, ship and barge operators, and pipelines.
Significant Customers For each of the years ended December 31, 2024 and 2023, the Company's revenues and operations were not dependent on any major customers. Competition The Company is in the ground transportation and logistics business and competes with other railways, motor carriers, ship and barge operators, and pipelines.
The Company provides a service advantage to its customers through grain transportation in 8,500-foot High Efficiency Product ("HEP") Trains TM including high-capacity hopper cars, which enables the Company to efficiently serve farmers, shippers, and the entire grain supply chain. The 8,500-foot HEP Trains TM can move approximately 40 percent more grain than the prior generation of grain train.
The Company also provides a service advantage, by way of its 8,500-foot High Efficiency Product ("HEP") Trains TM including high-capacity hopper cars, which enables the Company to efficiently serve farmers, shippers, and the entire grain supply chain. The 8,500-foot HEP Trains TM can move approximately 40% more grain than the prior generation of grain trains.
CPKCM has the right to use, but does not own, all track and buildings that are necessary for the rail lines’ operation.
CPKC 2024 ANNUAL REPORT / 11 CPKCM has the right to use, but does not own, all track and buildings that are necessary for the rail lines’ operation.
The Company has also worked diligently to establish backup sites to ensure a seamless transition in the event that the Company's operating systems are the target of a cyber-attack. By doing so, the Company expects to maintain network fluidity. Please see Item 1C. Cybersecurity for further discussion.
The Company has also worked diligently to establish backup sites designed to provide a seamless transition in the event that the Company's operating systems are the target of a cyber-attack. By doing so, the Company expects to maintain network fluidity. Please see Item 1A.
The following chart shows the percentage of the Company's Grain freight revenues generated from Canadian and U.S. shipments in 2023: Canadian grain transported by the Company consists of both whole grains, such as wheat, durum, canola, and pulses, as well as processed products such as oils and meals.
The following chart shows the percentage of the Company's Grain freight revenues generated from U.S. and Canadian shipments in 2024: U.S. grain transported by the Company consists of whole grains, such as corn, wheat, and soybeans, as well as processed products such as meals, feeds, and oils.
The following chart shows the percentage of the Company's Bulk freight revenues by line of business in 2023: 2023 Bulk Revenues (35% of Freight Revenues) Grain The Company’s Grain business represented approximately 58% of Bulk revenues and 20% of total Freight revenues in 2023.
The following chart shows the percentage of the Company's bulk freight revenues by line of business in 2024: 2024 Bulk Revenues (35% of Freight Revenues) Grain The Company’s Grain business represented approximately 61% of bulk revenues and 21% of total Freight revenues in 2024.
Energy, Chemicals and Plastics The Company’s Energy, chemicals and plastics business represented approximately 42% of Merchandise revenues and 19% of total Freight revenues in 2023. The Company moves energy products consisting of commodities such as fuel oil, liquefied petroleum gas ("L.P.G."), gasoline, and other energy products.
Energy, Chemicals and Plastics The Company’s Energy, chemicals and plastics business represented approximately 42% of merchandise revenues and 20% of total Freight revenues in 2024. The Company moves energy products consisting of commodities such as fuel oil, liquefied petroleum gas ("L.P.G."), gasoline, and other refined energy products. The majority of the Company’s energy traffic originates in the U.S.
The majority of the Company’s crude is now moving as DRUbit TM , a sustainable heavy crude oil specifically designed for rail transportation and produced using an innovative facility known as a Diluent Recovery Unit, which enables the removal of diluent at origin.
The majority of the Company’s crude is now moving as DRUbit TM , a sustainable heavy crude specifically designed for rail transportation and produced at an innovative facility known as a Diluent Recovery Unit, which enables the removal of diluent at origin. This technology enables the safe and economical transportation of crude and is cost competitive with pipeline transportation.
In addition, in operating a railway, it is possible that releases of hazardous materials during derailments or other accidents have, or may occur, that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company’s operating results, financial condition, and reputation.
In addition, in operating a railway, the release of hazardous materials during derailments or other accidents have, or may occur, that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company’s operating results, financial condition, and reputation. Please see “Legal and Regulatory Risks” in Item 1A.
HomeSafe puts everyone on the same level and empowers all employees to begin a safety conversation, no matter their role or position. Expanding HomeSafe, Safety walkabouts and other safety initiatives to the KCS and CPKCM has been instrumental in maintaining a strong safety performance in 2023.
HomeSafe puts everyone on the same level of safety operation expectations and empowers all employees to begin a safety conversation, no matter their role or position. HomeSafe, Safety Walkabouts and other safety initiatives have been instrumental in maintaining a strong safety performance in 2024.
The following chart shows the percentage of the Company's Intermodal freight revenues generated from domestic intermodal and international intermodal in 2023: 2023 Intermodal Revenues (20% of Freight Revenues) CPKC 2023 ANNUAL REPORT / 9 Domestic Intermodal The Company's domestic business represented approximately 56% of Intermodal revenues and 11% of total freight revenues in 2023.
The following chart shows the percentage of the Company's Intermodal freight revenues generated from domestic intermodal and international intermodal in 2024. 2024 Intermodal Revenues (18% of Freight Revenues) CPKC 2024 ANNUAL REPORT / 9 Domestic Intermodal The Company's domestic intermodal business represented approximately 55% of Intermodal revenues and 10% of total Freight revenues in 2024.
We believe that different backgrounds, experiences, and perspectives enhance creativity and innovation and encourage diversity of thought in the workplace. We are continually working on programs and opportunities to attract, retaining, and develop the best people and skill sets for the Company. The Company is committed to increasing diversity throughout all levels of the organization.
We define diversity broadly, and believe that different backgrounds, experiences, and perspectives enhance creativity and innovation and encourage diversity of thought in the workplace. We are continually working on programs and opportunities to attract, retain, and develop the best people and skill sets for the Company.
As such, fuel surcharge revenue includes carbon taxes and levy recoveries. Freight revenues included fuel surcharge revenues of $1,623 million in 2023, an increase of $320 million, or 25%, from $1,303 million in the same period of 2022.
As such, fuel surcharge revenue includes recoveries of carbon taxes and levies. Freight revenues included fuel surcharge revenues of $1,651 million in 2024, an increase of $28 million, or 2%, from $1,623 million in the same period of 2023.
Merchandise products move in both mixed freight and unit trains in a variety of car types. Service involves delivering products to many different customers and destinations. In addition to traditional rail service, the Company moves merchandise traffic through a network of truck-rail transload facilities, expanding the reach of the Company's network to non-rail served facilities.
Service involves delivering products to a wide variety of customers and destinations. In addition to traditional rail services, the Company moves merchandise traffic through a network of truck-rail transload facilities, expanding the reach of the Company's network to non-rail served facilities.
The effective implementation of these policies alongside our ongoing workforce initiatives ensures the Company’s attraction and recruitment, employee development, succession, engagement, and diversity and inclusion practices are consistent and aligned with the Company’s commitments, foundations, and values. Attraction and Recruitment We employ a number of recruitment strategies and retention tactics to attract and retain talent across North America.
By implementing these policies and through ongoing workforce initiatives, we ensure that our talent attraction practices, employee and leadership development, succession planning, engagement, and fostering diversity and inclusion are consistent with our commitments, foundations, and values. Attraction and Recruitment We employ a number of recruitment strategies and retention tactics to attract and retain talent across North America.
Midwest and move to end markets in the U.S., Mexico, Canada, and overseas. The most commonly shipped plastics products are polyethylene and polypropylene. The majority of the Company’s plastics traffic originates from the U.S. Gulf Coast and Alberta and moves to various North American destinations. The Company's biofuels traffic originates mainly from facilities in the U.S.
The most commonly shipped plastics products are polyethylene and polypropylene. The majority of the Company’s plastics traffic originates from the U.S. Gulf Coast, Alberta, and Mexico and moves to various North American destinations. The Company moves crude primarily from production facilities throughout Alberta and Saskatchewan to refining markets primarily in the U.S. Gulf Coast.
Canadian grain includes a division of business that is regulated by the Canadian government through the Canada Transportation Act (the “CTA”). This regulated business is subject to a maximum revenue entitlement (“MRE”). Under the CTA, railways can set their own rates for individual movements.
Grain is also shipped to the U.S., eastern Canada, and Mexico for domestic consumption. The majority of Canadian grain shipments are regulated by the Canadian government through the Canada Transportation Act (the “CTA”). This regulated business is subject to a maximum revenue entitlement (“MRE”). Under the CTA, railways can set their own rates for individual movements.
The following chart shows the percentage of the Company's Merchandise freight revenue by line of business in 2023: 2023 Merchandise Revenues (45% of Freight Revenues) Forest Products The Company’s Forest products business represented approximately 12% of Merchandise revenues and 5% of total Freight revenues in 2023.
The following chart shows the percentage of the Company's merchandise freight revenue by line of business in 2024: CPKC 2024 ANNUAL REPORT / 7 2024 Merchandise Revenues (47% of Freight Revenues) Forest Products The Company’s Forest products business represented approximately 12% of merchandise revenues and 6% of total Freight revenues in 2024.
The Company recognizes the importance of Board member diversity as a critical component of objective oversight and continuous improvement. As of December 31, 2023, five of the 13 directors (38.5%) are women.
The Company recognizes the importance of Board member diversity as a critical component of objective oversight and continuous improvement. As of December 31, 2024, four of the 12 directors (33.3%) are women.
The Company published its first Climate Strategy in 2021, outlining our approach to managing potential climate-related impacts across the business. Over the past year, the Company has taken action to support the execution of our carbon reduction efforts, including in connection with our integration of KCS.
Climate Strategy The Company published its first Climate Strategy in 2021, outlining our approach to managing potential climate-related impacts across the business. CPKC 2024 ANNUAL REPORT / 13 The Company has taken action to support the execution of our carbon reduction efforts.
Northern Plains and the U.S. Midwest. The Company moves U.S. grain to facilities in Mexico, export terminals in the U.S. Pacific Northwest, and to various other destinations across the U.S. and Canada for domestic consumption. Coal The Company’s Coal business represented approximately 20% of Bulk revenues and 7% of total Freight revenues in 2023.
This business is centred in the northern plains of the U.S. and the U.S. Midwest. The Company moves U.S. grain to facilities in Mexico, export terminals in the U.S. Pacific Northwest, and to various other destinations across the U.S. and Canada for domestic consumption.
The majority of the Company’s energy traffic originates in the Alberta Industrial Heartland (Canada's largest hydrocarbon processing region), the U.S. Gulf Coast, Saskatchewan, and Mexico. The Company accesses key destinations and export markets in Mexico, the U.S. Midwest, western Canada, the U.S. West Coast, and the U.S. Gulf Coast.
Gulf Coast, the Alberta Industrial Heartland (Canada's largest hydrocarbon processing region), Mexico, and Saskatchewan. The Company accesses key destinations and export markets in Mexico, the U.S. Midwest, western Canada, the U.S. Gulf Coast, and the U.S. West Coast. The Company is a main transportation provider of refined fuels from the U.S. Gulf Coast into Mexico.
Through ongoing engagement and collaboration across and beyond our organization, the Company continually refines our sustainability approach, including as part of our integration of KCS. Please see “Climate-Related Risks—Transition Risks" in Item 1A. Risk Factors for further discussion.
We believe that integrating sustainability into our business processes is imperative to future growth and long-term success as an organization. Through ongoing engagement across and beyond our organization, the Company continually refines our sustainability approach, including as part of our integration of KCS. Please see “Climate-Related Risks—Transition Risks" in Item 1A. Risk Factors for further discussion.
The majority of the Company's employees belong to labour unions and are subject to these agreements. The Company manages collaborative relationships with union members in Canada, the U.S. and Mexico. Unionized employees represent nearly 74% of our workforce and are represented by 75 active bargaining units.
Unionized Workforce Class I railways are party to collective bargaining agreements with various labour unions. The majority of the Company's employees belong to labour unions and are subject to these agreements. The Company manages collaborative relationships with union members in Canada, the U.S., and Mexico.
Gulf Coast, as well as to domestic markets in the U.S Midwest. All potash shipments for export beyond Canada and the U.S. are marketed by Canpotex Limited or K+S Potash Canada. Canpotex is an export company owned equally by Nutrien Ltd. and The Mosaic Company.
Potash shipments for export beyond Canada and the U.S. are marketed by Canpotex Limited ("Canpotex") or K+S Potash Canada. Canpotex is an export company jointly-owned by Nutrien Ltd. and The Mosaic Company. Independently, The Mosaic Company, Nutrien Ltd., and K+S Potash Canada move domestic potash with the Company primarily to the U.S. Midwest for local application.
The Risk and Sustainability Committee of the Board is responsible for reviewing ESG performance against sustainability objectives, as well as strategic plans and opportunities to align sustainability objectives with long-term climate strategy. With oversight from the President and Chief Executive Officer of the Company, implementation of the Company’s sustainability objectives is guided by a cross-functional executive Sustainability Steering Committee.
The Risk and Sustainability Committee of the Board is responsible for reviewing ESG performance against sustainability objectives, as well as strategic plans and opportunities to align sustainability objectives with long-term climate strategy.
We pride ourselves on offering a diverse workplace with a variety of careers in both our corporate and field locations. We recruit and hire talent based on relevant skills and experience, and seek to attract the highest quality candidates regardless of gender, age, cultural heritage, or ethnic origin.
We recruit and hire talent based on relevant skills and experience, and seek to attract the highest quality candidates regardless of gender, age, cultural heritage, or ethnic origin.
Recent legal developments with respect to climate- and other ESG-related matters include the rulemaking activities of securities regulatory authorities in Canada and the United States. In addition, recently enacted or proposed ESG-related statutes or regulations in certain U.S. states may impact the operations, preferences, activities and financial conditions of the Company and its customers and other stakeholders.
In addition, recently enacted or proposed environmental, social, and governance ("ESG") related statutes or regulations in certain U.S. states may impact the operations, preferences, activities and financial conditions of the Company and its customers and other stakeholders.
The Company is a main transportation provider of refined fuels from the U.S. Gulf Coast into Mexico. The Company’s chemical traffic includes products such as ethylene glycol, caustic soda, sulphuric acid, soda ash, and other chemical products. These shipments mainly originate from the U.S. Gulf Coast, western Canada, and the U.S.
The Company’s chemical traffic includes products such as ethylene glycol, caustic soda, soda ash, chlorine, sulphuric acid, and other chemical products. These shipments mainly originate from the U.S. Gulf Coast, western Canada, the U.S. Southeast, and the U.S. Midwest and move to end markets in the U.S., Mexico, Canada, and overseas.
Gulf Coast and the U.S. Midwest. Potash The Company's Potash business represented approximately 13% of Bulk revenues and 5% of total Freight revenues in 2023. The Company’s Potash traffic moves mainly from Saskatchewan to offshore markets through the Port of Vancouver, the Port of Portland, Oregon, and the U.S.
Potash The Company's Potash business represented approximately 12% of bulk revenues and 4% of total Freight revenues in 2024. The Company’s Potash traffic primarily moves from Saskatchewan to offshore markets through the Ports of Vancouver, Portland, and Thunder Bay, as well as to domestic markets in the U.S. Midwest.
The Company recognizes the valuable skills and experience that veterans have gained from serving their country. We were named part of the Military Friendly® Employers in the U.S. for 2024. The Company was also named Canada's Top 100 Employers for 2024 as well as Alberta's Top 80 Employers for 2024.
The Company recognizes the valuable skills and experience that veterans have gained from serving their country and we are proud to have earned the Military Friendly® designation in the U.S. We have also been named one of Alberta's Top 85 Employers for the sixth consecutive year.
However, the MRE governs aggregate revenue earned by the railway based on a formula that factors in the total volumes, length of haul, average revenue per ton, and inflationary adjustments.
However, the 6 / CPKC 2024 ANNUAL REPORT MRE governs aggregate revenues earned by the railway based on a formula that factors in the total volume, length of haul, average revenue per ton, and inflationary adjustments. The regulation applies to western Canadian export grain shipments to the ports of Vancouver and Thunder Bay.
The Company primarily moves coal west from the mines to port terminals for export to world markets (Pacific Rim, Europe, and South America). In the U.S., the Company moves primarily thermal coal from connecting railways, serving the thermal coal fields in the Powder River Basin in Montana and Wyoming, which is delivered to power-generating facilities in the U.S.
In the U.S., the Company primarily moves thermal coal from connecting railways, serving the thermal coal fields in the Powder River Basin in Montana and Wyoming, which is delivered to power-generating facilities in the U.S. Gulf Coast and the U.S. Midwest. The Company also transports petroleum coke within the U.S. Gulf Coast and Mexico.
Southeast, and western Canada to a variety of industrial users. The Company carries base metals such as aluminum, zinc, and lead. The Company also moves ores from mines to smelters and refineries for processing, as well as processed metals to automobile and consumer product manufacturers.
The Company carries base metals such as aluminum, zinc, and lead. The Company also moves ores from mines to smelters and refineries for processing, as well as delivers processed metals to automobile and consumer product manufacturers. Aggregate products include coarse particulate and composite materials such as cement, frac sand, sand and stone, clay bentonite, and gypsum.
Most sulphur is produced in Alberta as a byproduct of oil and gas activity. Sulphur is a raw material used primarily in the manufacturing of sulphuric acid, which is used most extensively in the production of phosphate fertilizers. CPKC 2023 ANNUAL REPORT / 7 MERCHANDISE The Company’s Merchandise business represented approximately 45% of total Freight revenues in 2023.
Sulphur is a raw material used primarily in the manufacturing of sulphuric acid, which is used most extensively in the production of phosphate fertilizers. MERCHANDISE The Company’s Merchandise business represented approximately 47% of total Freight revenues in 2024. Merchandise products move in both mixed freight and unit trains in a variety of car types.
The compensation terms under this labour agreement are subject to renegotiation on an annual basis and all other benefits are subject to negotiation every two years. The current agreement terms will remain in effect until new terms have been negotiated in 2024.
Mexico In Mexico, approximately 3,200 of CPKCM's employees are covered by a single labour agreement. The compensation terms under this labour agreement are subject to renegotiation on an annual basis and all other benefits are subject to negotiation every two years.
PSCC ensures that proper emergency responders and governing bodies are notified; and • To address cyber security risks, the Company’s Enterprise Security Department implements mitigation programs that evolve with the changing technology threat environment.
PSCC receives reports of emergencies, dangerous or potentially dangerous conditions, and other safety and security issues from our employees, the public, and law enforcement and other government officials. PSCC notifies proper emergency responders and governing bodies; and • To address cyber security risks, the Company’s Enterprise Security Department implements mitigation programs that evolve with the changing technology threat environment.
The Company’s Automotive portfolio consists of finished vehicles originating from Canadian production facilities in Ontario, the U.S., Mexico, and from overseas that are imported through the Port of Vancouver. Finished vehicles are primarily shipped to Canada, the U.S., and Mexico. In addition to finished vehicles, the Company also ships automotive parts, machinery, and pre-owned vehicles.
Automotive The Company’s Automotive business represented approximately 19% of merchandise revenues and 9% of total Freight revenues in 2024. The Company’s Automotive portfolio consists of finished vehicles originating from production facilities in Mexico, Canada, the U.S., and overseas imports arriving through the Port of Vancouver. Finished vehicles are primarily shipped to the U.S., Canada, 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. CPKC transports bulk commodities, merchandise freight, and intermodal traffic. For additional information regarding CPKC's network and geographical locations, refer to Item 2. Properties.
CPKC transports bulk commodities, merchandise freight, and intermodal traffic. For additional information regarding CPKC's network and geographical locations, refer to Item 2. Properties.
The following chart shows the percentage of the Company's Coal freight revenues generated from metallurgical and thermal coal in 2023: In Canada, the Company handles mostly metallurgical coal destined for export for use in the steelmaking process. The Company’s Canadian coal traffic originates mainly from Teck Resources Limited’s mines in southeastern B.C.
Coal The Company’s Coal business represented approximately 19% of bulk revenues and 7% of total Freight revenues in 2024. The following chart shows the percentage of the Company's Coal freight revenues generated from metallurgical coal, thermal coal, and petroleum coke in 2024: In Canada, the Company transports mostly metallurgical coal destined for export for use in the steelmaking process.
A comprehensive network of automotive compounds is utilized to facilitate final delivery of vehicles to dealers throughout Canada, the U.S, and Mexico. The Company services the majority of automotive plants within Mexico. INTERMODAL The Company’s Intermodal business represented approximately 20% of total Freight revenues in 2023. The Company's Intermodal freight revenues are generated from domestic and international movements.
The Company also ships machinery, automotive parts, and pre-owned vehicles. A comprehensive network of automotive facilities is utilized to facilitate final delivery of vehicles to dealers throughout Canada, the U.S, and Mexico. The Company provides freight services to the majority of automotive plants in Mexico.
The Company’s fertilizer traffic includes dry fertilizers, which are phosphate, urea, nitrate, and ammonium sulphate, and wet fertilizers, which are primarily anhydrous ammonia. Approximately half of the Company's fertilizer shipments originate from production facilities in Alberta, where abundant sources of natural gas and other chemicals provide feedstock for fertilizer production.
Approximately half of the Company's fertilizer shipments originate from production facilities in Alberta, where abundant sources of natural gas and other chemicals provide feedstock for fertilizer production. Most sulphur is produced in Alberta as a byproduct of oil and gas activity.
Their safety is of utmost importance to the Company and through 2023 we have continued to look at ways to improve safety in these areas of the operation. Operate Safely is one of our five foundations of successful railroading and it starts with knowing and following the rules.
Our employees' safety is of utmost importance to the Company and through continuous improvement objectives in 2024 we have continued to look at ways to integrate and improve safety in these areas of our network operation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePolicy and Regulatory Risks An escalating price on carbon emissions could materially increase direct costs related to fuel purchases and indirect expenses related to purchased goods, materials, and electricity required to operate our business. As a fuel-intensive operation, the Company is exposed to both emerging and escalating carbon pricing regulations.
Biggest changeAs a result, there is no assurance that we will be able to successfully achieve our sustainability goals, which could damage our reputation and customer and other stakeholder relationships and have an adverse effect on our business, results of operations, and financial condition. 22 / CPKC 2024 ANNUAL REPORT Policy and Regulatory Risks An escalating price on carbon emissions could materially increase direct costs related to fuel purchases and indirect expenses related to purchased goods, materials, and electricity required to operate our business.
CPKCM operates under the Concession granted by the Mexican government for a period of 50 years which is renewable under certain conditions for additional periods, each of up to 50 years.
CPKCM operates under the Concession granted by the Mexican government for a period of 50 years which is renewable under certain conditions, for additional periods, each up to 50 years.
The Company is exposed to severe weather conditions and natural disasters, including earthquakes, volcanism, hurricanes, tropical storms, tornadoes, floods, fires, avalanches, mudslides, extreme temperatures, and significant precipitation have caused track outages, severe damage to infrastructure, and business interruptions that have adversely affected the Company’s entire rail network.
The Company is exposed to severe weather conditions and natural disasters, including earthquakes, volcanism, hurricanes, tropical storms, tornadoes, floods, fires, avalanches, mudslides, extreme temperatures, and significant precipitation that have caused track outages, severe damage to infrastructure, and business interruptions that have adversely affected the Company’s entire rail network.
Although the Company devotes significant resources to protect its technology systems and proprietary data, there can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient in averting such incidents or attacks. (Please see “Item 1C. Cybersecurity” for further discussion).
Although the Company devotes significant resources to protect its technology systems and proprietary data, there can be no assurance that the systems and processes we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient in averting such incidents or attacks. (Please see “Item 1C. Cybersecurity” for further discussion).
The Company regularly transports energy commodities that serve refineries, processing locations, and end-users across North America and global markets. The Company’s business lines include thermal and metallurgical coal, crude oil and petroleum products, including liquefied petroleum gas, fuel oil, asphalt, gasoline, condensate (diluent), and lubricant oils.
The Company regularly transports energy commodities that serve refineries, processing locations, and end-users across North America and global markets. The Company’s business lines include thermal and metallurgical coal, petroleum coke, crude oil and petroleum products, including liquefied petroleum gas, fuel oil, asphalt, gasoline, condensate (diluent), and lubricant oils.
If we do not achieve the expected benefits and cost savings from the combination, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
If we do not achieve the expected benefits and cost savings from the KCS combination, or if the financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted.
The Company's inability to achieve the current GHG emissions reduction target or any future targets we may establish could negatively impact the Company, including both our reputation and financial results . The Company has established a science-based GHG emissions reduction target (please see “Sustainability-Related Laws, Regulations and Strategies—Climate Change” in Item 1. Business for further discussion).
The Company's inability to achieve our sustainability goals, including the current GHG emissions reduction target or any future targets we may establish could negatively impact the Company, including both our reputation and financial results . The Company has established a science-based GHG emissions reduction target (please see “Sustainability-Related Laws, Regulations and Strategies—Climate Change” in Item 1. Business for further discussion).
In addition, if the Company is unable to acquire or implement new technology in general, the Company may suffer a competitive disadvantage, which could also have an adverse effect on its results of operations, financial condition, and liquidity. Human Capital Risks The availability of qualified personnel could adversely affect the Company's operations.
In addition, if the Company is unable to acquire, develop or implement new technology, the Company may suffer a competitive disadvantage, which could also have an adverse effect on its results of operations, financial condition, and liquidity. Human Capital Risks The availability of qualified personnel could adversely affect the Company's operations.
In addition, the Company inherits conditions previously imposed by the STB on KCS in connection with various prior KCS acquisitions, including in relation to KCS’s commitment to keep the Laredo gateway open on commercially reasonable terms in connection with its prior acquisition of The Texas Mexican Railway.
In addition, the Company inherited conditions previously imposed by the STB on KCS in connection with various prior KCS acquisitions, including in relation to KCS’s commitment to keep the Laredo gateway open on commercially reasonable terms in connection with its prior acquisition of The Texas Mexican Railway.
CPKC 2023 ANNUAL REPORT / 17 This includes the rising rates of reported ransomware events, human error, or other cyber-attack methods disrupting the Company’s systems or the systems of third parties.
CPKC 2024 ANNUAL REPORT / 17 This includes the rising rates of reported ransomware events, human error, or other cyber-attack methods disrupting the Company’s systems or the systems of third parties.
Public health crises, including COVID-19, have created, and in the future may create, significant volatility, uncertainty and economic disruption in the regions in which the Company operates and therefore adversely affect the Company's business. Liquidity Risks The state of capital markets could adversely affect the Company's liquidity.
Public health crises, including pandemics, have created, and in the future may create, significant volatility, uncertainty, and economic disruption in the regions in which the Company operates and therefore adversely affect the Company's business. Liquidity Risks The state of capital markets could adversely affect the Company's liquidity.
The actual costs associated with both current and long-term liabilities may vary from the Company’s estimates due to a number of factors including, but not limited to changes in: the content or interpretation of environmental laws and regulations; required remedial actions; technology associated with site 18 / CPKC 2023 ANNUAL REPORT investigation or remediation; and the involvement and financial viability of other parties that may be responsible for portions of those liabilities.
The actual costs associated with both current and long-term liabilities may vary from the Company’s estimates due to a number of factors including, but not limited to changes in: the content or interpretation of environmental laws and regulations; required remedial actions; technology associated with site investigation or remediation; and the involvement and financial viability of other parties that may be responsible for portions of those liabilities.
Reductions in trading volumes, which may be caused by factors beyond the Company’s control, including increased government regulations regarding the safety and quality of Asian-manufactured products, could have a material adverse effect on the Company’s consolidated financial statements. Additionally, fluctuations in the peso-dollar exchange rates could lead to shifts in the types and volumes of Mexican imports and exports.
Reductions in trading volumes, which may be caused by factors beyond the Company’s control, including increased government regulations regarding the safety and quality of Asian-manufactured products, could have a material adverse effect on the Company’s results of operations. Additionally, fluctuations in the peso-dollar exchange rates could lead to shifts in the types and volumes of Mexican imports and exports.
Revocation or termination of the Concession could have a material adverse effect on the Company’s consolidated financial statements. The Company’s ownership of CPKCM and operations in Mexico subject it to Mexican economic and political risks. The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy.
Revocation or termination of the Concession could have a material adverse effect on the Company’s results of operations. The Company’s ownership of CPKCM and operations in Mexico subject it to Mexican economic and political risks. The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy.
Instability or disruptions of the capital markets and deterioration of the Company's financial condition, alone or in combination, could also result in a reduction in the Company's CPKC 2023 ANNUAL REPORT / 23 credit rating to below investment grade, which could also further prohibit or restrict the Company from accessing external sources of short-term and long-term debt financing, and/or significantly increase the associated costs.
Instability or disruptions of the capital markets and deterioration of the Company's financial condition, alone or in combination, could also result in a reduction in the Company's credit rating to below investment grade, which could also further prohibit or restrict the Company from accessing external sources of short-term and long-term debt financing, and/or significantly increase the associated costs.
Exchange rate variations also affect the calculation of taxes under Mexican income tax law, and a weakening of the peso against the U.S. dollar could cause an increase in the Company’s cash tax obligation and effective income tax rate. Climate-Related Risks Climate change presents both physical and transition risks to our business.
Exchange rate variations also affect the calculation of taxes under Mexican income tax law, and a weakening of the peso against the U.S. dollar could cause an increase in the Company’s cash tax obligation and effective income tax rate. CPKC 2024 ANNUAL REPORT / 21 Climate-Related Risks Climate change presents both physical and transition risks to our business.
Risks related to Operations in Mexico The Mexican concession of CPKCM is subject to revocation or termination in certain circumstances, which would prevent CPKCM from conducting rail operations under the Concession and would have a material adverse effect on the Company’s consolidated financial statements.
Risks related to Operations in Mexico The Mexican concession of CPKCM is subject to revocation or termination in certain circumstances, which would prevent CPKCM from conducting rail operations under the Concession and would have a material adverse effect on the Company’s results of operations.
Department of Transportation, the PHMSA, directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental and other matters. Together, the FRA and the PHMSA have broad jurisdiction over railroad operating standards and practices, including track, freight cars, locomotives, and hazardous materials requirements. In addition, the U.S.
Various other regulators, including the FRA, and the PHMSA, directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental and other matters. Together, the FRA and the PHMSA have broad jurisdiction over railroad operating standards and practices, including track, freight cars, locomotives, and hazardous materials requirements. In addition, the U.S.
In addition, we may be CPKC 2023 ANNUAL REPORT / 19 required to redeem all of the outstanding 2.450% notes due 2031 and 3.000% notes due 2041 pursuant to a special mandatory redemption requirement of those notes, which could have a significant adverse impact on the business and financial condition of the Company.
In addition, we may be required to redeem all of the outstanding 2.450% notes due 2031 and 3.000% notes due 2041 pursuant to a special mandatory redemption requirement of those notes, which could have a significant adverse impact on the business and financial condition of the Company.
The foregoing indebtedness, as well as any additional indebtedness we may incur, could have the effect, among other things, of reducing our liquidity and may limit our flexibility in responding to other business opportunities and increasing our vulnerability to adverse economic and industry conditions.
CPKC 2024 ANNUAL REPORT / 23 The foregoing indebtedness, as well as any additional indebtedness we may incur, could have the effect, among other things, of reducing our liquidity and may limit our flexibility in responding to other business opportunities and increasing our vulnerability to adverse economic and industry conditions.
The agreements that govern the indebtedness that has been incurred in connection with the KCS acquisition contain various affirmative and negative covenants that may, subject to certain customary exceptions, restrict our ability to, among other things, create liens over our property, change our line of business and/or merge or consolidate with any other person or sell or convey certain of our assets to another person.
The agreements that govern our indebtedness contain various affirmative and negative covenants that may, subject to certain customary exceptions, restrict our ability to, among other things, create liens over our property, change our line of business and/or merge or consolidate with any other person or sell or convey certain of our assets to another person.
Future developments in CPKC 2023 ANNUAL REPORT / 21 United States-Mexican trade beyond the Company’s control may result in a reduction of freight volumes or in an unfavourable shift in the mix of products and commodities CPKCM carries.
Future developments in United States-Mexican trade beyond the Company’s control may result in a reduction of freight volumes or in an unfavourable shift in the mix of products and commodities CPKCM carries.
Failure to preserve trade provisions conducive to trade, or any other action imposing import duties or border taxes, could negatively impact KCS customers and the volume of rail shipments, and could have a material adverse effect on the Company’s consolidated financial statements.
Failure to preserve trade provisions conducive to trade, or any other action imposing import duties or border taxes, could negatively impact our customers and the volume of rail shipments, and could have a material adverse effect on the Company’s results of operations.
General Risk Factors Global Risks Global economic and public health conditions could negatively affect demand for commodities and other freight transported by the Company.
General Risk Factors Global Risks Changes in global economic conditions, international trade policies, and public health conditions could negatively affect demand for commodities and other freight transported by the Company.
A decline or disruption in domestic, cross border or global economic conditions, including fluctuations in interest rates, that affect the supply or demand for the commodities that the Company transports may decrease the Company’s freight volumes and would result in a material adverse effect on the Company’s financial or operating results and liquidity.
A decline or disruption in domestic, cross-border, or global economic conditions, including fluctuations in interest rates and changes to international trade policies and tariffs, that affect the supply or demand for commodities that the Company transports may decrease the Company’s freight volumes. This could result in a material adverse effect on the Company’s financial or operating results and liquidity.
Downturns in the United States or Mexican economies or in trade between the United States and Mexico could have material adverse effects on the Company’s consolidated financial statements and the Company’s ability to meet debt service obligations.
Downturns in the United States or Mexican economies or in trade between the United States and Mexico could have material adverse effects on the Company’s results of operations and the Company’s ability to meet debt service obligations.
The social and political situation in Mexico could adversely affect the Mexican economy and CPKCM’s operations, and changes in laws, public policies and government programs could be enacted, each of which could also have a material adverse effect on the Company’s consolidated financial statements.
The social and political situation in Mexico could adversely affect the Mexican economy and CPKCM’s operations, and changes in laws, public policies, regulations and government programs, including measures related to new or increased taxes, could be enacted, each of which could also have a material adverse effect on the Company’s consolidated financial statements.
Downturns in the United States economy or in trade between the United States and Asia or Mexico and fluctuations in the peso-dollar exchange rates could have material adverse effects on the Company’s consolidated financial statements.
Downturns in the United States economy or in trade between the United States and Asia or Mexico and fluctuations in the peso-dollar exchange rates could have material adverse effects on the Company’s results of operations.
We are also subject to outbreaks of infectious disease, such as risks related to the global COVID-19 pandemic, which had adverse impacts on economic and market conditions and the Company's business.
The Company is also subject to outbreaks of infectious disease, such as risks related to pandemics, which can have adverse impacts on economic and market conditions and the Company's business.
In such a case, the SICT may restrict CPKCM’s ability to operate under the Concession in such manner as the SICT deems necessary under the circumstances, but only for the duration of any of the foregoing events.
In such a case, the SICT may restrict CPKCM’s ability to operate under the Concession in such manner as the SICT deems necessary under the circumstances, but only for the duration of any of the foregoing events. Mexican law requires that the Mexican government pay compensation if it effects a statutory appropriation for reasons of the public interest.
Any new rules from regulators could have a material adverse effect on the Company's financial condition, results of operations and liquidity as well as its ability to invest in enhancing and maintaining vital infrastructure. Various other regulators, including the FRA, and its sister agency within the U.S.
The Company’s Mexican operations are subject to economic and safety regulations by the SICT and ARTF. Any new rules from regulators could have a material adverse effect on the Company's financial condition, results of operations and liquidity as well as its ability to invest in enhancing and maintaining vital infrastructure.
This potential material adverse effect could also result in reduced capital spending on the Company’s rail network or in abandonment of lines. The Company is subject to environmental laws and regulations that may result in significant costs.
This potential material adverse effect could also result in reduced capital spending on the Company’s rail network or in abandonment of lines. In addition, these laws and regulations are evolving, and may impose differing or inconsistent requirements on us.
Further, as we continue to integrate KCS, we are conducting additional data-gathering and intend to further assess the climate and sustainability strategies and initiatives for the combined company, and may make changes to our existing strategies and initiatives as a result. 22 / CPKC 2023 ANNUAL REPORT As a result of these and other factors, we may not achieve our current GHG emissions reduction target or any future GHG emissions reduction targets we may establish.
Further, as we continue to integrate KCS, we are conducting additional data-gathering and intend to further assess the climate and sustainability strategies and initiatives for the combined company, and may make changes to our existing strategies and initiatives as a result.
In addition, the Concession would terminate automatically if CPKCM changes its nationality or assigns or creates any lien on the Concession, or if there is a change in control of CPKCM without the SICT’s approval.
In addition, the Concession would terminate automatically if CPKCM changes its nationality or assigns or creates any lien on the Concession, or if there is a change in control of CPKCM without the SICT’s approval. 20 / CPKC 2024 ANNUAL REPORT The SICT may also terminate the Concession as a result of CPKCM’s surrender of its rights under the Concession, or for reasons of public interest or upon CPKCM’s liquidation or bankruptcy.
Legal and Regulatory Risks The Company is subject to significant governmental legislation and regulation over commercial, operating and environmental, climate, sustainability and other matters. The Company’s railway operations are subject to extensive federal laws, regulations and rules in the countries it operates. Operations are subject to economic and safety regulations in Canada primarily by the Agency and TC.
The Company’s railway operations are subject to extensive federal laws, regulations and rules in the countries it operates. Operations are subject to economic and safety regulations in Canada primarily by the Agency and TC. The Company’s U.S. operations are subject to economic and safety regulation by the STB and the FRA.
Inability to meet our current GHG emissions reduction target or any future GHG emissions reduction targets we may establish, including our ability do so in a manner that meets standards and expectations developed by third parties such as SBTi, could have a material adverse effect on the Company's reputation, legal risks, results of operations, and financial position.
As a result of these and other factors, we may not achieve our current GHG emissions reduction target or any future GHG emissions reduction targets we may establish or do so in a manner that meets standards and expectations developed by third parties such as SBTi.
Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant impact on Mexican private sector entities in general and on CPKCM’s operations in particular. For example, CPKCM operations could be impacted with the introduction of new legislation or policies to regulate the railway industry, the energy market, or labour and tax conditions.
For example, CPKCM operations could be impacted with the introduction of new legislation or policies to regulate the railway industry, the energy market, or labour and tax conditions. The Company cannot predict the impact that the political landscape, including multiparty rule, social unrest and civil disobedience, will have on the Mexican economy or CPKCM’s operations.
The Company’s consolidated financial statements and prospects may be adversely affected by currency fluctuations, inflation, interest rates, regulation, taxation and other political, social and economic developments in or affecting Mexico. For example, the Company has a tax contingency related to an audit assessment, which is currently in litigation, for the CPKCM 2014 Mexico tax return.
For example, from time to time, teachers' protests in Mexico have resulted in service interruptions on CPKCM’s right of ways. The Company’s consolidated financial statements and prospects may be adversely affected by currency fluctuations, inflation, interest rates, regulation, taxation and other political, social and economic developments in or affecting Mexico.
The Company is further exposed to carbon pricing through electricity purchases, where electric utilities pass on carbon costs to customers.
The Company's Scope 1 and Scope 2 GHG emissions generated through our operations in Canada and Mexico are impacted by carbon pricing mechanisms. The Company is further exposed to carbon pricing through electricity purchases, where electric utilities pass on carbon costs to customers.
We cannot assure that the Company's current or future plans to reduce GHG emissions will be viable or successful.
We cannot assure that the Company's current or future plans to reduce GHG emissions will be viable or successful. In addition, there can be no assurance that our shareholders and other stakeholders will agree with our goals and strategies or be satisfied with our efforts to attain such goals.
The Company is regulated under multiple carbon taxation systems and cap and trade market mechanisms in the Canadian provinces in which we operate. The Company's Scope 1 and Scope 2 GHG emissions generated through our operations in Canada and Mexico are impacted by carbon pricing mechanisms.
As a fuel-intensive operation, the Company is exposed to both emerging and escalating carbon pricing regulations. The Company is regulated under multiple carbon taxation systems and cap and trade market mechanisms in the Canadian provinces in which we operate.
An adverse resolution of these matters could have a material adverse effect on the Company’s consolidated financial statements in a particular quarter or period. Tax contingencies are further discussed in Notes 6 and 26 of Item 8. Financial Statements and Supplementary Data.
Tax contingencies are further discussed in Notes 6 and 25 of Item 8. Financial Statements and Supplementary Data.
There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all. The Company may be unable to integrate KCS successfully, and the Company may not experience the growth being sought from the combination. CPRL and KCS operated independently until the Control Date.
There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Furthermore, the STB has noted its authority to issue supplemental orders to address issues or concerns that may arise in the future.
Furthermore, the STB has the authority to issue supplemental orders to address issues or concerns that may arise in the future. In addition, the final decision is subject to a pending petition for review in the U.S. Court of Appeals for the District of Colombia Circuit by a coalition of communities in the Chicago area.
Removed
The Company’s U.S. operations are subject to economic and safety regulation by the STB and the FRA. The Company’s Mexican operations are subject to economic and safety regulations by the SICT and ARTF.
Added
Legal and Regulatory Risks The Company is subject to significant governmental legislation and regulation across different jurisdictions over commercial, operating and environmental, climate, sustainability and other matters. The requirements and expectations of regulators and stakeholders continue to evolve and diverge, and our ability to meet these requirements and expectations may have a material adverse impact on our results of operations.
Removed
Risks Related to the Kansas City Southern Transaction The conditions imposed by the STB’s March 15, 2023 final decision could have an adverse effect on the Company’s businesses, results of operations, financial condition, cash flows or the market value of the Company’s common stock and debt securities, or reduce the anticipated benefits of the combination.
Added
For example, environmental, social and sustainability-related topics such as climate change and diversity, as well as companies’ actions and initiatives on such issues, have received significant attention from lawmakers, regulators and other stakeholders.
Removed
These conditions could disrupt the Company’s businesses, and uncertainty about the outcome of that review could divert management’s attention and resources, and reduce the anticipated benefits of the combination, and may have an adverse effect on the combined company.
Added
Various governments, including the U.S. and Canadian federal governments, as well as local, regional provincial and state governments, have adopted or are considering legislation, regulation or policies on these topics, which may diverge from, or potentially conflict with, those in other jurisdictions.
Removed
Further, the combination may give rise to potential liabilities, including as a result of pending and future shareholder lawsuits and other litigation relating to the combination. In addition, the Company has incurred, and expects to incur additional, material non-recurring expenses in connection with the completion of the combination and integration activities.
Added
Compliance with such laws, regulations or policies, including any that may be adopted in the future, could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services and impact the prices we charge our customers, any or all of which could adversely affect our results of operations.
Removed
Any of these matters could adversely affect the businesses of, or harm the results of operations, financial condition or cash flows of the Company and the market value of the Company’s common stock and debt securities. The Company incurred substantial indebtedness in connection with consummation of the acquisition, which may pose risks and/or intensify existing risks.
Added
Failure to comply with any legislation, regulation or policy, including as a result of making good faith interpretations that may differ from those taken by enforcement authorities in relevant jurisdictions, could potentially result in substantial fines, criminal sanctions, reputational harm or operational changes.
Removed
Prior to the KCS acquisition closing into voting trust that occurred on December 14, 2021, the Company incurred additional indebtedness of approximately U.S. $6.7 billion and $2.2 billion notes to indirectly fund the acquisition.
Added
Moreover, our customers, shareholders, employees and other stakeholders have diverse and evolving expectations, demands and perspectives on various topics, including environmental, social and sustainability topics.
Removed
Integrating KCS with CPKC will involve operational, technological and personnel-related challenges. This process is time-consuming and expensive, may disrupt the businesses of either or both of the companies and may reduce the growth opportunities sought from the combination.
Added
We may not be able to meet the diverse expectations and demands of all of our stakeholders, which could harm our reputation, reduce customer demand for our products and services, and subject us to legal and operational risks. 18 / CPKC 2024 ANNUAL REPORT The Company is subject to environmental laws and regulations that may result in significant costs.
Removed
There can be no guarantee of the successful integration of KCS or that the combined company will realize the anticipated benefits of the business combination, whether financial, strategic or otherwise, and this may be exacerbated by changes to the economic, political and global environment in which the merged company would operates.
Added
Risks Related to the Kansas City Southern Transaction The Company may fail to realize the anticipated cost savings, growth opportunities and synergies and other benefits anticipated from the recent acquisition of KCS and is subject to continuing obligations under the STB’s final decision, which could adversely affect the Company’s business. On April 14, 2023, the Company assumed control of KCS.
Removed
Mexican law requires that the Mexican government pay compensation if it effects a statutory appropriation for reasons of the public 20 / CPKC 2023 ANNUAL REPORT interest.
Added
The success of the KCS acquisition will depend on, among other things, the Company’s ability to successfully integrate the business of KCS with the Company's other U.S. rail carrier subsidiaries in a manner that facilitates growth opportunities, realizes anticipated synergies, and achieves the projected cost savings, revenue growth and profitability targets of the combined businesses without adversely affecting current revenues and investments in future growth.
Removed
The SICT may also terminate the Concession as a result of CPKCM’s surrender of its rights under the Concession, or for reasons of public interest or upon CPKCM’s liquidation or bankruptcy.
Added
There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition, which may involve delays or additional and unforeseen expenses. Integration and other disruptions from the KCS acquisition may also disrupt the Company’s ongoing businesses.
Removed
The Company cannot predict the impact that the political landscape, including multiparty rule, social unrest and civil disobedience, will have on the Mexican economy or CPKCM’s operations. For example, from time to time, teachers' protests in Mexico have resulted in service interruptions on CPKCM’s right of ways.
Added
In connection with the integration of the CPKC 2024 ANNUAL REPORT / 19 KCS business, the Company has incurred and expects to continue to incur significant costs. These costs may exceed the savings and efficiencies the Company expects to achieve from the integration of the businesses.
Added
Compliance with these conditions and orders, or revisions or additions to the conditions imposed by the STB, could impact the Company’s operations and cause the Company to incur significant expenses.
Added
If the Company is not able to successfully achieve its objectives from the KCS acquisition within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, which may adversely affect the Company’s business.
Added
Accordingly, Mexican governmental actions and policies concerning the economy and state-owned enterprises, including with respect to taxes, salaries, pension, transport and similar services, as well as other political events in Mexico could have a significant impact on Mexican private sector entities in general and on CPKCM’s operations in particular.
Added
For example, the Company has a tax contingency related to an audit assessment, which is currently in litigation, for the CPKCM 2014 Mexico tax return. An adverse resolution of these matters could have a material adverse effect on the Company’s consolidated financial statements in a particular quarter or period.
Added
Moreover, any perception, whether or not valid, that we have failed to act responsibly with respect to such matters, failed (or may fail) to achieve our goals or to effectively respond to new or additional legal or regulatory requirements, could adversely affect our business, reputation, and exposure to legal risks.
Added
The Company's indebtedness may pose risks and/or intensify existing risks. As at December 31, 2024, we have $22,623 million of indebtedness.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDepending on their source and nature, cyber incidents could in the future materially affect CPKC and its operations, and financial condition. See “Risk Factors” in Part I, Item 1A of this Form 10-K for further information about information and cybersecurity risk.
Biggest changeDepending on their source and nature, cyber incidents could in the future materially affect CPKC and its operations, and financial condition.
The Audit and Finance Committee receives updates on information systems and cybersecurity audit and advisory engagements from the Chief Internal Auditor.
The Audit and Finance Committee also receives updates on information systems and cybersecurity audit and advisory engagements from the Chief Internal Auditor.
The Company's cybersecurity risk management program is supervised by the Managing Director of Enterprise Security who reports directly to the CISO. The Chief Information Officer and CISO regularly update senior leadership and the executive committee on cybersecurity risks.
The Company's cybersecurity risk management program is supervised by the Managing Director of Enterprise Security who reports directly to the CISO. The CIO and CISO regularly update senior leadership and the executive committee on cybersecurity risks.
Among other qualifications, certain members of the CISO's and CIO's management team also have certifications as a CISSP (Certified Information Systems Security Professional) and CISM (Certified Information Security Manager). 24 / CPKC 2023 ANNUAL REPORT
Among other qualifications, certain members of the CISO's and CIO's management team also have certifications as a CISSP (Certified Information Systems Security Professional) and CISM (Certified Information Security Manager).
The Chief Information Officer (CIO) provides annual and periodic updates to the Risk and Sustainability Committee and the Board of Directors on cybersecurity risks and the Company’s implementation of its strategy for mitigating such risks. In addition, the Company’s Chief Information Security Officer (CISO) also briefs the Risk and Sustainability Committee.
The Chief Information Officer ("CIO") provides annual and periodic updates to the Audit and Finance Committee and the Board of Directors on cybersecurity risks and the Company’s strategy for mitigating such risks. Additionally, the Chief Information Security Officer ("CISO") briefs the Audit and Finance Committee periodically.
Removed
Governance and Oversight The Board of Directors oversees the work of all of its committees, including the Risk and Sustainability Committee. The Risk and Sustainability Committee is responsible for overseeing the Company’s strategic and integrated risk practices, including its approach to management and assessment of cybersecurity risks.
Added
See “Risk Factors” in Part I, Item 1A of this Form 10-K for further information about information and cybersecurity risk. 24 / CPKC 2024 ANNUAL REPORT Governance and Oversight The Board of Directors oversees the work of all its committees, including the Audit and Finance Committee.
Added
The Audit and Finance Committee is responsible for, among other things, overseeing the Company’s financial disclosures and its internal and external audit functions, maintaining the integrity of financial reporting and internal controls, and providing stewardship and guidance to management in its approach to the assessment and mitigation of cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

13 edited+2 added−3 removed7 unchanged
Biggest changeAs of December 31, 2023, the Company owned and leased the following units of intermodal equipment: Intermodal equipment Owned Leased Total Average age (in years) Containers 10,728 — 10,728 6 Chassis 7,640 2,017 9,657 12 Total intermodal equipment 18,368 2,017 20,385 9 Headquarters Office Building The Company's global headquarters in Calgary, Alberta is a multi-building campus encompassing the head office building, a data centre, training facility, and other office and operational buildings.
Biggest changeAs of December 31, 2024, the Company owned and leased the following freight cars: Freight cars Owned Leased Total Average Age (in years) Box car 3,974 1,022 4,996 31 Covered hopper 15,270 6,202 21,472 17 Flat car 1,660 1,386 3,046 29 Gondola 6,163 2,151 8,314 26 Intermodal 1,781 150 1,931 22 Multi-level autorack 6,137 2,811 8,948 16 Company service car 2,978 443 3,421 48 Open top hopper 227 20 247 32 Tank car 29 556 585 18 Total freight cars 38,219 14,741 52,960 22 As of December 31, 2024, the Company owned and leased the following units of intermodal equipment: Intermodal equipment Owned Leased Total Average age (in years) Containers 10,467 — 10,467 6 Chassis 6,999 2,418 9,417 12 Total intermodal equipment 17,466 2,418 19,884 9 Headquarters Office Building The Company's global headquarters in Calgary, Alberta is a multi-building campus encompassing the head office building, a data centre, training facility, and other office and operational buildings.
Northeast; the Central Maine & Quebec Railway U.S. Inc., which operates in the U.S. Northeast, and the Kansas City Southern Railway Company, which operates in the central and south-central U.S. KCS indirectly owns CPKCM which operates in northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz.
Northeast; the Central Maine & Quebec Railway U.S. Inc., which operates in the U.S. Northeast, and the Kansas City Southern Railway Company, which operates in the central and south-central U.S. KCS indirectly owns CPKCM which operates in northeastern and central Mexico and the port cities of Lázaro Cárdenas, Veracruz, Altamira and Tampico.
The Company’s U.S. headquarters is located in Kansas City, Missouri while Mexican headquarters are located in Monterrey, Nuevo Leon and Mexico City. The Company's main dispatch centre is located in Calgary, and is the primary dispatching facility in Canada.
The Company’s U.S. headquarters is located in Kansas City while Mexican headquarters are located in Monterrey, Nuevo Leon and Mexico City. The Company's main dispatch centre is located in Calgary, and is the primary dispatching facility in Canada.
The Company also maintains dispatch centres in the U.S., located in Kansas City and Minneapolis, Minnesota, and Mexico, located in Monterrey to service the dispatching needs of locomotive and train crews working in the U.S. and Mexico, respectively. Capital Expenditures The Company incurs expenditures to expand and enhance its rail network, rolling stock, and other infrastructure.
The Company also maintains dispatch centres in the U.S. and Mexico, located in Kansas City and Monterrey, respectively, to service the dispatching needs of locomotive and train crews working in the U.S. and Mexico, respectively. Capital Expenditures The Company incurs expenditures to expand and enhance its rail network, rolling stock, and other infrastructure.
The Company’s network in Canada covers approximately 8,400 miles and extends from the Port of Vancouver, B.C. on Canada’s Pacific Coast to the Port of Montréal, Québec, and eastern Québec and to the Port of Saint John, New Brunswick via a haulage agreement.
The Company’s network in Canada covers approximately 8,400 miles and extends from the Port of Vancouver on Canada’s Pacific Coast to the Port of Montréal, and eastern Québec and to the Port of Saint John via a haulage agreement.
The Company’s network in Mexico extends approximately 3,100 miles from the Laredo, Texas border crossing through Mexico City, Mexico City with port access at Lázaro Cárdenas, Michoacán, Veracruz, Veracruz, and Altamira, Tamaulipas.
The Company’s network in Mexico extends approximately 3,100 miles from the Laredo, Texas border crossing through Mexico City, with port access at Lázaro Cárdenas, Veracruz, Altamira, and Tampico.
CPKC 2023 ANNUAL REPORT / 25 At December 31, 2023, the breakdown of the Company's operated track miles is as follows: Total First main track 19,178 Second and other main track 1,159 Passing sidings and yard track 5,815 Industrial and way track 1,894 Total track miles 28,046 Rail Facilities The Company operates numerous facilities including: terminals for intermodal, transload, automotive and other freight; classification rail yards for train-building and switching, storage-in-transit and other activities; offices to administer and manage operations; dispatch centres to direct traffic on the rail network; crew quarters to house train crews along the rail line; shops and other facilities for fuelling, maintenance and repairs of locomotives; and facilities for maintenance of freight cars and other equipment.
CPKC 2024 ANNUAL REPORT / 25 At December 31, 2024, the breakdown of the Company's operated track miles is as follows: Total First main track 19,176 Second and other main track 1,165 Passing sidings and yard track 5,809 Industrial and way track 1,898 Total track miles 28,048 Rail Facilities The Company operates numerous facilities including: terminals for intermodal, transload, automotive and other freight; classification rail yards for train-building and switching, storage-in-transit and other activities; offices to administer and manage operations; dispatch centres to direct traffic on the rail network; crew quarters to house train crews along the rail line; shops and other facilities for fuelling, maintenance and repairs of locomotives; and facilities for maintenance of freight cars and other equipment.
In addition to fully operational redundant systems, the Company has a fully integrated Business Continuity Centre, should the Company's operations centre be affected by any natural disaster, fire, cyber-attack, or hostile threat.
CPKC 2024 ANNUAL REPORT / 27 In addition to fully operational redundant systems, the Company has a fully integrated Business Continuity Centre, should the Company's operations centre be affected by any natural disaster, fire, cyber-attack, or hostile threat.
In this section, owned equipment includes units acquired by the Company, equipment leased to third parties, units held under finance leases, and equipment leased to the Company under short-term or long-term operating leases.
In this section, owned equipment includes units acquired by the Company, equipment leased to third parties, units held under finance leases, and equipment leased to the Company under 26 / CPKC 2024 ANNUAL REPORT short-term or long-term operating leases.
These expenditures are aimed at improving efficiency and safety of our operations. Such investments are also an integral part of the Company's multi-year capital program and support growth initiatives. In 2023, the Company invested in capital expenditures of $2,468 million (2022 - $1,557 million), up 59% from the prior year mainly as a result of the KCS acquisition.
These expenditures are aimed at improving efficiency and safety of our operations. Such investments are also an integral part of the Company's multi-year capital program and support growth initiatives.
The Company’s locomotive productivity, defined as the daily average GTMs divided by daily average operating horsepower, for the years ended December 31, 2023 and 2022, was 171 and 196 GTMs per Operating horsepower, respectively.
The Company’s locomotive productivity, defined as the daily average GTMs divided by daily average operating horsepower, for the years ended December 31, 2024 and 2023, was 165 and 171 GTMs per operating horsepower, respectively. Operating horsepower excludes units offline, tied up or in storage, or in use on other railways, and includes foreign units online.
For further details, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. CPKC 2023 ANNUAL REPORT / 27 Encumbrances Refer to Item 8. Financial Statements and Supplementary Data, Note 17 Debt, for information on the Company's finance lease obligations and assets held as collateral under these agreements.
Encumbrances Refer to Part II, Item 8. Financial Statements and Supplementary Data, Note 16 Debt, for information on the Company's finance lease obligations and assets held as collateral under these agreements.
As of December 31, 2023, the Company owned or leased the following locomotive units: Locomotives Owned Leased Total Average Age (in years) Line haul 1,438 54 1,492 15 Road Switcher 771 7 778 43 Yard Switcher 49 — 49 50 Total locomotives 2,258 61 2,319 23 26 / CPKC 2023 ANNUAL REPORT The Company’s average in-service utilization percentage for freight cars, for the years ended December 31, 2023 and 2022, was 81% and 85%, respectively (1) . 2022 reflects legacy CP on a standalone basis.
As of December 31, 2024, the Company owned or leased the following locomotive units: Locomotives Owned Leased Total Average Age (in years) Line haul 1,376 54 1,430 16 Road Switcher 760 3 763 38 Yard Switcher 49 — 49 51 Total locomotives 2,185 57 2,242 24 The Company’s average in-service utilization percentage for freight cars, for the years ended December 31, 2024 and 2023, was 79% and 81%, respectively.
Removed
Operating horsepower excludes units offline, tied up or in storage, or in use on other railways, and includes foreign units online. 2022 GTMs reflect legacy CP on a standalone basis. As of December 31, 2023, the Company had 357 locomotives in storage.
Added
As of December 31, 2024, the Company had 257 locomotives in storage.
Removed
As of December 31, 2023, the Company owned and leased the following freight cars: Freight cars Owned Leased Total Average Age (in years) Box car 4,366 1,203 5,569 31 Covered hopper 15,642 6,416 22,058 16 Flat car 1,773 1,141 2,914 30 Gondola 6,251 2,719 8,970 25 Intermodal 1,791 202 1,993 21 Multi-level autorack 6,252 1,907 8,159 17 Company service car 2,986 466 3,452 47 Open top hopper 230 21 251 31 Tank car 44 383 427 28 Total freight cars 39,335 14,458 53,793 22 (1) Average in-service utilization percentage for 2022 previously reported as 79%, has been restated to 85% in this annual report.
Added
In 2024 , the Company invested in capital expenditures of $2,825 million (2023 - $2,468 million), up 14% from the prior year mainly as a result of assets acquired as part of the KCS acquisition. For further details, refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.
Removed
The restatement reflects new methodology adopted by the Company in 2023 to harmonize utilization data across the combined network.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed6 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS For further details, refer to Item 8. Financial Statements and Supplementary Data, Note 26 Commitments and contingencies. SEC regulations require the disclosure of any proceeding under environmental laws to which a government authority is a party unless the registrant reasonably believes it will not result in sanctions over a certain threshold.
Biggest changeITEM 3. LEGAL PROCEEDINGS For further details, refer to Item 8. Financial Statements and Supplementary Data, Note 25 Commitments and contingencies. SEC regulations require the disclosure of any proceeding under environmental laws to which a government authority is a party unless the registrant reasonably believes it will not result in sanctions over a certain threshold.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

27 edited+5 added−8 removed10 unchanged
Biggest changeClements has responsibilities that include strategic network issues, Network Service Centre operations, and Information Services. Previously, Mr. Clements served as Senior Vice-President, Strategic Planning and Technology Transformation at CP since September 2019. Before this appointment, he was the Vice-President, Strategic Planning and Transportation Services of the Company from 2014. Mr.
Biggest changeClements has responsibilities that include the Company's strategic government relations and communications functions as well as leadership of CPKC's ongoing multi-year integration and change management efforts. Previously, Mr. Clements served as Senior Vice-President, Strategic Planning and Technology Transformation at the Company since September 2019.
Albiston is responsible for leading the Company's Human Resources function across North America, including in the areas of talent management, recruitment, total rewards, occupational health and leadership development. Ms. Albiston also oversees the management of the Company's pension plans, which include CP's defined benefit pension plan, one of the oldest and largest corporate pension plans in Canada.
Albiston is responsible for leading the Company's Human Resources function across North America, including in the areas of talent management, recruitment, total rewards, occupational health and leadership development. Ms. Albiston also oversees the management of the Company's pension plans, which include the Company's defined benefit pension plan, one of the oldest and largest corporate pension plans in Canada.
Previous to this appointment, she was the CP's first Vice-President Innovation & Business Transformation, a portfolio she retains in her current role, including oversight of the Company's Network Service Centre. Ms.
Previous to this appointment, she was the Company's first Vice-President Innovation & Business Transformation, a portfolio she retains in her current role, including oversight of the Company's Network Service Centre. Ms.
Mr. Pitz, a Vietnam War veteran and former Federal Bureau of Investigation special agent, is a 40-year career professional who has directed strategic and operational risk mitigation, security and crisis management functions for companies operating in a wide range of fields, including defence, logistics and transportation. Mike Foran, 50 Senior Vice-President, Network and Capacity Management Mr.
Mr. Pitz, a Vietnam War veteran and former Federal Bureau of Investigation special agent, is a 40-year career professional who has directed strategic and operational risk mitigation, security and crisis management functions for companies operating in a wide range of fields, including defence, logistics and transportation. Mike Foran, 51 Senior Vice-President, Network and Capacity Management Mr.
During her nearly 20 year career at CP, Ms. Albiston has held a number of leadership roles, most recently as Vice-President Capital Markets where she acted as the primary point of contact for the financial community with oversight for the investor relations, treasury and pension functions. Ms. Albiston holds a Bachelor of Commerce from the University of Alberta.
During her nearly 20 year career at the Company, Ms. Albiston has held a number of leadership roles, most recently as Vice-President Capital Markets where she acted as the primary point of contact for the financial community with oversight for the investor relations, treasury and pension functions. Ms. Albiston holds a Bachelor of Commerce from the University of Alberta.
There are no family relationships among our officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. As of the date of this filing, the executive officers’ names, ages, and business experience are: Name, Age and Position Business Experience Keith Creel, 55 President and Chief Executive Officer Mr.
There are no family relationships among our officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. As of the date of this filing, the executive officers’ names, ages, and business experience are: Name, Age and Position Business Experience Keith Creel, 56 President and Chief Executive Officer Mr.
Brooks began his railroading career with Union Pacific Corporation and later helped start I&M Rail Link, LLC, which was purchased by DM&E in 2002. Mr. Brooks was Vice-President, Marketing at DM&E prior to it being acquired by CP in 2007. With more than 25 years in the railroading business, Mr.
Brooks began his railroading career with Union Pacific Corporation and later helped start I&M Rail Link, LLC, which was purchased by DM&E in 2002. Mr. Brooks was Vice-President, Marketing at DM&E prior to it being acquired by the Company in 2007. With more than 25 years in the railroading business, Mr.
Velani holds a Bachelor of Economics degree from Western University and an MBA in finance/international business from McGill University. In 2022, Mr. Velani completed the Advanced Management Program at Harvard Business School. John Brooks, 53 Executive Vice-President and Chief Marketing Officer Mr. Brooks is Executive Vice-President and Chief Marketing Officer ("CMO") of CPKC. Mr.
Velani holds a Bachelor of Economics degree from Western University and an MBA in finance/international business from McGill University. In 2022, Mr. Velani completed the Advanced Management Program at Harvard Business School. John Brooks, 54 Executive Vice-President and Chief Marketing Officer Mr. Brooks is Executive Vice-President and Chief Marketing Officer ("CMO") of CPKC. Mr.
Velani served as Executive Vice-President and Chief Financial Officer at CP having earlier served as Vice-President Investor Relations. Prior to joining CP, Mr. Velani spent 15 years at CN where he worked in a variety of positions in Strategic and Financial Planning, Investor Relations, Sales and Marketing and the Office of the President and CEO. Mr.
Velani served as Executive Vice-President and Chief Financial Officer at the Company having earlier served as Vice-President Investor Relations. Prior to joining the Company, Mr. Velani spent 15 years at CN where he worked in a variety of positions in Strategic and Financial Planning, Investor Relations, Sales and Marketing and the Office of the President and CEO. Mr.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 / CPKC 2023 ANNUAL REPORT INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers are appointed by the Board of Directors and they hold office until their successors are appointed, subject to resignation, retirement or removal by the Board of Directors.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 28 / CPKC 2024 ANNUAL REPORT INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers are appointed by the Board of Directors and they hold office until their successors are appointed, subject to resignation, retirement or removal by the Board of Directors.
Creel holds a Bachelor of Science in marketing from Jacksonville State University and completed the Advanced Management Program at Harvard Business School. Nadeem Velani, 51 Executive Vice-President and Chief Financial Officer Mr. Velani is Executive Vice-President and Chief Financial Officer of CPKC. In his role, Mr.
Creel holds a Bachelor of Science in marketing from Jacksonville State University and completed the Advanced Management Program at Harvard Business School. Nadeem Velani, 52 Executive Vice-President and Chief Financial Officer Mr. Velani is Executive Vice-President and Chief Financial Officer of CPKC. In his role, Mr.
Oscar Augusto Del Cueto Cuevas, 57 CPKCM President, General Manager and Executive Representative Mr. Del Cueto is the President and the Executive Representative of CPKCM. Mr. Del Cueto has more than 30 years of experience in the railway industry. Mr.
Oscar Augusto Del Cueto Cuevas, 58 CPKCM President, General Manager and Executive Representative Mr. Del Cueto is the President and the Executive Representative of CPKCM. Mr. Del Cueto has more than 30 years of experience in the railway industry. Mr.
Creel held various positions including Executive Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of the Prairie Division. Mr. Creel began his railroad career at Burlington Northern Railway in 1992 as an intermodal ramp manager in Birmingham, Alabama.
During his time at CN, Mr. Creel held various positions including Executive Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of the Prairie Division. Mr. Creel began his railroad career at Burlington Northern Railway in 1992 as an intermodal ramp manager in Birmingham, Alabama.
Brooks brings a breadth of experience to the CMO role that is pivotal to the Company's continued and future success. Mr. Brooks holds a Bachelor of Arts in finance from the University of Northern Iowa and a minor in real estate finance. CPKC 2023 ANNUAL REPORT / 29 Mark Redd, 53 Executive Vice-President and Chief Operating Officer Mr.
Brooks brings a breadth of experience to the CMO role that is pivotal to the Company's continued and future success. Mr. Brooks holds a Bachelor of Arts in finance from the University of Northern Iowa and a minor in real estate finance. CPKC 2024 ANNUAL REPORT / 29 Mark Redd, 54 Executive Vice-President and Chief Operating Officer Mr.
Pitz is responsible for risk management, police services, U.S. and Canadian casualty and general claims, environmental risk and forensic audit investigations. Previously, Mr. Pitz served as Senior Vice-President and CRO of CP since October 2017.
Pitz is responsible for risk management, police services, U.S. and Canadian casualty and general claims, environmental risk and forensic audit investigations. Previously, Mr. Pitz served as Senior Vice-President and CRO of the Company since October 2017.
Creel's leadership, CP achieved industry-leading safety performance and delivered more efficient ways to connect customers to domestic and global markets, playing a prominent role in connecting communities across North America. Prior to joining the Company, Mr. Creel was Executive Vice-President and COO at Canadian National Railway Limited ("CN") from January 2010 to February 2013. During his time at CN, Mr.
Under Mr. Creel's leadership, the Company achieved industry-leading safety performance and delivered more efficient ways to connect customers to domestic and global markets, playing a prominent role in connecting communities across North America. Prior to joining the Company, Mr. Creel was Executive Vice-President and COO at Canadian National Railway Limited ("CN") from January 2010 to February 2013.
Creel became the first President and Chief Executive Officer ("CEO") of CPKC on April 14, 2023. Mr. Creel previously served as President and CEO of CP from January 31, 2017 to April 13, 2023. He was appointed CP President and Chief Operating Officer ("COO") in February 2013 and joined the CP Board of Directors in May of 2015. Under Mr.
Creel became the first President and Chief Executive Officer ("CEO") of CPKC on April 14, 2023. Mr. Creel previously served as President and CEO of the Company from January 31, 2017 to April 13, 2023. He was appointed the Company's President and Chief Operating Officer ("COO") in February 2013 and joined the Company's Board of Directors in May of 2015.
Foran is Senior Vice-President, Network and Capacity Management at CPKC. In this role, Mr. Foran is responsible for guiding the use of company assets to align with corporate objectives to drive strategic, sustainable growth. Previously, Mr. Foran served as Vice-President, Market Strategy and Asset Management at CP since May 2017. During his more than 21 years at CP, Mr.
Foran is Senior Vice-President, Network and Capacity Management at CPKC. In this role, Mr. Foran is responsible for guiding the use of company assets to align with corporate objectives to drive strategic, sustainable growth. Previously, Mr. Foran served as Vice-President, Market Strategy and Asset Management at the Company since May 2017.
Brooks served as Executive Vice-President and CMO of CP since February 2019. He has worked in senior marketing roles at CP since joining in 2007, including past experience as Senior Vice-President and CMO and Vice-President, Marketing – Bulk and Intermodal. Mr.
Brooks served as Executive Vice-President and CMO of the Company from February 2019. He worked in senior marketing roles at the Company since joining in 2007, including past experience as Senior Vice-President and CMO and Vice-President, Marketing - Bulk and Intermodal. Mr.
Redd is Executive Vice-President and COO of CPKC, bringing considerable leadership experience in rail operations and safety excellence to the role. Mr. Redd oversees the 24/7 operations of CPKC's North American network, north of Beaumont, Texas, including teams responsible for network transportation, operations, mechanical, engineering, training and safety. Previously, Mr.
Redd is Executive Vice-President and COO of CPKC, bringing considerable leadership experience in rail operations and safety excellence to the role. Mr. Redd oversees the 24/7 operations of CPKC's North American network, including teams responsible for network transportation, operations, mechanical, engineering, training and safety. Previously, Mr. Redd served as Executive Vice-President Operations of the Company from September 2019.
Additionally, he received a Certificate in the Management Rail Program from the University of Michigan. He is fluent in Spanish and English. CPKC 2023 ANNUAL REPORT / 31 Pam Arpin, 49 Vice-President and Chief Information Officer Ms. Arpin is Vice-President and Chief Information Officer at CPKC.
Additionally, he received a Certificate in the Management Rail Program from the University of Michigan. He is fluent in Spanish and English. Pam Arpin, 50 Senior Vice-President and Chief Information Officer Ms. Arpin is Senior Vice-President and Chief Information Officer at CPKC.
Redd served as Executive Vice-President Operations of CP since September 2019. He joined CP in October 2013 as General Manager Operations U.S. West and has held various leadership positions. In April 2016, he became Vice-President Operations Western Region and in February 2017, he became Senior Vice-President Operations Western Region. Previous to these roles, Mr.
He joined the Company in October 2013 as General Manager Operations U.S. West and has held various leadership positions. In April 2016, he became Vice-President Operations Western Region and in February 2017, he became Senior Vice-President Operations Western Region. Previous to these roles, Mr.
Clements has more than 20 years' experience at the Company, enabling an extensive understanding of the Company's customers, processes, systems, and leadership of CP-KCS integration planning.
Before this appointment, he was the Vice-President, Strategic Planning and Transportation Services of the Company from 2014. Mr. Clements has more than 20 years' experience at the Company, enabling an extensive understanding of the Company's customers, processes, systems, and leadership of CP-KCS integration planning.
Foran has worked in operations, business development, marketing and general management. Mr. Foran holds an Executive MBA from the Ivey School of Business at Western University and a Bachelor of Commerce from the University of Calgary. Maeghan Albiston, 42 Vice-President and Chief Human Resources Officer Ms. Albiston is Vice-President and Chief Human Resources Officer at CPKC. Ms.
Foran holds an Executive MBA from the Ivey School of Business at Western University and a Bachelor of Commerce from the University of Calgary. 30 / CPKC 2024 ANNUAL REPORT Maeghan Albiston, 43 Senior Vice-President and Chief Human Resources Officer Ms. Albiston is Senior Vice-President and Chief Human Resources Officer at CPKC. Ms.
Redd holds Bachelor's and Master's degrees of science in management from the University of Phoenix and an Executive MBA from the University of Missouri – Kansas City. John Orr, 60 Executive Vice-President and Chief Transformation Officer Mr. Orr is Executive Vice-President and Chief Transformation Officer of CPKC. In this new strategic position, Mr.
Redd holds Bachelor's and Master's degrees of science in management from the University of Phoenix and an Executive MBA from the University of Missouri - Kansas City. James Clements, 55 Executive Vice-President, Strategic Planning and Corporate Services Mr. Clements is Executive Vice-President, Strategic Planning and Corporate Services at CPKC. Mr.
Clements holds an MBA in international business and finance from McGill University and a Bachelor of Science in computer science and mathematics from McMaster University. Jeffrey Ellis, 56 Executive Vice-President, Chief Legal Officer and Corporate Secretary Mr. Ellis is Executive Vice-President, Chief Legal Officer and Corporate Secretary of CPKC. Mr.
Clements holds an MBA in finance/international business from McGill University and a Bachelor of Science in computer science and mathematics from McMaster University. Laird Pitz, 80 Senior Vice-President and Chief Risk Officer Mr. Pitz is Senior Vice-President and Chief Risk Officer ("CRO") at CPKC. In his role, Mr.
She was named the 2019 Railway Woman of the Year by the League of Railway Women and was named one of Canada's Most Powerful Women: Top 100 by the Women's Executive Network that same year. Ms.
She was named the 2019 Railway Woman of the Year by the League of Railway Women and was named one of Canada's Most Powerful Women: Top 100 by the Women's Executive Network that same year. Ms. Arpin holds a Bachelor of Commerce from the University of Saskatchewan. Cassandra Quach, 51 Vice-President, Chief Legal Officer and Corporate Secretary Ms.
Removed
Orr's responsibilities include Mexico operations, network operations planning and design, labor relations and regulatory affairs. Previously, Mr. Orr served as Executive Vice-President Operations for Kansas City Southern, overseeing the transportation, engineering, mechanical, network operations, health-safety-environmental and labor relations teams from 2021-2023. A fourth-generation railroader, Mr.
Added
During his more than 20 years at the Company, Mr. Foran has worked in operations, business development, marketing and general management. Mr.
Removed
Orr began his railroad career at CN in 1985, gaining critical experience and ultimately holding various leadership positions including Senior Vice-President and Chief Transportation Officer. Mr. Orr holds a Bachelor of Arts in environmental studies from the University of Waterloo and has most recently completed the Advanced Management Program at Harvard University.
Added
Quach is Vice-President, Chief Legal Officer and Corporate Secretary. Ms. Quach has accountability for the overall strategic leadership, oversight and performance of the legal and corporate secretarial functions of CPKC, which include regulatory, commercial, litigation, and securities matters across the Canada, U.S., and Mexico network.
Removed
He has also completed additional business coursework and professional development in leadership from University of Waterloo, University of Guelph, University of Western Ontario and Niagara Leadership Institute. James Clements, 54 Executive Vice-President, Strategic Planning and Technology Mr. Clements is Executive Vice-President, Strategic Planning and Technology at CPKC. Mr.
Added
She also has accountability for handling privacy matters and provides strategic support to senior management and the Board of Directors in all areas. Since joining the Company in 2005 as Legal Counsel, Ms.
Removed
Ellis has accountability for the overall strategic leadership, oversight and performance of the legal, corporate secretarial, government relations, and communications functions of the Company. Mr. Ellis' responsibilities include litigation management, regulatory, contracts, commercial matters, advising on risk management as well as providing strategic support to senior management and the Board of Directors. Previously, Mr.
Added
Quach has held various roles within the Legal Services team with increasing responsibilities, including being promoted to be the Assistant Vice-President, Regulatory and Commercial Law after the successful acquisition of Kansas City Southern. Prior to joining the Company, Ms. Quach practiced law at the law firm of Moore Wittman Phillips, mainly with a focus on commercial litigation. Ms.
Removed
Ellis served as Chief Legal Officer and Corporate Secretary at CP, a role he had served in since 2015. Prior to joining CP, Mr. Ellis was the U.S. General Counsel at BMO Financial Group. Before joining BMO in 2006, Mr. Ellis was with the law firm of Borden Ladner Gervais LLP in Toronto, Ontario. Mr.
Added
Quach holds a Bachelor of Arts, with a major in Law & Society and a Bachelor of Laws degree from the University of Calgary. Ms. Quach was called to the Alberta Bar in 2000. CPKC 2024 ANNUAL REPORT / 31 PART II 32 / CPKC 2024 ANNUAL REPORT
Removed
Ellis holds a Bachelor of Arts and a Master's of Arts degree from the University of Toronto, Juris Doctor and Master of Laws degrees from Osgoode Hall Law School, and an MBA from the Richard Ivey School of Business, Western University. Mr.
Removed
Ellis is a member of the bars of New York, Illinois, Ontario and Alberta. 30 / CPKC 2023 ANNUAL REPORT Laird Pitz, 79 Senior Vice-President and Chief Risk Officer Mr. Pitz is Senior Vice-President and Chief Risk Officer ("CRO") at CPKC. In his role, Mr.
Removed
Arpin holds a Bachelor of Commerce from the University of Saskatchewan. 32 / CPKC 2023 ANNUAL REPORT PART II CPKC 2023 ANNUAL REPORT / 33

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−1 removed3 unchanged
Biggest changeThe values for the assumed investments depicted on the graph and in the table have been calculated assuming that any dividends are reinvested. Issuer Purchase of Equity Securities In connection with the KCS transaction, the Company suspended share repurchases and did not have an active program as at December 31, 2023.
Biggest changeThe values for the assumed investments depicted on the graph and in the table have been calculated assuming that any dividends are reinvested. CPKC 2024 ANNUAL REPORT / 33
In addition, the Company has a Management Stock Option Incentive Plan (“MSOIP”), under which key officers and employees are granted options to purchase the Common Shares. All number of options presented herein are shown on the basis of the number of shares subject to the options .
In addition, the Company has a Management Stock Option Incentive Plan (“MSOIP”), under which key officers and employees are granted options to purchase Common Shares. All number of options presented herein are shown on the basis of the number of Common Shares subject to the options .
At February 26, 2024, 6,992,378 options were outstanding under the MSOIP and stand-alone option agreements entered into with Mr. Keith Creel. There are 20,940,714 options available to be issued by the Company’s MSOIP in the future. The Company also has a Director's Stock Option Plan (“DSOP”), under which directors are granted options to purchase Common Shares.
At February 26, 2025, 6,558,443 options were outstanding under the MSOIP and stand-alone option agreements entered into with Mr. Keith Creel. There are 20,088,456 options available to be issued by the Company’s MSOIP in the future. The Company also has a Directors' Stock Option Plan (“DSOP”), under which directors are granted options to purchase Common Shares.
Share Capital At February 26, 2024, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were 932,428,454 Common Shares and no preferred shares issued and outstanding, which consisted of 15,190 holders of record of the Common Shares.
Share Capital At February 26, 2025, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were 933,713,487 Common Shares issued and outstanding, which consisted of 13,541 holders of record of the Common Shares, and no preferred shares issued and outstanding.
Removed
Active programs and purchases made in prior years are further described in Item 8. Financial Statements and Supplementary Data, Note 21 Shareholders' Equity. 34 / CPKC 2023 ANNUAL REPORT

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

167 edited+47 added−102 removed36 unchanged
Biggest changeIn 2023, there were five significant items included in the Net income attributable to controlling shareholders as reported on a GAAP basis as follows: • during the course of the year, a total current tax expense of $16 million related to a tax settlement with the SAT of $13 million and a reserve for the estimated impact of potential future audit settlements of $3 million, that unfavourably impacted Diluted EPS by 2 cents as follows: – in the fourth quarter, a current tax expense of $1 million related to a tax settlement with the SAT that had minimal impact on Diluted EPS; and – in the third quarter, a total current tax expense of $15 million related to a tax settlement with the SAT of $9 million and reserves for the estimated impact of potential future audit settlements of $6 million of which $3 million was settled in the fourth quarter, that unfavourably impacted Diluted EPS by 2 cents; • in the second quarter, a remeasurement loss of KCS of $7,175 million recognized in "Remeasurement loss of Kansas City Southern" due to the derecognition of CPKC’s previously held equity method investment in KCS and remeasurement at its Control Date fair value that unfavourably impacted Diluted EPS by $ 7.68; • during the course of the year, a deferred tax recovery of $72 million on account of changes in tax rates and apportionment that favourably impacted Diluted EPS by 7 cents as follows: – in the fourth quarter, a deferred tax recovery of $7 million due to CPKC unitary state apportionment changes that favourably impacted Diluted EPS by 1 cent; – in the third quarter, a deferred tax recovery of $14 million due to decreases in the Iowa and Arkansas state tax rates that favourably impacted Diluted EPS by 2 cents; and – in the second quarter, a deferred tax recovery of $51 million due to CPKC unitary state apportionment changes that favourably impacted Diluted EPS by 5 cents; • during the course of the year, a deferred tax recovery of $7,855 million on changes in the outside basis difference on the equity investment in KCS that favourably impacted Diluted EPS by $8.42 as follows: – in the second quarter, a deferred tax recovery of $7,832 million related to the elimination of the deferred tax liability on the outside basis difference of the investment in KCS that favourably impacted Diluted EPS by $8.39; and 52 / CPKC 2023 ANNUAL REPORT – in the first quarter, a deferred tax recovery of $23 million on changes in the outside basis difference of the equity investment in KCS that favourably impacted Diluted EPS by 3 cents; and • during the course of the year, acquisition-related costs of $201 million in connection with the KCS acquisition ($164 million after current tax recovery of $37 million), including an expense of $71 million recognized in "Compensation and benefits", $2 million recognized in "Materials", $111 million recognized in "Purchased services and other", $6 million recognized in "Other expense", and $11 million recognized in "Equity (earnings) loss of Kansas City Southern", that unfavourably impacted Diluted EPS by 17 cents as follows: – in the fourth quarter, acquisition-related costs of $32 million ($24 million after current tax recovery of $8 million), including costs of $7 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the third quarter, acquisition-related costs of $24 million ($18 million after current tax recovery of $6 million), including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $22 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the second quarter, acquisition-related costs of $120 million ($101 million after current tax recovery of $19 million), including costs of $63 million recognized in "Compensation and benefits", $53 million recognized in "Purchased services and other", $3 million recognized in "Other expense", and $1 million recognized in "Equity (earnings) loss of Kansas City Southern", that unfavourably impacted Diluted EPS by 11 cents; and – in the first quarter, acquisition-related costs of $25 million ($21 million after current tax recovery of $4 million), including costs of $12 million recognized in "Purchased services and other", $3 million recognized in "Other expense", and $10 million recognized in "Equity (earnings) loss of Kansas City Southern", that unfavourably impacted Diluted EPS by 2 cents.
Biggest changeIn 2023, there were five significant items included in Net income attributable to controlling shareholders as reported on a GAAP basis as follows: • in the second quarter, a remeasurement loss of KCS of $7,175 million recognized in "Remeasurement loss of Kansas City Southern" due to the derecognition of CPKC’s previously held equity method investment in KCS and remeasurement at its Control Date fair value, that unfavourably impacted Diluted EPS by $7.68; • during the course of the year, a total current tax expense of $16 million related to a tax settlement with the Servicio de Administracion Tributaria ("SAT") of $13 million and a reserve for the estimated impact of potential future audit settlements of $3 million, that unfavourably impacted Diluted EPS by 2 cents as follows: – in the fourth quarter, a current tax expense of $1 million related to a tax settlement with the SAT that had minimal impact on Diluted EPS; and – in the third quarter, a total current tax expense of $15 million related to a tax settlement with the SAT of $9 million and reserves for the estimated impact of potential future audit settlements of $6 million of which $3 million was settled in the fourth quarter, that unfavourably impacted Diluted EPS by 2 cents; • during the course of the year, a deferred income tax recovery of $72 million on account of changes in tax rates and apportionment, that favourably impacted Diluted EPS by 7 cents as follows: – in the fourth quarter, a deferred income tax recovery of $7 million due to CPKC unitary state apportionment changes, that favourably impacted Diluted EPS by 1 cent; – in the third quarter, a deferred income tax recovery of $14 million due to decreases in the Iowa and Arkansas state corporate income tax rates, that favourably impacted Diluted EPS by 2 cents; and – in the second quarter, a deferred income tax recovery of $51 million due to CPKC unitary state apportionment changes, that favourably impacted Diluted EPS by 5 cents; • during the course of the year, deferred income tax recovery of $7,855 million on changes in the outside basis difference on the equity investment in KCS, that favourably impacted Diluted EPS by $8.42 as follows: – in the second quarter, a deferred income tax recovery of $7,832 million related to the elimination of the deferred income tax liability on the outside basis difference of the investment in KCS, that favourably impacted Diluted EPS by $8.39; and – in the first quarter, a deferred income tax recovery of $23 million on changes in the outside basis difference of the equity investment in KCS that favourably impacted Diluted EPS by 3 cents; and • during the course of the year, acquisition-related costs of $201 million in connection with the KCS acquisition ($164 million after current income tax recovery of $37 million), including an expense of $71 million recognized in "Compensation and benefits", $2 million recognized in "Materials", $111 million recognized in "Purchased services and other", $6 million recognized in "Other (income) expense", and $11 million recognized in "Equity earnings of Kansas City Southern", that unfavourably impacted Diluted EPS by 17 cents as follows: – in the fourth quarter, acquisition-related costs of $32 million ($24 million after current income tax recovery of $8 million), including costs of $7 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the third quarter, acquisition-related costs of $24 million ($18 million after current income tax recovery of $6 million), including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $22 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the second quarter, acquisition-related costs of $120 million ($101 million after current income tax recovery of $19 million), including costs of $63 million recognized in "Compensation and benefits", $53 million recognized in "Purchased services and other", $3 million recognized in "Other (income) expense", and $1 million recognized in "Equity earnings of Kansas City Southern", that unfavourably impacted Diluted EPS by 11 cents; and – in the first quarter, acquisition-related costs of $25 million ($21 million after current income tax recovery of $4 million), including costs of $12 million recognized in "Purchased services and other", $3 million recognized in "Other (income) expense", and $10 million recognized in "Equity earnings of Kansas City Southern", that unfavourably impacted Diluted EPS by 2 cents. 50 / CPKC 2024 ANNUAL REPORT KCS purchase accounting included in Net income attributable to controlling shareholders as reported on a GAAP basis was as follows: 2024: • during the course of the year, KCS purchase accounting of $352 million ($256 million after deferred income tax recovery of $96 million), including costs of $333 million recognized in "Depreciation and amortization", $3 million recognized in "Purchased services and other" related to the amortization of equity investments, $20 million recognized in "Net interest expense", $3 million recognized in "Other (income) expense", and a recovery of $7 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 27 cents as follows: – in the fourth quarter, KCS purchase accounting of $93 million ($68 million after deferred income tax recovery of $25 million), including costs of $87 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other" related to the amortization of equity investments, $6 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and a recovery of $2 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 8 cents; – in the third quarter, KCS purchase accounting of $89 million ($65 million after deferred income tax recovery of $24 million), including costs of $85 million recognized in "Depreciation and amortization", $4 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and a recovery of $1 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 7 cents; – in the second quarter, KCS purchase accounting of $86 million ($62 million after deferred income tax recovery of $24 million), including costs of $82 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other" related to the amortization of equity investments, $5 million recognized in "Net interest expense", and a recovery of $2 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 6 cents; and – in the first quarter, KCS purchase accounting of $84 million ($61 million after deferred income tax recovery of $23 million), including costs of $79 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other" related to the amortization of equity investments, $5 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and a recovery of $2 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 7 cents. 2023: • during the course of the year, KCS purchase accounting of $297 million ($228 million after deferred income tax recovery of $69 million), including costs of $234 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other" related to the amortization of equity investments, $17 million recognized in "Net interest expense", $2 million recognized in "Other (income) expense", $48 million recognized in "Equity earnings of Kansas City Southern", and a recovery of $5 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 25 cents as follows: – in the fourth quarter, KCS purchase accounting of $87 million ($62 million after deferred income tax recovery of $25 million), including costs of $85 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other" related to the amortization of equity investments, $6 million recognized in "Net interest expense", and a recovery of $5 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 7 cents; – in the third quarter, KCS purchase accounting of $87 million ($63 million after deferred income tax recovery of $24 million), including costs of $81 million recognized in "Depreciation and amortization", $5 million recognized in "Net interest expense", and $1 million in recognized in "Other (income) expense", that unfavourably impacted Diluted EPS by 7 cents; – in the second quarter, KCS purchase accounting of $81 million ($61 million after deferred income tax recovery of $20 million), including costs of $68 million recognized in "Depreciation and amortization", $6 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and $6 million recognized in "Equity earnings of Kansas City Southern", that unfavourably impacted Diluted EPS by 6 cents; and – in the first quarter, KCS purchase accounting of $42 million recognized in "Equity earnings of Kansas City Southern", that unfavourably impacted Diluted EPS by 5 cents.
The Company uses Core adjusted effective tax rate to evaluate CPKC’s operating performance and for planning and forecasting future profitability. Core adjusted effective tax rate also excludes equity earnings of KCS (net of tax) and KCS purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting.
The Company uses the Core adjusted effective tax rate to evaluate CPKC’s operating performance and for planning and forecasting future profitability. Core adjusted effective tax rate also excludes equity earnings of KCS (net of tax) and KCS purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting.
Summarized Financial Information The following tables present summarized financial information for CPRC (Subsidiary Issuer) and CPKC (Parent) on a combined basis after elimination of (i) intercompany transactions and balances among CPRC and CPKC; (ii) equity in earnings from and investments in the Non-Guarantor Subsidiaries; and (iii) intercompany dividend income.
Summarized Financial Information The following tables present summarized financial information for CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) on a combined basis after elimination of (i) intercompany transactions and balances among CPRC and CPKC; (ii) equity in earnings from and investments in the Non-Guarantor Subsidiaries; and (iii) intercompany dividend income.
(2) Includes Other expense (income), Other components of net periodic benefit recovery, and Net interest expense.
(2) Includes Other (income) expense, Other components of net periodic benefit recovery, and Net interest expense.
KCS purchase accounting represents the amortization of basis differences being the incremental depreciation and amortization in relation to fair value adjustments to properties and intangible assets, incremental amortization in relation to fair value adjustments to KCS’s investments, amortization of the change in fair value of debt of KCS assumed on the Control Date, and depreciation and amortization of fair value adjustments that are attributable to non-controlling interest, as recognized within "Depreciation and amortization", "Other expense", "Net interest expense", and "Net loss attributable to non-controlling interest", respectively, in the Company's Consolidated Statements of Income.
KCS purchase accounting represents the amortization of basis differences being the incremental depreciation and amortization in relation to fair value adjustments to properties and intangible assets, incremental amortization in relation to fair value adjustments to KCS’s investments, amortization of the change in fair value of debt of KCS assumed on the Control Date, and depreciation and amortization of fair value adjustments that are attributable to the non-controlling interest, as recognized within "Depreciation and amortization", "Other (income) expense", "Net interest expense", and "Net loss attributable to non-controlling interest", respectively, in the Company's Consolidated Statements of Income.
The forward-looking statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K are based on current expectations, estimates, projections and assumptions, having regard to the Company's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: change in business strategies; North American and global economic growth; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; foreign exchange rates (as specified herein); effective tax rates (as specified herein); 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; and the satisfaction by third parties of their obligations to the Company.
The forward-looking statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K are based on current expectations, estimates, projections and assumptions, having regard to the Company's experience and its perception of historical trends, and include, but are not limited to, expectations, estimates, projections and assumptions relating to: change in business strategies; North American and global economic growth; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; foreign exchange rates (as specified herein); effective tax rates (as specified herein); 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; and the satisfaction by third parties of their obligations to the Company.
For example, if the estimated average life of track assets, including rail, ties, ballast, and other track material, increased (or decreased) by one year, annual depreciation expense would decrease (or increase) by approximately $33 million. Due to the capital intensive nature of the railway industry, depreciation represents a significant part of operating expenses.
For example, if the estimated average life of track assets, including rail, ties, ballast, and other track material, increased (or decreased) by one year, annual depreciation expense would decrease (or increase) by approximately $41 million. Due to the capital intensive nature of the railway industry, depreciation represents a significant part of operating expenses.
Discussions of 2021 items and comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Management believes these Non-GAAP measures facilitate a multi-period assessment of long-term profitability. These Non-GAAP measures have no standardized meaning and are not defined by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies.
Management believes these Non-GAAP measures facilitate a multi-period assessment of long-term profitability. These Non-GAAP measures have no standardized meanings and are not defined by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies.
In accounting for the business combination, the Company’s previously held interest in KCS was remeasured to its Control Date fair value. The identifiable assets acquired, and liabilities and non-controlling interest assumed are measured at their provisional fair values at the Control Date, with certain exceptions, including income taxes and contract liabilities.
In accounting for the business combination, the Company’s previously held interest in KCS was remeasured to its Control Date fair value. The identifiable assets acquired, and liabilities and non-controlling interest assumed were measured at their provisional fair values at the Control Date, with certain exceptions, including income taxes and contract liabilities.
Depreciation studies for Canadian assets are provided to the Canadian Transportation Agency (the "Agency"), but the Agency does not approve depreciation rates. In determining appropriate depreciation rates, management is required to make judgments and assumptions about a variety of key factors that are subject to future variability due to inherent uncertainties.
Depreciation studies for Canadian assets are provided to the Canadian Transportation Agency (the "Agency"), but the Agency does not approve depreciation rates. In determining appropriate depreciation rates, management is required to make judgement and assumptions about a variety of key factors that are subject to future variability due to inherent uncertainties.
The Company uses U.S. dollar-denominated debt and operating lease liabilities to hedge its net investment in U.S. operations. As at December 31, 2023, the net investment in U.S. operations is greater than the total U.S. denominated debt and the operating lease liabilities. Consequently, FX translation on the Company's unhedged net investment in U.S. operations is recognized in Other comprehensive income.
The Company uses U.S. dollar-denominated debt and operating lease liabilities to hedge its net investment in U.S. operations. As at December 31, 2024, the net investment in U.S. operations is greater than the total U.S. denominated debt and operating lease liabilities. Consequently, FX translation on the Company's unhedged net investment in U.S. operations is recognized in Other comprehensive income.
U.S. dollar-denominated revenues and expenses increase (decrease) when the Canadian dollar weakens (strengthens) in relation to the U.S. dollar. Mexican peso-denominated revenues and expenses increase (decrease) when the U.S. dollar weakens (strengthens) in relation to the Mexican peso.
Mexican peso-denominated revenues and expenses increase (decrease) when the U.S. dollar weakens (strengthens) in relation to the Mexican peso.
In 2024, the Company expects that every Ps.0.10 strengthening (or weakening) of the Mexican peso relative to the Canadian dollar, positively (or negatively) impacts Total revenues by approximately $7 million and negatively (or positively) impacts Operating expenses by approximately $7 million on an annualized basis.
In 2025, the Company expects that every Ps.0.10 strengthening (or weakening) of the Mexican peso relative to the Canadian dollar, positively (or negatively) impacts Total revenues by approximately $6 million (2024 - approximately $7 million) and negatively (or positively) impacts Operating expenses by approximately $6 million (2024 - approximately $7 million) on an annualized basis.
Credit ratings as at December 31, 2023 (1) Long-term debt Outlook Standard & Poor's BBB+ stable Moody's Baa2 stable Commercial paper program Standard & Poor's A-2 N/A Moody's P-2 N/A (1) Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a specific security for a particular investor.
Credit ratings as at December 31, 2024 (1) Long-term debt Outlook Standard & Poor's BBB+ stable Moody's Baa2 positive Commercial paper program Standard & Poor's A-2 N/A Moody's P-2 N/A (1) Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a specific security for a particular investor.
The table includes estimates of the related impacts to the provisional fair values: (in billions of dollars, except percentages) Provisional Estimate at Control Date Sensitivity Range Value Range Previously held equity investment in KCS $ 37.2 Revenue growth rate -1 % 1 % $ 36.2 $ 38.3 Terminal EBITDA multiple -0.5x 0.5x $ 35.6 $ 38.8 EBITDA margin -1 % 1 % $ 36.7 $ 37.8 Discount rate -1 % 1 % $ 38.9 $ 35.6 Intangible assets including Mexican concession (1) $ 12.2 Terminal growth rate -0.5 % 0.5 % $ 11.4 $ 13.1 Discount rate -1 % 1 % $ 14.4 $ 10.6 Mexican concession (1) $ 9.2 Renewal probability of Mexican concession (1) -10 % 10 % $ 8.9 $ 9.4 (1) Concession rights and related assets held under the terms of a concession from the Mexican government are presented with acquired Properties.
The table includes estimates of the related impacts to the fair values: (in billions of Canadian dollars, except percentages) Fair Value Sensitivity Range Value Range Previously held equity investment in KCS $ 37.2 Revenue growth rate -1 % 1 % $ 36.2 $ 38.3 Terminal EBITDA multiple -0.5x 0.5x $ 35.6 $ 38.8 EBITDA margin -1 % 1 % $ 36.7 $ 37.8 Discount rate -1 % 1 % $ 38.9 $ 35.6 Intangible assets including Mexican Concession (1) $ 12.2 Terminal growth rate -0.5 % 0.5 % $ 11.4 $ 13.1 Discount rate -1 % 1 % $ 14.4 $ 10.6 Mexican Concession (1) $ 9.2 Renewal probability of Mexican Concession (1) -10 % 10 % $ 8.9 $ 9.4 (1) Concession land rights and related assets held under the terms of a concession from the Mexican government are presented with acquired Properties.
These basis differences relate to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and are amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments .
These basis differences related to depreciable property, plant and equipment, intangible assets with definite lives, and long-term debt, and were amortized over the related assets' remaining useful lives, and the remaining terms to maturity of the debt instruments .
Except as required by law, the Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, or the foregoing assumptions and risks affecting such forward-looking statements, whether as a result of new information, future events or otherwise. CPKC 2023 ANNUAL REPORT / 63
Except as required by law, the Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, or the foregoing assumptions and risks affecting such forward-looking statements, whether as a result of new information, future events or otherwise. 60 / CPKC 2024 ANNUAL REPORT
The fair value of the Concession rights and related assets assigned through the Purchase Price Allocation following the acquisition of KCS and as adjusted through the measurement period, are capitalized and depreciated using the group method of depreciation over the lesser of the current expected concession term, including probable renewal of an additional 50-year term, or the estimated useful lives of the assets and rights.
CPKC 2024 ANNUAL REPORT / 57 The fair value of the Concession rights and related assets assigned through the Purchase Price Allocation following the acquisition of KCS and as adjusted through the measurement period, are capitalized and depreciated using the group method of depreciation over the lesser of the current expected concession term, including probable renewal of an additional 50-year term, or the estimated useful lives of the assets and rights.
Non-GAAP Performance Measures On April 14, 2023, CP obtained control of KCS and CPKC began consolidating KCS, which had been accounted for under the equity method of accounting between December 14, 2021 and April 13, 2023. On the Control Date, CPKC’s previously-held interest in KCS was remeasured to its Control Date fair value.
Non-GAAP Performance Measures On the Control Date, Canadian Pacific Railway Limited obtained control of KCS and CPKC began consolidating KCS, which had been accounted for under the equity method of accounting between December 14, 2021 and April 13, 2023. On the Control Date, CPKC’s previously-held interest in KCS was remeasured to its Control Date fair value.
The fair value of the Company’s reporting unit is estimated using a combination of: • discounted cash flows and earnings multiples which represent amounts at which the reporting unit as a whole could be bought or sold in a current transaction between willing parties; CPKC 2023 ANNUAL REPORT / 57 • present value techniques of estimated future cash flows; and • valuation techniques based on multiples of earnings or revenue.
The fair value of the Company’s reporting unit is estimated using a combination of: • discounted cash flows and earnings multiples which represent amounts at which the reporting unit as a whole could be bought or sold in a current transaction between willing parties; • present value techniques of estimated future cash flows; and • valuation techniques based on multiples of earnings or revenue.
The foregoing list of factors is not exhaustive. There are more specific factors that could cause actual results to differ materially from those described in the forward-looking statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K.
The foregoing list of factors is not exhaustive. There are more specific factors that could cause actual results to differ materially from those described in the forward-looking statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K. These more specific factors are identified and discussed in Item 1A.
The estimated fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.
The estimated fair values assigned to tangible and intangible assets acquired and liabilities assumed were based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilized customary valuation procedures and techniques.
These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, acquisition-related costs, the merger termination payment received, KCS's gain on unwinding of interest rate hedges (net of CPKC's associated purchase accounting basis differences and tax), as recognized within "Equity (earnings) loss of Kansas City Southern" in the Company's Consolidated Statements of Income, loss on derecognition of CPKC’s previously held equity method investment in KCS, discrete tax items, changes in the outside basis tax difference between the carrying amount of CPKC's equity investment in KCS and its tax basis of this investment, a deferred tax recovery related to the elimination of the deferred tax liability on the outside basis difference of the investment, settlement of Mexican taxes relating to prior years, changes in income tax rates, changes to an uncertain tax item, and certain items outside the control of management.
These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets, acquisition-related costs, adjustments to provisions and settlements of Mexican taxes, KCS's gain on unwinding of interest rate hedges (net of CPKC's associated purchase accounting basis differences and tax), as recognized within "Equity earnings of Kansas City Southern" in the Company's Consolidated Statements of Income, loss on derecognition of CPKC’s previously held equity method investment in KCS, discrete tax items, changes in the outside basis tax difference between the carrying amount of CPKC's equity investment in KCS and its tax basis of this investment, a deferred income tax recovery related to the elimination of the deferred income tax liability on the outside basis difference of the investment, changes in income tax rates, changes to an uncertain tax item, and certain items outside the control of management.
Acquisition- CPKC 2023 ANNUAL REPORT / 51 related costs include legal, consulting, financing fees, integration costs including third-party services and system migration, debt exchange transaction costs, community investments, fair value gain or loss on FX forward contracts and interest rate hedges, FX gain on U.S. dollar-denominated cash on hand from the issuances of long-term debt to fund the KCS acquisition, restructuring, employee retention and synergy incentive costs, and transaction and integration costs incurred by KCS.
Acquisition-related costs include legal, consulting, integration costs including third-party services and system migration, debt exchange transaction costs, community investments, fair value gain or loss on FX forward contracts and interest rate hedges, FX gain on U.S. dollar-denominated cash on hand from the issuances of long-term debt to fund the KCS acquisition, restructuring, employee retention and synergy incentive costs, and transaction and integration costs incurred by KCS.
Goodwill and Intangible Assets The Company evaluates goodwill and indefinite life intangible assets for impairment at least annually, or sooner if indicators of impairment exist. For intangible assets with finite lives impairment is assessed whenever events or circumstances indicate that their carrying amounts may not be recoverable.
CPKC 2024 ANNUAL REPORT / 55 Goodwill and Intangible Assets The Company evaluates goodwill and indefinite life intangible assets for impairment at least annually, or sooner if indicators of impairment exist. For intangible assets with finite lives impairment is assessed whenever events or circumstances indicate that their carrying amounts may not be recoverable.
This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
As the equity method of accounting and consolidation both provide the same diluted earnings per share for CPKC, no adjustment is required to pre-control diluted earnings per share to be comparable on a consolidated basis.
As the equity method of accounting and consolidation both provide the same diluted EPS for CPKC, no adjustment is required to pre-control diluted EPS to be comparable on a consolidated basis.
Core Adjusted Combined Operating Ratio Core adjusted combined operating ratio is calculated from reported GAAP revenue and operating expenses adjusted for (1) KCS operating income prior to the Control Date and giving effect to transaction accounting adjustments in a consistent manner with Regulation S-X Article 11 ("Article 11"), where applicable, (2) significant items (acquisition-related costs) that are reported within Operating income, and (3) KCS purchase accounting recognized in Depreciation and amortization and Purchased services and other.
Core Adjusted Combined Operating Ratio Core adjusted combined operating ratio is calculated from reported GAAP revenue and operating expenses adjusted for (1) KCS operating income prior to the Control Date and giving effect to transaction accounting adjustments in a manner consistent with Article 11, where applicable, (2) significant items (acquisition-related costs and adjustments to provisions and settlement of Mexican taxes) that are reported within Operating income, and (3) KCS purchase accounting recognized in "Depreciation and amortization" and "Purchased services and other".
Changes in freight volumes generally contribute to corresponding changes in Freight revenues and certain variable expenses such as fuel, equipment rents, and crew costs. Non-freight revenues are generated from leasing of certain assets, interline switching, and other arrangements, including contracts with passenger service operators, fibre optic agreements, and logistical services.
Changes in freight volumes generally contribute to corresponding changes in Freight revenues and certain variable expenses such as fuel, equipment rents, and crew costs. Non-freight revenues are generated from leasing certain assets, interline switching, and other arrangements including contracts with passenger service operators, subsurface and mineral rights agreements, and logistical services.
This Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K includes forward-looking statements relating, but not limited to statements concerning the Company’s defined benefit pension expectations for 2024 and through 2027, expected impacts resulting from changes in the U.S. dollar and Mexican peso exchange rates relative to the Canadian dollar, and the effective tax rate, as well as statements concerning the Company’s operations, anticipated financial performance, business prospects and strategies, including statements concerning the anticipation that cash flow from operations and various sources of financing will be sufficient to meet debt repayments and obligations in the foreseeable future and concerning anticipated capital programs, statements regarding future payments including income taxes, statements regarding the Company's greenhouse gas emissions targets, our environmental, climate- or other sustainability-related strategies and initiatives and other information regarding environmental, climate- or other sustainability-related actions we plan to take in the future.
This Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K includes forward-looking statements relating, but not limited to statements concerning integration of KCS, forecasted performance factors, the Company's intention to indefinitely reinvest in its foreign investments, the Company’s estimated future defined benefit pension expectations, expected impacts resulting from changes in the U.S. dollar and Mexican peso exchange rates relative to the Canadian dollar, and the effective tax rate, as well as statements concerning the Company’s operations, anticipated financial performance, business prospects and strategies, including statements concerning the anticipation that cash flow from operations and various sources of financing will be sufficient to meet debt repayments and obligations in the foreseeable future and concerning anticipated capital programs, statements regarding future payments including income taxes, statements regarding the Company's greenhouse gas emissions targets, our environmental-, climate- or other sustainability-related strategies and initiatives and other information regarding environmental-, climate- or other sustainability-related actions we plan to take in the future.
In addition, it is also not reasonably likely based on current Mexican laws, that the renewal term would change. 60 / CPKC 2023 ANNUAL REPORT However, any change in the renewal term could result in a change in the depreciable lives of the assets and future depreciation expense.
In addition, it is also not reasonably likely based on current Mexican laws, that the renewal term would change. However, any change in the renewal term could result in a change in the depreciable lives of the assets and future depreciation expense.
Goodwill is the residual 56 / CPKC 2023 ANNUAL REPORT value after allocating the fair value of KCS to the assets acquired and liabilities and non-controlling interest assumed, i.e. it represents the excess of the purchase price over the fair value of the identifiable net assets.
Goodwill is the residual value after allocating the fair value of KCS to the assets acquired and liabilities and non-controlling interest assumed, i.e. it represents the excess of the purchase price over the fair value of the identifiable net assets.
The Company's 2024 Core adjusted effective tax rate is expected to be between 25.00% to 25.50%. The Core adjusted effective tax rate is a Non-GAAP measure, calculated as the effective tax rate adjusted for significant items as they are not considered indicative of future financial trends either by nature or amount nor provide comparability to past performance.
The Company's 2025 Core adjusted effective tax rate is expected to be approximately 24.50%. The Core adjusted effective tax rate is a Non-GAAP measure, calculated as the effective tax rate adjusted for significant items as they are not considered indicative of future financial trends either by nature or amount nor provide comparability to past performance.
Risk Factors. Impact of Foreign Exchange on Earnings and Foreign Exchange Risk Although the Company is headquartered in Canada and reports in Canadian dollars, a significant portion of its revenues, expenses, assets and liabilities including debt are denominated in U.S. dollars and Mexican pesos. In addition, equity earnings or losses of KCS are denominated in U.S. dollars.
Impact of Foreign Exchange on Earnings and Foreign Exchange Risk Although the Company is headquartered in Canada and reports in Canadian dollars, a significant portion of its revenues, expenses, assets and liabilities, including debt, are denominated in U.S. dollars and Mexican pesos.
Estimates and assumptions include, but are not limited to, the cash flows an asset is expected to generate in the future and the appropriate weighted average cost of capital as at the Control Date, including market data, historical and future cash flow estimates, growth rates and discount rates.
Estimates and assumptions included, but were not limited to, the cash flows an asset was expected to generate in the future and the appropriate weighted average cost of capital as at the Control Date, including market data, historical and future cash flow estimates, growth rates and discount rates.
Under the bilateral letter of credit facilities, the Company has the option to post collateral in the form of Cash or cash equivalents, equal at least to the face value of the letter of credit issued.
Under these agreements, the Company has the option to post collateral in the form of cash or cash equivalents, equal at least to the face value of the letter of credit issued.
Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost CPKC 2023 ANNUAL REPORT / 37 savings.
Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost savings.
Pursuant to Rule 13-01 of the SEC's Regulation S-X, the Company provides summarized financial and non-financial information of CPRC in lieu of providing separate financial statements of CPRC. More information on the securities under this guarantee structure can be found in Exhibit 22.1 List of Issuers and Guarantor Subsidiaries of this annual report.
More information on the securities under this guarantee structure can be found in Exhibit 22.1 List of Issuers and Guarantor Subsidiaries of this annual report. Pursuant to Rules 3-01 and 13-01 of the Securities Exchange Commission ("SEC")'s Regulation S-X, the Company provides summarized financial and non-financial information of CPRC in lieu of providing separate financial statements of CPRC.
Forward-Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of other relevant securities legislation, including applicable securities laws in Canada (collectively referred to herein as "forward-looking statements").
Financial Statements and Supplementary Data, Note 6 Income taxes. 58 / CPKC 2024 ANNUAL REPORT Forward-Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of other relevant securities legislation, including applicable securities laws in Canada (collectively referred to herein as "forward-looking statements").
The following section generally discusses 2023 and 2022 items and comparisons between 2023 and 2022.
The following section generally discusses 2024 and 2023 items and comparisons between 2024 and 2023.
The increase in train miles reflects the impact of a 29% increase in workload (GTMs), and an 8% decrease in average train weights, which was primarily due to the impact of the KCS acquisition. Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs.
The increase in train miles reflected the impact of a 12% increase in workload (GTMs) and a 2% decrease in average train weights, which was primarily due to the impact of the KCS acquisition. Fuel efficiency is defined as U.S. gallons of locomotive fuel consumed per 1,000 GTMs.
In 2023, investments in buildings were approximately $112 million (2022 - $75 million) and included the new operations building in Kansas City, facility upgrades, renovations, and shop equipment. Other investments were $483 million (2022 – $199 million) and included investments in intermodal equipment, information systems, work equipment and vehicles.
In 2024, investments in buildings were approximately $140 million (2023 - $112 million) and included the new operations building in Kansas City, facility upgrades, renovations, and shop equipment. Other investments were $371 million (2023 - $483 million) and included investments in intermodal equipment, information systems, work equipment, and vehicles.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS Page Executive Summary 36 Performance Indicators 36 Results of Operations 37 Operating Revenues 37 Operating Expenses 41 Other Income Statement Items 42 Impact of Foreign Exchange on Earnings and Foreign Exchange Risk 44 Impact of Fuel Price on Earnings 44 Impact of Share Price on Earnings and Stock-based Compensation 44 Liquidity and Capital Resources 45 Share Capital 50 Non-GAAP Measures 50 Critical Accounting Estimates 55 Forward-Looking Statements 61 36 / CPKC 2023 ANNUAL REPORT The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to enhance a reader’s understanding of the Company’s results of operations and financial condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS Page Executive Summary 35 Performance Indicators 35 Results of Operations 36 Operating Revenues 36 Operating Expenses 40 Other Income Statement Items 41 Impact of Foreign Exchange on Earnings and Foreign Exchange Risk 42 Impact of Fuel Price on Earnings 43 Impact of Share Price on Earnings and Stock-based Compensation 43 Liquidity and Capital Resources 43 Non-GAAP Measures 47 Critical Accounting Estimates 54 Forward-Looking Statements 58 CPKC 2024 ANNUAL REPORT / 35 The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to enhance a reader’s understanding of the Company’s results of operations and financial condition.
This excludes the impact of changes in Common Share price relative to the S&P/TSX 60 Index, S&P 500 Industrials Index, and to Class I railways, which may trigger different performance share unit payouts. Stock-based compensation may also be impacted by non-market performance conditions. Additional information concerning stock-based compensation is included in Item 8.
This excludes the impact of changes in Common Share price relative to the S&P/TSX 60 Index, S&P 500 Industrials Index, and to other Class I railways, which may trigger different performance share unit payouts. Stock-based compensation expense may also be impacted by non-market performance conditions.
Credit ratings are based on the rating agencies' methodologies and may be subject to revision or withdrawal at any time by the rating agencies. Supplemental Guarantor Financial Information Canadian Pacific Railway Company (“CPRC”), a 100%-owned subsidiary of CPKC, is the issuer of certain securities, which are fully and unconditionally guaranteed by CPKC on an unsecured basis.
Credit ratings are based on the rating agencies' methodologies and may be subject to revision or withdrawal at any time by the rating agencies. 46 / CPKC 2024 ANNUAL REPORT Supplemental Guarantor Financial Information CPRC a 100%-owned subsidiary of CPKC, is the issuer of certain securities, which are fully and unconditionally guaranteed by CPKC on an unsecured basis.
Purchased services and other expense encompasses a wide range of third-party costs, including expenses for joint facilities, personal injury and damage claims, environmental remediation, property taxes, contractor and consulting fees, and insurance.
CPKC 2024 ANNUAL REPORT / 41 Purchased Services and Other Purchased services and other expense encompasses a wide range of third-party costs, including expenses for joint facilities, personal injury and damage claims, provisions for environmental remediation, property taxes, contractor and consulting fees, and insurance premiums.
This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices and lower volumes of Canadian coal to Kamloops, B.C. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
This increase was partially offset by l ower volumes of U.S. coal, lower volumes of Canadian coal to Kamloops, B.C., and the unfavourable impact of lower fuel prices on fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
Valuation allowances are recorded as appropriate to reduce deferred income tax assets to the amount considered more likely than not to be realized. Deferred income tax expense is reported in “Income tax (recovery) expense” on the Company's Consolidated Statements of Income. Additional disclosures are provided in Item 8. Financial Statements and Supplementary Data, Note 6 Income taxes.
Valuation allowances are recorded as appropriate to reduce deferred income tax assets to the amount considered more likely than not to be realized. Deferred income tax expense is reported in “Income tax expense (recovery)” on the Company's Consolidated Statements of Income. Additional disclosures are provided in Item 8.
This increase was partially offset by lower interest costs of $19 million following the repayment of maturing long-term debt and higher interest income of $12 million. Remeasurement of Kansas City Southern On April 14, 2023, the Company assumed control of KCS and accounted for its acquisition as a business combination achieved in stages.
This increase was partially offset by lower interest expense of $39 million following the repayment of maturing long-term debt. Remeasurement of Kansas City Southern On April 14, 2023, the Company assumed control of KCS and began accounting for its acquisition as a business combination achieved in stages.
As of the same date, CPRC also had $2,300 million principal amount of debt securities issued under Canadian Securities Law due through 2050 for which CPKC is the guarantor and not subject to the Exchange Act.
As of the same date, CPRC also had $2,300 million principal amount of debt securities outstanding due through 2050 issued in Canada under our Canadian base shelf prospectus for which CPKC is the guarantor and not subject to the Exchange Act.
At December 31, 2023, the Concession rights and related assets, net of depreciation and amortization, were $9,079 million.
At December 31, 2024, the Concession rights and related assets, net of depreciation and amortization, were $9,836 million.
In 2024, the Company expects that every $0.01 weakening (or strengthening) of the Canadian dollar relative to the U.S. dollar, positively (or negatively) impacts Total revenues by approximately $75 million (2023 – approximately $37 million excluding the impact of KCS), negatively (or positively) impacts Operating expenses by approximately $46 million (2023 – approximately $18 million excluding the impact of KCS), and negatively (or positively) impacts Net interest expense by approximately $5 million (2023 – approximately $4 million excluding the impact of KCS) on an annualized basis.
In 2025, the Company expects that every $0.01 weakening (or strengthening) of the Canadian dollar relative to the U.S. dollar, positively (or negatively) impacts Total revenues by approximately $76 million (2024 - approximately $75 million), negatively (or positively) impacts Operating expenses by approximately $43 million (2024 - approximately $46 million), and negatively (or positively) impacts Net interest expense by approximately $6 million (2024 - approximately $5 million) on an annualized basis.
KCS purchase accounting included in operating ratio on a combined basis calculated in a manner consistent with Article 11 was as follows: 2023 • during the course of the year, KCS purchase accounting of $327 million including $326 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.4% as follows: – in the fourth quarter, KCS purchase accounting of $86 million including $85 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%; – in the third quarter, KCS purchase accounting of $81 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.4%; – in the second quarter, KCS purchase accounting of $80 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.4%; and – in the first quarter, KCS purchase accounting of $80 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.3%. 2022 • during the course of the year, KCS purchase accounting of $310 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.3% as follows: – in the fourth quarter, KCS purchase accounting of $80 million that unfavourably impacted operating ratio by 2.2%; – in the third quarter, KCS purchase accounting of $78 million that unfavourably impacted operating ratio by 2.3%; – in the second quarter, KCS purchase accounting of $76 million that unfavourably impacted operating ratio by 2.3%; and – in the first quarter, KCS purchase accounting of $76 million that unfavourably impacted operating ratio by 2.7%.
KCS purchase accounting included in Operating income on a combined basis calculated in a manner consistent with Article 11, where applicable, was as follows: 2024: • during the course of the year, KCS purchase accounting of $336 million including $333 million recognized in "Depreciation and amortization" and $3 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3% as follows: – in the fourth quarter, KCS purchase accounting of $88 million including $87 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%; – in the third quarter, KCS purchase accounting of $85 million recognized in "Depreciation and amortization", that unfavourably impacted operating ratio by 2.4%; – in the second quarter, KCS purchase accounting of $83 million including $82 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%; and – in the first quarter, KCS purchase accounting of $80 million including $79 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%. 2023: • during the course of the year, KCS purchase accounting of $327 million including $326 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.4% as follows: – in the fourth quarter, KCS purchase accounting of $86 million including $85 million recognized in "Depreciation and amortization" and $1 million recognized in "Purchased services and other" related to the amortization of equity investments, that unfavourably impacted operating ratio by 2.3%; – in the third quarter, KCS purchase accounting of $81 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.4%; – in the second quarter, KCS purchase accounting of $80 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.4%; and – in the first quarter, KCS purchase accounting of $80 million recognized in "Depreciation and amortization" that unfavourably impacted operating ratio by 2.3%.
Business Acquisition As described in Item 8. Financial Statements and Supplementary Data, Note 11 Business acquisition and Note 12 Investment in KCS, the Company assumed control of KCS and commenced consolidation of KCS on the Control Date, accounting for the acquisition as a business combination achieved in stages.
Financial Statements and Supplementary Data, Note 10 Business acquisition and Note 11 Investment in Kansas City Southern, the Company assumed control of KCS and commenced consolidation of KCS on the Control Date, accounting for the acquisition as a business combination achieved in stages.
In addition, alternative estimates or assumptions could have been used in the establishment of the fair value of KCS and the provisional fair values of the assets acquired and liabilities assumed, including goodwill.
Alternative estimates or assumptions could have been used in the establishment of the fair value of KCS and the fair values of the assets acquired and liabilities assumed, including goodwill. The table below outlines the sensitivities of key estimates.
As of the date of the filing of the Form 10-K, CPRC had U.S. $14,714 million principal amount of debt securities outstanding due through 2115 which includes the debt exchanged for KCS debt as described below, and U.S. $30 million and GBP £3 million in perpetual 4% consolidated debenture stock, for all of which CPKC is the guarantor subject to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended.
As of the date of the filing of the Form 10-K, CPRC had U.S. $12,466 million principal amount of SEC-registered debt securities outstanding due through 2115 issued in the U.S. pursuant to a trust indenture, and U.S. $30 million and GBP £3 million in perpetual 4% consolidated debenture stock, for all of which CPKC is the guarantor subject to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended.
In addition, Core adjusted combined operating ratio and Core adjusted combined diluted earnings per share exclude KCS purchase accounting.
In addition, Core adjusted combined operating ratio and Core adjusted combined diluted EPS exclude KCS purchase accounting.
Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by RTMs, and/or workload, as measured by GTMs, indicates improved train productivity.
Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by RTMs, and/or workload, as measured by GTMs, indicates improved train productivity.
During the periods that KCS was equity accounted for, from December 14, 2021 to April 13, 2023, KCS purchase accounting represents the amortization of basis differences, being the difference in value between the consideration paid to acquire KCS and the underlying carrying value of the net assets of KCS immediately prior to its acquisition by the Company, net of tax, as recognized within "Equity (earnings) loss of Kansas City Southern" in the Company's Consolidated Statements of Income.
During the periods prior to the Control Date, KCS purchase accounting represents the amortization of basis differences, being the difference in value between the consideration paid to acquire KCS and the underlying carrying value of the net assets of KCS immediately prior to its acquisition by the Company, net of tax, as recognized within "Equity earnings of Kansas City Southern" in the Company's Consolidated Statements of Income.
This Non-GAAP measure does not have a standardized meaning and is not defined by GAAP and, therefore, may not be comparable 44 / CPKC 2023 ANNUAL REPORT to similar measures presented by other companies. Significant items and KCS purchase accounting are discussed further in Non-GAAP Measures of this Item 7.
This Non-GAAP measure does not have a standardized meaning and is not defined by GAAP and, therefore, may not be comparable to similar measures presented by other companies. Significant items and KCS purchase accounting are discussed further in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Non-GAAP measures.
Impact of Fuel Price on Earnings Fluctuations in fuel prices affect the Company’s results because fuel expense constitutes a significant portion of the Company's operating costs. As fuel prices fluctuate, there will be a timing impact on earnings, as discussed further in Item 1. Business, Operations, Fuel Cost Adjustment Program and Item 1A.
Impact of Fuel Price on Earnings Fluctuations in fuel prices affect the Company’s results because fuel expense constitutes a significant portion of the Company's operating expenses. As fuel prices fluctuate, there will be an impact on earnings due to the timing of recoveries from the Company's fuel cost adjustment program, as discussed further in Item 1.
To the extent that the Company has provided forecasts or targets using Non-GAAP financial measures, the Company may not be able to provide a reconciliation to a GAAP measure without unreasonable efforts, due to unknown variables and uncertainty related to future results.
To the extent that the Company has provided forecasts or targets using Non-GAAP financial measures, the Company may not be able to provide a reconciliation to the most directly comparable GAAP measures without unreasonable efforts, due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value.
At December 31, 2023, the Company had recorded goodwill of $17,729 million, all of which is allocated to a single reporting unit represented by the Company’s rail transportation operating segment, and intangible assets of $2,974 million.
At December 31, 2024, the Company had recorded goodwill of $19,350 million, all of which is allocated to a single reporting unit represented by the Company’s rail transportation operating segment, and intangible assets of $3,146 million.
Performance Indicators For the year ended December 31 2023 2022 % Change Gross ton-miles (“GTMs”) (millions) 348,447 269,134 29 Train miles (thousands) 41,312 28,899 43 Fuel efficiency (U.S. gallons of locomotive fuel consumed /1,000 GTMs) 1.026 0.955 7 Total employees (average) 18,233 12,570 45 These key measures are used by management in the planning process to facilitate decisions that continue to drive further productivity improvements in the Company's operations.
Performance Indicators For the year ended December 31 2024 2023 % Change Gross ton-miles (“GTMs”) (millions) 388,958 348,447 12 Train miles (thousands) 46,892 41,312 14 Fuel efficiency (U.S. gallons of locomotive fuel consumed /1,000 GTMs) 1.033 1.026 1 Total employees (average) 20,144 18,233 10 These key measures are used by management in the planning process to facilitate decisions that continue to drive further productivity improvements in the Company's operations.
This increase was partially offset by the unfavourable impact to fuel surcharge revenue as a result of lower fuel prices and lower volumes of steel. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
This increase was partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenue and lower volumes of DRUbit TM crude to Port Arthur, Texas. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX.
In addition to these amounts, the Concession rights and related assets held under a concession from the Mexican government, which are recognized within Properties, totalled $9,079 million at December 31, 2023. Environmental Liabilities Environmental remediation accruals cover site-specific remediation programs.
In addition to these amounts, the Concession rights and related assets held under a concession from the Mexican government, which are recognized within Properties, totalled $9,836 million at December 31, 2024.
This decrease was primarily due to an increase in interest cost on the benefit obligation of $109 million and a decrease in the expected return on plan assets of $77 million, partially offset by a decrease in recognized net actuarial losses of $103 million. Net Interest Expense Net interest expense includes interest on long-term debt and finance leases.
The increase was primarily due to a decrease in interest cost on the benefit obligation of $17 million and an increase in the expected return on plan assets of $9 million. Net Interest Expense Net interest expense includes interest on long-term debt, short-term debt, and finance leases.
The Company believes the fair value of KCS and the provisional fair values of the assets acquired and the liabilities and non-controlling interest assumed are based on reasonable assumptions and reflect known information and estimates. Measurement uncertainty in these estimates exists due to the characteristics of the assumptions and facts used to generate these estimates.
The Company believes the fair value of KCS and the fair values of the assets acquired and the liabilities and non-controlling interest assumed were based on reasonable assumptions and known information and estimates as of the Control Date. Characteristics of the assumptions and facts used to generate these estimates include measurement uncertainties.
Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. RTMs decreased more than carloads due to moving lower volumes of export potash to Vancouver, which has a longer length of haul.
Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX. Carloads increased more than RTMs due to moving higher volumes of export potash to the U.S.
CPKC 2023 ANNUAL REPORT / 49 Statements of Income CPRC (Subsidiary Issuer) and CPKC (Parent) (in millions of Canadian dollars) For the year ended December 31, 2023 For the year ended December 31, 2022 Total revenues $ 6,577 $ 6,384 Total operating expenses 4,074 4,110 Operating income (1) 2,503 2,274 Less: Other (2) 468 234 Income before income tax expense 2,035 2,040 Net income $ 1,480 $ 1,533 (1) Includes net lease costs incurred from non-guarantor subsidiaries for the year ended December 31, 2023, and 2022 of $463 million and $410 million, respectively.
Statement of Income Information CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) For the year ended December 31 (in millions of Canadian dollars) 2024 2023 Total revenues $ 6,877 $ 6,577 Total operating expenses 4,300 4,074 Operating income (1) 2,577 2,503 Less: Other (2) 516 468 Income before income tax expense 2,061 2,035 Net income $ 1,496 $ 1,480 (1) Includes net lease costs incurred from Non-Guarantor Subsidiaries for the years ended December 31, 2024, and 2023 of $462 million and $463 million, respectively.
CPKC 2023 ANNUAL REPORT / 55 For the year ended December 31 2023 2022 (3) CPKC operating ratio as reported 65.0 % 62.2 % Add: KCS operating income as reported prior to Control Date (1) — % 0.5 % Pro forma Article 11 transaction accounting adjustments (2) 0.8 % 2.6 % 65.8 % 65.3 % Less: Acquisition-related costs 1.4 % 1.3 % KCS purchase accounting in Operating expenses 2.4 % 2.3 % Core adjusted combined operating ratio 62.0 % 61.7 % (1) KCS results were translated into Canadian dollars at the Bank of Canada monthly average rates of $1.35 and $1.30 for January 1 through April 13, 2023 and the year ended December 31, 2022, respectively.
CPKC 2024 ANNUAL REPORT / 53 For the year ended December 31 2024 2023 CPKC operating ratio as reported 64.4 % 65.0 % Add: KCS operating income as reported prior to Control Date (1) — % — % Pro forma Article 11 transaction accounting adjustments (2) — % 0.8 % 64.4 % 65.8 % Less: Acquisition-related costs 0.8 % 1.4 % KCS purchase accounting in Operating expenses 2.3 % 2.4 % Core adjusted combined operating ratio 61.3 % 62.0 % (1) KCS's historical amounts in U.S. dollars were translated into Canadian dollars at the Bank of Canada average exchange rate for the period from January 1 to April 13, 2023 with an effective exchange rate of $1.35.
CPKC 2023 ANNUAL REPORT / 45 Based on information available at December 31, 2023 and expectations for 2024 share-based grants, for every $1.00 change in Common Share price, stock-based compensation expense has a corresponding change of approximately $1.6 million to $2.3 million (2022 – approximately $1.2 million to $1.8 million).
Based on information available at December 31, 2024 and expectations for 2025 share-based grants, for every $1.00 change in the Company's Common Share price, stock-based compensation expense has a corresponding change of approximately $1.9 million to $2.7 million.
Intermodal For the year ended December 31 2023 2022 Total Change % Change Freight revenues (in millions) $ 2,465 $ 2,242 $ 223 10 Carloads (in thousands) 1,606.6 1,185.2 421.4 36 Revenue ton-miles (in millions) 33,470 31,173 2,297 7 Freight revenue per carload (in dollars) $ 1,534 $ 1,892 $ (358) (19) Freight revenue per revenue ton-mile (in cents) 7.36 7.19 0.17 2 The increase in Intermodal revenue was primarily due to the impact of the KCS acquisition, higher freight rates, higher international intermodal volumes due to onboarding a new customer and higher volumes imported through the Port of Vancouver, higher domestic wholesale volumes, and the favourable impact of the change in FX.
Intermodal For the year ended December 31 2024 2023 Total Change % Change Freight revenues (in millions) $ 2,524 $ 2,465 $ 59 2 Carloads (in thousands) 1,642.9 1,606.6 36.3 2 Revenue ton-miles (in millions) 35,218 33,470 1,748 5 Freight revenue per carload (in dollars) $ 1,536 $ 1,534 $ 2 — Freight revenue per revenue ton-mile (in cents) 7.17 7.36 (0.19) (3) The increase in Intermodal revenue was primarily due to the impact of the KCS acquisition, higher international intermodal volumes to and from the Port of Vancouver, including onboarding a new customer, and to and from the Port of Saint John, higher domestic intermodal wholesale volumes, higher freight rates, and the favourable impact of the change in FX.
Capital Programs For the year ended December 31 (in millions of Canadian dollars, except for track miles and crossties) 2023 2022 Additions to capital Track and roadway $ 1,623 $ 1,048 Rolling stock 273 243 Buildings 112 75 Other 483 199 Total – accrued additions to capital 2,491 1,565 Less: Non-cash transactions 23 8 Cash invested in additions to properties (per Consolidated Statements of Cash Flows) $ 2,468 $ 1,557 Track installation capital programs Track miles of rail laid (miles) 323 271 Track miles of rail capacity expansion (miles) 24 17 Crossties installed (thousands) 1,617 1,215 Track and roadway expenditures include the replacement and enhancement of the Company’s track infrastructure.
Capital Programs For the year ended December 31 (in millions of Canadian dollars, except for track miles and crossties) 2024 2023 Additions to capital Track and roadway $ 1,997 $ 1,623 Rolling stock 346 273 Buildings 140 112 Other 371 483 Total additions to capital 2,854 2,491 Less: Non-cash transactions 29 23 Cash invested in additions to properties $ 2,825 $ 2,468 Track installation capital programs Track miles of rail laid 328 323 Track miles of rail capacity expansion 18 24 Crossties installed (thousands) 1,484 1,617 Track and roadway expenditures include the replacement and enhancement of the Company’s track infrastructure.
The following table shows the ratings issued for the Company by the rating agencies noted as of December 31, 2023 and is being presented as it relates to the Company’s cost of funds and liquidity.
The following table shows the ratings issued for the Company by the rating agencies noted as at December 31, 2024 and is being presented as it relates to the Company’s cost of funds and liquidity. During the first quarter of 2025, Moody's upgraded the Company's Long-term debt rating to Baa1.
CPKC 2023 ANNUAL REPORT / 43 Other Expense Other expense consists of gains and losses from the change in FX on cash and working capital, the impact of foreign currency forwards, financing costs, shareholder costs, equity earnings, and other non-operating expenditures. Other expense was $52 million in 2023, an increase of $35 million, or 206%, from $17 million in 2022.
Other (Income) Expense Other (income) expense consists of gains and losses from the change in FX on cash and working capital, the impact of foreign exchange currency forwards, financing costs, shareholder costs, equity earnings, and other non-operating expenditures. Other income was $42 million, a change of $94 million, or 181%, from Other expense of $52 million in 2023.
By their nature, forward-looking statements involve numerous inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including but not limited to the following factors: changes in business strategies; general North American and global economic, 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; industry capacity; shifts in market demand; changes in commodity prices; uncertainty surrounding timing and volumes of commodities being shipped via the Company; 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; 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 investments; trade restrictions or other changes to international trade arrangements; climate change; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches, volcanism and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; the outbreak of a pandemic or contagious disease and the resulting effects on economic conditions, 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.
By their nature, forward-looking statements involve numerous inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including but not limited to the following factors: changes in business strategies and strategic opportunities; general North American 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; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped via the Company; 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 of 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, including the imposition of any tariffs, or other changes to international trade arrangements; the effects of current and future multinational trade agreements on or other developments affecting 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 the Concession; public opinion; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches, volcanism 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; the outbreak of a pandemic or contagious disease and the resulting effects on economic conditions; the demand environment for logistics requirements and energy prices; restrictions imposed by CPKC 2024 ANNUAL REPORT / 59 public health authorities or governments; fiscal and monetary policy responses by governments and financial institutions; 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.
Between December 14, 2021 and April 13, 2023, KCS was accounted for in CPKC's diluted earnings per share reported on a GAAP basis using the equity method of accounting and on a consolidated basis beginning April 14, 2023 .
Prior to the Control Date, KCS was accounted for in CPKC's diluted EPS reported on a GAAP basis using the equity method of accounting and on a consolidated basis beginning April 14, 2023 .
The impact of a one year change in depreciable lives of the Concession’s track assets has been included in the sensitivity discussed above for the Company’s total track assets. Deferred Income Taxes The Company accounts for deferred income taxes based on the asset and liability method.
The impact of a one year change in depreciable lives of the Concession’s track assets has been included in the sensitivity discussed above for the Company’s total track assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company may also enter into swap agreements whereby one party agrees to pay a fixed rate of interest while the other party pays a floating rate. Contingent on the direction of interest rates, the Company may incur higher costs depending on the contracted rate.
Biggest changeTo manage interest rate exposure, the Company may enter into forward rate agreements such as treasury rate locks or bond locks that protect against interest rate increases. The Company may also enter into swap agreements whereby one party agrees to pay a fixed rate of interest while the other party pays a floating rate.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information concerning market risk sensitive instruments is set forth under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Impact of Foreign Exchange on Earnings and Foreign Exchange Risk and Impact of Changes in Share Price on Earnings and Stock-Based Compensation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information concerning market risk sensitive instruments is set forth under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of Foreign Exchange on Earnings and Foreign Exchange Risk and Impact of Share Price on Earnings and Stock-Based Compensation.
As at December 31, 2023, a hypothetical one percentage point change in interest rates on the Company's floating rate debt obligations outstanding is not material. In addition, the present value of the Company’s assets and liabilities will also vary with interest rate changes.
As at December 31, 2024, a hypothetical one percentage point change in interest rates on the Company's floating rate debt obligations outstanding is not material. In addition, the present value of the Company’s assets and liabilities will also vary with interest rate changes.
Fair values of the Company’s fixed rate debt are estimated by considering the impact of the hypothetical interest rates on quoted market prices and current borrowing rates, but do not consider other factors that could impact actual results. Information concerning market risks is supplemented in Item 8.
Fair values of the Company’s fixed rate debt are estimated by considering the impact of the hypothetical interest rates on quoted market prices and current borrowing rates, but do not consider other factors that could impact actual results. Information concerning market risks is supplemented in Item 8. Financial Statements and Supplementary Data, Note 17 Financial instruments.
The fair value of the Company’s fixed rate debt may fluctuate with changes in market interest rates. A hypothetical one percentage point decrease in interest rates as of December 31, 2023, would result in an increase of approximately $1.9 billion to the fair value of the Company's debt as at December 31, 2023 (December 31, 2022 - approximately $1.5 billion).
A hypothetical one percentage point decrease in interest rates as of December 31, 2024 would increase the fair value of the Company's debt as at December 31, 2024 by approximately $1.7 billion (December 31, 2023 - approximately $1.9 billion).
Removed
To manage interest rate exposure, the Company may enter into forward rate agreements such as treasury rate locks or bond forwards that lock in rates for a future date, thereby protecting against interest rate increases.
Added
Contingent on the direction of interest rates, the Company may incur higher costs depending on the contracted rate. The fair value of the Company’s fixed rate debt may fluctuate with changes in market interest rates.
Removed
Financial Statements and Supplementary Data, Note 18 Financial instruments. 64 / CPKC 2023 ANNUAL REPORT