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What changed in CANADIAN PACIFIC KANSAS CITY LTD/CN's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CANADIAN PACIFIC KANSAS CITY LTD/CN's 2024 and 2025 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 2025 report.

+416 added−461 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-27)

Top changes in CANADIAN PACIFIC KANSAS CITY LTD/CN's 2025 10-K

416 paragraphs added · 461 removed · 353 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

88 edited+19 added−26 removed51 unchanged
Biggest changeCollective bargaining has also resulted in recent agreements being ratified by the TCRC-Maintenance of Way Employees Division (Engineering) and Unifor (Mechanical). Agreements are in place with the other three bargaining units in Canada, of which two are effective until December 31, 2025, and one is in effect until December 31, 2026. Please see Item 1.
Biggest changeAgreements are in place with the other bargaining units in Canada, of which one is in effect until December 31, 2026, two are in effect until December 31, 2027, three are in effect until December 31, 2028 and one until December 31, 2029. U.S. In the U.S., there are currently 63 active bargaining units representing approximately 4,300 unionized active employees.
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.
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, eastern U.S., Mexico, and the U.S. Gulf Coast.
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 also ships automotive parts, machinery, 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 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 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 Mexico and the U.S., the Company’s services are delivered mainly through intermodal marketing companies.
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 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, and 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.
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.
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.
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.
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, and 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. Upper Midwest.
TC is also responsible for overseeing the safe and secure transportation of dangerous goods. Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, environment, climate, sustainability and other matters. U.S. The Company’s U.S. rail operations are subject to economic regulation by the STB.
TC is also responsible for overseeing the safe and secure transportation of dangerous goods. Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, environment, climate, sustainability, and other matters. U.S. The Company’s U.S. rail operations are subject to economic regulation by the U.S.
The Company’s Canadian coal traffic originates mainly from Elk Valley Resources' mines in the southeast region of British Columbia ("B.C."). The Company primarily moves coal west from the mines destined to port terminals for export to world markets (Pacific Rim, Europe, and South America).
The Company’s Canadian coal traffic originates mainly from Elk Valley Resources' mines in the southeast region of British Columbia ("B.C."). The Company primarily moves coal west from the mines destined to port terminals for export to world markets (Pacific Rim, Europe, India, and South America).
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.
The Risk and Sustainability Committee of the Board is responsible for reviewing performance against sustainability objectives, as well as strategic plans and opportunities to align sustainability objectives with long-term climate strategy.
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.
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.
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.
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 result 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.
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.
Significant Customers For each of the years ended December 31, 2025 and 2024, 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.
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.
Automotive The Company’s Automotive business represented approximately 19% of merchandise revenues and 9% of total Freight revenues in 2025. 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.
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.
Coal The Company’s Coal business represented approximately 19% of bulk revenues and 7% of total Freight revenues in 2025. The following chart shows the percentage of the Company's Coal freight revenues generated from metallurgical coal, thermal coal, and petroleum coke in 2025: In Canada, the Company transports mostly metallurgical coal destined for export for use in the steelmaking process.
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.
Potash The Company's Potash business represented approximately 12% of bulk revenues and 4% of total Freight revenues in 2025. 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.
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.
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 2025.
The Company was originally incorporated on June 22, 2001, under the Canada Business Corporations Act and controls and owns all of the Common Shares of Canadian Pacific Railway Company (“CPRC”), which was incorporated in 1881 by Letters Patent pursuant to an Act of the Parliament of Canada.
The Company was originally incorporated on June 22, 2001, under the Canada Business Corporations Act and controls and owns all of the Common Shares of Canadian Pacific Railway Company ("CPRC"), which was incorporated in 1881 by Letters Patent pursuant to an Act of the Parliament of Canada.
The Company finished the year with the lowest FRA-reportable train accident frequency among Class I railways for the second year in a row. This safety performance is building on Canadian Pacific's legacy of 17 consecutive years of industry leadership.
The Company finished the year with the lowest FRA-reportable train accident frequency among Class I railways for the third year in a row. This safety performance is building on Canadian Pacific's legacy of 17 consecutive years of industry leadership.
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.
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 ATTRAPI may request information to verify CPKCM´s compliance with the Concession and any applicable regulatory framework.
Environmental Laws, Regulations and Strategies The Company’s operations and real estate assets are subject to extensive federal, provincial, state, and local environmental laws and regulations, including those governing air pollutants, greenhouse gas ("GHG") emissions, (please see “Sustainability-Related Laws, Regulations and Strategies” for further discussion), management and remediation of historical contaminant sites, discharges to waters and the handling, storage, transportation, and disposal of waste and other materials.
Environmental Laws, Regulations and Strategies The Company’s operations and real estate assets are subject to extensive federal, provincial, state, and local environmental laws and regulations, including those governing air pollutants, greenhouse gas ("GHG") emissions, (please see "Sustainability-Related Laws, Regulations and Strategies" for further discussion), management and remediation of historical contaminant sites, discharges to waters and the handling, storage, transportation, and disposal of waste and other materials.
The Company may freely set rates on a non-discriminatory basis up to the maximum rates registered with the ARTF. At any time, the ARTF may request additional information regarding the determination of maximum rates and may issue recommendations with respect to proposed rate increases.
The Company may freely set rates on a non-discriminatory basis up to the maximum rates registered with the ATTRAPI. At any time, the ATTRAPI may request additional information regarding the determination of maximum rates and may issue recommendations with respect to proposed rate increases.
Fertilizers and Sulphur The Company's Fertilizers and sulphur business represented approximately 8% of bulk revenues and 3% of total Freight revenues in 2024. The Company’s fertilizer traffic includes dry fertilizers, which are phosphate, urea, nitrate, and ammonium sulphate, and wet fertilizers, which are primarily anhydrous ammonia.
Fertilizers and Sulphur The Company's Fertilizers and sulphur business represented approximately 8% of bulk revenues and 3% of total Freight revenues in 2025. The Company’s fertilizer traffic includes wet fertilizers, which are primarily anhydrous ammonia, and dry fertilizers, which are phosphate, nitrate, urea, and ammonium sulphate.
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
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 2025 ANNUAL REPORT
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.
Our employees' safety is of utmost importance to the Company and through continuous improvement objectives in 2025 we have continued to look at ways to integrate and improve safety in these areas of our network operation.
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.
Climate 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 broader environmental, social, governance, and sustainability matters.
In 2024, the Company opened the CPKC Dallas Automotive Facility in Wylie, Texas as part of the Company's closed loop rail service for Original Equipment Manufacturers to move vehicles to markets between Canada, the U.S., and Mexico. INTERMODAL The Company’s Intermodal business represented approximately 18% of total Freight revenues in 2024.
In 2024, the Company opened the CPKC Dallas Automotive Facility in Wylie, Texas as part of the Company's closed loop rail service for Original Equipment Manufacturers to move vehicles to markets between Canada, the U.S., and Mexico. CPKC 2025 ANNUAL REPORT / 9 INTERMODAL The Company’s Intermodal business represented approximately 18% of total Freight revenues in 2025.
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.
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. 12 / CPKC 2025 ANNUAL REPORT The Company focuses on key strategies, identifying tactics and actions to support and operationalize our environmental commitments.
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.
As such, fuel surcharge revenues are a function of freight volumes and fuel prices. Fuel surcharge revenues accounted for approximately 10% of the Company's Freight revenues in 2025. 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.
Operating 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.
Operating income is typically lowest in the first quarter due to lower freight revenues and higher operating costs associated with winter conditions. 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.
On April 14, 2023, CPKC assumed control of Kansas City Southern (“KCS”) through an indirect wholly-owned subsidiary.
On April 14, 2023, CPKC assumed control of Kansas City Southern ("KCS") through an indirect wholly-owned subsidiary.
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.
The following chart shows the percentage of the Company’s total Freight revenues derived from each of the three major lines of business in 2025: 2025 Freight Revenues CPKC 2025 ANNUAL REPORT / 5 BULK The Company's Bulk business represented approximately 36% of total Freight revenues in 2025. Bulk includes the Grain, Coal, Potash, and Fertilizers and sulphur lines of business.
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.
The Company's access to the Port of Saint John provides the fastest rail service between the East Coast and Canadian and U.S. markets for imports from and exports to Asia, Europe, and South America. Fuel Cost Adjustment Program The short-term volatility in fuel prices may adversely or positively impact revenues.
CPKC's registered, executive and corporate head office is located at 7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9, Canada. CPKC's U.S. head office is located at 427 West 12 Street, Kansas City, Missouri, 64105. CPKC's Common Shares (the "Common Shares") are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”) under the symbol “CP”.
CPKC's registered, executive and corporate head office is located at 7550 Ogden Dale Road S.E., Calgary, Alberta, T2C 4X9, Canada. CPKC's U.S. head office is located at 427 West 12 Street, Kansas City, Missouri, 64105. CPKC's Common Shares (the "Common Shares") are listed on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") under the symbol "CP".
If the COFECE determines that there is no effective competition for particular movements, the ARTF could set rates for those movements or grant limited trackage rights to another railroad while the condition of no effective competition remains.
If the CNA determines that there is no effective competition for particular movements, the ATTRAPI could set rates for those movements or grant limited trackage rights to another railroad while the condition of no effective competition remains.
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.
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.
Our FRA-reportable personal injury incidents rate per 200,000 employee-hours decreased 18% to 0.95 (2023 - 1.16) and our FRA-reportable train accident rate per million train-miles decreased 5% to 1.01 (2023 - 1.06). The Company’s safety performance is disclosed publicly on a quarterly basis using standardized metrics set out by the FRA.
Our FRA-reportable personal injury incidents rate per 200,000 employee-hours decreased 3% to 0.92 (2024 - 0.95) and our FRA-reportable train accident rate per million train-miles decreased 16% to 0.85 (2024 - 1.01). The Company’s safety performance is disclosed publicly on a quarterly basis using standardized metrics set out by the FRA.
During 2024, we continued our roll out of HomeSafe and other initiatives to drive our safety culture across the entire CPKC network, tapping into the human side of safety and what it means to promote both safety engagement and constructive feedback.
During 2025, we continued to promote and leverage our HomeSafe engagement strategy and other initiatives to drive our safety culture across the entire CPKC network, tapping into the human side of safety and what it means to promote both safety engagement and constructive feedback.
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.
In addition, in operating a railway, the release of hazardous materials during derailments or other accidents has occurred, or may occur, which 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.
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.
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 2025 ANNUAL REPORT / 7 MERCHANDISE The Company’s Merchandise business represented approximately 46% of total Freight revenues in 2025. Merchandise products move in both mixed freight and unit trains in a variety of car types.
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.
We believe that integrating sustainability into our business processes is imperative to future growth and long-term success as an organization. CPKC 2025 ANNUAL REPORT / 13 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.
(also known as Canadian Pacific Kansas City Mexico) ("CPKCM") must register its maximum rates with the ARTF and make regular reports to the ARTF and the Secretaría de Infraestructura, Comunicaciones y Transportes (also known as Secretariat of Infrastructure, Communications and Transportation) (the "SICT").
Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") must register its maximum rates with the ATTRAPI and make regular reports to the ATTRAPI and the Secretaría de Infraestructura, Comunicaciones y Transportes (also known as Secretariat of Infrastructure, Communications and Transportation) (the "SICT").
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.
CPKCM has the right to use, but does not own, all track and buildings that are necessary for the rail lines’ operation.
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 Grain freight revenues generated from Canadian and U.S. shipments in 2025: Canadian grain transported by the Company consists of whole grains, such as wheat, durum, canola, and pulses, as well as processed products such as oils and meals.
We value feedback from our stakeholders, strive to learn from our performance and constantly challenge ourselves to improve our practices, including our sustainability disclosure practices.
Risk Factors for further discussion. We value feedback from our stakeholders, strive to learn from our performance and constantly challenge ourselves to improve our practices, including our sustainability disclosure practices.
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.
Energy, Chemicals and Plastics The Company’s Energy, chemicals and plastics business represented approximately 43% of merchandise revenues and 20% of total Freight revenues in 2025. 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 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.
The following chart shows the percentage of the Company's bulk freight revenues by line of business in 2025: 2025 Bulk Revenues (36% of Freight Revenues) Grain The Company’s Grain business represented approximately 61% of bulk revenues and 22% of total Freight revenues in 2025.
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 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 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.
The following chart shows the percentage of the Company's Intermodal freight revenues generated from domestic intermodal and international intermodal in 2025. 2025 Intermodal Revenues (18% of Freight Revenues) Domestic Intermodal The Company's domestic intermodal business represented approximately 54% of Intermodal revenues and 10% of total Freight revenues in 2025.
The STB provides economic regulatory oversight and administers Title 49 of the United States Code and related Code of Federal Regulations. The STB has jurisdiction over railroad rate and service issues, proposed railroad mergers, and other transactions.
Surface Transportation Board (the "STB"), which administers portions of Title 49 of the United States Code and related Code of Federal Regulations. The STB has jurisdiction over railroad rate and service issues, proposed railroad mergers, and other transactions.
If the ARTF or another party considers there to be no effective competition, they may request an opinion from the Comisión Federal de Competencia Económica (also known as Mexican Antitrust Commission) (the “COFECE”) regarding market conditions.
If the ATTRAPI or another party considers there to be no effective competition, they may request an opinion from the Comisión Nacional Antimonopolios (also known as Mexican Antitrust Commission) (the "CNA") regarding market conditions.
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").
For the purposes of this Annual Report on Form 10-K, 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").
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.
This decrease was primarily due to lower fuel prices, which includes lower carbon levy surcharge revenue due to the elimination of the Canadian federal carbon tax program effective April 1, 2025, and the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program, partially offset by higher volumes and the favourable impact of the change in foreign exchange ("FX") rates.
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.
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, Alberta, and Mexico and moves to various North American destinations. The Company's biofuels traffic originates mainly from facilities in the U.S.
In 2024, the Company generated Freight revenues totalling $14,223 million ($12,281 million in 2023).
In 2025, the Company generated Freight revenues totalling $14,776 million ($14,223 million in 2024).
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 following chart shows the percentage of the Company's merchandise freight revenue by line of business in 2025: 2025 Merchandise Revenues (46% of Freight Revenues) Forest Products The Company’s Forest products business represented approximately 12% of merchandise revenues and 5% of total Freight revenues in 2025.
Prior to April 14, 2023, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment (see Part II Item 8 Financial Statements and Supplementary Data, Note 10 Business acquisition and Note 11 Investment in Kansas City Southern). All references to currency amounts included in this annual report are in Canadian dollars unless specifically noted otherwise.
Prior to April 14, 2023, the Company's 100% interest in KCS was accounted for and reported as an equity-method investment (see Part II Item 8. Financial Statements and Supplementary Data, Note 11 Business acquisition and Note 12 Investment in Kansas City Southern).
With oversight from the President and CEO of the Company, implementation of the Company’s sustainability objectives, including as they relate to climate change, is guided by a cross-functional executive Sustainability Steering Committee. Updates and progress reports on the Company's sustainability objectives and management approach to sustainability topics are regularly provided to the Risk and Sustainability Committee of the Board.
With oversight from the President and Chief Executive Officer ("CEO") of the Company, implementation of the Company’s sustainability objectives, including as they relate to climate change, is guided by a cross-functional executive Sustainability Steering Committee.
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.
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, chlorine, soda ash, caustic soda, sulphuric acid, and other chemical products. These shipments mainly originate from the U.S. Gulf Coast, western Canada, the U.S. Southeast, Mexico, and the U.S.
The Company’s U.S. operations are subject to safety regulations enforced by the Federal Railroad Administration (the “FRA”), and the Pipeline and Hazardous Materials Safety Administration (“PHMSA”). The FRA regulates safety-related aspects of the Company’s railway operations in the U.S. under the Federal Railroad Safety Act , as well as rail portions of other safety statutes.
The FRA regulates safety-related aspects of the Company’s railway operations in the U.S. under Title 49 of the Code of Federal Regulations, the Federal Railroad Safety Act , as well as rail portions of other safety statutes. The PHMSA regulates the safe transportation of hazardous materials by rail.
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.
As such, fuel surcharge revenue includes recoveries of carbon taxes and levies. 10 / CPKC 2025 ANNUAL REPORT Freight revenues included fuel surcharge revenues of $1,483 million in 2025, a decrease of $168 million, or 10%, from $1,651 million in the same period of 2024.
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.
However, the 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.
We are monitoring these legal developments, as well as trends in climate and other ESG-related litigation and regulatory investigations, as well as their potential impact on the Company’s climate and other ESG-related activities (including its strategies, disclosure and risk management practices). Please see “Legal and Regulatory Risks” in Item 1A. Risk Factors for further discussion.
Ongoing monitoring of legal developments and emerging trends in climate and other sustainability-related litigation and regulatory investigations is conducted to evaluate potential impacts on the Company’s climate and other sustainability-related activities, including its strategies, disclosure and risk management practices. Please see "Legal and Regulatory Risks" in Item 1A. Risk Factors for further discussion.
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.
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, 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. Pacific Northwest.
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.
In 2023, the Company established a 2030 locomotive GHG emissions reduction target. The target was validated by the Science Based Targets Initiative ("SBTi"), under its sectoral-based approach for freight railroads and is aligned with a well-below 2⁰C global warming scenario. The Company has also established a Carbon Reduction Task Force, composed of CPKC’s engineers and operations experts.
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.
Recent legal developments with respect to such matters include the legislative and rule-making activities of securities regulatory authorities in Canada, the U.S. and Mexico. In addition, recently enacted, proposed or evolving environmental, social, governance, and sustainability related statutes or regulations may impact the operations, preferences, activities and financial conditions of the Company and its customers and other stakeholders.
Canadian grain transported by the Company consists of whole grains, such as wheat, durum, canola, and pulses, as well as processed products such as oils and meals. This business is centred in the Canadian Prairies (Saskatchewan, Manitoba, and Alberta), with grain shipped primarily west to the Port of Vancouver and east to the Port of Thunder Bay for export.
This business is centred in the Canadian Prairies (Saskatchewan, Manitoba, and Alberta), with grain shipped primarily west to the Port of Vancouver and east to the Port of Thunder Bay for export. Grain is also shipped to the U.S., Mexico, and eastern Canada for domestic consumption.
The Company's Metals, minerals and consumer products freight revenues are generated from the transportation of steel, aggregates, food and consumer products, and non-ferrous metals. 8 / CPKC 2024 ANNUAL REPORT The Company transports steel in various forms from mills in Mexico, the U.S. Midwest, the U.S. Southeast, and western Canada to a variety of industrial users.
The Company transports steel in various forms from mills in Mexico, the U.S. Midwest, the U.S. Southeast, and western Canada to a variety of industrial users. The Company carries base metals such as aluminum, zinc, and lead.
Unionized employees represent nearly 73% of our workforce and are represented by 74 active bargaining units. Canada Within Canada, there are eight bargaining units representing approximately 7,100 Canadian unionized active employees. From time to time, we negotiate to renew collective agreements with various unionized groups of employees.
The Company manages collaborative relationships with union members in Canada, the U.S., and Mexico. Unionized employees represent nearly 75% of our workforce and are represented by 73 active bargaining units. Canada Within Canada, there are eight bargaining units representing approximately 7,000 Canadian unionized active employees.
Everything we do is grounded in precision scheduled railroading and our five foundations of Provide Service, Control Costs, Optimize Assets, Operate Safely, and Develop People. A team of approximately 20,000 railroaders across North America underpins the Company’s success and brings value to our customers and shareholders.
The Company's culture is guided by the values of Accountability, Diversity, and Pride. Built on a bedrock of respect, these values drive our actions. Everything we do is grounded in precision scheduled railroading and our five foundations of Provide Service, Control Costs, Optimize Assets, Operate Safely, and Develop People.
The total number of employees as of December 31, 2024 , was 19,797, a decrease of 130 compared to 19,927 as of December 31, 2023. Workforce is defined as employees plus contractors and consultants. The total workforce as of December 31, 2024 was 19,924, a decrease of 114 compared to 20,038 as of December 31, 2023.
Total Employees and Workforce An employee is defined by the Company as an individual currently engaged in full-time, part-time, or seasonal employment with the Company. The total number of employees as of December 31, 2025, was 19,479, a decrease of 318 compared to 19,797 as of December 31, 2024. Workforce is defined as employees plus contractors and consultants.
The majority of frac sand originates at mines located along the Company's network in Wisconsin and Iowa and moves to the Bakken and Marcellus shale formations and other shale formations across North America. Food, consumer, and other products traffic consists of a diverse mix of goods, including railway equipment, food products, and large domestic use appliances.
Midwest, Alberta, Ontario, and Mexico to energy and construction projects in the U.S. Midwest, western Canada, Mexico, and the U.S. Gulf Coast. The majority of frac sand originates at mines located along the Company's network in Wisconsin and Iowa and moves to the Bakken and Marcellus shale formations and other shale formations across North America.
The PHMSA regulates the safe transportation of hazardous materials by rail. The Company’s U.S. rail operations are also subject to security regulations and directives by the Transportation Security Administration ("TSA"), a component of the U.S. Department of Homeland Security.
The Company’s U.S. rail operations are also subject to security regulations and directives by the Transportation Security Administration ("TSA"), a component of the U.S. Department of Homeland Security. CPKC 2025 ANNUAL REPORT / 11 Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental, climate, sustainability, and other matters.
The current agreement terms will remain in effect until new terms have been negotiated in 2025. 14 / CPKC 2024 ANNUAL REPORT Health and Safety CPKC is an industry leader in rail safety and we are committed to protecting our employees, our communities, our environment, and our customers’ goods.
Health and Safety CPKC is an industry leader in rail safety. We are committed to protecting our employees, our communities, our environment, and our customers’ goods in all three countries which we operate in: Canada, the U.S., and Mexico.
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.
The total workforce as of December 31, 2025 was 19,502, a decrease of 422 compared to 19,924 as of December 31, 2024. 14 / CPKC 2025 ANNUAL REPORT 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.
Strategy The Company’s strategy remains focused on precision scheduled railroading as embedded within our five foundations: • Provide Service: Providing efficient and consistent transportation solutions for the Company’s customers. “Doing what we say we are going to do” is what drives the Company in providing a reliable product with a lower cost operating model.
All references to currency amounts included in this Annual Report on Form 10-K are in Canadian dollars unless specifically noted otherwise. Strategy The Company’s strategy remains focused on precision scheduled railroading as embedded within our five foundations: • Provide Service: Providing efficient and consistent transportation solutions for the Company’s customers.
Accordingly, Develop People is one of the foundations of how we do business, illustrating our focus and energy towards empowering our people, providing an engaging culture, and cultivating an industry leading team. Total Employees and Workforce An employee is defined by the Company as an individual currently engaged in full-time, part-time, or seasonal employment with the Company.
A team of approximately 20,000 railroaders across North America underpins the Company’s success and brings value to our customers and shareholders. Accordingly, Develop People is one of the foundations of how we do business, illustrating our focus and energy towards empowering our people, providing an engaging culture, and cultivating an industry leading team.
Talent Management The Company’s talent management strategy is led by our Human Resources department, which oversees recruitment, development, engagement, and retention programs and processes. It is further supported by our executive led Leadership and Diversity Steering Committee.
Talent Management The Company’s talent management programs are led by the Human Resources department and, supported by our executive-led Leadership and Diversity Steering Committee. This Committee, consisting of CEO direct reports, oversees workforce and leadership development. Senior leaders actively manage our succession planning program, which is regularly reviewed by the Board of Directors for alignment and oversight.
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 Mexico Midwest Express ("MMX") is a premium intermodal service providing the first truck-competitive, single-line rail option between the U.S. Midwest and Mexico. In 2024, the Company and CSX Corporation created a new east-west Class I corridor that connects shippers in Mexico, Texas, and the U.S.
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.
The compensation terms under the collective bargaining agreements are subject to renegotiation on an annual basis and all other benefits are subject to negotiation every two years. The current agreements' terms will remain in effect until new terms have been negotiated. One agreement is under active negotiation, and the other will remain in effect until June 30, 2026.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
Biggest changeAs a result, there is no assurance that we will be able to successfully achieve our sustainability goals or that our sustainability strategy will satisfy the diverging expectations of our stakeholders, 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.
The Company’s Mexican operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment concerning, among other matters, emissions to the air, land, and water, and the handling of hazardous materials and wastes, and are also subject to the compliance with standards for water discharge, water supply, emissions, noise pollution, hazardous substances and transportation and handling of hazardous and solid waste.
The Company’s Mexican operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment concerning, among other matters, emissions to the air, land, and water, and the handling of hazardous materials and wastes, and are also subject to compliance with standards for water discharge, water supply, emissions, noise pollution, hazardous substances and transportation and handling of hazardous and solid waste.
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.
For example, CPKCM's 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.
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.
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 rate could lead to shifts in the types and volumes of Mexican imports and exports.
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.
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 2025 ANNUAL REPORT The Company is subject to environmental laws and regulations that may result in significant costs.
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.
The Company’s Mexican operations are subject to economic and safety regulations by the SICT and ATTRAPI. 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.
Among other obligations, CPKCM must comply with the investment commitments established in its business plan, which forms an integral part of the Concession, and must update the plan every three years. The SICT treats CPKCM’s business plans confidentially. The SICT and ARTF also monitor CPKCM’s compliance with efficiency and safety standards established in the Concession.
Among other obligations, CPKCM must comply with the investment commitments established in its business plan, which forms an integral part of the Concession, and must update the plan every three years. The SICT treats CPKCM’s business plans confidentially. The SICT and ATTRAPI also monitor CPKCM’s compliance with efficiency and safety standards established in the Concession.
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.
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 market developments or legal or regulatory requirements, could adversely affect our business, reputation, and exposure to legal risks.
Any restrictive exchange control policy could adversely affect the Company’s ability to obtain U.S. dollars or to convert Mexican pesos into dollars for purposes of making payments. This could have a material adverse effect on the Company’s consolidated financial statements.
Any restrictive FX control policy could adversely affect the Company’s ability to obtain U.S. dollars or to convert Mexican pesos into dollars for purposes of making payments. This could 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.
Risks Related to Operations in Mexico The Concession granted to CPKCM from the Mexican government 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.
The SICT and ARTF, which are principally responsible for regulating railroad services in Mexico, have broad powers to monitor CPKCM’s compliance with the Concession, and they can require CPKCM to supply them with any technical, administrative and financial information they request.
The SICT and ATTRAPI, which are principally responsible for regulating railroad services in Mexico, have broad powers to monitor CPKCM’s compliance with the Concession, and they can require CPKCM to supply them with any technical, administrative, and financial information they request.
The Company continually evaluates attackers’ techniques, tactics and motives, and strives to be diligent in its monitoring, training, planning, and prevention. However, due to the increasing sophistication of cyber-attacks and greater complexity within our IT supply chain, the Company may be unable to anticipate or implement appropriate preventive measures to detect and respond to a security breach.
The Company continually evaluates attackers’ techniques, tactics and motives, and strives to be diligent in its monitoring, training, planning, and prevention. However, due to the increasing sophistication of cyber-attacks and greater complexity within our information technology supply chain, the Company may be unable to anticipate or implement appropriate preventive measures to detect and respond to a security breach.
These events have resulted and can result in substantial costs to respond during the event and recover following the event. Costs can include modifications to existing infrastructure or implementation of new infrastructure to prevent future impacts to our business.
These events have resulted and may in the future result in substantial costs to respond during the event and recover following the event. Costs have and in the future can include modifications to existing infrastructure or implementation of new infrastructure to prevent future impacts on our business.
Our current GHG emissions reduction target and any future GHG emissions reduction targets we may establish are subject to a number of risks, assumptions and uncertainties that include, but are not limited to: changes in carbon markets; evolving sustainability strategies and scientific, methodological or technological developments, including future investments in and the availability of GHG emissions-reduction tools and technologies, shifts in the science, data, methodology and legal and financial considerations underlying our climate and sustainability-related analysis and strategy, including those developed and used by organizations such as SBTi, the ability of the Company to successfully implement its climate and sustainability-related strategies and initiatives (including actions and plans undertaken by the Company to reduce GHG emissions), significant changes in the Company's GHG emissions profile as a result of changes to its railway asset base, the Company's ability to work with governments and third parties to mitigate the impacts of climate change, domestic and international economic conditions, including exchange rates, the effects of competition and regulation, uncertainties in the financial markets, capital spending, actions of vendors, the willingness of customers to acquire our services, cost of network expansion, maintenance and retrofits, and physical impact of climate change on our business.
Our current GHG emissions reduction target and any future GHG emissions reduction targets we may establish are subject to a number of risks, assumptions, and uncertainties that include, but are not limited to: evolving sustainability strategies and scientific, methodological, or technological developments, including future investments in and the availability of GHG emissions-reduction tools and technologies, shifts in the science, data, methodology, and legal and financial considerations underlying our climate and sustainability-related analysis and strategy, including those developed and used by organizations such as SBTi, the ability of the Company to successfully implement its climate and sustainability-related strategies and initiatives (including actions and plans undertaken by the Company to reduce GHG emissions), significant changes in the Company's GHG emissions profile as a result of changes to its railway asset base, the Company's ability to work with governments and third parties to mitigate the impacts of climate change, domestic and international economic conditions, including FX rates, the effects of competition and regulation, shifting climate-related policy, regulations and stakeholder expectations, uncertainties in the financial markets, capital spending, actions of vendors, the willingness of customers to acquire our services, cost of network expansion, maintenance and retrofits, and physical impact of climate change on our business.
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.
CPKC 2025 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.
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.
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 developed by third parties such as SBTi or the expectations of our key stakeholders.
The Mexican economy in the past has suffered balance of payment deficits and shortages in FX reserves. Although Mexico has imposed foreign exchange controls in the past, there are currently no exchange controls in Mexico.
The Mexican economy in the past has suffered balance of payment deficits and shortages in FX reserves. Although Mexico has imposed FX controls in the past, there are currently no FX controls in Mexico.
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).
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).
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.
For example, from time to time, teachers' protests in Mexico have resulted in service interruptions on CPKCM’s rights of way. 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.
Fluctuations in the peso-dollar exchange rates also have an effect on the Company’s consolidated financial statements. A weakening of the peso against the U.S. dollar would cause reported peso-denominated revenues and expenses to decrease, and could increase reported foreign exchange loss due to the Company’s net monetary assets that are peso-denominated.
Fluctuations in the peso-dollar exchange rate also have an effect on the Company’s consolidated financial statements. A weakening of the peso against the U.S. dollar would cause reported peso-denominated revenues and expenses to decrease, and could increase reported FX loss due to the Company’s net monetary assets that are peso-denominated.
Environmental Protection Agency (“EPA”) has regulatory authority with respect to matters that impact the Company's properties and operations.
Environmental Protection Agency ("EPA") has regulatory authority with respect to matters that impact the Company's properties and operations.
The SICT and ARTF review, and may amend, these standards from time to time. COFECE also has the authority to regulate railroad service in Mexico, having powers to monitor compliance with the antitrust laws as well as to investigate and determine remedies for anticompetitive practices.
The SICT and ATTRAPI review, and may amend, these standards from time to time. The CNA also has the authority to regulate railroad service in Mexico, having powers to monitor compliance with the antitrust laws as well as to investigate and determine remedies for anticompetitive practices.
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.
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 tax rate. Climate-Related Risks Climate change presents both physical and transition risks to our business.
Introduction of, or changes to, regulations by government bodies in response to climate change that increase the cost of carbon emissions could result in a significant increase in expenses and could adversely affect our business performance, results of operations, financial position, and liquidity. Please see “Sustainability-Related Laws, Regulations and Strategies” in Item 1.
Introduction of, or changes to, regulations by government bodies in response to climate change that increase the cost of carbon emissions could result in a significant increase in expenses and could adversely affect our business performance, results of operations, financial position, and liquidity. Please see “ Sustainability-Related Laws, Regulations and Strategies ” in Item 1.
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 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.
A summary of climate-related risks that could adversely affect our business, operations and financial results is discussed below. Physical Risks Changing climate conditions, severe weather or natural disasters could result in significant business interruptions and costs to the Company.
A summary of climate-related risks that could adversely affect our business, operations and financial results are discussed below. Physical Risks Changing climate conditions, extreme weather events or natural disasters could result in significant business interruptions and costs to the Company.
The information set forth in this Item 1A. Risk Factors should be read in conjunction with the rest of the information included in this annual report, including Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.
The information set forth in this Item 1A. Risk Factors should be read in conjunction with the rest of the information included in this Annual Report on Form 10-K, including Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.
In addition, the accuracy, consistency and usefulness of climate or sustainability-related data (including data underlying our current or future targets and their baselines) could be impacted by a number of factors, including the accuracy of the assumptions in the science-based methodology used to calculate this data, improvement in our data collection and measuring systems, activities such as joint ventures, mergers and acquisitions or divestitures, and industry-driven changes to methodologies.
In addition, the accuracy, consistency, and usefulness of climate or sustainability-related data (including data underlying our current or future targets and their baselines) could be impacted by a number of factors, including the accuracy of the assumptions in the science-based methodology used to calculate this data, the quality of the data we rely on (including data collected by third parties) and our measuring systems, activities such as joint ventures, mergers and acquisitions or divestitures, and industry-driven changes to methodologies.
The SICT may revoke the Concession if CPKCM is sanctioned for the same cause at least three times within a period of five years for any of the following: unjustly interrupting the operation of its rail lines or rendering its public services for charging rates higher than those it has registered with the ARTF; unlawfully restricting the ability of other Mexican rail operators to use its rail lines; failing to make payments for damages caused during the performance of services; failing to comply with any term or condition of the Mexican Regulatory Railroad Service Law and regulations or the Concession; failing to make the capital investments required under its three-year business plan filed with the SICT; or failing to maintain an obligations compliance bond and insurance coverage as specified in the Mexican Regulatory Railroad Service Law and regulations.
However, these payments may not be sufficient to compensate CPKCM for its losses and may not be made timely. 20 / CPKC 2025 ANNUAL REPORT The SICT may revoke the Concession if CPKCM is sanctioned for the same cause at least three times within a period of five years for any of the following: unjustly interrupting the operation of its rail lines or rendering its public services for charging rates higher than those it has registered with the ATTRAPI; unlawfully restricting the ability of other Mexican rail operators to use its rail lines; failing to make payments for damages caused during the performance of services; failing to comply with any term or condition of the Mexican Regulatory Railroad Service Law and regulations or the Concession; failing to make the capital investments required under its three-year business plan filed with the SICT; or failing to maintain an obligations compliance bond and insurance coverage as specified in the Mexican Regulatory Railroad Service Law and regulations.
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.
In connection with the integration of the 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.
(Please see “Environmental Laws, Regulations and Strategies” and “Sustainability-Related Laws, Regulations and Strategies” in Item 1. Business for further discussion). Violation of these laws and regulations can result in significant fines and penalties, as well as other potential impacts on the Company’s operations.
(Please see "Environmental Laws, Regulations and Strategies" and "Sustainability-Related Laws, Regulations and Strategies" in Item 1. Business for further discussion). Violation of these laws and regulations can result in significant fines and penalties, as well as other potential impacts on the Company’s operations.
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).
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 Chang e” in Item 1.
Please see “Sustainability-Related Laws, Regulations and Strategies” in Item 1. Business for further discussion of climate- and other sustainability-related laws, regulations and other legal developments that could materially affect the preferences, activities, and financial conditions of our customers and other stakeholders, as well as the Company’s operating results, financial condition, and reputation.
Business for further discussion of climate- and other sustainability-related laws, regulations, and other legal developments that could materially affect the preferences, activities, and financial conditions of our customers and other stakeholders, as well as the Company’s operating results, financial condition, and reputation.
Economic conditions resulting in bankruptcies of one or more large customers could have a significant impact on the Company's financial position, results of operations, and liquidity in a particular year or quarter.
These factors could result in a material adverse effect on the Company’s financial or operating results and liquidity. Economic conditions resulting in bankruptcies of one or more large customers could have a significant impact on the Company's financial position, results of operations, and liquidity in a particular year or quarter.
Extreme volatility in the peso-dollar exchange rate may result in disruption of the international foreign exchange markets and may limit the ability to transfer or convert Mexican pesos into U.S. dollars.
CPKC 2025 ANNUAL REPORT / 21 Extreme volatility in the peso-dollar exchange rate may result in disruption of the international FX markets and may limit the ability to transfer or convert Mexican pesos into U.S. dollars.
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.
There can be no assurance that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.
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.
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.
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.
CPKC 2025 ANNUAL REPORT / 19 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 acquisition of KCS and is subject to continuing obligations under the STB’s final decision, which could adversely affect the Company’s business.
The Company's indebtedness may pose risks and/or intensify existing risks. As at December 31, 2024, we have $22,623 million of indebtedness.
The Company's indebtedness may pose risks and/or intensify existing risks. As at December 31, 2025, we have $23,188 million of indebtedness.
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.
The Company is exposed to extreme weather events such as hurricanes, tropical storms, tornadoes, floods, wildfires, extreme temperatures, drought, significant precipitation, and natural disasters including earthquakes, volcanism, avalanches, and mudslides that have caused and in the future can cause track outages, severe damage to infrastructure and business interruptions that adversely affect the Company’s rail network.
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.
Furthermore, the STB has the authority to issue supplemental orders to address issues or concerns that may arise in the future. 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.
Such events have had and in the future could have a material adverse effect on the Company’s results of operations, financial condition, and liquidity. Insurance maintained by the Company to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, depending on the nature of the risk insured.
Insurance maintained by the Company to protect against loss of business and other related consequences resulting from extreme weather events and natural disasters is subject to coverage limitations, depending on the nature of the risk insured.
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.
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.
Market Risks A number of the sectors the Company serves have the potential to be significantly impacted by climate-related transitional risks, including increased regulations, technology changes, and shifts in consumer preferences. The Company’s business is based on transporting a wide variety of commodities from suppliers to the marketplace.
Business for further discussion of climate- and other sustainability-related laws and regulations that could materially affect the Company’s operating results, financial condition, and reputation. Market Risks A number of the sectors the Company serves have the potential to be significantly impacted by climate-related transitional risks, including increased regulations, technology changes, and shifts in consumer preferences.
This insurance may not be sufficient to cover all of the Company's damages or damages to others, and may not continue to be available at commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic interruption of services, the Company may not be able to restore services without a significant interruption in operations.
This insurance may not be sufficient to cover all of the Company's damages or damages to others, and may not continue to be available at commercially reasonable rates.
Shifting consumer demand to lower-carbon products and increased climate-focused regulations, such as carbon pricing and fuel regulations, may instigate a broad transition in the energy sector. Programs that place a price on carbon emissions or other government restrictions on certain market sectors may further impact current and potential freight rail customers in the energy sector.
Programs that place a price on carbon emissions or other government restrictions on certain market sectors may further impact current and potential freight rail customers in the energy sector. A comprehensive transition in the energy sector could significantly impact the markets of the Company's energy customers or lead to market differentiation through geographic variation in policies and demand trends.
Transition Risks Reputational Risks The Company has established a GHG emissions reduction target, and may establish updated or new targets in the future to guide the implementation of the Company's carbon reduction efforts.
Even with insurance, if any extreme weather event or natural disaster leads to a catastrophic interruption of services, the Company may not be able to restore services without a significant interruption in operations. 22 / CPKC 2025 ANNUAL REPORT Transition Risks Reputational Risks The Company has established a GHG emissions reduction target, and may establish updated or new targets in the future to guide the implementation of the Company's carbon reduction efforts.
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.
In addition, there can be no assurance that our shareholders and other stakeholders, who hold increasingly diverging views on these topics, will agree with our goals and strategies or be satisfied with our efforts to attain such goals or with our other sustainability-related efforts or commitments.
A comprehensive transition in the energy sector could significantly impact the markets of the Company's energy customers or lead to market differentiation through geographic variation in policies and demand trends. A portion of the Company’s business could be materially affected by potential future changes and instability that may be related to such a transition.
A portion of the Company’s business could be materially affected by potential future changes and instability that may be related to such a transition. CPKC 2025 ANNUAL REPORT / 23 Please see "Sustainability-Related Laws, Regulations and Strategies" in Item 1.
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.
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 7 and 26 of Part II Item 8. Financial Statements and Supplementary Data.
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.
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. Shifting consumer demand to lower-carbon products and increased climate-focused regulations, such as carbon pricing and fuel regulations, may lead to a broader transition in the energy sector.
Impacts from these types of events are highly variable based on the severity and length of the event and scope of network impact. Climate-related changes such as rising mean temperatures and severe weather events can increase physical climate risk potentially compounding impacts to the business and operations.
Impacts from these extreme weather events or natural disasters are highly variable based on the severity and length of the event and scope of network impact. Climate change may cause or contribute to the frequency, duration, and intensity of some extreme weather events and natural disasters, increasing the Company’s exposure to chronic and acute physical climate risks.
Removed
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.
Added
On April 14, 2023, the Company assumed control of KCS.
Removed
However, these payments may not be sufficient to compensate CPKCM for its losses and may not be made timely.
Added
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.
Removed
Tax contingencies are further discussed in Notes 6 and 25 of Item 8. Financial Statements and Supplementary Data.
Added
For example, Mexican tax reforms effective January 1, 2026, requiring cash deposits to contest tax assessments may adversely affect our liquidity and ability to challenge such assessments. Additionally, the Company has a tax contingency related to an audit assessment, which is currently in litigation, as well as audit assessments that are in administrative appeals.
Removed
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.
Added
The impacts from these events can vary significantly by region and over time, with examples including extreme heat, prolonged droughts, regional water stress, increased wildfire risk, and severe precipitation – all of which may compound operational challenges across the rail network.
Removed
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.
Added
These impacts have necessitated and in the future could necessitate significant capital investments to enhance infrastructure resilience; however, even with such investments, the Company may still face increased maintenance costs and potential service disruptions due to the unpredictability of extreme weather events or natural disasters as they become more severe and as circumstances otherwise evolve, and there is no guarantee that we will be able to quickly and effectively respond or restore operations following extreme weather events or natural disasters.
Removed
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.
Added
The resulting impacts may materially affect the Company’s operating results, financial condition, and liquidity, as well as its ability to meet customer service commitments and maintain network efficiency.
Removed
Business for further discussion of climate- and other sustainability-related laws and regulations (including the rulemaking activities of securities regulatory authorities in Canada and the United States) that could materially affect the Company’s operating results, financial condition, and reputation.
Added
We cannot assure that the Company's current or future plans to reduce GHG emissions will be viable or successful.
Removed
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.
Added
Policy and Regulatory Risks An escalating price on carbon emissions could materially increase direct costs related to energy purchases and indirect expenses related to purchased goods and materials, required to operate our business.
Removed
Our increased indebtedness could also reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages relative to other companies with lower debt levels.
Added
As an energy-intensive operation, the Company is exposed to evolving climate-focused policy and regulations, including carbon pricing, clean fuel standards and emissions trading regulations, which may vary significantly across jurisdictions and increase compliance complexity.
Removed
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.
Added
The Company’s business is based on transporting a wide variety of commodities from suppliers to the marketplace. The Company regularly transports energy commodities that serve refineries, processing locations, and end-users across North America and global markets.
Added
If such a transition occurs, demand for certain commodities, such as crude oil and petroleum, may decline, while demand for alternatives such as renewable fuels may increase, creating potential volatility in future revenue streams.
Added
In particular, the imposition, expansion, or modification of tariffs, quotas or other trade restrictions affecting goods moving between the United States, Mexico, and Canada could result in a material adverse effect on the Company's freight volumes.
Added
In addition, trade agreement reviews, including the scheduled 2026 joint review of the United States-Mexico-Canada Agreement, and any resulting changes to or non-renewal of these agreements could disrupt North American supply chains and adversely affect cross-border customer demand, pricing dynamics, and long-term capital investment patterns.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeSee “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.
Biggest changeGovernance and Oversight The Board of Directors oversees the work of all its committees, including the Audit and Finance Committee.
The Company scopes the third-party penetration tests as real-world attacks against perimeter defenses and internal processes such as social engineering and phishing. The Company's cybersecurity risk management program also includes ongoing threat research and analysis conducted with the assistance of third parties, including on emerging threat attack vectors, tactics, actors and motivations.
The Company scopes the third-party penetration tests as real-world attacks against perimeter defences and internal processes such as social engineering and phishing. The Company's cybersecurity risk management program also includes ongoing threat research and analysis conducted with the assistance of third parties, including on emerging threat attack vectors, tactics, actors, and motivations.
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).
Among other qualifications, certain members of the CISO's and CIO's management team also have certifications as a Certified Information Systems Security Professional and Certified Information Security Manager. CPKC 2025 ANNUAL REPORT / 25
Depending on their source and nature, cyber incidents could in the future materially affect CPKC and its operations, and financial condition.
Depending 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.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeAs of December 31, 2025, the Company owned and leased the following freight cars: Freight cars Owned Leased Total Average Age (in years) Box car 3,472 1,094 4,566 29 Covered hopper 14,910 6,185 21,095 18 Flat car 1,638 1,385 3,023 29 Gondola 6,067 2,150 8,217 27 Intermodal 1,777 149 1,926 23 Multi-level autorack 5,963 3,305 9,268 18 Company service car 2,779 369 3,148 51 Open top hopper 224 20 244 33 Tank car 48 436 484 12 Total freight cars 36,878 15,093 51,971 23 As of December 31, 2025, the Company owned and leased the following units of intermodal equipment: Intermodal equipment Owned Leased Total Average age (in years) Containers 10,061 — 10,061 7 Chassis 6,664 2,409 9,073 13 Total intermodal equipment 16,725 2,409 19,134 10 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.
Rail traffic controllers coordinate and dispatch crews, and manage the day-to-day locomotive management across the network, 24 hours a day, and seven days a week. The operations centre has a complete backup system in the event of any power disruption.
Rail traffic controllers coordinate and dispatch crews, and manage the day-to-day locomotive operations across the network, 24 hours a day, and seven days a week. The operations centre has a complete backup system in the event of any power disruption.
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’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 operations centre is located in Calgary, and is the primary dispatching facility in Canada.
The Company’s network accesses the U.S. markets directly through five wholly-owned subsidiaries: Soo Line Railroad Company (“Soo Line”), a Class I railway operating in the U.S. Midwest; the Dakota, Minnesota & Eastern Railroad ("DM&E"), which operates in the U.S. Midwest; Delaware & Hudson Railway Company, Inc., which operates between eastern Canada and the U.S.
The Company’s network accesses the U.S. markets directly through five wholly-owned subsidiaries: Soo Line Railroad Company, a Class I railway operating in the U.S. Midwest; the Dakota, Minnesota & Eastern Railroad ("DM&E"), which operates in the U.S. Midwest; Delaware & Hudson Railway Company, Inc., which operates between eastern Canada and the U.S. Northeast; the Central Maine & Quebec Railway U.S.
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 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.
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.
The Company’s locomotive productivity, defined as the daily average gross ton-miles ("GTMs") divided by daily average operating horsepower, for the years ended December 31, 2025 and 2024, was 166 and 165 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.
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.
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.
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.
Inc., which operates in the U.S. Northeast, and the Kansas City Southern Railway Company, a Class I railway which operates in the central and south-central U.S. KCS indirectly owns CPKCM which operates in northeastern and central Mexico and to and from the port cities of Lázaro Cárdenas, Veracruz, Altamira and Tampico.
As of December 31, 2024, the Company had 257 locomotives in storage.
As of December 31, 2025, the Company had 292 locomotives in storage.
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.
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.
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.
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. 26 / CPKC 2025 ANNUAL REPORT At December 31, 2025, 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 5,830 Industrial and way track 1,904 Total track miles 28,075 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 repair of locomotives; and facilities for maintenance of freight cars and other equipment.
The Company’s locomotive fleet is comprised of largely high-adhesion alternating current line haul locomotives that are more fuel efficient and reliable and have superior hauling capacity as compared with standard direct current locomotives. The Company has entered into locomotive leases in the past to ensure there is appropriate capacity to meet market demand.
The Company’s locomotive fleet is comprised of largely high-adhesion alternating current line haul locomotives that are more fuel efficient and reliable and have superior hauling capacity as compared with standard direct current locomotives.
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.
These expenditures are aimed at improving the 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 2025 , the Company invested in capital expenditures of $3,102 million (2024 - $2,825 million), an increase of 10% from the prior year.
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.
As of December 31, 2025, the Company owned or leased the following locomotive units: Locomotives Owned Leased Total Average Age (in years) Line haul 1,471 54 1,525 16 Road Switcher 732 3 735 38 Yard Switcher 47 — 47 52 Total locomotives 2,250 57 2,307 24 CPKC 2025 ANNUAL REPORT / 27 The Company’s average in-service utilization percentage for freight cars, for the years ended December 31, 2025 and 2024, was 82% and 79%, respectively.
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.
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. 28 / CPKC 2025 ANNUAL REPORT Encumbrances Refer to Part II, Item 8.
Removed
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.
Added
The Company has entered into multi-year purchase agreements for new Tier 4 line haul locomotives to improve the overall fleet reliability and availability with new technology while also significantly reducing emissions.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNeither the EPA nor the DOJ has issued a final compendium of alleged violations, demand for corrective or mitigating actions, or articulated a preliminary civil penalty assessment, and it remains too early to provide a fulsome evaluation of the likely outcome with respect to either the nature of any alleged violations or the amount of any potential civil penalty.
Biggest changeNeither the EPA nor the DOJ has issued a final compendium of alleged violations or a final demand for corrective or mitigating actions, and it remains too early to provide a fulsome evaluation of the likely outcome with respect to either the nature of any alleged violations, or the amount of any potential civil penalty.
Department of Justice (“DOJ”) sent a communication requesting a meeting with the Company to discuss potentially resolving any alleged noncompliance which included an initial draft consent decree from the DOJ. That initial meeting occurred in January 2023 and communications are ongoing.
Department of Justice ("DOJ") sent a communication requesting a meeting with the Company to discuss potentially resolving any alleged noncompliance which included an initial draft consent decree from the DOJ. That initial meeting occurred in January 2023 and communications are ongoing.
In September 2020, the Company received an initial request for information from the EPA inquiring into the Company’s compliance with the mobile source provisions of the Clean Air Act (“CAA”).
In September 2020, the Company received an initial request for information from the EPA inquiring into the Company’s compliance with the mobile source provisions of the Clean Air Act ("CAA").
ITEM 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 3. LEGAL PROCEEDINGS For further details, refer to Part II 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.
The Company will continue to fully cooperate and engage in discussions to resolve the matter.
However, any potential civil penalty amount is not anticipated to be material. The Company will continue to fully cooperate and engage in discussions to resolve the matter.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAlbiston 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.
Biggest changeCPKC 2025 ANNUAL REPORT / 31 Maeghan Albiston, 44 Senior Vice-President and Chief Human Resources Officer Ms. Albiston is Senior Vice-President and Chief Human Resources Officer at CPKC. Ms. 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.
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.
Velani served as Executive Vice-President and Chief Financial Officer of 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.
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's leadership, the Company has 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.
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.
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, 57 President and Chief Executive Officer 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.
Creel became the first President and 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. Under 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.
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 from May 2017.
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.
Before this appointment, he was the Vice-President, Strategic Planning and Transportation Services of the Company from 2014. Mr. Clements has more than 30 years' experience at the Company, enabling an extensive understanding of the Company's customers, processes, systems, and leadership of CP-KCS integration planning.
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.
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, 81 Senior Vice-President and Chief Risk Officer Mr. Pitz is Senior Vice-President and Chief Risk Officer ("CRO") at CPKC. In his role, 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.
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, 56 Executive Vice-President, Strategic Planning and Corporate Services Mr. Clements is Executive Vice-President, Strategic Planning and Corporate Services at CPKC. 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.
Brooks served as Executive Vice-President and CMO of the Company from February 2019. He worked in senior marketing roles at the Company after joining in 2007, including past experience as Senior Vice-President and CMO and Vice-President, Marketing - Bulk and Intermodal. Mr.
Clements 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.
Clements 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 and operations technology. Previously, Mr. Clements served as Senior Vice-President, Strategic Planning and Technology Transformation at the Company from September 2019.
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.
Mr. Pitz, a Vietnam War veteran and former Federal Bureau of Investigation special agent, is a 50-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, 52 Senior Vice-President, Network and Capacity Management 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.
Creel holds a Bachelor of Science in marketing from Jacksonville State University and completed the Advanced Management Program at Harvard Business School. Nadeem Velani, 53 Executive Vice-President and Chief Financial Officer Mr. Velani is Executive Vice-President and Chief Financial Officer ("CFO") of CPKC. In his role, Mr.
Del Cueto was also appointed as President of the Mexican Association of Railways after serving as Chairman of the Operations and Security Committee for five years. He is on the Board of Directors of the Railway and Terminal del Valle de México, ("Ferrovalle") and a full member of the Steering Committee of the Ferrovalle railway terminal.
In August 2020, Mr. Del Cueto was also appointed as President of the Mexican Association of Railways after serving as Chairman of the Operations and Security Committee for five years. He is on the Board of Directors of the Railway and Terminal del Valle de México, ("Ferrovalle") and a full member of the Steering Committee of the Ferrovalle railway terminal.
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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. CPKC 2025 ANNUAL REPORT / 29 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.
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
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. 32 / CPKC 2025 ANNUAL REPORT PART II CPKC 2025 ANNUAL REPORT / 33
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 holds a Bachelor of Economics degree from Western University and a Master of Business Administration ("MBA") in finance/international business from McGill University. In 2022, Mr. Velani completed the Advanced Management Program at Harvard Business School. John Brooks, 55 Executive Vice-President and Chief Marketing Officer Mr. Brooks is Executive Vice-President and Chief Marketing Officer ("CMO") of CPKC. Mr.
Redd worked for over 20 years at Kansas City Southern Railway Company where he held a variety of leadership positions in network and field operations, including Vice-President Transportation where he oversaw key operating functions in the U.S. and Mexico. Mr.
Redd worked for over 20 years at KCS where he held a variety of leadership positions in network and field operations, including Vice-President Transportation where he oversaw key operating functions in the U.S. and Mexico. Mr.
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.
Arpin is Senior Vice-President and CIO at CPKC. 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.
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.
Pitz is responsible for risk management, police services, environmental risk and forensic audit investigations. Previously, Mr. Pitz served as Senior Vice-President and CRO of the Company from October 2017.
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.
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, casualty and general claims, and securities matters across the Canada, U.S., and Mexico network.
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.
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. Pam Arpin, 51 Senior Vice-President and Chief Information Officer 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.
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. Oscar Del Cueto, 59 CPKCM President, General Manager and Executive Representative Mr.
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.
Additionally, he received a Certificate in the Management Rail Program from the University of Michigan. He is fluent in Spanish and English. Cassandra P. Quach, 52 Vice-President, Chief Legal Officer and Corporate Secretary Ms. Quach is Vice-President, Chief Legal Officer and Corporate Secretary. Ms.
Del Cuteo joined KCS de Mexico in 2006 where he served in numerous roles including Director of Mechanical, Director of Transportation, General Superintendent of Transportation and Vice President and General Director. In August 2020, 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. Del Cueto joined KCS de Mexico in 2006 where he served in numerous roles including Director of Mechanical, Director of Transportation, General Superintendent of Transportation and Vice President and General Director.
During his more than 20 years at the Company, Mr. Foran has worked in operations, business development, marketing and general management. Mr.
During his more than 28 years at the Company, Mr. 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.
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.
Brooks holds a Bachelor of Arts in finance from the University of Northern Iowa and a minor in real estate finance and completed the Advanced Management Program at Harvard Business School. 30 / CPKC 2025 ANNUAL REPORT Mark Redd, 55 Executive Vice-President and Chief Operating Officer Mr.
Removed
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.
Added
Brooks brings a breadth of experience to the CMO role that is pivotal to the Company's continued and future success. Mr.
Removed
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.
Added
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. During her nearly 20 year career at the Company, Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed2 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. CPKC 2024 ANNUAL REPORT / 33
Biggest changeThe values for the assumed investments depicted on the graph and in the table have been calculated assuming that any dividends are reinvested. 34 / CPKC 2025 ANNUAL REPORT Issuer Purchase of Equity Securities The Company has established a share repurchase program which is further described in Item 8. Financial Statements and Supplementary Data, Note 21 Shareholders' equity.
Stock Performance Graph The following graph provides an indicator of cumulative total shareholder return on the Common Shares, of an assumed investment of $100, as compared to the TSX 60 Index (“TSX 60”), the Standard & Poor's 500 Stock Index (“S&P 500”), and the peer group index (comprising Canadian National Railway Company, Union Pacific Corporation, Norfolk Southern Corporation and CSX Corporation) on December 31 for each of the years indicated.
Stock Performance Graph The following graph provides an indicator of cumulative total shareholder return on the Common Shares, of an assumed investment of $100, as compared to the TSX 60 Index ("TSX 60"), the Standard & Poor's 500 Stock Index ("S&P 500"), and the peer group index (comprising Canadian National Railway Company, Union Pacific Corporation, Norfolk Southern Corporation and CSX Corporation) on December 31 for each of the years indicated.
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 .
In addition, the Company has a Management Stock Option Incentive Plan ("MSOIP"), under which key officers and employees are granted options to purchase Common S hares. All number of options presented herein are shown on the basis of the number of Common Shares subject to the options.
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.
Share Capital At February 25, 2026, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were 897,958,953 Common Shares issued and outstanding, which consisted of 13,067 holders of record of the Common Shares, and no Preferred Shares issued and outstanding.
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.
At February 25, 2026, 6,109,505 option s were outstanding under the MSOIP and stand-alone option agreements entered into with Mr. Keith Creel. There are 18,951,173 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.
Added
The following table presents the number of Common Shares repurchased during each month of the fourth quarter of 2025 and the average price paid by CPKC for the repurchase of such Common Shares: Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) (1) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) that may yet be purchased under the Plans or Programs Common Stock October 1-31, 2025 3,259,131 $ 108.53 3,259,131 — November 1-30, 2025 — $ — — — December 1-31, 2025 — $ — — — Total 3,259,131 $ 108.53 3,259,131 — (1) Includes brokerage fees and applicable tax on share repurchases.

Item 7. Management's Discussion & Analysis

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

154 edited+26 added−69 removed27 unchanged
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.
Biggest changeKCS purchase accounting recognized in Net income attributable to controlling shareholders as reported on a GAAP basis was as follows: 2025: • during the course of the year, KCS purchase accounting of $391 million ($285 million after deferred income tax recovery of $106 million), including costs of $373 million recognized in "Depreciation and amortization", $3 million recognized in "Purchased services and other" related to the amortization of equity investments, $21 million recognized in "Net interest expense", $1 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 31 cents as follows: – in the fourth quarter, KCS purchase accounting of $109 million ($79 million after deferred income tax recovery of $30 million), including costs of $105 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other", $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 8 cents; – in the third quarter, KCS purchase accounting of $95 million ($69 million after deferred income tax recovery of $26 million), including costs of $90 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other", $6 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 8 cents; – in the second quarter, KCS purchase accounting of $95 million ($70 million after deferred income tax recovery of $25 million), including costs of $91 million recognized in "Depreciation and amortization", $5 million recognized in "Net interest expense", and a recovery of $1 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 7 cents; and – in the first quarter, KCS purchase accounting of $92 million ($67 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", $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. 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", $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; CPKC 2025 ANNUAL REPORT / 51 – 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", $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.
Surface Transportation Board in its March 15, 2023 decision; the successful integration of KCS into the Company; the focus of management time and attention on the CP-KCS transaction and other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction.
Surface Transportation Board in its March 15, 2023 decision; the successful integration of KCS into the Company; the focus of management time and attention on the CP-KCS integration and other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction.
The Company performs depreciation studies of each property asset class approximately every three years to update depreciation rates. The studies are conducted with assistance from third-party specialists and analyzed and reviewed by the Company's management. Depreciation studies for U.S. assets are reviewed and approved by the STB.
The Company performs depreciation studies of each asset class approximately every three years to update depreciation rates. The studies are conducted with assistance from third-party specialists and analyzed and reviewed by the Company's management. Depreciation studies for U.S. assets are reviewed and approved by the STB.
For example, a change in temporary differences of $10 million would result in an approximate deferred income tax change of $3 million. It is assumed that such temporary differences will be settled in the future in the deferred income tax assets and liabilities at the balance sheet date.
For example, a change in temporary differences of $10 million would result in an approximate deferred income tax change of $3 million. It is assumed that such temporary differences will be settled in the future in the deferred income tax assets and liabilities as at the balance sheet date.
Core adjusted combined diluted EPS and Core adjusted combined operating ratio are defined and reconciled in the "Non-GAAP Measures" section of this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Core adjusted diluted EPS and Core adjusted operating ratio are defined and reconciled in the "Non-GAAP Measures" section of this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management believes excluding these significant items from GAAP results provides an additional viewpoint which may give users a consistent understanding of CPKC's financial performance when performing a multi-period assessment including assessing the likelihood of future results. Accordingly, these Non-GAAP financial measures may provide additional insight to investors and other external users of CPKC's financial information.
Management believes excluding these significant items from GAAP results provides an additional viewpoint which may give users a consistent understanding of the Company's financial performance when performing a multi-period assessment including assessing the likelihood of future results. Accordingly, these Non-GAAP financial measures may provide additional insight to investors and other external users of the Company's Financial Information.
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.
This excludes the impact of changes in Common Share price relative to the Standard and Poor's ("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.
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.
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 Part I Item 1.
Expected rates of return for individual asset classes are weighted based on each plan’s target allocation in order to set the expected rate of return assumption. On an aggregate basis, the expected long-term rate of return on plan assets assumption was approximately 6.70 % in 2024 and will continue to be approximately 6.70% in 2025.
Expected rates of return for individual asset classes are weighted based on each plan’s target allocation in order to set the expected rate of return assumption. On an aggregate basis, the expected long-term rate of return on plan assets assumption was approximately 6.70% in 2025 and will continue to be approximately 6.70% in 2026.
Mexican peso-denominated revenues and expenses increase (decrease) when the U.S. dollar weakens (strengthens) in relation to the Mexican peso.
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.
(2) Includes Other (income) expense, Other components of net periodic benefit recovery, and Net interest expense.
(2) Includes Other (income) expense, Other components of net periodic benefit recovery (cost) and Net interest expense.
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.
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, 2025, the net investment in U.S. operations is greater than the total U.S. dollar-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 (loss)".
The debt instruments that are referenced for this purpose are rated at least AA (at least BBB in the case of self-insured workers’ compensation benefits) by a recognized rating agency. The aggregate discount rate across the Company’s pension and other benefits plans was 4.68% as at December 31, 2024, and 4.64% as at December 31, 2023.
The debt instruments that are referenced for this purpose are rated at least AA (at least BBB in the case of self-insured workers’ compensation benefits) by a recognized rating agency. The aggregate discount rate across the Company’s pension and other benefits plans was 4.94% as at December 31, 2025, and 4.68% as at December 31, 2024.
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.
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 Canadian, U.S., Mexican and global social, economic, political, credit and business conditions; risks associated with agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures, including competition from other rail carriers, trucking companies and maritime shippers in Canada, the U.S. and Mexico; North American and global economic growth and conditions; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped by the Company; inflation; geopolitical instability; changes in laws, regulations and government policies, including, without limitation, those relating to regulation of rates, tariffs, import/export, trade, wages, labour and immigration; 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; FX 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 56 / CPKC 2025 ANNUAL REPORT 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 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.
The MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s Consolidated Financial Statements and the related notes in Item 8. Financial Statements and Supplementary Data, and other information in this annual report. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.
The MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s Consolidated Financial Statements and the related notes in Item 8. Financial Statements and Supplementary Data, and other information in this Annual Report on Form 10-K. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.
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 fair value would be estimated using one or 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.
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.
CPKC 2025 ANNUAL REPORT / 47 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.
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
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 2025 ANNUAL REPORT / 57
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.
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 April 14, 2023, 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.
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.
As of the date of filing of this Form 10-K, CPRC had U.S. $13,416 million principal amount of Securities and Exchange Commission ("SEC") - registered debt securities outstanding due through 2115 issued in the U.S. pursuant to a trust indenture, and U.S. $30 million and £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.
Lower fuel prices resulted in a decrease in Total operating expenses of $86 million from 2023. Impact of Share Price on Earnings and Stock-Based Compensation Fluctuations in the Common Share price affect the Company's Operating expense because stock-based compensation liabilities are measured at fair value.
Lower fuel prices resulted in a decrease in Total operating expenses of $159 million from 2024. Impact of Share Price on Earnings and Stock-Based Compensation Fluctuations in the Common Share price affect the Company's Operating expense because stock-based compensation liabilities are measured at fair value.
As described in Part II Item 8 Financial Statements and Supplementary Data, Note 2 Summary of significant accounting policies, and Note 22 Pensions and other benefits, management must make a number of economic and demographic assumptions to calculate the present value of these future benefits.
As described in Item 8 Financial Statements and Supplementary Data, Note 2 Summary of significant accounting policies, and Note 23 Pensions and other benefits, management must make a number of economic and demographic assumptions to calculate the present value of these future benefits.
The Company is not aware of any material trends, events, or uncertainties that would create any deficiencies in the Company's liquidity. As at December 31, 2024, the Company had $739 million of Cash and cash equivalents compared to $464 million at December 31, 2023.
The Company is not aware of any material trends, events, or uncertainties that would create any deficiencies in the Company's liquidity. As at December 31, 2025, the Company had $184 million of Cash and cash equivalents compared to $739 million at December 31, 2024.
These agreements permit the Company to withdraw amounts posted as collateral at any time; therefore, the amounts posted as collateral are presented as “Cash and cash equivalents” on the Company’s Consolidated Balance Sheets.
These agreements permit the Company to withdraw amounts posted as collateral at any time; therefore, the amounts posted as collateral are presented as "Cash and cash equivalents" on the Company’s Consolidated Balance Sheets.
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.
Based on information available at December 31, 2025 and expectations for 2026 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 $1.3 million to $1.9 million.
In addition, changes in the exchange rate between the Canadian dollar and other currencies (including the U.S. dollar and Mexican peso) make the goods transported by the Company more or less competitive in the world marketplace and may in turn positively or negatively affect revenues.
In addition, changes in the FX rates between the Canadian dollar and other currencies (including the U.S. dollar and Mexican peso) make the goods transported by the Company more or less competitive in the world marketplace and may in turn positively or negatively affect the Company's revenues.
The guarantee is CPKC’s unsubordinated and unsecured obligation and ranks equally with all of CPKC’s other unsecured, unsubordinated obligations. CPKC will be released and relieved of its obligations under the guarantees after obligations to the holders are satisfied in accordance with the terms of the respective instruments.
The guarantees are CPKC’s unsubordinated and unsecured obligations and rank equally with all of CPKC’s other unsecured, unsubordinated obligations. CPKC will be released and relieved of its obligations under the guarantees after obligations to the holders are satisfied in accordance with the terms of the respective instruments.
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.
In 2026, 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 $78 million (2025 - approximately $76 million), negatively (or positively) impacts Operating expenses by approximately $45 million (2025 - approximately $43 million), and negatively (or positively) impacts Net interest expense by approximately $6 million (2025 - approximately $6 million) on an annualized basis.
Pensions and Other Benefits The Company sponsors several defined benefit pension plans, and also provides post-retirement health and life insurance benefits, as well as self-insured workers’ compensation benefits in some Canadian provinces.
Pensions and Other Benefits The Company sponsors several defined benefit pension plans, and also provides post-retirement health and life insurance benefits, as well as self-insured workers’ compensation benefits administered through the Workers' Compensation Boards in four Canadian provinces.
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.
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.
CPKC presents Core adjusted combined measures to provide a comparison to prior period financial information as adjusted to exclude certain significant items and KCS purchase accounting.
Non-GAAP Performance Measures CPKC presents Core adjusted measures to provide a comparison to prior period financial information as adjusted to exclude certain significant items and KCS purchase accounting.
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.
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 on Form 10-K. Pursuant to Rules 3-01 and 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.
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.
CPKC 2025 ANNUAL REPORT / 43 In 2026, 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 (2025 - approximately $6 million) and negatively (or positively) impacts Operating expenses by approximately $8 million (2025 - approximately $6 million) on an annualized basis.
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.
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, environmental remediation, property taxes, contractor and consulting fees, and insurance premiums.
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.
Impact of FX on Earnings and FX Risk Although the Company is headquartered in Canada and reports in Canadian dollars, a significant amount of its revenues, expenses, assets and liabilities, including debt, are denominated in U.S. dollars and Mexican pesos ("Ps.").
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.
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 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 48 Critical Accounting Estimates 52 Forward-Looking Statements 55 36 / CPKC 2025 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.
As at December 31, 2024, the Company had total commercial paper borrowings outstanding of U.S. $1,102 million ($1,586 million) (December 31, 2023 - U.S. $800 million ($1,058 million)). The Company has bilateral letter of credit facilities with six financial institutions to support its requirement to post letters of credit in the ordinary course of business.
As at December 31, 2025, the Company had total commercial paper borrowings outstanding of U.S. $850 million ($1,165 million) (December 31, 2024 - U.S. $1,102 million ($1,586 million)). The Company has bilateral letter of credit facilities with six highly rated financial institutions to support its requirement to post letters of credit in the ordinary course of business.
As at December 31, 2024, the Company ha d U .S. $200 million ($288 million) dr awn on the two-year U.S. $1.1 billion tranche of its revolving credit facility (December 31, 2023 - undrawn) and was undrawn on the five-year U.S. $1.1 billion tranche (December 31, 2023 - undrawn).
As at December 31, 2025, the Company was undrawn on the two-year U.S. $1.1 billion tranche of its revolving credit facility (December 31, 2024 - U.S. $200 million ( $288 million) ) and was undrawn on the five-year U.S. $1.1 billion tranche (December 31, 2024 - undrawn).
All provisions are subject to change as new information becomes known and claims progress through resolution. Deferred Income Taxes The Company accounts for deferred income taxes based on the asset and liability method.
The recognition and measurement of provisions for contingent liabilities are subject to change as new information becomes known and claims progress through resolution. Deferred Income Taxes The Company accounts for deferred income taxes based on the asset and liability method.
The increase in Compensation and benefits expense was primarily due to: • the impact of the KCS acquisition of $243 million; • the impact of wage and benefit inflation; and • increased volume variable expense as a result of an increase in workload as measured by GTMs.
The increase in Compensation and benefits expense was primarily due to the impact of wage and benefit inflation and increased volume variable expenses as a result of increased workload as measured by GTMs.
The increase in freight revenue per RTM was primarily due to higher freight rates and the favourable impact of the change in foreign exchange ("FX") of $94 million, partially offset by the unfavourable impact of lower fuel prices on fuel surcharge revenues of $184 million.
Freight revenue per RTM was flat primarily due to higher freight rates and the favourable impact of the change in foreign exchange ("FX") rates of $154 million, offset by the unfavourable impact of lower fuel prices on fuel surcharge revenues of $205 million.
The Company's Common Shares are listed on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") with ticker symbol "CP". In 2024, the change in the Company's Common Share price resulted in a stock-based compensation expense recovery of $13 million, a variance of $17 million from $4 million expense in 2023.
The Company's Common Shares are listed on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") with ticker symbol "CP". In 2025, the change in the Company's Common Share price resulted in a stock-based compensation expense recovery of $5 million, a decrease of $8 million from $13 million recovery in 2024.
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").
CPKC 2025 ANNUAL REPORT / 55 Forward-Looking Statements This Management's Discussion and Analysis of Financial Condition and Results of Operations and Annual Report on Form 10-K contains 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").
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.
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. Financial Statements and Supplementary Data, Note 7 Income taxes.
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.
In conjunction with other Non-GAAP measures, 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 KCS purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting.
The other subsidiaries of CPRC do not guarantee the securities and are referred to below as the “Non-Guarantor Subsidiaries”.
The subsidiaries of CPRC do not guarantee the securities and are referred to below as the "Non-Guarantor Subsidiaries".
This increase was partially offset by a decrease in freight revenue per RTM, lower domestic intermodal volumes between Mexico and Texas, and lower international intermodal volumes to and from the Port of Montréal. Freight revenue per RTM decreased due to the unfavourable impact of lower fuel prices on fuel surcharge revenue.
This increase was partially offset by a decrease in freight revenue per RTM and lower international intermodal volumes to and from the Port of Montréal. Freight revenue per RTM decreased due to lower fuel surcharge revenue.
When qualitative assessments suggest that the fair value of the Company’s reporting unit is more likely than not to be lower than its carrying amount, the Company performs a quantitative impairment test. Measurement of the fair value of a reporting unit requires the use of estimates and assumptions.
When qualitative assessments indicate that the fair value of the Company’s reporting unit is more likely than not lower than its carrying amount, or the carrying value of an intangible asset is not recoverable, the Company performs a quantitative impairment test. Measurement of the fair value of the reporting unit or intangible asset requires the use of estimates and assumptions.
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.
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: changes in business strategies; North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; FX rates (as specified herein); core adjusted 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, including, without limitation, those relating to regulation of rates, tariffs, import/export, trade, taxes, wages, labour and immigration; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to the Company; and carbon markets, evolving sustainability strategies, and scientific or technological developments.
The increase in Depreciation and amortization expense was primarily due to: • the impact of the KCS acquisition of $255 million; • a higher depreciable asset base as a result of capital program spending in 2024 and 2023; and • the unfavourable impact of the change in FX of $13 million.
The increase in Depreciation and amortization expense was primarily due to a higher depreciable asset base as a result of capital program spending in 2025 and 2024, and the unfavourable impact of the change in FX rates of $22 million.
Business, Operations, Fuel Cost Adjustment Program and Item 1A. Risk Factors, “The Company is affected by fluctuating fuel prices” . The impact of fuel price on earnings includes the impacts of carbon taxes, levies, and obligations under cap-and-trade programs recovered and paid, on revenues and expenses, respectively.
Business, Operations, Fuel Cost Adjustment Program and Item 1A. Risk Factors, "The Company is affected by fluctuating fuel prices". The impact of fuel price on earnings includes the impacts of carbon taxes, levies, and obligations under cap-and-trade programs recovered and paid, on revenues and expenses, respectively. In 2025, the unfavourable impact of fuel prices on "Operating income" was $46 million.
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.
Statement of Income Information CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) For the year ended December 31 (in millions of Canadian dollars) 2025 2024 Total revenues $ 7,184 $ 6,877 Total operating expenses 4,398 4,300 Operating income (1) 2,786 2,577 Less: Other (2) 360 516 Income before income tax expense 2,426 2,061 Net income $ 1,803 $ 1,496 (1) Includes net lease costs incurred from Non-Guarantor Subsidiaries for the years ended December 31, 2025, and 2024 of $441 million and $462 million, respectively.
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.
This increase was partially offset by lower volumes of crude, plastics, diluents, and fuel oil and lower fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX rates.
The increase in Materials expense was primarily due to the impact of the KCS acquisition of $33 million and higher locomotive material costs due to a new parts agreement insourcing a subset of maintenance work with favorable offset in purchased services and other effective in the fourth quarter of 2024.
The increase in Materials expense was primarily due to: • higher locomotive material costs primarily due to a new parts agreement insourcing a subset of maintenance work with a favourable offset in "Purchased services and other" effective in the fourth quarter of 2024; • higher freight car maintenance; and • increased safety material costs.
Depreciation and Amortization Depreciation and amortization expense is the charge associated with the use of track and roadway, rolling stock, buildings, and other depreciable assets, including assets related to a concession granted by the Mexican government, as well as amortization of finite life intangible assets.
Depreciation and Amortization Depreciation and amortization expense is the charge associated with the use of track and roadway, rolling stock, buildings, and other depreciable assets, including assets related to the Company's concession granted by the Mexican government (see further discussion on the Concession in the "Liquidity and Capital Resources" section), as well as amortization of finite life intangible assets.
It includes interest cost on benefit obligation, expected return on plan assets, recognized net actuarial loss, and amortization of prior service costs. Other components of net periodic benefit recovery was $352 million in 2024, an increase of $25 million, or 8%, from $327 million in 2023.
It includes interest cost on benefit obligation, expected return on plan assets, recognized net actuarial loss, effects of special termination benefits, and amortization of prior service costs. Other components of net periodic benefit recovery was $415 million in 2025, an increase of $63 million, or 18%, from $352 million in 2024.
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.
Performance Indicators For the year ended December 31 2025 2024 % Change Gross ton-miles ("GTMs") (millions) 403,891 388,958 4 Train miles (thousands) 47,170 46,892 1 Fuel efficiency (U.S. gallons of locomotive fuel consumed /1,000 GTMs) 1.034 1.033 — Total employees (average) 19,967 20,144 (1) 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.
The amendment also extended the maturity date of the two-year U.S. $1.1 billion tranche from May 11, 2025 to June 25, 2026.
The amendment extended the maturity date of the five-year U.S. $1.1 billion tranche from June 25, 2029 to June 25, 2030. The amendment also extended the maturity date of the two-year U.S. $1.1 billion tranche from June 25, 2026 to June 25, 2027.
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.
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 or past financial trends either by nature or amount.
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.
This Non-GAAP measure does not have a standardized meaning and is 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. Significant items and KCS purchase accounting are discussed further in Item 7.
In 2024, the U.S. dollar strengthened to an average rate of $1.37 Canadian/U.S. dollar and the Mexican Peso weakened to an average rate of Ps.13.32 Mexican Peso/Canadian dollar, compared to $1.35 Canadian/U.S. dollar and Ps.13.12 Mexican Peso/Canadian dollar in 2023, resulting in an increase in Total revenues of $95 million, an increase in Total operating expenses of $48 million, and an increase in Net interest expense of $11 million.
In 2025, the U.S. dollar strengthened to an average exchange rate of $1.40 Canadian/U.S. dollar and the Mexican Peso weakened to an average exchange rate of Ps.13.73 Mexican Peso/Canadian dollar, compared to $1.37 Canadian/U.S. dollar and Ps.13.32 Mexican Peso/Canadian dollar in 2024, resulting in an increase in Total revenues of $157 million, an increase in Total operating expenses of $75 million, and an increase in Net interest expense of $16 million.
(in millions of Canadian dollars) Projected benefit obligation as at December 31, 2024 Estimated 2025 Current service cost Estimated 2025 Other components of net periodic benefit (recovery) cost 0.1% increase in discount rate (119) (3) (5) 0.1% decrease in discount rate 123 3 5 0.1% increase in expected return on plan assets N/A N/A (14) 0.1% decrease in expected return on plan assets N/A N/A 14 Properties The Company follows the group depreciation method under which a single depreciation rate is applied to the total cost in a particular class of property, despite differences in the service life or salvage value of individual properties within the same class.
(in millions of Canadian dollars) Projected benefit obligation as at December 31, 2025 Estimated 2026 Current service cost Estimated 2026 Other components of net periodic benefit (recovery) cost 0.1% increase in discount rate (111) (3) 1 0.1% decrease in discount rate 113 3 4 0.1% increase in expected return on plan assets N/A N/A (14) 0.1% decrease in expected return on plan assets N/A N/A 14 Properties The Company follows the group depreciation method under which a single depreciation rate is applied to the total cost in a particular class of property ("asset class"), reflecting the weighted-average whole service or remaining useful lives and average estimated salvage values of properties within the same asset class.
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.
As of the same date, CPRC also had $3,700 million principal amount of debt securities outstanding due through 2055 issued in Canada for which CPKC is the guarantor and not subject to the Exchange Act.
These include the following: Key Assumptions Assessments • Whole and remaining asset lives • Statistical analysis of historical retirement patterns; • Evaluation of management strategy and its impact on operations and the future use of specific property assets; • Assessment of technological advances; • Engineering estimates of changes in current operations and analysis of historic, current, and projected future usage; • Additional factors considered for track assets: density of traffic and whether rail is new or has been re-laid in a subsequent position; • Assessment of policies and practices for the management of assets including maintenance; and • Comparison with industry data. • Salvage values • Analysis of historical, current, and estimated future salvage values.
In determining appropriate depreciation rates, management is required to make estimates, assumptions, and judgements about a variety of key factors that are subject to future variability due to inherent uncertainties: Key Assumptions Assessments Whole service and remaining useful lives • Statistical analysis of historical retirement patterns; • Evaluation of management strategy and its impact on operations and the future use of specific property assets; • Assessment of technological advances; • Engineering estimates of changes in current operations and analysis of historic, current, and projected future usage; • Additional factors considered for track assets: density of traffic and whether rail is new or has been re-laid in a subsequent position; • Assessment of policies and practices for the management of assets including maintenance; and • Comparison with industry data.
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.
This increase was partially offset by lower volumes of Canadian coal to Thunder Bay and l ower fuel surcharge revenue. Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX rates. Carloads increased more than RTMs due to moving higher volumes of U.S. coal within the U.S.
In 2024, there were three 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 deferred income tax recovery of $81 million on account of changes in tax rates, that favourably impacted Diluted EPS by 9 cents as follows: – in the fourth quarter, a deferred income tax recovery of $78 million due to a decrease in the Louisiana state corporate income tax rate, that favourably impacted Diluted EPS by 9 cents; and – in the second quarter, a deferred income tax recovery of $3 million due to a decrease in the Arkansas state corporate income tax rate, that had minimal impact on Diluted EPS; • during the course of the year, adjustments to provisions and settlements of Mexican taxes of $4 million recovery ($2 million after deferred income tax expense of $2 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS as follows: – in the fourth quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery ($6 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS; – in the third quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery ($6 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that favourably impacted Diluted EPS by 1 cent; and – in the first quarter, adjustments to provisions and settlements of Mexican taxes of $10 million expense ($10 million after deferred income tax recovery) recognized in "Compensation and benefits", that unfavourably impacted Diluted EPS by 1 cent; and CPKC 2024 ANNUAL REPORT / 49 • during the course of the year, acquisition-related costs of $112 million in connection with the KCS acquisition ($82 million after current income tax recovery of $30 million), including an expense of $18 million recognized in "Compensation and benefits", $6 million recognized in "Materials", and $88 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 9 cents as follows: – in the fourth quarter, acquisition-related costs of $22 million in connection with the KCS acquisition ($17 million after current income tax recovery of $5 million) including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the third quarter, acquisition-related costs of $36 million in connection with the KCS acquisition ($26 million after current income tax recovery of $10 million) including costs of $11 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 3 cents; – in the second quarter, acquisition-related costs of $28 million in connection with the KCS acquisition ($19 million after current income tax recovery of $9 million) including costs of $2 million recognized in "Compensation and benefits", $2 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; and – in the first quarter, acquisition-related costs of $26 million in connection with the KCS acquisition ($20 million after current income tax recovery of $6 million) including costs of $4 million recognized in "Compensation and benefits", $2 million recognized in "Materials", and $20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents.
Significant items recognized in Net income attributable to controlling shareholders as reported on a GAAP basis were as follows: 2025: • during the course of the year, a gain on sale of an equity investment of $333 million ($256 million after current income tax expense of $102 million net of deferred income tax recovery of $25 million) recognized in "Gain on sale of equity investment", that favourably impacted Diluted EPS by 27 cents as follows: – in the fourth quarter, a current tax expense of $26 million recognized in "Current income tax expense" due to the finalization of the related tax provision, that unfavourably impacted Diluted EPS by 3 cents; – in the second quarter, a gain on sale of an equity investment of $333 million ($282 million after current income tax expense of $76 million net of deferred income tax recovery of $25 million) recognized in "Gain on sale of equity investment", that favourably impacted Diluted EPS by 30 cents; • during the course of the year, acquisition-related costs of $72 million in connection with the KCS acquisition ($56 million after current income tax recovery of $16 million), including an expense of $11 million recognized in "Compensation and benefits" primarily related to synergy related incentive compensation and restructuring costs, $1 million recognized in "Materials", $51 million recognized in "Purchased services and other" primarily related to system migration, legal fees, and other third party purchased services, and $9 million recognized in "Other components of net period benefit recovery" related to special termination benefit costs, that unfavourably impacted Diluted EPS by 6 cents as follows: – in the fourth quarter, acquisition-related costs of $20 million ($17 million after current income tax recovery of $3 million) including a recovery of $5 million recognized in "Compensation and benefits", $16 million recognized in "Purchased services and other", and $9 million recognized in "Other components of net period benefit recovery", that unfavourably impacted Diluted EPS by 2 cents; – in the third quarter, acquisition-related costs of $13 million ($10 million after current income tax recovery of $3 million) including costs of $4 million recognized in "Compensation and benefits", and $9 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 1 cent; – in the second quarter, acquisition-related costs of $19 million ($14 million after current income tax recovery of $5 million) including costs of $7 million recognized in "Compensation and benefits", and $12 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; and – in the first quarter, acquisition-related costs of $20 million ($15 million after current income tax recovery of $5 million) including costs of $5 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $14 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents. 2024: • during the course of the year, a deferred income tax recovery of $81 million on account of changes in tax rates, that favourably impacted Diluted EPS by 9 cents as follows: – in the fourth quarter, a deferred income tax recovery of $78 million due to a decrease in the Louisiana state corporate income tax rate, that favourably impacted Diluted EPS by 9 cents; – in the second quarter, a deferred income tax recovery of $3 million due to a decrease in the Arkansas state corporate income tax rate, that had minimal impact on Diluted EPS; • during the course of the year, adjustments to provisions and settlements of Mexican taxes of $4 million recovery ($2 million after deferred income tax expense of $2 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS as follows: – in the fourth quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery ($6 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that had minimal impact on Diluted EPS; – in the third quarter, adjustments to provisions and settlements of Mexican taxes of $7 million recovery ($6 million after deferred income tax expense of $1 million) recognized in "Compensation and benefits", that favourably impacted Diluted EPS by 1 cent; – in the first quarter, adjustments to provisions and settlements of Mexican taxes of $10 million expense ($10 million after deferred income tax recovery) recognized in "Compensation and benefits", that unfavourably impacted Diluted EPS by 1 cent; 50 / CPKC 2025 ANNUAL REPORT • during the course of the year, acquisition-related costs of $112 million in connection with the KCS acquisition ($82 million after current income tax recovery of $30 million), including an expense of $18 million recognized in "Compensation and benefits" primarily related to retention and synergy related incentive compensation costs, $6 million recognized in "Materials", and $88 million recognized in "Purchased services and other" primarily related to system migration, relocation expenses, legal and consulting fees, that unfavourably impacted Diluted EPS by 9 cents as follows: – in the fourth quarter, acquisition-related costs of $22 million ($17 million after current income tax recovery of $5 million) including costs of $1 million recognized in "Compensation and benefits", $1 million recognized in "Materials", and $20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; – in the third quarter, acquisition-related costs of $36 million ($26 million after current income tax recovery of $10 million) including costs of $11 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 3 cents; – in the second quarter, acquisition-related costs of $28 million ($19 million after current income tax recovery of $9 million) including costs of $2 million recognized in "Compensation and benefits", $2 million recognized in "Materials", and $24 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents; and – in the first quarter, acquisition-related costs of $26 million ($20 million after current income tax recovery of $6 million) including costs of $4 million recognized in "Compensation and benefits", $2 million recognized in "Materials", and $20 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents.
The estimated useful lives of properties have a direct impact on the amount of depreciation recorded as a component of "Properties" on the Company’s Consolidated Balance Sheets.
The estimated lives of properties have a direct impact on the amount of depreciation recognized as a component of "Properties" on the Company’s Consolidated Balance Sheets and as a component of "Operating expenses" on the Company's Consolidated Statements of Income.
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.
Other Income Statement Items Other (Income) Expense Other (income) expense consists of gains and losses from the change in FX rates on cash and working capital, the impact of foreign currency forwards, financing costs, shareholder costs, equity earnings, and other non-operating expenditures.
In addition, Core adjusted combined operating ratio and Core adjusted combined diluted EPS exclude KCS purchase accounting.
CPKC 2025 ANNUAL REPORT / 49 In addition, Core adjusted operating ratio and Core adjusted diluted EPS exclude KCS purchase accounting.
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 following table shows the ratings issued for the Company by the rating agencies noted as at December 31, 2025 and is being presented as it relates to the Company’s cost of funds and liquidity: Credit ratings as at December 31, 2025 (1) Long-term debt Outlook Standard & Poor's BBB+ positive Moody's Baa1 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.
Net Periodic Benefit (Recovery) Cost The following table shows, on an aggregate basis for the defined benefit pension and other benefits plans, the Company’s estimate of 2025 net periodic benefit (recovery) cost compared to actual amounts for 2024. 56 / CPKC 2024 ANNUAL REPORT For the year ended December 31 (in millions of Canadian dollars) 2025 (estimated) 2024 Current service cost $ 98 $ 97 Other components of net periodic benefit (recovery) cost (428) (352) Net periodic benefit (recovery) cost $ (330) $ (255) Sensitivities The following table illustrates the impact of changes to the discount rate and expected rate of return on plan assets assumptions on the projected benefit obligations as at December 31, 2024 and on the 2025 estimated net periodic benefit (recovery) cost of the defined benefit pension and other benefits plans.
For the year ended December 31 (in millions of Canadian dollars) 2026 (estimated) 2025 Current service cost $ 89 $ 98 Other components of net periodic benefit recovery (441) (415) Net periodic benefit recovery $ (352) $ (317) Sensitivities The following table illustrates the impact of changes to the discount rate and expected rate of return on plan assets assumptions on the projected benefit obligations as at December 31, 2025 and on the 2026 estimated net periodic benefit recovery of the defined benefit pension and other benefits plans.
Outstanding obligations related to debt and leases can be found in Item 8. Financial Statements and Supplementary Data, Note 16 Debt and Note 19 Leases. Interest obligations related to debt and finance leases amount to $783 million within the next 12 months, with the remaining amount committed thereafter of $17,054 million.
Financial Statements and Supplementary Data, Note 17 Debt and Note 20 Leases. Interest obligations related to debt and finance leases amount to $889 million within the next 12 months, with the remaining amount committed thereafter of $16,818 million.
The presentation of these Non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP.
These Non-GAAP measures have no standardized meanings and are not defined by GAAP and, therefore, may not be comparable to similar measures presented by other companies. The presentation of these Non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP.
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.
Intermodal For the year ended December 31 2025 2024 Total Change % Change Freight revenues (in millions) $ 2,679 $ 2,524 $ 155 6 Carloads (in thousands) 1,780.6 1,642.9 137.7 8 Revenue ton-miles (in millions) 38,473 35,218 3,255 9 Freight revenue per carload (in dollars) $ 1,505 $ 1,536 $ (31) (2) Freight revenue per revenue ton-mile (in cents) 6.96 7.17 (0.21) (3) The increase in Intermodal revenue was primarily due to higher international intermodal volumes to and from the Port of Vancouver and the Port of Saint John, including with the new Gemini Cooperation shipping alliance, higher domestic intermodal wholesale and retail volumes, higher freight rates, and the favourable impact of the change in FX rates.
Additionally, the U.S.-to-Canadian dollar exchange rate is unpredictable and can have a significant impact on CPKC’s reported results but may be excluded from CPKC’s Non-GAAP financial measures.
These or other similar large unforeseen transactions affect CPKC's results on a GAAP basis but may be excluded from CPKC’s Non-GAAP financial measures. Additionally, the U.S. dollar and Mexican peso exchange rates relative to the Canadian dollar are unpredictable and can have a significant impact on CPKC’s reported results but may be excluded from CPKC’s Non-GAAP financial measures.
In determining if events or circumstances indicate the carrying value of the reporting unit exceeds its fair value, the Company considers relevant events and conditions, including, but not limited to: • macroeconomic trends; • industry and market conditions; • overall financial performance; • company-specific events; and • legal and regulatory factors.
The Company considers relevant events and circumstances including, but not limited to: • macroeconomic trends; • industry and market conditions; • the Company’s overall financial performance; • Company-specific events; and • legal and regulatory factors.
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.
Freight revenue per RTM increased due to higher freight rates and the favourable impact of the change in FX rates.
Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures Core Adjusted Combined Diluted Earnings per Share Core adjusted combined diluted EPS is calculated using Diluted EPS reported on a GAAP basis adjusted for significant items less KCS purchase accounting.
Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures The following tables reconciles the most directly comparable measures presented in accordance with GAAP to the Non-GAAP measures: Core Adjusted Diluted EPS Core adjusted diluted EPS is calculated using Diluted EPS reported on a GAAP basis adjusted for significant items less KCS purchase accounting.
If the Company’s credit ratings were to decline to below investment-grade levels, the Company could experience a significant increase in its interest cost for new debt along with a negative effect on its ability to readily issue new debt.
If the Company’s credit ratings were to decline to below investment-grade levels, the Company could experience a significant increase in its interest cost for new debt along with a negative effect on its ability to readily issue new debt. 46 / CPKC 2025 ANNUAL REPORT Credit ratings and outlooks are based on the rating agencies’ methodologies and can change from time to time to reflect their views of the Company.
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".
Core Adjusted Operating Ratio Core adjusted operating ratio is calculated from reported GAAP revenue and operating expenses adjusted for where applicable, (1) significant items (acquisition-related costs) that are reported within Operating income, and (2) KCS purchase accounting recognized in "Depreciation and amortization" and "Purchased services and other".

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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 changeFair 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.
Biggest changeFair 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.
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.
As at December 31, 2025, 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.
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).
A hypothetical one percentage point decrease in interest rates as at December 31, 2025 would increase the fair value of the Company's debt as at December 31, 2025 by approximately $1.8 billion (December 31, 2024 - approximately $1.7 billion).
Added
Financial Statements and Supplementary Data, Note 18 Financial instruments. 58 / CPKC 2025 ANNUAL REPORT