CALGARY, AB, April 24, 2024 /CNW/ - Canadian Pacific Kansas City (TSX:CP) (NYSE:CP) (CPKC) today announced its first-quarter results, including revenues of $3.5 billion, diluted earnings per share (EPS) of $0.83 and core adjusted combined diluted EPS1, 2 of $0.93. "One year into our historic combination, I am proud of what our dedicated family of railroaders has accomplished as we deliver on the benefits of our unrivalled network – spurring competition, increasing safety and connecting more markets for our customers," said Keith Creel, CPKC President and Chief Executive Officer. "Today's results show the success of our efforts to drive growth as the only railway connecting Canada, the United States and Mexico." First-quarter 2024 results1 Reported operating ratio (OR) increased by 400 basis points to 67.4 percent from 63.4 percent in Q1 2023 Core adjusted combined OR2 increased 50 basis points to 64.0 percent from 63.5 percent in Q1 2023 Reported diluted EPS decreased to $0.83 from $0.86 in Q1 2023 Core adjusted combined diluted EPS2 increased three percent to $0.93 from $0.90 in Q1 2023 Volumes, as measured in Revenue Ton-Miles3 (RTMs), increased one percent on a combined basis Federal Railroad Administration (FRA)-reportable train accident frequency increased to 0.89 from 0.71 in Q1 2023 on a combined basis4 FRA-reportable personal injury frequency increased to 1.15 from 1.12 in Q1 2023 on a combined basis4 "We exited last year with strong momentum and our performance in the first quarter, combined with an improving demand environment, has us well positioned to deliver on our 2024 guidance," Creel added. "As we enter the second year of our forever story, we are focused on safely executing on the unique and undeniable opportunities this franchise creates and delivering long-term value for our employees, customers and shareholders." 1   The results of Kansas City Southern (KCS) are included on a consolidated basis from April 14, 2023, the date we acquired control. From December 14, 2021 to April 13, 2023, we recorded our interest in KCS under the equity method of accounting. 2    These measures have no standardized meanings prescribed 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. For information regarding non-GAAP measures including reconciliations, see attached supplementary schedule of Non-GAAP Measures. 3    These operating statistics represent combined operating information to illustrate the estimated effects of the acquisition for the first quarter ended March 31, 2023, as if the acquisition closed on January 1, 2022. For the three months ended March 31, 2024, KCS was consolidated. 4    FRA statistics for Q1 2023 reflect Canadian Pacific (CP) and KCS results on a combined basis. In the first-quarter of 2023, CP standalone reported FRA personal injury frequency of 1.21 and FRA-reportable train accident frequency of 0.98. The first-quarter 2023 FRA-reportable personal injury frequency on a combined basis was previously reported as 1.15. This restatement reflects new information available within a specified period as stipulated by the FRA but that exceeds CPKC's financial reporting timeline. Conference Call DetailsCPKC will discuss its results with the financial community in a conference call beginning at 9:45 a.m. ET (7:45 a.m. MT) on April 24, 2024. Conference Call AccessCanada and U.S.: 800-225-9448International: 203-518-9708*Conference ID: CPKCQ124Callers should dial in 10 minutes prior to the call.   Webcast We encourage you to access the webcast and presentation material in the Investors section of CPKC's website at investor.cpkcr.com. A replay of the first-quarter conference call will be available through May 1, 2024, at 800-839-8705 (Canada/U.S.) or 402-220-6075 (International).  Forward looking informationThis news release contains certain forward-looking information and forward-looking statements (collectively, "forward-looking information") within the meaning of applicable securities laws in both the U.S. and Canada. Forward-looking information includes, but is not limited to, statements concerning expectations, beliefs, plans, goals, objectives, assumptions and statements about possible future events, conditions, and results of operations or performance. Forward-looking information may contain statements with words or headings such as "financial expectations", "key assumptions", "anticipate", "believe", "expect", "plan", "will", "outlook", "guidance", "should" or similar words suggesting future outcomes. This news release contains forward-looking information relating, but not limited, to statements concerning our ability to deliver on our financial guidance for 2024, the success of our business, the realization of anticipated benefits and synergies of the CP-KCS combination, and the opportunities arising therefrom, our operations, priorities and plans, business prospects and demand for our services and growth opportunities. The forward-looking information that may be in this news release is based on current expectations, estimates, projections and assumptions, having regard to CPKC's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: changes in business strategies, North American and global economic growth and conditions; commodity demand growth; sustainable industrial and agricultural production; commodity prices and interest rates; performance of our assets and equipment; sufficiency of our budgeted capital expenditures in carrying out our business plan; geopolitical conditions, applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; labour disruptions; the satisfaction by third parties of their obligations to CPKC; and carbon markets, evolving sustainability strategies, and scientific or technological developments. Although CPKC believes the expectations, estimates, projections and assumptions reflected in the forward-looking information presented herein are reasonable as of the date hereof, there can be no assurance that they will prove to be correct. Current conditions, economic and otherwise, render assumptions, although reasonable when made, subject to greater uncertainty. Undue reliance should not be placed on forward-looking information as actual results may differ materially from those expressed or implied by forward-looking information. By its nature, CPKC's forward-looking information involves inherent risks and uncertainties that could cause actual results to differ materially from the forward looking information, including, but not limited to, the following factors: changes in business strategies and strategic opportunities; general Canadian, U.S., Mexican and global social, economic, political, credit and business conditions; risks associated with agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures, including competition from other rail carriers, trucking companies and maritime shippers in Canada, the U.S. and Mexico; North American and global economic growth and conditions; industry capacity; shifts in market demand; changes in commodity prices and commodity demand; uncertainty surrounding timing and volumes of commodities being shipped via CPKC; inflation; geopolitical instability; changes in laws, regulations and government policies, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; changes in fuel prices; disruption in fuel supplies; uncertainties of investigations, proceedings or other types of claims and litigation; compliance with environmental regulations; labour disputes; changes in labour costs and labour difficulties; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; sufficiency of budgeted capital expenditures in carrying out business plans; services and infrastructure; the satisfaction by third parties of their obligations; currency and interest rate fluctuations; exchange rates; effects of changes in market conditions and discount rates on the financial position of pension plans and investments; trade restrictions or other changes to international trade arrangements; the effects of current and future multinational trade agreements on the level of trade among Canada, the U.S. and Mexico; climate change and the market and regulatory responses to climate change; anticipated in-service dates; success of hedging activities; operational performance and reliability; customer, regulatory and other stakeholder approvals and support; regulatory and legislative decisions and actions; the adverse impact of any termination or revocation by the Mexican government of Kansas City Southern de México, S.A. de C.V.'s Concession; public opinion; various events that could disrupt operations, including severe weather, such as droughts, floods, avalanches and earthquakes, and cybersecurity attacks, as well as security threats and governmental response to them, and technological changes; acts of terrorism, war or other acts of violence or crime or risk of such activities; insurance coverage limitations; material adverse changes in economic and industry conditions, including the availability of short and long-term financing; the demand environment for logistics requirements and energy prices, restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions, and disruptions to global supply chains; the realization of anticipated benefits and synergies of the CP-KCS transaction and the timing thereof; the satisfaction of the conditions imposed by the U.S. Surface Transportation Board in its March 15, 2023 final decision; the success of integration plans for KCS; other disruptions arising from the CP-KCS integration; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favourable terms or at all; cost of debt and equity capital; improvement in data collection and measuring systems; industry-driven changes to methodologies; and the ability of the management of CPKC to execute key priorities, including those in connection with the CP-KCS transaction. The foregoing list of factors is not exhaustive. These and other factors are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States. Reference should be made to "Item 1A – Risk Factors" and "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements" in CPKC's annual and interim reports on Form 10-K and 10-Q. Any forward-looking information contained in this news release is made as of the date hereof. Except as required by law, CPKC undertakes no obligation to update publicly or otherwise revise any forward-looking information, or the foregoing assumptions and risks affecting such forward-looking information, whether as a result of new information, future events or otherwise. About CPKCWith its global headquarters in Calgary, Alta., Canada, CPKC is the first and only single-line transnational railway linking Canada, the United States and México, with unrivaled access to major ports from Vancouver to Atlantic Canada to the Gulf of México to Lázaro Cárdenas, México. Stretching approximately 20,000 route miles and employing 20,000 railroaders, CPKC provides North American customers unparalleled rail service and network reach to key markets across the continent. CPKC is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpkcr.com to learn more about the rail advantages of CPKC. CP-IR FINANCIAL STATEMENTS INTERIM CONSOLIDATED STATEMENTS OF INCOME(unaudited) For the three monthsended March 31 (in millions of Canadian dollars, except share and per share data) 2024 2023 Revenues (Note 3) Freight $           3,427 $           2,217 Non-freight 93 49 Total revenues 3,520 2,266 Operating expenses Compensation and benefits (Note 8) 690 438 Fuel 458 326 Materials (Note 8) 94 72 Equipment rents 82 30 Depreciation and amortization (Note 8) 467 225 Purchased services and other (Note 8) 580 346 Total operating expenses 2,371 1,437 Operating income 1,149 829 Less: Equity earnings of Kansas City Southern (Note 8, 9) — (204) Other (income) expense (Note 8) (2) 2 Other components of net periodic benefit recovery (Note 12) (88) (86) Net interest expense (Note 8) 206 154 Income before income tax expense 1,033 963 Less: Current income tax expense (Note 4) 242 139 Deferred income tax expense (Note 4) 17 24 Income tax expense (Note 4) 259 163 Net income $              774 $              800 Less: Net loss attributable to non-controlling interest (Note 8) (1) — Net income attributable to controlling shareholders $              775 $              800 Earnings per share (Note 5) Basic earnings per share $             0.83 $             0.86 Diluted earnings per share $             0.83 $             0.86 Weighted-average number of shares (millions) (Note 5) Basic 932.4 930.7 Diluted 934.4 933.5 Dividends declared per share $             0.19 $             0.19 See Notes to Interim Consolidated Financial Statements.   INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(unaudited) For the three monthsended March 31 (in millions of Canadian dollars) 2024 2023 Net income $            774 $            800 Net gain (loss) in foreign currency translation adjustments, net of hedging activities 699 (27) Change in derivatives designated as cash flow hedges 1 2 Change in pension and post-retirement defined benefit plans 12 8 Other comprehensive income from equity investees — 3 Other comprehensive income (loss) before income taxes 712 (14) Income tax recovery (expense) 6 (3) Other comprehensive income (loss) (Note 6) 718 (17) Comprehensive income $        1,492 $            783 Comprehensive income attributable to non-controlling interest 22 — Comprehensive income attributable to controlling shareholders $        1,470 $            783 See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED BALANCE SHEETS AS AT(unaudited) March 31 December 31 (in millions of Canadian dollars) 2024 2023 Assets Current assets Cash and cash equivalents $                    519 $                    464 Accounts receivable, net (Note 7) 1,943 1,887 Materials and supplies 399 400 Other current assets 285 251 3,146 3,002 Investments 561 533 Properties 52,693 51,744 Goodwill (Note 8) 18,228 17,729 Intangible assets 3,026 2,974 Pension asset 3,427 3,338 Other assets 587 582 Total assets $               81,668 $               79,902 Liabilities and equity Current liabilities Accounts payable and accrued liabilities $                 2,525 $                 2,567 Long-term debt maturing within one year (Note 10, 11) 3,899 3,143 6,424 5,710 Pension and other benefit liabilities 583 581 Other long-term liabilities 832 797 Long-term debt (Note 10, 11) 18,829 19,351 Deferred income taxes 11,239 11,052 Total liabilities 37,907 37,491 Shareholders' equity Share capital 25,629 25,602 Additional paid-in capital 95 88 Accumulated other comprehensive income (loss) (Note 6) 77 (618) Retained earnings 17,018 16,420 42,819 41,492 Non-controlling interest 942 919 Total equity 43,761 42,411 Total liabilities and equity $               81,668 $               79,902 See Contingencies (Note 14). See Notes to Interim Consolidated Financial Statements.   INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited) For the three monthsended March 31 (in millions of Canadian dollars) 2024 2023 Operating activities Net income $             774 $             800 Reconciliation of net income to cash provided by operating activities: Depreciation and amortization 467 225 Deferred income tax expense (Note 4) 17 24 Pension recovery and funding (Note 12) (76) (77) Equity earnings of Kansas City Southern (Note 8, 9) — (204) Dividend from Kansas City Southern (Note 9) — 300 Settlement of foreign currency forward contracts (Note 11) (65) — Other operating activities, net 1 (47) Changes in non-cash working capital balances related to operations (103) (140) Net cash provided by operating activities 1,015 881 Investing activities Additions to properties (527) (405) Additions to Meridian Speedway properties (4) — Proceeds from sale of properties and other assets 1 4 Other investing activities, net (12) — Net cash used in investing activities (542) (401) Financing activities Dividends paid (177) (177) Issuance of Common Shares 22 18 Repayment of long-term debt, excluding commercial paper (Note 10) (71) (486) Net repayment of commercial paper (Note 10) (205) — Net cash used in financing activities (431) (645) Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents 13 4 Cash position Net increase (decrease) in cash and cash equivalents 55 (161) Cash and cash equivalents at beginning of period 464 451 Cash and cash equivalents at end of period $             519 $             290 Supplemental cash flow information Income taxes paid $             242 $             184 Interest paid $             245 $             147 See Notes to Interim Consolidated Financial Statements. INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) For the three months ended March 31 (in millions of Canadian dollarsexcept per share data) CommonShares(inmillions) Share capital Additional paid-in capital Accumulated other comprehensive Income (loss) Retained earnings Total shareholders' equity Non-controllinginterest Total equity Balance as at January 1, 2024 932.1 $ 25,602 $            88 $                (618) $   16,420 $          41,492 $          919 $ 42,411 Net income (loss) — — — — 775 775 (1) 774 Contribution from non-controllinginterest — — — — — — 1 1 Other comprehensive income(Note 6) — — — 695 — 695 23 718 Dividends declared ($0.19 pershare) — — — — (177) (177) — (177) Effect of stock-basedcompensation expense — — 13 — — 13 — 13 Shares issued under stock optionplan 0.5 27 (6) — — 21 — 21 Balance as at March 31, 2024 932.6 $ 25,629 $            95 $                    77 $   17,018 $          42,819 $          942 $ 43,761 Balance as at January 1, 2023 930.5 $ 25,516 $            78 $                    91 $   13,201 $          38,886 $             — $ 38,886 Net income — — — — 800 800 — 800 Other comprehensive loss (Note 6) — — — (17) — (17) — (17) Dividends declared ($0.19 pershare) — — — — (177) (177) — (177) Effect of stock-basedcompensation expense — — 10 — — 10 — 10 Shares issued under stock optionplan 0.4 22 (4) — — 18 — 18 Balance as at March 31, 2023 930.9 $ 25,538 $            84 $                    74 $   13,824 $          39,520 $             — $ 39,520 See Notes to Interim Consolidated Financial Statements. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2024 (unaudited) 1   Description of business and basis of presentation Canadian Pacific Kansas City Limited ("CPKC" or the "Company") owns and operates a transcontinental freight railway spanning Canada, the United States ("U.S."), and Mexico. CPKC provides rail and intermodal transportation services over a network of approximately 20,000 miles, serving principal business centres across Canada, the U.S. and Mexico. The Company transports bulk commodities, merchandise and intermodal freight. CPKC's Common Shares trade on the Toronto Stock Exchange and New York Stock Exchange under the symbol "CP". On April 14, 2023, Canadian Pacific Railway Limited ("CPRL") assumed control of Kansas City Southern ("KCS") and changed CPRL's name to Canadian Pacific Kansas City Limited ("CPKC"). The Interim Consolidated Financial Statements as at and for the three months ended March 31, 2024 include KCS as a consolidated subsidiary. The Interim Consolidated Financial statements for the comparative three months ended March 31, 2023 report the Company's 100% equity interest in KCS as an equity-method investment (see Notes 8 and 9). These unaudited interim consolidated financial statements as at and for the three months ended March 31, 2024 ("Interim Consolidated Financial Statements") have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP"). They do not include all of the information required for a complete set of annual financial statements prepared in accordance with GAAP and should be read in conjunction with the Company's audited consolidated financial statements as at and for the year ended December 31, 2023 ("last annual financial statements"). Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and results of operations since the last annual financial statements. These Interim Consolidated Financial Statements have been prepared using the same significant accounting policies used in the last annual financial statements, except for the adoption of new standards (see Note 2). Amounts are stated in Canadian dollars unless otherwise noted. The Company's operations and income for interim periods can be affected by seasonal fluctuations such as changes in customer demand and weather conditions, and may not be indicative of annual results. 2   Accounting changes Recently adopted accounting standards The accounting standards that have become effective during the three months ended March 31, 2024 did not have a material impact on the Interim Consolidated Financial statements. Accounting standards not yet adopted Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations when they are adopted. 3   Revenues  The following table presents disaggregated information about the Company's revenues from contracts with customers by major source: For the three monthsended March 31 (in millions of Canadian dollars) 2024 2023 Grain $             730 $             515 Coal 209 155 Potash 137 132 Fertilizers and sulphur 104 96 Forest products 202 103 Energy, chemicals and plastics 702 366 Metals, minerals and consumer products 440 233 Automotive 265 125 Intermodal 638 492 Total freight revenues 3,427 2,217 Non-freight excluding leasing revenues 63 27 Revenues from contracts with customers 3,490 2,244 Leasing revenues 30 22 Total revenues $          3,520 $          2,266 4   Income taxes The effective tax rate including discrete items for the three months ended March 31, 2024 was 25.09%, compared to 16.90% for the same period of 2023. For the three months ended March 31, 2024, the effective tax rate was 25.00%, excluding the discrete items of amortization of business acquisition fair value adjustments of $84 million, acquisition-related costs incurred by CPKC of $26 million, and adjustments to provisions for Mexican taxes of $10 million recognized in "Compensation and benefits". For the three months ended March 31, 2023, the effective tax rate was 24.50%, excluding the discrete items of the equity earnings of KCS of $204 million, acquisition-related costs incurred by CPKC of $15 million, and an outside basis deferred tax recovery of $23 million arising from the difference between the carrying amount of CPKC's investment in KCS for financial reporting and the underlying tax basis of this investment. Mexican Tax Audits There are certain Mexican subsidiaries with ongoing audits for the years 2016-2018 and 2021. As at March 31, 2024, the Company believes that it has recorded sufficient income tax reserves with respect to these income tax examinations. 2014 Tax Assessment The Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") 2014 Tax Assessment, which is currently in litigation, is expected to be resolved by the Administrative Court in 2024 (see Note 14). 5   Earnings per share For the three monthsended March 31 (in millions, except per share data) 2024 2023