Canadian Pacific Railway (TSX/NYSE: CP) reported net income of $413 million or $2.60 per diluted share in 2004, compared with $401 million or $2.52 per diluted share in 2003. Results in 2004 reflected a decline of $115 million ($130 million after tax) in foreign exchange gains on long-term debt, and a reduction of $172 million in charges ($111 million after tax) for other specified items, which included a $91-million charge ($55 million after tax) for environmental remediation and a $19-million reversal ($12 million after tax) related to labour restructuring. Excluding the foreign exchange gains on long-term debt and other specified items, income in 2004 increased 10 per cent to $361 million or $2.27 per diluted share, compared with income in 2003 of $330 million or $2.07 per diluted share.
SUMMARY OF FULL-YEAR 2004 COMPARED WITH FULL-YEAR 2003:
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Operating income of $789 million, an increase of 8 per cent, excluding other specified items.
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Revenue up $242 million, with significant growth in five of seven business lines, despite a $130-million reduction caused by the Canadian dollar's gain against the U.S. dollar.
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Operating expenses up $183 million, excluding other specified items.
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Operating ratio improved to 79.8 per cent, from 80.1 per cent, excluding other specified items
CPR generated growth across the bulk commodities, a turnaround in industrial products and continued expansion in containerized intermodal freight. Rob Ritchie, President and Chief Executive Officer of CPR, said: "Our business model and franchise proved their power and value in 2004. A critical element of our business model was CPR's unrelenting focus on increasing asset velocity and fluidity across the network. As a result, we began driving our productivity and efficiency indicators in the right direction at the same time as freight volumes took off. Greater fluidity has become our single most compelling objective. As fluidity continues to increase, productivity will increase and unit operating costs will come down, enabling CPR to drive more of its growth to the bottom line." CPR moved more freight in 2004 than in any prior fiscal year. Productivity increased dramatically, with revenue tonnage growing 8 per cent while train miles accumulated in moving the tonnage increased by just one-quarter of that rate. "These steady gains improved the value of CPR's service to customers, and we made the most of a robust transportation market," Mr. Ritchie said.
Operating expenses in 2004 increased mainly due to higher fuel prices, increased freight volumes, depreciation, temporary costs to train additional crews, and a return to a normal level of performance-based incentive compensation, partly offset by a favorable impact from the Canadian dollar's appreciation. CPR responded to unprecedented high fuel prices with an improved fuel surcharge mechanism, in addition to its hedge program and fuel efficiency measures. These initiatives enabled CPR to recover about two-thirds of its price-related fuel cost increase.