Canadian Pacific outlines new vision for the future

             Canadian Pacific outlines new vision for the future

PR Newswire

NEW YORK, Dec. 4, 2012

Railway on track to achieve mid-60s OR for 2016

NEW YORK, Dec. 4, 2012 /PRNewswire/ - Canadian Pacific (TSX:CP)(NYSE:CP)
President and CEO E. Hunter Harrison today outlined CP's go-forward plan for
change that will greatly improve service, increase the railway's efficiency,
lower cost and grow the business.

"Momentum is building at Canadian Pacific and the organization is driving to a
culture of intense focus on operations. Service will be what drives this
organization, by providing a premium, reliable product offering through a
lower cost operation," Harrison said. "We have initiated a rapid change
agenda and have made tremendous progress in my first 160 days, and we are only
getting started."

Progress Already Underway
Harrison provided various examples of steps taken over the past five months
highlighting CP's evolution to a more competitive railway, including the

  *New executive leadership team now in place including a new Senior
    Operations lead team with a mandate for centralized planning and
    decentralized execution, to eliminate bureaucracy and have service
    decisions made faster and closer to the customer;
  *Revamped intermodal and merchandise train service resulting in faster
    transit times for customers - example of new intermodal services
    connecting Vancouver to Chicago or Toronto;
  *Closure of hump-switching yards in Toronto, Winnipeg, Calgary and Chicago
    - producing significant cost savings and more efficient operating
  *Closure of intermodal terminals in Milwaukee, Obico (Toronto), and
    Schiller Park (Chicago) - reducing footprint and operating expenses while
    also facilitating efficient operating practices and reduced end-to-end
    transit times;
  *Improved train service and network velocity resulting in the need for 195
    fewer locomotives and 3,200 fewer leased rail cars - current stored,
    year-to-date lease returned and declared surplus locomotive units total

Harrison continued, "We are hearing feedback from customers that they are
seeing and liking the results. The reduced number of assets and the
decentralized decision making within the organization will allow us to
appropriately size to any changes in market conditions. I have always
maintained that by focusing on the best possible service, along with
appropriate cost containment, the operating ratio will take care of itself. CP
is no different; we already see the service and related bottom line benefits
of our early actions. It's an exciting time to be a part of this great

The Plan for Change Going Forward
"We now have a leadership team that understands the urgency of making change
and improving the culture of this organization" Harrison said. "CP has many
talented railroaders who want to win. Together we are squarely focused on
improved service and becoming the low cost carrier. This will allow us to
continue to grow with our customers."

Moving forward, Harrison outlined various plans CP will execute to continue to
improve service reliability, increase the railway's efficiency, and grow the
business. Key highlights include:

  *Reduce roughly 4,500 employee and/or contractor positions by 2016 -
    through job reductions, natural attrition and fewer contractors. We have
    already made progress on this front and expect 1,700 positions to be
    eliminated by year end;
  *New longer sidings program will improve asset utilization and increase
    train length and velocity - The plan will allow CP to move the same or
    increased volumes with fewer trains, and is expected to save over 14,500,
    or 4%, crew starts;
  *Explore options to maximize full value of existing and anticipated surplus
    real estate holdings;
  *Relocate CP's current corporate headquarters in downtown Calgary to new
    office space at CP-owned Ogden Yard by 2014;
  *Review options for the Delaware & Hudson (D&H) in the U.S. Northeast,
    while maintaining options for continued growth in the energy business;
  *Announced earlier, CP is seeking expressions of interest on the 660-mile
    portion of the former Dakota, Minnesota & Eastern (DM&E), west of Tracy,

"I am excited about what we've achieved to date, but we have only just started
this journey to being a more competitive railway. We will continue to drive
our service offering while focusing on taking unproductive costs out of the
business. We see a strong earnings profile and solid free cash flow picture
emerging." Harrison added. "Canadian Pacific is a great franchise with strong
growth upside and we are more confident than ever that we will drive
shareholder value long into the future."

Financial expectations on CP's journey to 2016 include:

  *Compound annual revenue growth of 4% -7% off the 2012 base
  *A full-year operating ratio in the mid-sixties for 2016
  *Cash flow before dividends (*see Non-GAAP Measures below) of $900 million
    - $1,400 million in 2016
  *Annual capital spending in the range of $1.0 -$1.1 billionover the

Key Assumptions

  *Average fuel cost per gallon of $3.45 U.S. per U.S. gallon
  *Defined benefit pension expense of $140 - $150 million through 2016
  *Defined benefit pension contributions between $100 - $125 million through
    2015 increasing to $200 - $300 million in 2016
  *A tax rate of 25 - 27%
  *CP becomes fully cash taxable during the four-year period
  *Canadian to U.S. exchange rate at par

Fourth Quarter 2012
As previously noted on December 3, 2012, CP anticipates taking a fourth
quarter estimated pre-tax non-cash charge of approximately $180 million ($107
million after tax) on its option to build into the Powder River Basin. CP
also anticipates taking a charge related to labour and other restructuring
activities, the amount of which is under review.

Editor's Notes:

*To access a HD video webcast of the presentations on December 4 and 5 go to: under "Invest In CP" tab.

**To access the conference by the phone on December 4 and 5, please call
888-821-9349 or 201-604-5056 password 637402.

***Investor Day full-disclosure PowerPoint presentations by Mr. Harrison and
his Executive Team can be viewed at after 0830 December 5, 2012.

Note on Forward-Looking Information

This news release contains certain forward-looking information within the
meaning of applicable securities laws relating, but not limited, to our
operations, priorities and plans, anticipated financial performance, business
prospects, planned capital expenditures, programs and strategies. This
forward-looking information also 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", "should" or similar words
suggesting future outcomes. To the extent that CP has provided guidance that
is a non-GAAP financial measure, the Company may not be able to provide a
reconciliation to a GAAP measure, due to unknown variables and uncertainty
related to future results.

Undue reliance should not be placed on forward-looking information as actual
results may differ materially from the forward-looking information.
Forward-looking information is not a guarantee of future performance. By its
nature, CP's forward-looking information involves numerous assumptions,
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; general North American
and global economic, credit and business conditions; risks in agricultural
production such as weather conditions and insect populations; the availability
and price of energy commodities; the effects of competition and pricing
pressures; industry capacity; shifts in market demand; changes in commodity
prices; uncertainty surrounding timing and volumes of commodities being
shipped via CP; inflation; changes in laws and regulations, including
regulation of rates; changes in taxes and tax rates; potential increases in
maintenance and operating costs; uncertainties of investigations, proceedings
or other types of claims and litigation; labour disputes; risks and
liabilities arising from derailments; transportation of dangerous goods;
timing of completion of capital and maintenance projects; currency and
interest rate fluctuations; effects of changes in market conditions and
discount rates on the financial position of pension plans and investments; and
various events that could disrupt operations, including severe weather,
droughts, floods, avalanches and earthquakes as well as security threats and
governmental response to them, and technological changes. The foregoing list
of factors is not exhaustive.

These and other factors are detailed from time to time in reports filed by CP
with securities regulators in Canada and the United States. Reference should
be made to "Management's Discussion and Analysis" in CP's annual and interim
reports, Annual Information Form and Form 40-F. Readers are cautioned not to
place undue reliance on forward-looking information. Forward-looking
information is based on current expectations, estimates and projections and it
is possible that predictions, forecasts, projections, and other forms of
forward-looking information will not be achieved by CP. Except as required by
law, CP undertakes no obligation to update publicly or otherwise revise any
forward-looking information, whether as a result of new information, future
events or otherwise.

Non-GAAP Measures

We present non-GAAP measures and cash flow information to provide a basis for
evaluating underlying earnings and liquidity trends in our business that can
be compared with the results of our operations in prior periods. These
non-GAAP measures have no standardized meaning and are not defined by GAAP
and, therefore, are unlikely to be comparable to similar measures presented by
other companies.

Free cash and cash flow before dividends are non-GAAP measures that management
considers to be indicators of liquidity. These measures are used by
management to provide information with respect to the relationship between
cash provided by operating activities and investment decisions and provides a
comparable measure for period to period changes. Free cash is calculated as
cash provided by operating activities, less cash used in investing activities
and dividends paid, adjusted for changes in cash and cash equivalent balances
resulting from FX fluctuations. For the purposes of this press release cash
flow before dividends has been calculated as cash provided by operating
activities less cash used in investing activities. Dividends have been
excluded as, at this time, the board of directors of the Company has not
approved dividends for 2016 and therefore it is not appropriate to provide
forward looking estimates of what amount such dividends could be. In
addition, it is assumed that the Canadian dollar will be at parity with the US
dollar, thereby eliminating any foreign exchange FX fluctuations on cash
balances. For further information regarding non-GAAP measures see our
Management's Discussion and Analysis for the third quarter of 2012 or the
document Non-GAAP Measures on our web site at

About Canadian Pacific
Canadian Pacific (TSX:CP)(NYSE:CP) is a transcontinental railway in Canada and
the United States with direct links to eight major ports, including Vancouver
and Montreal, providing North American customers a competitive rail service
with access to key markets in every corner of the globe. CP is a low-cost
provider that is growing with its customers, offering a suite of freight
transportation services, logistics solutions and supply chain expertise. Visit to see the rail advantages of Canadian Pacific.

SOURCE Canadian Pacific


Ed Greenberg
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