CP

CANADIAN PACIFIC KANSAS CITY LTD/CN

NYSE · INDUSTRIALS · RAILROADS, LINE-HAUL OPERATING

88.10

+0.77 +0.88%

USD · close Oct 21

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MKT CAP $77.4BP/E 20.5DIV YIELD 1.08%FCF YIELD 3.14%REV TTM $15.4B +3.6%NET INCOME $3.9B −7.5%NET DEBT $21.9B52W 68.88 – 96.69SEC XBRL · TTM TO Invalid Date

How CP rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

28%

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523

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Dropped

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Length

−3,387

words, now 44,363

New in FY2025

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.").
Fluctuations in FX rates affect the Company’s financial results because revenues and expenses denominated in U.S. dollars and Mexican pesos are translated into Canadian dollars.
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 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.
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.
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)".
To manage its exposure to fluctuations in exchange rates between Canadian dollars, U.S. dollars, and Mexican pesos, the Company may sell or purchase U.S. dollar or Mexican peso forwards at fixed rates in future periods.
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.
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.
In 2025, the unfavourable impact of fuel prices on "Operating income" was $46 million.
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 of the timing of recoveries under the Company's fuel cost adjustment program, resulted in a decrease in "Total revenues" of $205 million from 2024.
Lower fuel prices resulted in a decrease in Total operating expenses of $159 million from 2024.
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.
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.
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.
As at December 31, 2025, the Company had $184 million of Cash and cash equivalents compared to $739 million at December 31, 2024.
During 2025, the Company issued U.S. $600 million 4.80% 5-year unsecured notes due March 30, 2030 for net proceeds of U.S. $596 million ($857 million), $500 million 4.00% 7-year unsecured notes due June 13, 2032 for net proceeds of $498 million, U.S. $600 million 5.20% 10-year unsecured notes due March 30, 2035 for net proceeds of U.S. $593 million ($853 million), $600 million 4.40% 10.5-year unsecured notes due January 13, 2036 for net proceeds of $598 million, and $300 million 4.80% 30-year unsecured notes due June 13, 2055 for net proceeds of $296 million.
The Company also entered into, and fully repaid, a U.S. $500 million unsecured non-revolving term credit facility.
In 2025, the Company repaid, at maturity, the remaining balance of U.S. $642 million ($930 million) on its 2.90% 10-year notes. 44 / CPKC 2025 ANNUAL REPORT Effective August 20, 2025, the Company entered into a facility agreement to extend the maturity dates under the revolving credit facility.
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.
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).
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, 2025, the Company did not have any collateral posted on its bilateral letter of credit facilities (December 31, 2024 - $nil) and had letters of credit drawn of $79 million (December 31, 2024 - $95 million) from a total available amount of $300 million.
Contractual Commitments The Company’s material cash requirements from known contractual obligations and commitments to make future payments primarily consist of long-term debt and related interest, capital commitments, operating goods and services commitments, leases, and other long term liabilities.
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.
Commitments for capital and operating goods and services and other long-term liabilities due in the next 12 months are $1,758 million and $73 million, respectively.
The remaining amounts committed thereafter are $2,639 million and $627 million, respectively.
Concession Duty The Mexican government granted the Company's subsidiary, Kansas City Southern de México, S.A. de C.V.
("CPKCM"), a concession until June 2047, which is renewable under certain conditions, for additional periods, each up to 50 years (the "Concession").
Under the Concession, CPKCM pays annual Concession duties equal to 1.25% of CPKCM's gross revenues.
Capital commitments under the Concession are included in the amounts disclosed above.
Financial Statements and Supplementary Data, Note 27 Guarantees for details.
Operating Activities Net cash provided by operating activities increased $40 million in 2025 compared to 2024.
The increase was primarily due to higher cash generating operating income, partially offset by unfavourable changes in working capital and other operating activities.
Investing Activities Net cash used in investing activities decreased $131 million in 2025 compared to 2024.
The decrease was primarily due to proceeds received from the sale of an equity investment of $493 million, partially offset by higher capital additions and transaction costs paid on the sale of an equity investment.

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Gone since FY2024

Impact of Foreign Exchange on Earnings and Foreign Exchange Risk Although the Company is headquartered in Canada and reports in Canadian dollars, a significant portion of its revenues, expenses, assets and liabilities, including debt, are denominated in U.S. dollars and Mexican pesos.
In addition, equity earnings of KCS recognized for the period from January 1 to April 13, 2023 are denominated in U.S. dollars.
Fluctuations in FX affect the Company’s financial results because revenues and expenses denominated in U.S. dollars and Mexican pesos are translated into Canadian dollars.
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 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 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.
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.
CPKC 2024 ANNUAL REPORT / 43 To manage its exposure to fluctuations in exchange rates between Canadian dollars, U.S. dollars, and or Mexican pesos, the Company may sell or purchase U.S. dollar or Mexican peso forwards at fixed rates in future periods.
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.
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.
In 2024, the unfavourable impact of fuel prices on Operating income was $98 million.
Lower fuel prices and the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program, partially offset by increased carbon levy surcharge revenues, resulted in a decrease in Total revenues of $184 million from 2023.
Lower fuel prices resulted in a decrease in Total operating expenses of $86 million from 2023.
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.
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.
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.
As at December 31, 2024, the Company had $739 million of Cash and cash equivalents compared to $464 million at December 31, 2023.
During 2024, the Company repaid the remaining balance of U.S. $1,429 million ($2,002 million) on its 1.35% 3-year Notes.
The Company also repaid U.S. $48 million ($66 million) on its 5.41% Senior Secured Notes and repurchased, on the open market, certain of its Senior Notes with principal values of U.S. $176 million ($241 million).
Effective June 25, 2024, the Company entered into a third amended and restated revolving credit facility (the "facility") agreement to extend the maturity dates under the facility.
The amendment extended the maturity date of the five-year U.S. $1.1 billion tranche from May 11, 2028 to June 25, 2029.
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.
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, 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, 2024, the Company did not have any collateral posted on its bilateral letter of credit facilities (December 31, 2023 - $nil) and had letters of credit drawn of $95 million (December 31, 2023 - $93 million) from a total available amount of $300 million. 44 / CPKC 2024 ANNUAL REPORT Contractual Commitments The Company’s material cash requirements from known contractual obligations and commitments to make future payments primarily consist of long-term debt and related interest, capital commitments, supplier purchases, leases, and other long term liabilities.
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.
Supplier purchase agreements and other long-term liabilities due in the next 12 months are $971 million and $73 million, respectively.
The remaining amounts committed thereafter are $2,944 million and $632 million, respectively.
Capital commitments are discussed further in Item 8.
Financial Statements and Supplementary Data, Note 25 Commitments and contingencies.
Concession Duty The Company's subsidiary, Kansas City Southern de México, S.A. de C.V.
("CPKCM") has a fifty-year concession (the "Concession"), which will expire in 2047 but is renewable under certain conditions, for additional periods, each up to 50 years.
Under the Concession, CPKCM pays annual concession duties equal to 1.25% of its gross revenues.
Capital commitments under the Concession are described in Item 8.
Financial Statements and Supplementary Data, Note 26 Guarantees for details.
Operating Activities Cash provided by operating activities increased $1,132 million in 2024 compared to 2023.
The increase was primarily due to an increase in cash generating income, including the impact of the acquisition of KCS, and an unfavourable change in wo rking capital in 2023.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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