Canadian Pacific Kansas City Ltd 10-Q for FY2026 Q3
Canadian Pacific Kansas City Ltd (CP)
10-Q
2026-10-29
For: 2026-09-30
View Original
Added on
October 29, 2026
About this 10-Q
Canadian Pacific Kansas City Ltd filed this 10-Q on October 29, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Canadian Pacific Kansas City Limited reported third-quarter 2026 revenues of $4,219 million, up 15%; core adjusted diluted EPS of $1.28, up 16%; and operating ratio of 64.8%, up 130 basis point from 63.5%. AI summary
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- 4.22B CAD
- up 15.2% from 3.66B CAD a year earlier
- Net income
- 917M CAD
- down 0.3% from net income of 920M CAD a year earlier
- Diluted EPS
- 1.04 CAD
- up 3.0% from 1.01 CAD a year earlier
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
For the quarterly period ended September 30, 2026
OR
For the transition period from to
Commission File Number 001-01342
Canadian Pacific Kansas City Limited
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant’s Telephone Number, Including Area Code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which Registered | ||||||||||||||||||||||||
Canadian Pacific Kansas City Limited | ||||||||||||||||||||||||||
Canadian Pacific Kansas City Limited | Toronto Stock Exchange | |||||||||||||||||||||||||
| London Stock Exchange | ||||||||||||||||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
þ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of the close of business on October 27, 2026, there were 869,554,740 of the registrant’s Common Shares outstanding.
CANADIAN PACIFIC KANSAS CITY LIMITED
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION | ||||||||
| Page | ||||||||
| Item 1. | Financial Statements: | |||||||
| Interim Consolidated Statements of Income (Unaudited) | ||||||||
| For the Three and Nine Months Ended September 30, 2026 and 2025 | ||||||||
| Interim Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||
| For the Three and Nine Months Ended September 30, 2026 and 2025 | ||||||||
| Interim Consolidated Balance Sheets (Unaudited) | ||||||||
| As at September 30, 2026 and December 31, 2025 | ||||||||
| Interim Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| For the Three and Nine Months Ended September 30, 2026 and 2025 | ||||||||
| Interim Consolidated Statements of Changes in Equity (Unaudited) | ||||||||
| For the Three and Nine Months Ended September 30, 2026 and 2025 | ||||||||
| Notes to Interim Consolidated Financial Statements (Unaudited) | ||||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| Executive Summary | ||||||||
| Performance Indicators | ||||||||
| Financial Highlights | ||||||||
| Results of Operations | ||||||||
| Liquidity and Capital Resources | ||||||||
| Share Capital | ||||||||
| Non-GAAP Measures | ||||||||
| Critical Accounting Estimates | ||||||||
| Forward-Looking Statements | ||||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |||||||
| Item 4. | Controls and Procedures | |||||||
PART II - OTHER INFORMATION | ||||||||
| Item 1. | Legal Proceedings | |||||||
| Item 1A. | Risk Factors | |||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
| Item 3. | Defaults Upon Senior Securities | |||||||
| Item 4. | Mine Safety Disclosures | |||||||
| Item 5. | Other Information | |||||||
| Item 6. | Exhibits | |||||||
| Signature | ||||||||
PART I
ITEM 1. FINANCIAL STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||||||||
| (in millions of Canadian dollars, except share and per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||
Revenues (Note 3) | ||||||||||||||||||||
| Freight | $ | $ | $ | $ | ||||||||||||||||
| Non-freight | ||||||||||||||||||||
| Total revenues | ||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
Compensation and benefits (Note 13) | ||||||||||||||||||||
| Fuel | ||||||||||||||||||||
Materials | ||||||||||||||||||||
| Equipment rents | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
| Purchased services and other | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Operating income | ||||||||||||||||||||
| Other (income) expense | ( | ( | ||||||||||||||||||
| Other components of net periodic benefit recovery (Note 12) | ( | ( | ( | ( | ||||||||||||||||
Net interest expense | ||||||||||||||||||||
Gain on sale of equity investment (Note 4) | ( | |||||||||||||||||||
| Income before income tax expense | ||||||||||||||||||||
Current income tax expense | ||||||||||||||||||||
Deferred income tax expense (recovery) | ( | |||||||||||||||||||
Income tax expense (Note 5) | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||
Net loss attributable to non-controlling interest | ( | ( | ( | ( | ||||||||||||||||
| Net income attributable to controlling shareholders | $ | $ | $ | $ | ||||||||||||||||
Earnings per share (Note 6) | ||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | ||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | ||||||||||||||||
Weighted-average number of shares (millions) (Note 6) | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
| Dividends declared per share | $ | $ | $ | $ | ||||||||||||||||
See Notes to Interim Consolidated Financial Statements.
2
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||
| Net income | $ | $ | $ | $ | ||||||||||
| Net (loss) gain in foreign currency translation adjustments, net of hedging activities | ( | ( | ||||||||||||
| Change in derivatives designated as cash flow hedges | ( | ( | ||||||||||||
| Change in pension and post-retirement defined benefit plans | ( | |||||||||||||
| Other comprehensive income from equity investees | ||||||||||||||
| Other comprehensive (loss) income before income taxes | ( | ( | ||||||||||||
| Income tax recovery (expense) | ( | |||||||||||||
| Other comprehensive (loss) income | ( | ( | ||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||
| Comprehensive (loss) income attributable to non-controlling interest | ( | ( | ||||||||||||
| Comprehensive income attributable to controlling shareholders | $ | $ | $ | $ | ||||||||||
See Notes to Interim Consolidated Financial Statements.
3
INTERIM CONSOLIDATED BALANCE SHEETS AS AT
(unaudited)
| September 30 | December 31 | |||||||
| (in millions of Canadian dollars) | 2026 | 2025 | ||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net (Note 8) | ||||||||
| Materials and supplies | ||||||||
| Other current assets | ||||||||
| Investments | ||||||||
| Properties | ||||||||
Goodwill | ||||||||
Intangible assets | ||||||||
| Pension asset | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
Long-term debt maturing within one year (Note 9, 10) | ||||||||
| Pension and other benefit liabilities | ||||||||
| Other long-term liabilities | ||||||||
Long-term debt (Note 9, 10) | ||||||||
| Deferred income taxes | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity | ||||||||
| Share capital | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income (Note 7) | ||||||||
| Retained earnings | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See Contingencies (Note 14).
See Notes to Interim Consolidated Financial Statements.
4
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||
| Operating activities | ||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||
| Reconciliation of net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Deferred income tax expense (recovery) | ( | |||||||||||||
| Pension recovery and funding (Note 12) | ( | ( | ( | ( | ||||||||||
Gain on sale of equity investment (Note 4) | ( | |||||||||||||
| Other operating activities, net | ( | ( | ( | ( | ||||||||||
| Changes in operating assets and liabilities | ( | ( | ||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Investing activities | ||||||||||||||
| Additions to properties | ( | ( | ( | ( | ||||||||||
| Additions to Meridian Speedway properties | ( | ( | ( | ( | ||||||||||
| Proceeds from sale of properties and other assets | ||||||||||||||
Proceeds from sale of equity investment (Note 4) | ||||||||||||||
| Other investing activities, net | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ( | ( | ||||||||||
| Financing activities | ||||||||||||||
| Dividends paid | ( | ( | ( | ( | ||||||||||
| Issuance of Common Shares | ||||||||||||||
Purchase of Common Shares (Note 11) | ( | ( | ( | ( | ||||||||||
Repayment of long-term debt, excluding commercial paper (Note 9) | ( | ( | ( | ( | ||||||||||
Issuance of long-term debt, excluding commercial paper (Note 9) | ||||||||||||||
Net issuance of commercial paper (Note 9) | ||||||||||||||
Net repayment of short-term borrowings (Note 9) | ( | |||||||||||||
| Other financing activities, net | ( | ( | ( | |||||||||||
| Net cash used in financing activities | ( | ( | ( | ( | ||||||||||
| Effect of foreign currency fluctuations on foreign-denominated cash and cash equivalents | ( | |||||||||||||
| Cash position | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | ||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | $ | $ | ||||||||||
| Supplemental cash flow information | ||||||||||||||
| Income taxes paid | $ | $ | $ | $ | ||||||||||
| Interest paid | $ | $ | $ | $ | ||||||||||
Certain comparative figures have been reclassified within "Net cash provided by operating activities" to conform to the current period's presentation. These reclassifications had no impact on total net cash flows from operating, investing, or financing activities, or the net increase (decrease) in cash and cash equivalents.
See Notes to Interim Consolidated Financial Statements.
5
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
For the three months ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars except per share data) | Common Shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders’ equity | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as at July 1, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss (Note 7) | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Shares repurchased (Note 11) | ( | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Shares issued under stock option plan | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as at September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as at July 1, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (Note 7) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Shares repurchased (Note 11) | ( | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Shares issued under stock option plan | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as at September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
6
For the nine months ended September 30 | ||||||||||||||||||||||||||||||||
| (in millions of Canadian dollars except per share data) | Common Shares (in millions) | Share capital | Additional paid-in capital | Accumulated other comprehensive income | Retained earnings | Total shareholders’ equity | Non-controlling interest | Total equity | ||||||||||||||||||||||||
Balance as at January 1, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | |||||||||||||||||||||||||||
Other comprehensive income (Note 7) | — | — | — | — | ||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Effect of stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||
Common Shares repurchased (Note 11) | ( | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Common Shares issued under stock option plan | ( | — | — | — | ||||||||||||||||||||||||||||
Balance as at September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Balance as at January 1, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | |||||||||||||||||||||||||||
| Contribution from non-controlling interest | — | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive loss (Note 7) | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Effect of stock-based compensation expense | — | — | — | — | — | |||||||||||||||||||||||||||
Common Shares repurchased (Note 11) | ( | ( | — | — | ( | ( | — | ( | ||||||||||||||||||||||||
| Common Shares issued under stock option plan | ( | — | — | — | ||||||||||||||||||||||||||||
Balance as at September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
See Notes to Interim Consolidated Financial Statements.
7
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2026
(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 freight, and intermodal traffic. CPKC's Common Shares trade on the Toronto Stock Exchange ("TSX") and New York Stock Exchange under the symbol "CP".
These unaudited interim consolidated financial statements ("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, 2025 ("last annual consolidated 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 consolidated financial statements. The Interim Consolidated Financial Statements have been prepared using the same significant accounting policies used in the last annual consolidated financial statements, except for the adoption of new accounting 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.
Operating segment
The Company only has one operating segment: rail transportation. The Company's measure of segment profit is reported on the Interim Consolidated Statements of Income as "Net income attributable to controlling shareholders". CPKC's significant segment expenses are consistent with the expenses presented on the Interim Consolidated Statements of Income.
2 Accounting changes
Accounting Standards Update ("ASU") 2025-05 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets
On January 1, 2026, the Company prospectively adopted ASU 2025-05, which simplifies estimating credit losses on current accounts receivable and current contract assets. Under the new guidance, CPKC elected to adopt a practical expedient allowing the Company to assume that conditions existing as of the balance sheet date will remain unchanged over the remaining life of the asset when developing reasonable and supportable forecasts for estimating expected credit losses. Adoption of ASU 2025-05 did not have a material impact on the Company's Interim Consolidated Financial Statements.
Other accounting standards that became effective during the nine months ended September 30, 2026 did not have a material impact on the Company's Interim Consolidated Financial Statements. Recently issued accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations upon adoption.
8
3 Revenues
The following table presents disaggregated information about the Company’s revenues from contracts with customers by major source:
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | 2026 | 2025 | ||||||||||
| Grain | $ | $ | $ | $ | ||||||||||
| Coal | ||||||||||||||
| Potash | ||||||||||||||
| Fertilizers and sulphur | ||||||||||||||
| Forest products | ||||||||||||||
| Energy, chemicals and plastics | ||||||||||||||
| Metals, minerals and consumer products | ||||||||||||||
| Automotive | ||||||||||||||
| Intermodal | ||||||||||||||
| Total freight revenues | ||||||||||||||
| Non-freight excluding leasing revenues | ||||||||||||||
| Revenues from contracts with customers | ||||||||||||||
| Leasing revenues | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||
4 Gain on sale of equity investment
On April 1, 2025, CPKC sold its 50 % equity method investment in the Panama Canal Railway Company to APM Terminals Panama Rail LP (“APM Terminals”), a subsidiary of A.P. Moller-Maersk A/S, for gross proceeds of U.S. $350 million. After finalizing purchase price adjustments for cash acquired and debt and net working capital assumed by APM Terminals, the Company received cash consideration of U.S. $344 million ($493 million) and recognized a pre-tax gain of U.S. $232 million ($333 million) in "Gain on sale of equity investment”. For the nine months ended September 30, 2025, the after-tax gain was U.S. $196 million ($282 million).
5 Income taxes
The effective income tax rate including discrete items for the three and nine months ended September 30, 2026 was 32.79 % and 27.52 %, respectively, compared to 24.34 % and 23.58 %, respectively, for the same periods in 2025.
For the three months ended September 30, 2026, the effective income tax rate was 24.75 %, excluding the discrete items of:
•amortization of the fair value adjustments associated with purchase accounting of $96 million, reassessment of prior year taxes by the Canada Revenue Agency ("CRA") of $94 million, and acquisition-related costs of $12 million, all related to the Kansas City Southern ("KCS") acquisition;
•a tax settlement with the Servicio de Administracion Tributaria (“SAT”) of $17 million; and
•advisory costs related to the analysis and advocacy in connection with the U.S. Surface Transportation Board's (the "STB") review of the proposed merger between Union Pacific Corporation ("UP") and Norfolk Southern Corporation ("NS") of $17 million.
For the three months ended September 30, 2025, the effective income tax rate was 24.50 %, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $97 million and acquisition-related costs of $13 million, both related to the KCS acquisition.
For the nine months ended September 30, 2026, the effective income tax rate was 24.75 %, excluding the discrete items of:
•amortization of the fair value adjustments associated with purchase accounting of $283 million, reassessment of prior year taxes by the CRA of $94 million, and acquisition-related costs of $48 million, all related to the KCS acquisition;
•advisory costs related to the analysis and advocacy in connection with the STB's review of the proposed merger between UP and NS of $44 million; and
•a tax settlement with the SAT of $17 million.
9
For the nine months ended September 30, 2025, the effective income tax rate was 24.50 %, excluding the discrete items of a gain on sale of an equity investment of $333 million, amortization of the fair value adjustments associated with purchase accounting of $287 million and acquisition-related costs of $52 million, both related to the KCS acquisition.
Tax Audits
During the three months ended September 30, 2026, the Company received notices of reassessment from the CRA for prior tax years related to the KCS acquisition. The Company has reviewed the reassessments and has objected to certain positions assessed. An income tax expense of $94 million was recorded in respect of positions that the Company has not objected to. The Company believes that it has recorded sufficient income tax reserves as at September 30, 2026 in respect of the disputed positions in the notices of reassessment. The timing and amount of an ultimate resolution of this matter is not determinable at this time.
Mexican Tax Settlements
During the three months ended September 30, 2026, a Mexican subsidiary of the Company settled and closed certain income tax matters in Mexico for the 2020 and 2021 tax years with the SAT resulting in a payment of $20 million and an income tax expense of $17 million. The 2016 to 2019 tax years remain under dispute, and the timing and amount of an ultimate resolution for these years is not determinable at this time. The Company believes that it has recorded sufficient tax reserves as at September 30, 2026 with respect to the 2016 to 2019 tax years.
2014 Tax Assessment
Canadian Pacific Kansas City Mexico's ("CPKCM") 2014 Tax Assessment is currently in litigation (see Note 14).
6 Earnings per share
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| (in millions, except per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||
| Net income attributable to controlling shareholders | $ | $ | $ | $ | ||||||||||
| Weighted-average basic shares outstanding | ||||||||||||||
| Dilutive effect of stock options | ||||||||||||||
| Weighted-average diluted shares outstanding | ||||||||||||||
| Earnings per share - basic | $ | $ | $ | $ | ||||||||||
| Earnings per share - diluted | $ | $ | $ | $ | ||||||||||
For the three and nine months ended September 30, 2026, there were nil and 0.5 million options, respectively, excluded from the computation of diluted earnings per share because their effects were not dilutive (three and nine months ended September 30, 2025 - 2.2 million and 1.8 million, respectively).
10
7 Changes in Accumulated other comprehensive income ("AOCI") by component
Changes in AOCI attributable to controlling shareholders, net of tax, by component are as follows:
| For the three months ended September 30 | |||||||||||||||||
| (in millions of Canadian dollars) | Foreign currency net of hedging activities | Derivatives | Pension and post- retirement defined benefit plans | Equity accounted investments | Total | ||||||||||||
| Opening balance, July 1, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||
| Net other comprehensive (loss) income | ( | ( | ( | ||||||||||||||
| Balance as at September 30, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||
| Opening balance, July 1, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||
| Amounts reclassified from AOCI | ( | ||||||||||||||||
| Net other comprehensive income (loss) | ( | ||||||||||||||||
| Balance as at September 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||
| For the nine months ended September 30 | |||||||||||||||||
| Foreign currency net of hedging activities | Derivatives | Pension and post-retirement defined benefit plans | Equity accounted investments | Total | |||||||||||||
| Opening balance, January 1, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||
| Net other comprehensive income (loss) | ( | ||||||||||||||||
| Balance as at September 30, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||
| Opening balance, January 1, 2025 | $ | $ | $ | ( | $ | ( | $ | ||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||
| Net other comprehensive (loss) income | ( | ( | |||||||||||||||
| Balance as at September 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||
8 Accounts receivable, net
| (in millions of Canadian dollars) | As at September 30, 2026 | As at December 31, 2025 | ||||||
| Total accounts receivable | $ | $ | ||||||
| Allowance for credit losses | ( | ( | ||||||
| Total accounts receivable, net | $ | $ | ||||||
9 Debt
During the nine months ended September 30, 2026, the Company repaid, at maturity, U.S. $250 million ($339 million) 3.70 % notes and U.S. $250 million ($345 million) 3.125 % 10-year notes.
Issuance of long-term debt
During the nine months ended September 30, 2026, the Company issued U.S. $600 million ($821 million) 4.00 % 3-year unsecured notes due March 15, 2029 for net proceeds of U.S. $597 million ($816 million), and U.S. $600 million ($821 million) 5.50 % 30-year unsecured notes due March 15, 2056 for net proceeds of U.S. $589 million ($805 million). The issued notes pay interest semi-annually and carry a negative pledge.
11
Credit facility
Effective July 6, 2026, the Company amended its revolving credit facility agreement (the "facility") to extend the maturity dates of its two-year U.S. $1.1 billion tranche and five-year U.S. $1.1 billion tranche to June 25, 2028, and June 25, 2031, respectively. As at September 30, 2026, the facility was undrawn (December 31, 2025 - undrawn). The Company presents draws and repayments on the facility in the Interim Consolidated Statements of Cash Flows on a net basis.
Commercial paper program
10 Financial instruments
A. Fair values of financial instruments
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
The Company’s short-term financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term borrowings, including commercial paper and term loans. The carrying value of short-term financial instruments approximate their fair value.
The carrying value of the Company’s debt does not approximate its fair value. The estimated fair value has been determined based on market information, where available, or by discounting future payments of principal and interest at estimated interest rates expected to be available to the Company at the balance sheet date. All measurements are classified as Level 2. The Company’s long-term debt, including current maturities, with a carrying value of $23,668 million as at September 30, 2026 (December 31, 2025 - $22,023 million), had a fair value of $20,954 million (December 31, 2025 - $20,740 million).
B. Financial risk management
Foreign exchange ("FX") management
Net investment hedge
The majority of the Company’s U.S. dollar-denominated long-term debt, finance lease obligations, and operating lease liabilities have been designated as a hedge of the Company's net investment in foreign subsidiaries. This designation has the effect of mitigating volatility on Net income by offsetting long-term FX gains and losses on U.S. dollar-denominated long-term debt and gains and losses on its net investment. The effect of the Company's net investment hedge for the three and nine months ended September 30, 2026 was an FX gain of $2 million and an FX loss of $255 million, respectively (three and nine months ended September 30, 2025 - FX loss of $123 million and an FX gain of $182 million, respectively) recognized in “Other comprehensive income (loss)”.
11 Share repurchases
On January 28, 2026, the Company announced a normal course issuer bid ("NCIB"), commencing February 2, 2026, to purchase up to 44.9 million Common Shares in the open market for cancellation on or before February 1, 2027.
On February 27, 2025, the Company announced a NCIB, commencing March 3, 2025, to purchase up to 37.3 million Common Shares in the open market for cancellation on or before March 2, 2026. By October 29, 2025, the Company had purchased and cancelled all 37.3 million Common Shares authorized to be purchased under the NCIB.
12
All purchases were made in accordance with the respective NCIB at prevailing market prices plus brokerage fees, with consideration allocated to "Share capital" up to the average carrying amount of the Common Shares and any excess allocated to "Retained earnings".
In accordance with Canadian tax legislation, the Company has accrued for a 2% tax on the fair market value of Common Shares repurchased (net of qualifying issuances of equity) as a direct cost of Common Share repurchases recognized in Shareholders’ equity. During the three and nine months ended September 30, 2026, the Company has accrued a liability of $29 million and $65 million, respectively, for the tax due on the net share repurchases made, payable within the first quarter of the following year.
The following table provides activities under the share repurchase program:
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
Number of Common Shares repurchased(1) | ||||||||||||||
Weighted-average price per share(2) | $ | $ | $ | $ | ||||||||||
Amount of repurchase (in millions of Canadian dollars)(1)(2) | $ | $ | $ | $ | ||||||||||
(2) Includes brokerage fees and applicable tax on share repurchases.
12 Pension and other benefits
During the three and nine months ended September 30, 2026, the Company made contributions, net of refunds, to its defined benefit pension plans of $3 million and $5 million, respectively (three and nine months ended September 30, 2025 - $3 million and $11 million, respectively).
Net periodic benefit (recovery) cost for defined benefit pension plans and other benefits included the following components:
| For the three months ended September 30 | ||||||||||||||||||||
| Pensions | Other benefits | Total | ||||||||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||
| Current service cost | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Other components of net periodic benefit (recovery) cost: | ||||||||||||||||||||
| Interest cost on benefit obligation | ||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||
| Recognized net actuarial (gain) loss | ( | ( | ( | |||||||||||||||||
| Amortization of prior service costs | ||||||||||||||||||||
| Total other components of net periodic benefit (recovery) cost | ( | ( | ( | ( | ||||||||||||||||
| Net periodic benefit (recovery) cost | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | ||||||||||
| For the nine months ended September 30 | ||||||||||||||||||||
| Pensions | Other benefits | Total | ||||||||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||
| Current service cost | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Other components of net periodic benefit (recovery) cost: | ||||||||||||||||||||
| Interest cost on benefit obligation | ||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||
| Recognized net actuarial (gain) loss | ( | ( | ( | ( | ||||||||||||||||
| Amortization of prior service costs | ||||||||||||||||||||
| Total other components of net periodic benefit (recovery) cost | ( | ( | ( | ( | ||||||||||||||||
| Net periodic benefit (recovery) cost | $ | ( | $ | ( | $ | $ | $ | ( | $ | ( | ||||||||||
13
13 Stock-based compensation
As at September 30, 2026, the Company had several stock-based compensation plans including stock option plans, various cash‑settled liability plans, and an employee share purchase plan. These plans resulted in an expense for the three and nine months ended September 30, 2026 of $39 million and $182 million, respectively (three and nine months ended September 30, 2025 - $4 million and $96 million, respectively).
Stock options plan
In the nine months ended September 30, 2026, under the Company’s stock option plan, the Company issued 1,189,411 options at the weighted-average price of $104.69 per share, based on the closing price of the Company's Common Shares on the TSX at the grant date. Pursuant to the employee plan, these options may be exercised upon vesting, which is between 12 months and 48 months after the grant date, and will expire seven years from the grant date.
Under the fair value method, the fair value of the stock options at the grant date was approximately $30 million.
Performance share unit plans
During the nine months ended September 30, 2026, the Company issued 629,722 Performance Share Units ("PSUs") with a grant date fair value of $66 million and 20,386 Performance Deferred Share Units ("PDSUs") with a grant date fair value, including the fair value of expected future matching units, of $3 million. PSUs and PDSUs attract dividend equivalents in the form of additional units based on dividends paid on the Company’s Common Shares, and vest to four years after the grant date, contingent on the Company’s performance ("performance factor"). Vested PSUs are settled in cash. Vested PDSUs are converted into Deferred Share Units ("DSUs") pursuant to the DSU plan, are eligible for a 25 % Company match if the employee has not exceeded their Common Share ownership requirements, and are settled in cash only when the holder ceases their employment with the Company.
The performance period for all PSUs and all PDSUs granted in the nine months ended September 30, 2026 is January 1, 2026 to December 31, 2028 and the performance factors are Free Cash Flow ("FCF"), Total Shareholder Return ("TSR") compared to the Standard and Poor's ("S&P")/TSX 60 Index, and TSR compared to the S&P 500 Industrials Index.
The performance period for the 544,175 PSUs and 26,333 PDSUs granted in 2023 was January 1, 2023 to December 31, 2025, and the performance factors were FCF, Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), TSR compared to the S&P/TSX 60 Index, TSR compared to the S&P 500 Industrials Index, and TSR compared to other Class I railways. The resulting payout was 91 % of the outstanding units multiplied by the Company's average Common Share price calculated based on the last 30 trading days preceding December 31, 2025. In the first quarter of 2026, payouts were $42 million on 461,766 PSUs, including dividends reinvested. The 26,555 PDSUs that vested on December 31, 2025, with a fair value of $3 million, including dividends reinvested and matching units, will be paid out in future reporting periods pursuant to the DSU plan (as described above).
14 Contingencies
Litigation
In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending as at September 30, 2026 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company’s business, financial position, results of operations, or liquidity. However, an unexpected adverse resolution of one or more of these legal actions could have a material adverse effect on the Company's business, financial position, results of operations, or liquidity in a particular quarter or fiscal year.
Legal proceedings related to Lac-Mégantic rail accident
On July 6, 2013, a train carrying petroleum crude oil operated by Montréal Maine and Atlantic Railway (“MMAR”) or a subsidiary, Montréal Maine & Atlantic Canada Co. (“MMAC” and collectively the “MMA Group”), derailed in Lac-Mégantic, Québec. The derailment occurred on a section of railway owned and operated by the MMA Group and while the MMA Group exclusively controlled the train.
Following the derailment, MMAC sought court protection in Canada under the Companies’ Creditors Arrangement Act and MMAR filed for bankruptcy in the U.S. Plans of arrangement were approved in both Canada and the U.S. (the “Plans”), providing for the distribution of approximately $440 million amongst those claiming derailment damages.
14
A number of legal proceedings, set out below, were commenced in Canada and the U.S. against the Company and others:
(1)Québec's Minister of Sustainable Development, Environment, Wildlife and Parks (the "MELCCFP") ordered various parties, including the Company, to remediate the derailment site (the "Cleanup Order") and served the Company with a Notice of Claim for $95 million for those costs. The Company appealed the Cleanup Order and contested the Notice of Claim with the Administrative Tribunal of Québec. These proceedings were stayed pending determination of the Attorney General of Québec (“AGQ”) action (paragraph 2 below). Following final determination of the consolidated claims described below, the AGQ reached out to the Company. On October 16, 2026, an agreement was reached whereby the Cleanup Order and the related Notices of Claim will all be annulled by the MELCCFP, following which all the proceedings still pending before the Administrative Tribunal of Québec will be discontinued. The parties are now completing the steps required to implement the agreement and formally conclude the proceedings.
(2)The AGQ sued the Company in the Québec Superior Court claiming $409 million in damages, which was further amended and reduced to $231 million (the “AGQ Action”). The AGQ Action alleges that: (i) the Company was responsible for the petroleum crude oil from its point of origin until its delivery to Irving Oil Ltd.; and (ii) the Company is vicariously liable for the acts and omissions of the MMA Group.
(3)A class action in the Québec Superior Court on behalf of persons and entities residing in, owning or leasing property in, operating a business in, or physically present in Lac-Mégantic at the time of the derailment was certified against the Company on May 8, 2015 (the "Class Action"). Other defendants including MMAC and Mr. Thomas Harding ("Harding") were added to the Class Action on January 25, 2017. On November 28, 2019, the plaintiffs' motion to discontinue their action against Harding was granted. The Class Action seeks unquantified damages, including for wrongful death, personal injury, property damage, and economic loss.
(4)Eight subrogated insurers sued the Company in the Québec Superior Court claiming approximately $16 million in damages, which was amended and reduced to approximately $14 million (the “Promutuel Action”), and two additional subrogated insurers sued the Company claiming approximately $3 million in damages (the “Royal Action”). Both actions contain similar allegations as the AGQ Action. The actions do not identify the subrogated parties. As such, the extent of any overlap between the damages claimed in these actions and under the Plans is unclear. The Royal Action was stayed pending determination of the consolidated proceedings described below. On October 9, 2026, the Québec Superior Court dismissed the Royal Action following final determination of the consolidated proceedings.
On December 11, 2017, the AGQ Action, the Class Action and the Promutuel Action were consolidated. The joint liability trial of these consolidated claims commenced on September 21, 2021 with oral arguments ending on June 15, 2022. The Québec Superior Court issued a decision on December 14, 2022 dismissing all claims against the Company, finding that the Company’s actions were not the direct and immediate cause of the accident and the damages suffered by the plaintiffs. All three plaintiffs filed a declaration of appeal on January 13, 2023. The appeal was heard October 7 to 10, 2024 by the Québec Court of Appeal. On February 26, 2025, the Québec Court of Appeal issued its unanimous decision upholding the trial decision and dismissing the appeals in their entirety. On April 28, 2025, all three plaintiffs filed applications for leave to appeal to the Supreme Court of Canada. On May 30, 2025, the Company filed its response to the plaintiffs' leave applications. On May 14, 2026, the Supreme Court of Canada dismissed all three plaintiffs’ filed applications for leave to appeal.
(5)Forty-eight plaintiffs (all individual claims joined in one action) sued the Company, MMAC, and Harding in the Québec Superior Court claiming approximately $5 million in damages for economic loss and pain and suffering, and asserting similar allegations as in the Class Action and the AGQ Action. The majority of the plaintiffs opted-out of the Class Action and all but two are also plaintiffs in litigation against the Company, described in paragraph 7 below. This action was stayed pending determination of the consolidated claims described above. On October 9, 2026, the Québec Superior Court dismissed this action following final determination of the consolidated proceedings.
(6)The MMAR U.S. bankruptcy estate representative commenced an action against the Company in November 2014 in the Maine Bankruptcy Court claiming that the Company failed to abide by certain regulations and seeking approximately U.S. $30 million in damages for MMAR’s loss in business value according to an expert report filed by the bankruptcy estate. This action asserts that the Company knew or ought to have known that the shipper misclassified the petroleum crude oil and therefore should have refused to transport it. A summary judgement motion was argued and taken under advisement on June 9, 2022. On May 23, 2023, the case management judge stayed the proceedings pending the outcome of the appeal in the Canadian consolidated claims. On April 18, 2025, the Court lifted the stay and ordered briefing concerning the Company’s request for summary judgement based on the preclusive effect of matters decided in other Lac-Mégantic cases. The Court would address that basis for summary judgement first, then would address other arguments for summary judgement, if necessary, afterwards. On October 8, 2025, the Court heard the Company's summary judgement motion. On April 21, 2026, the Court granted CPKC’s motion for summary judgement, dismissing the bankruptcy estate representative’s claims. The deadline for any appeal passed in May 2026 and no appeal was filed.
15
(7)The class and mass tort action commenced against the Company in June 2015 in Texas (on behalf of Lac-Mégantic residents and wrongful death representatives) and the wrongful death and personal injury actions commenced against the Company in June 2015 in Illinois and Maine, were all transferred and consolidated in Federal District Court in Maine (the “Maine Actions”). The Maine Actions allege that the Company negligently misclassified and improperly packaged the petroleum crude oil. On the Company’s motion, the Maine Actions were dismissed. The plaintiffs appealed the dismissal decision to the U.S. First Circuit Court of Appeals, which dismissed the plaintiffs' appeal on June 2, 2021. The plaintiffs further petitioned the U.S. First Circuit Court of Appeals for a rehearing, which was denied on September 8, 2021. On January 24, 2022, the plaintiffs further appealed to the U.S. Supreme Court on two bankruptcy procedural grounds. On May 31, 2022, the U.S. Supreme Court denied the petition, thereby rejecting the plaintiffs' appeal.
(8)The trustee for the wrongful death trust commenced Carmack Amendment claims against the Company in North Dakota Federal Court, seeking to recover approximately U.S. $6 million for damaged rail cars and lost crude oil and reimbursement for the settlement paid by the consignor and the consignee under the Plans (alleged to be U.S. $110 million and U.S. $60 million, respectively). The Court issued an Order on August 6, 2020 granting and denying in part the parties' summary judgement motions which has been reviewed and confirmed following motions by the parties for clarification and reconsideration. Final briefs of dispositive motions for summary judgement and for reconsideration on tariff applicability were submitted on September 30, 2022. On January 20, 2023, the Court granted in part the Company's summary judgement motion by dismissing all claims for recovery of settlement payments but leaving for trial the determination of the value of the lost crude oil. It also dismissed the Company's motion for reconsideration on tariff applicability. The remaining issues of the value of the lost crude oil and applicability of judgement reduction provisions did not require trial, and were fully briefed in 2024. On January 5, 2024, the Court issued its decision finding that the Company was liable for approximately U.S. $3.9 million plus pre-judgement interest, but declined to determine whether judgement reduction provisions were applicable, referring the parties to a court in Maine on that issue. On January 18, 2024, the Company filed a motion for reconsideration for the Court to apply the judgement reduction provisions. On January 19, 2024, the trustee for the wrongful death trust filed a Notice of Appeal for the January 5, 2024 decision, as well as prior decisions. On February 23, 2024, the Court denied the Company’s motion for reconsideration, again referring the parties to a court in Maine to apply the judgement reduction provision. On March 6, 2024, the Company filed its notice of appeal of this latest ruling, as well as prior decisions. The appeal was heard on March 18, 2025. On July 3, 2025, the U.S. Eighth Circuit Court of Appeals unanimously allowed the Company’s appeal, reversing the district court decision and remanding the matter back to the district court for a complete reduction of the judgement against the Company. On July 17, 2025, the trustee for the wrongful death trust petitioned the U.S. Eighth Circuit Court of Appeals for a rehearing. On August 7, 2025, the U.S. Eighth Circuit Court of Appeals denied the petition for a rehearing. The deadline for any petition to the U.S. Supreme Court for certiorari passed in November 2025 and no petition was filed.
At this stage of the proceedings, any potential responsibility by the Company is remote.
Court decision related to Remington Development Corporation legal claim
On October 20, 2022, the Court of King’s Bench of Alberta issued a decision in a claim brought by Remington Development Corporation (“Remington”) against the Company and the Province of Alberta (“Alberta”) with respect to an alleged breach of contract by the Company in relation to the sale of certain properties in Calgary. In its decision, the Court found the Company had breached its contract with Remington and Alberta had induced the contract breach. The Court found the Company and Alberta liable for damages of approximately $164 million plus interest and costs, and subject to an adjustment to the acquisition value of the property. In a further decision on August 30, 2023, the Court determined that adjustment and set the total damages at $165 million plus interest and costs. On October 20, 2023, the Court determined the costs payable to Remington, however, the Court had not provided any indication of how the damages, which were estimated to total approximately $232 million as at June 30, 2025, should be apportioned between the Company and Alberta. On November 17, 2022, the Company filed an appeal of the Court’s decision. On April 11, 2024, the Court of Appeal of Alberta ("ABCA") stayed the judgement pending the outcome of the appeal. On September 10, 2024, the ABCA heard the Company's appeal and reserved its decision. On July 2, 2025, the ABCA unanimously allowed the Company’s appeal and set aside the trial judgement and costs order. A majority of the ABCA ordered a new trial in the Court of King’s Bench. On September 26, 2025, Remington sought leave to appeal the ABCA’s decision to the Supreme Court of Canada. On July 2, 2026, the Supreme Court of Canada dismissed Remington's application for leave to appeal the ABCA's decision. Parties are now proceeding with various procedural steps prior to the new trial ordered by a majority of the ABCA.
2014 tax assessment
On April 13, 2022, the SAT delivered an audit assessment of CPKCM’s 2014 tax returns (the "2014 Assessment"). As at September 30, 2026, the 2014 Assessment, including inflation, interest, and penalties was Mexican Pesos ("Ps.") 6,710 million ($528 million).
On July 7, 2022, CPKCM filed an administrative appeal (the “Administrative Appeal”) before the SAT, seeking to revoke the 2014 Assessment on the basis that the SAT’s notification of the 2014 Assessment through the tax mailbox was not legal, because it was in violation of a tax mailbox injunction previously granted to CPKCM on March 19, 2015. On September 26, 2022, the SAT dismissed the Administrative Appeal, on the basis that it was not a timely submission (the “Administrative Appeal Resolution”).
16
On October 10, 2022, CPKCM submitted an annulment lawsuit (the "Annulment Lawsuit") before the Federal Administrative Court (the "Administrative Court"), challenging the 2014 Assessment, its notification, and the Administrative Appeal Resolution. On April 24, 2024, the Administrative Court resolved the Annulment Lawsuit, confirming the Administrative Appeal Resolution and the 2014 Assessment (the "Administrative Court Resolution").
On June 21, 2024, CPKCM challenged the Administrative Court Resolution by submitting an Amparo appeal (Demanda de Amparo) before the Collegiate Circuit Courts (Tribunales Colegiados de Circuito). On June 4, 2025, the Twenty Third Collegiate Court of the First Circuit (the "Circuit Court") unanimously granted CPKCM’s Amparo petition, vacating the prior decision and sending the matter back to the Administrative Court with an order to issue a new resolution addressing CPKCM’s arguments that were presented in the Annulment Lawsuit. On June 25, 2025, the Administrative Court resolved the Annulment Lawsuit unfavourably to CPKCM (the "2025 Administrative Court Resolution"). On August 19, 2025, CPKCM submitted a new Amparo appeal challenging the 2025 Administrative Court Resolution. On September 8, 2025, the Circuit Court admitted the Amparo appeal submitted by CPKCM. CPKCM expects to prevail based on the technical merits of its case.
On August 20, 2025, derived from the submission of the Amparo appeal, the Administrative Court issued a resolution granting an injunction against the enforcement and collection of the 2014 Assessment, as long as the 2014 Assessment is duly guaranteed.
On March 24, 2026, CPKC filed with the International Centre for Settlement of Investment Disputes ("ICSID") a Request for Arbitration against the United Mexican States, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP"), for the actions taken by the SAT in connection with the 2014 Assessment. On April 27, 2026, the ICSID registered the Request for Arbitration filed by the Company, which is a procedural step taken to preserve CPKCM’s legal rights under the CPTPP.
Environmental liabilities
Environmental remediation accruals, recognized on an undiscounted basis unless a reliable, determinable estimate as to an amount and timing of costs can be established, cover site-specific remediation programs.
The accruals for environmental remediation represent the Company’s best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recognized accruals include the Company’s best estimate of all probable costs, the Company’s total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, and as environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable.
Provisions for environmental remediation costs are recognized in the Company's Interim Consolidated Balance Sheets in “Other long-term liabilities”, except for the current portion, which is recognized in “Accounts payable and accrued liabilities”. The total amount provided as at September 30, 2026 was $247 million (December 31, 2025 - $241 million). Payments are expected to be made over 10 years through 2035.
15 Subsequent event
On October 6, 2026, the Company issued $500 million 4.20 % unsecured notes due April 15, 2030 for net proceeds of $498 million, $550 million 4.60 % 7-year unsecured notes due October 15, 2033 for net proceeds of $547 million, $300 million 4.90 % unsecured notes due April 15, 2037 for net proceeds of $297 million, and $450 million 5.40 % 30-year unsecured notes due October 15, 2056 for net proceeds of $443 million. The issued notes pay interest semi-annually and carry a negative pledge.
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Interim Consolidated Financial Statements and the related notes as at and for the three and nine months ended September 30, 2026 in Item 1. Financial Statements, other information in this report, and Item 8. Financial Statements and Supplementary Data of the Company's 2025 Annual Report on Form 10-K. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.
In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, references to "CPKC", "the Company" or "our" are to Canadian Pacific Kansas City Limited ("CPKC") and its subsidiaries.
Available Information
The Company makes available on or through its website www.cpkcr.com free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission (“SEC”). Our website also contains charters for our Board of Directors and each of its committees, our corporate governance guidelines and our Code of Business Ethics. SEC filings made by the Company are also accessible through the SEC’s website at www.sec.gov. The information on our website is not part of this quarterly report on Form 10-Q.
The Company has included the Chief Executive Officer's (“CEO”) and Chief Financial Officer's ("CFO") certifications regarding the Company's public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits to this report.
Executive Summary
Third Quarter of 2026 Results
•Total revenues were $4,219 million, an increase of 15% compared to $3,661 million in 2025.
•Diluted earnings per share ("EPS") was $1.04, an increase of 3% compared to $1.01 in 2025.
•Core adjusted diluted EPS was $1.28, an increase of 16% compared to $1.10 in 2025.
•Operating ratio was 64.8%, a 130 basis point increase from 63.5% in 2025.
•Core adjusted operating ratio was 61.9%, a 120 basis point increase from 60.7% in 2025.
Core adjusted diluted EPS and Core adjusted operating ratio are defined and reconciled in the "Non-GAAP Measures" section of this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Performance Indicators
The following table lists the key measures of the Company’s operating performance:
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||||||||
| 2026 | 2025 | % Change | 2026 | 2025 | % Change | |||||||||||||||
| Operations Performance | ||||||||||||||||||||
| Gross ton-miles (“GTMs”) (millions) | 107,042 | 100,310 | 7 | 315,271 | 300,695 | 5 | ||||||||||||||
| Train miles (thousands) | 12,398 | 11,589 | 7 | 36,314 | 35,353 | 3 | ||||||||||||||
| Fuel efficiency (U.S. gallons of locomotive fuel consumed / 1,000 GTMs) | 0.990 | 1.021 | (3) | 1.007 | 1.040 | (3) | ||||||||||||||
| Total employees (average) | 19,857 | 20,067 | (1) | 19,744 | 19,985 | (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. These key measures reflect how effective the Company’s management is at controlling costs and executing the Company’s operating plan and strategy. Continued monitoring of these key measures enables the Company to take appropriate actions to deliver superior service and grow its business at low incremental cost.
A GTM is defined as the movement of one ton of train weight over one mile. GTMs are calculated by multiplying total train weight by the distance the train moved. Total train weight comprises the weight of the freight cars, their contents, and any inactive locomotives. An increase in GTMs indicates additional workload. The increase in GTMs in the third quarter of 2026 was primarily due to higher volumes of Grain, Intermodal, and Metals, minerals and consumer products, partially offset by lower volumes of Coal and Potash.
18
The increase in GTMs in the first nine months of 2026 was primarily due to higher volumes of Grain, Intermodal, Metals, minerals and consumer products, and crude, partially offset by lower volumes of Coal, Energy, chemicals and plastics, excluding crude, and Potash.
Train miles are defined as the sum of the distance moved by all trains operated on the network. Train miles provide a measure of the productive utilization of our network. A smaller increase in train miles relative to increases in volumes, as measured by Revenue ton-miles ("RTMs"), and/or workload, as measured by GTMs, indicates improved train productivity. The increase in train miles in the third quarter of 2026 reflected the impact of a 7% increase in workload (GTMs).
The increase in train miles in the first nine months of 2026 reflected the impact of a 5% increase in workload (GTMs), partially offset by a 1% increase in average train weights, which was primarily due to an improvement in operating plan efficiency.
Fuel efficiency is defined as United States ("U.S.") gallons of locomotive fuel consumed per 1,000 GTMs. Fuel consumed includes gallons from freight, yard and commuter service but excludes fuel used in capital projects and other non-freight activities. An improvement in fuel efficiency indicates operational cost savings. The improvements in Fuel efficiency in the third quarter and in the first nine months of 2026 were due to the improvements in locomotive productivity as measured by GTMs / operating horsepower.
An employee is defined as an individual currently engaged in full-time, part-time, or seasonal employment with the Company. The Company monitors employment and workforce levels in order to efficiently meet service and strategic requirements. The number of employees is a key driver of total compensation and benefits costs. The decreases in the average number of total employees in the third quarter and in the first nine months of 2026 were primarily due to the completion of systems integration in 2025 and efficient resource planning.
Financial Highlights
The following table presents selected financial data related to the Company’s financial results for the three and nine months ended September 30, 2026 and the comparative periods in 2025:
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| (in millions, except per share data, percentages and ratios) | 2026 | 2025 | 2026 | 2025 | ||||||||||
| Financial Performance | ||||||||||||||
| Total revenues | $ | 4,219 | $ | 3,661 | $ | 12,084 | $ | 11,155 | ||||||
| Operating income | 1,487 | 1,336 | 4,217 | 3,996 | ||||||||||
| Net income attributable to controlling shareholders | 917 | 920 | 2,787 | 3,064 | ||||||||||
| Basic EPS | 1.05 | 1.01 | 3.14 | 3.32 | ||||||||||
| Diluted EPS | 1.04 | 1.01 | 3.14 | 3.32 | ||||||||||
Core adjusted diluted EPS(1) | 1.28 | 1.10 | 3.57 | 3.28 | ||||||||||
| Dividends declared per share | 0.268 | 0.228 | 0.764 | 0.646 | ||||||||||
| Financial Ratios | ||||||||||||||
Operating ratio(2) | 64.8 | % | 63.5 | % | 65.1 | % | 64.2 | % | ||||||
Core adjusted operating ratio(1) | 61.9 | % | 60.7 | % | 62.1 | % | 61.3 | % | ||||||
(1)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. These measures are defined and reconciled in the Non-GAAP Measures section.
(2)Operating ratio is defined as total operating expenses divided by total revenues.
19
Results of Operations
Operating Revenues
The Company’s revenues are primarily derived from transporting freight. Changes in freight volumes generally contribute to corresponding changes in Freight revenues and certain variable expenses such as fuel, equipment rents, and crew costs. Non-freight revenues are generated from leasing certain assets, interline switching, and other arrangements including contracts with passenger service operators, subsurface and mineral rights agreements, and logistical services.
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 4,139 | $ | 3,589 | $ | 550 | 15 | ||||||||||
| Non-freight revenues (in millions) | 80 | 72 | 8 | 11 | |||||||||||||
| Total revenues (in millions) | $ | 4,219 | $ | 3,661 | $ | 558 | 15 | ||||||||||
| Carloads (in thousands) | 1,191.0 | 1,132.2 | 58.8 | 5 | |||||||||||||
| Revenue ton-miles (in millions) | 57,505 | 54,200 | 3,305 | 6 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 3,475 | $ | 3,170 | $ | 305 | 10 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 7.20 | 6.62 | 0.58 | 9 | |||||||||||||
Total Revenues
The increase in Freight revenues in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes as measured by RTMs. The increase in Non-freight revenues was primarily due to higher revenues from subsurface agreements and passenger service operators.
RTMs
RTMs are defined as the movement of one revenue-producing ton of freight over a distance of one mile. RTMs measure the relative weight and distance of rail freight moved by the Company. The increase in RTMs in the third quarter of 2026 was primarily due to higher volumes of Grain, Intermodal, and Metals, minerals and consumer products, partially offset by lower volumes of Coal and Potash.
Freight Revenue per RTM
Freight revenue per RTM is defined as freight revenue per revenue-producing ton of freight over a distance of one mile. This is an indicator of yield. The increase in freight revenue per RTM in the third quarter of 2026 was primarily due to the favourable impact of higher fuel prices on fuel surcharge revenue of $244 million, higher freight rates, and the favourable impact of the change in foreign exchange ("FX") rates of $65 million.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 11,855 | $ | 10,945 | $ | 910 | 8 | ||||||||||
| Non-freight revenues (in millions) | 229 | 210 | 19 | 9 | |||||||||||||
| Total revenues (in millions) | $ | 12,084 | $ | 11,155 | $ | 929 | 8 | ||||||||||
| Carloads (in thousands) | 3,423.6 | 3,383.8 | 39.8 | 1 | |||||||||||||
| Revenue ton-miles (in millions) | 169,807 | 163,453 | 6,354 | 4 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 3,463 | $ | 3,235 | $ | 228 | 7 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 6.98 | 6.70 | 0.28 | 4 | |||||||||||||
Total Revenues
The increase in Freight revenues in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes as measured by RTMs. The increase in Non-freight revenues was primarily due to higher revenues from subsurface agreements.
RTMs
The increase in RTMs in the first nine months of 2026 was primarily due to higher volumes of Grain, Intermodal, Metals, minerals and consumer products, and crude, partially offset by lower volumes of Coal, Energy, chemicals and plastics, excluding crude, and Potash.
Freight Revenue per RTM
Freight revenue per RTM in the first nine months of 2026 increased primarily due to the favourable impact of higher fuel prices on fuel surcharge revenue of $461 million, higher freight rates, and the favourable impact of the change in FX rates of $5 million.
20
Fuel Cost Adjustment Program
Freight revenues include fuel surcharge revenues associated with the Company's fuel cost adjustment program, which is designed to respond to fluctuations in fuel prices and reduce exposure to changes in fuel prices. The surcharge is applied to shippers through tariffs and by contract, within agreed-upon guidelines. This program includes recoveries of carbon taxes, levies, and obligations under cap-and-trade programs. Freight revenues included fuel surcharge revenues of $629 million in the third quarter of 2026, an increase of $271 million, or 76%, from $358 million in the same period of 2025. This increase was primarily due to higher fuel prices, higher volumes, and the favourable impact of the change in FX rates, partially offset by the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program.
In the first nine months of 2026, fuel surcharge revenues were $1,589 million, an increase of $479 million, or 43%, from $1,110 million in the same period of 2025. This increase was primarily due to higher fuel prices, higher volumes, and the favourable impact of the change in FX rates, partially offset by the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program and lower carbon levy surcharge revenue due to the elimination of the Canadian federal carbon tax program effective April 1, 2025.
Lines of Business
Grain
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 904 | $ | 702 | $ | 202 | 29 | ||||||||||
| Carloads (in thousands) | 158.8 | 132.3 | 26.5 | 20 | |||||||||||||
| Revenue ton-miles (in millions) | 17,092 | 13,950 | 3,142 | 23 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 5,693 | $ | 5,306 | $ | 387 | 7 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 5.29 | 5.03 | 0.26 | 5 | |||||||||||||
The increase in Grain revenue in the third quarter of 2026 was primarily due to higher volumes of Canadian grain to Vancouver, British Columbia ("B.C."), Mexico, and Thunder Bay, Ontario, higher volumes of U.S. grain to Mexico and the U.S. Pacific Northwest, and an increase in freight revenue per RTM due to higher fuel surcharge revenue, the favourable impact of the change in FX rates, and higher freight rates. RTMs increased more than carloads due to moving higher volumes of Grain to Mexico, which has a longer length of haul.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 2,700 | $ | 2,233 | $ | 467 | 21 | ||||||||||
| Carloads (in thousands) | 475.9 | 408.6 | 67.3 | 16 | |||||||||||||
| Revenue ton-miles (in millions) | 51,691 | 43,862 | 7,829 | 18 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 5,673 | $ | 5,465 | $ | 208 | 4 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 5.22 | 5.09 | 0.13 | 3 | |||||||||||||
The increase in Grain revenue in the first nine months of 2026 was primarily due to higher volumes of Canadian grain to Vancouver, Mexico, eastern Canada, and the U.S. Midwest, higher volumes of U.S. grain to Mexico and the U.S. Pacific Northwest, and an increase in freight revenue per RTM due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates.
Coal
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 254 | $ | 255 | $ | (1) | — | ||||||||||
| Carloads (in thousands) | 116.1 | 126.5 | (10.4) | (8) | |||||||||||||
| Revenue ton-miles (in millions) | 5,406 | 6,081 | (675) | (11) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 2,188 | $ | 2,016 | $ | 172 | 9 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 4.70 | 4.19 | 0.51 | 12 | |||||||||||||
Coal revenue was relatively flat in the third quarter of 2026 primarily due to lower volumes of Canadian coal to Kamloops, B.C. and Vancouver, as well as lower volumes of U.S. coal, offset by an increase in freight revenue per RTM due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates. RTMs decreased more than carloads due to moving proportionately lower volumes of Canadian coal, which has a longer length of haul.
21
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 689 | $ | 768 | $ | (79) | (10) | ||||||||||
| Carloads (in thousands) | 320.0 | 363.5 | (43.5) | (12) | |||||||||||||
| Revenue ton-miles (in millions) | 14,928 | 17,937 | (3,009) | (17) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 2,153 | $ | 2,113 | $ | 40 | 2 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 4.62 | 4.28 | 0.34 | 8 | |||||||||||||
The decrease in Coal revenue in the first nine months of 2026 was primarily due to lower volumes of Canadian coal to Kamloops, Vancouver, and Thunder Bay due to lower production and maintenance at both the mines and the ports, as well as lower volumes of U.S. coal, partially offset by an increase in freight revenue per RTM due to higher fuel surcharge revenue and higher freight rates. RTMs decreased more than carloads due to moving proportionately lower volumes of Canadian coal, which has a longer length of haul.
Potash
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 182 | $ | 167 | $ | 15 | 9 | ||||||||||
| Carloads (in thousands) | 43.3 | 47.3 | (4.0) | (8) | |||||||||||||
| Revenue ton-miles (in millions) | 4,813 | 5,158 | (345) | (7) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 4,203 | $ | 3,531 | $ | 672 | 19 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 3.78 | 3.24 | 0.54 | 17 | |||||||||||||
The increase in Potash revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of export potash to Kansas City, Missouri, Chicago, Illinois, and Kamloops, partially offset by lower volumes of export potash to the U.S. Pacific Northwest and Vancouver and lower volumes of domestic potash. Freight revenue per RTM increased due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 515 | $ | 490 | $ | 25 | 5 | ||||||||||
| Carloads (in thousands) | 131.0 | 134.5 | (3.5) | (3) | |||||||||||||
| Revenue ton-miles (in millions) | 14,541 | 14,881 | (340) | (2) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 3,931 | $ | 3,643 | $ | 288 | 8 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 3.54 | 3.29 | 0.25 | 8 | |||||||||||||
The increase in Potash revenue in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of export potash to Kansas City and Kamloops, partially offset by lower volumes of export potash to the U.S. Pacific Northwest and Vancouver and lower volumes of domestic potash. Freight revenue per RTM increased due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates.
Fertilizers and Sulphur
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 105 | $ | 102 | $ | 3 | 3 | ||||||||||
| Carloads (in thousands) | 16.5 | 16.6 | (0.1) | (1) | |||||||||||||
| Revenue ton-miles (in millions) | 1,187 | 1,273 | (86) | (7) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,364 | $ | 6,145 | $ | 219 | 4 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 8.85 | 8.01 | 0.84 | 10 | |||||||||||||
The increase in Fertilizers and sulphur revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of dry fertilizers, partially offset by lower volumes of sulphur and wet fertilizers. Freight revenue per RTM increased due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates. RTMs decreased more than carloads due to moving lower volumes of sulphur from Alberta to Chicago, which has a longer length of haul, and higher volumes of dry fertilizers within Alberta, which has a shorter length of haul.
22
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 327 | $ | 314 | $ | 13 | 4 | ||||||||||
| Carloads (in thousands) | 50.3 | 50.0 | 0.3 | 1 | |||||||||||||
| Revenue ton-miles (in millions) | 3,803 | 3,920 | (117) | (3) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,501 | $ | 6,280 | $ | 221 | 4 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 8.60 | 8.01 | 0.59 | 7 | |||||||||||||
The increase in Fertilizers and sulphur revenue in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of dry fertilizers, partially offset by lower volumes of sulphur. Freight revenue per RTM increased due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates. RTMs decreased while carloads increased due to moving lower volumes of sulphur from Alberta to Chicago, which has a longer length of haul, and higher volumes of dry fertilizers within Alberta, which has a shorter length of haul.
Forest Products
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 211 | $ | 193 | $ | 18 | 9 | ||||||||||
| Carloads (in thousands) | 32.1 | 31.9 | 0.2 | 1 | |||||||||||||
| Revenue ton-miles (in millions) | 2,248 | 2,194 | 54 | 2 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,573 | $ | 6,050 | $ | 523 | 9 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 9.39 | 8.80 | 0.59 | 7 | |||||||||||||
The increase in Forest products revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of printing papers, wood pulp, and logs and poles, partially offset by lower volumes of paperboard. Freight revenue per RTM increased due to higher fuel surcharge revenue, the favourable impact of the change in FX rates, and higher freight rates.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 590 | $ | 605 | $ | (15) | (2) | ||||||||||
| Carloads (in thousands) | 93.7 | 99.5 | (5.8) | (6) | |||||||||||||
| Revenue ton-miles (in millions) | 6,548 | 6,773 | (225) | (3) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,297 | $ | 6,080 | $ | 217 | 4 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 9.01 | 8.93 | 0.08 | 1 | |||||||||||||
The decrease in Forest products revenue in the first nine months of 2026 was primarily due to lower volumes of wood pulp, paperboard, and newsprint, partially offset by higher volumes of printing papers and an increase in freight revenue per RTM. Freight revenue per RTM increased due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates. Carloads decreased more than RTMs due to moving lower volumes of paperboard from Louisiana to the U.S. Midwest, which has a shorter length of haul.
Energy, Chemicals and Plastics
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 763 | $ | 701 | $ | 62 | 9 | ||||||||||
| Carloads (in thousands) | 139.9 | 139.0 | 0.9 | 1 | |||||||||||||
| Revenue ton-miles (in millions) | 9,360 | 9,400 | (40) | — | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 5,454 | $ | 5,043 | $ | 411 | 8 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 8.15 | 7.46 | 0.69 | 9 | |||||||||||||
The increase in Energy, chemicals and plastics revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of liquefied petroleum gas, partially offset by lower volumes of crude. Freight revenue per RTM increased due to higher fuel surcharge revenue, the favourable impact of the change in FX rates, and higher freight rates.
23
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 2,240 | $ | 2,171 | $ | 69 | 3 | ||||||||||
| Carloads (in thousands) | 415.3 | 424.2 | (8.9) | (2) | |||||||||||||
| Revenue ton-miles (in millions) | 28,252 | 28,249 | 3 | — | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 5,394 | $ | 5,118 | $ | 276 | 5 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 7.93 | 7.69 | 0.24 | 3 | |||||||||||||
The increase in Energy, chemicals and plastics revenue in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes of crude, partially offset by lower volumes of fuel oil. Freight revenue per RTM increased due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates.
Metals, Minerals and Consumer Products
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 532 | $ | 458 | $ | 74 | 16 | ||||||||||
| Carloads (in thousands) | 134.8 | 125.3 | 9.5 | 8 | |||||||||||||
| Revenue ton-miles (in millions) | 5,357 | 4,951 | 406 | 8 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 3,947 | $ | 3,655 | $ | 292 | 8 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 9.93 | 9.25 | 0.68 | 7 | |||||||||||||
The increase in Metals, minerals and consumer products revenue in the third quarter of 2026 was primarily due to higher volumes of steel and aluminum and an increase in freight revenue per RTM due to higher fuel surcharge revenue, the favourable impact of the change in FX rates, and higher freight rates.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 1,494 | $ | 1,350 | $ | 144 | 11 | ||||||||||
| Carloads (in thousands) | 385.8 | 375.1 | 10.7 | 3 | |||||||||||||
| Revenue ton-miles (in millions) | 15,408 | 14,537 | 871 | 6 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 3,872 | $ | 3,599 | $ | 273 | 8 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 9.70 | 9.29 | 0.41 | 4 | |||||||||||||
The increase in Metals, minerals and consumer products revenue in the first nine months of 2026 was primarily due to higher volumes of steel, sand and stone, and aluminum and an increase in freight revenue per RTM due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates. RTMs increased more than carloads due to moving higher volumes of sand and stone from Wisconsin to Mexico, which has a longer length of haul.
Automotive
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 373 | $ | 343 | $ | 30 | 9 | ||||||||||
| Carloads (in thousands) | 59.7 | 62.2 | (2.5) | (4) | |||||||||||||
| Revenue ton-miles (in millions) | 1,442 | 1,514 | (72) | (5) | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,248 | $ | 5,514 | $ | 734 | 13 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 25.87 | 22.66 | 3.21 | 14 | |||||||||||||
The increase in Automotive revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM, partially offset by lower volumes from the U.S. Midwest and Mexico. Freight revenue per RTM increased due to higher fuel surcharge revenue, the favourable impact of the change in FX rates, and higher freight rates.
24
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 1,072 | $ | 988 | $ | 84 | 9 | ||||||||||
| Carloads (in thousands) | 176.0 | 182.4 | (6.4) | (4) | |||||||||||||
| Revenue ton-miles (in millions) | 4,228 | 4,163 | 65 | 2 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 6,091 | $ | 5,417 | $ | 674 | 12 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 25.35 | 23.73 | 1.62 | 7 | |||||||||||||
The increase in Automotive revenue in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM and higher volumes from Mexico to Canada, partially offset by lower volumes from the U.S. Midwest. Freight revenue per RTM increased due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates. Carloads decreased while RTMs increased due to moving lower volumes from Ontario to Chicago and New York, which have shorter lengths of haul, and moving higher volumes from Mexico to Canada, which has a longer length of haul.
Intermodal
| For the three months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 815 | $ | 668 | $ | 147 | 22 | ||||||||||
| Carloads (in thousands) | 489.8 | 451.1 | 38.7 | 9 | |||||||||||||
| Revenue ton-miles (in millions) | 10,600 | 9,679 | 921 | 10 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 1,664 | $ | 1,481 | $ | 183 | 12 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 7.69 | 6.90 | 0.79 | 11 | |||||||||||||
The increase in Intermodal revenue in the third quarter of 2026 was primarily due to an increase in freight revenue per RTM, higher international intermodal volumes to and from the Port of Vancouver and the Port of Montréal, and higher domestic intermodal wholesale volumes, partially offset by lower international intermodal volumes to and from the Port of Saint John. Freight revenue per RTM increased due to higher fuel surcharge revenue, higher freight rates, and the favourable impact of the change in FX rates.
| For the nine months ended September 30 | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Freight revenues (in millions) | $ | 2,228 | $ | 2,026 | $ | 202 | 10 | ||||||||||
| Carloads (in thousands) | 1,375.6 | 1,346.0 | 29.6 | 2 | |||||||||||||
| Revenue ton-miles (in millions) | 30,408 | 29,131 | 1,277 | 4 | |||||||||||||
| Freight revenue per carload (in dollars) | $ | 1,620 | $ | 1,505 | $ | 115 | 8 | ||||||||||
| Freight revenue per revenue ton-mile (in cents) | 7.33 | 6.95 | 0.38 | 5 | |||||||||||||
The increase in Intermodal revenue in the first nine months of 2026 was primarily due to an increase in freight revenue per RTM, higher international intermodal volumes to and from the Port of Vancouver, and higher domestic intermodal wholesale volumes, partially offset by lower international intermodal volumes to and from the Port of Saint John. Freight revenue per RTM increased due to higher fuel surcharge revenue and higher freight rates, partially offset by the unfavourable impact of the change in FX rates.
Operating Expenses
| For the three months ended September 30 | |||||||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Compensation and benefits | $ | 711 | $ | 619 | $ | 92 | 15 | ||||||||||
| Fuel | 667 | 415 | 252 | 61 | |||||||||||||
| Materials | 130 | 114 | 16 | 14 | |||||||||||||
| Equipment rents | 101 | 109 | (8) | (7) | |||||||||||||
| Depreciation and amortization | 529 | 503 | 26 | 5 | |||||||||||||
| Purchased services and other | 594 | 565 | 29 | 5 | |||||||||||||
| Total operating expenses | $ | 2,732 | $ | 2,325 | $ | 407 | 18 | ||||||||||
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| For the nine months ended September 30 | |||||||||||||||||
| (in millions of Canadian dollars) | 2026 | 2025 | Total Change | % Change | |||||||||||||
| Compensation and benefits | $ | 2,125 | $ | 1,960 | $ | 165 | 8 | ||||||||||
| Fuel | 1,743 | 1,301 | 442 | 34 | |||||||||||||
| Materials | 387 | 362 | 25 | 7 | |||||||||||||
| Equipment rents | 293 | 311 | (18) | (6) | |||||||||||||
| Depreciation and amortization | 1,560 | 1,500 | 60 | 4 | |||||||||||||
| Purchased services and other | 1,759 | 1,725 | 34 | 2 | |||||||||||||
| Total operating expenses | $ | 7,867 | $ | 7,159 | $ | 708 | 10 | ||||||||||
Compensation and Benefits
Compensation and benefits expense includes employee wages, salaries, fringe benefits, and stock-based compensation. The increase in Compensation and benefits expense in the third quarter of 2026 was primarily due to:
•increased stock-based compensation expense of $35 million, primarily due to changes in payout rates and in the Common Share price;
•higher incentive compensation;
•the impact of wage and benefit inflation;
•higher volume variable expense as a result of increased workload as measured by GTMs; and
•the unfavourable impact of the change in FX rates of $13 million.
This increase was partially offset by efficient resource planning and efficiencies gained by a reduction in headcount due to the completion of systems integration in 2025.
The increase in Compensation and benefits expense in the first nine months of 2026 was primarily due to:
•increased stock-based compensation expense of $86 million, primarily due to changes in payout rates and in the Common Share price;
•the impact of wage and benefit inflation;
•increased volume variable expenses as a result of increased workload as measured by GTMs;
•higher incentive compensation; and
•the unfavourable impact of the change in FX rates of $19 million.
This increase was partially offset by efficiencies gained by a reduction in headcount due to the completion of systems integration in 2025 and efficient resource planning, including the impact of increased train weights.
Fuel
Fuel expense consists primarily of fuel used by locomotives and includes provincial, state, and federal fuel taxes. The increase in Fuel expense in the third quarter of 2026 was primarily due to:
•the impact of higher fuel prices of $216 million due to higher diesel benchmark prices net of purchasing discounts;
•an increase in workload, as measured by GTMs; and
•the unfavourable impact of the change in FX rates of $13 million.
This increase was partially offset by the favourable impact of improved fuel efficiency due to the improvement in locomotive productivity as measured by GTMs / operating horsepower.
The increase in Fuel expense in the first nine months of 2026 was primarily due to:
•the impact of higher fuel prices of $395 million due to higher diesel benchmark prices net of purchasing discounts, partially offset by lower carbon tax expense following the elimination of the Canadian federal carbon tax program effective April 1, 2025;
•an increase in workload, as measured by GTMs; and
•the unfavourable impact of the change in FX rates of $19 million.
This increase was partially offset by the favourable impact of improved fuel efficiency due to the improvement in locomotive productivity as measured by GTMs / operating horsepower.
Materials
Materials expense includes the cost of materials used for the maintenance of track, locomotives, freight cars, and buildings, as well as software sustainment. The increase in Materials expense in the third quarter of 2026 was primarily due to cost inflation and increased locomotive maintenance.
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The increase in Materials expense in the first nine months of 2026 was primarily due to cost inflation and increased locomotive maintenance. This increase was partially offset by reduced safety material costs.
Equipment Rents
Equipment rents expense includes the cost associated with using other railways' freight cars, intermodal equipment, and locomotives, net of recoveries received from other railways for their use of similar equipment owned by the Company. Equipment rents decreased in the third quarter of 2026 primarily due to improved freight car cycle times, which reduced car hire costs, partially offset by higher usage of pooled intermodal platforms by the Company.
The decrease in Equipment rents expense in the first nine months of 2026 was primarily due to improved cycle times, which reduced car hire costs and the impact of lower car hire rates for pooled and foreign freight cars used by the Company. This decrease was partially offset by higher expenses related to leased freight cars and higher usage of pooled intermodal platforms by the Company.
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, as well as amortization of finite life intangible assets. The increase in Depreciation and amortization expense in the third quarter of 2026 was primarily due to a larger depreciable asset base as a result of capital program spending.
The increase in Depreciation and amortization expense in the first nine months of 2026 was primarily due to a larger depreciable asset base as a result of capital program spending, partially offset by the favourable impact of the change in FX rates of $9 million.
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. The increase in Purchased services and other expense in the third quarter of 2026 was primarily due to:
•advisory costs related to the analysis and advocacy in connection with the U.S. Surface Transportation Board's (the "STB") review of the proposed merger between Union Pacific Corporation ("UP") and Norfolk Southern Corporation ("NS") of $17 million;
•the impact of cost inflation;
•higher property taxes;
•the unfavourable impact of the change in FX rates of $11 million;
•higher track repairs; and
•higher expenses due to environmental and weather-related events.
This increase was partially offset by a decrease in casualty incident costs and lower crew costs.
The increase in Purchased services and other expense in the first nine months of 2026 was primarily due to:
•advisory costs related to the analysis and advocacy in connection with the STB's review of the proposed merger between UP and NS of $44 million;
•the impact of cost inflation;
•higher expenses due to environmental and weather-related events; and
•higher property taxes.
This increase was partially offset by lower acquisition-related and other operating costs across several areas, including intermodal operations, track repairs and infrastructure projects, terminal services, crew costs, and casualty incident costs.
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, financing costs, shareholder costs, equity earnings, and other non-operating expenditures. Other income was $5 million in the third quarter of 2026, a change of $13 million, or 163%, from Other expense of $8 million in the same period of 2025. This change was driven by higher equity income and a net FX gain of $5 million primarily from the re-measurement of working capital denominated in U.S. dollars and Mexican pesos.
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Other expense was $1 million in the first nine months of 2026, a change of $2 million, or 200%, from Other income of $1 million in the same period of 2025. This change was driven by net FX losses of $24 million primarily from the re-measurement of working capital and cash denominated in U.S. dollars and Mexican pesos, partially offset by higher equity income.
Other Components of Net Periodic Benefit Recovery
Other components of net periodic benefit recovery is related to the Company's defined benefit pension and other post-retirement and post-employment benefit plans. It includes interest cost on benefit obligation, expected return on plan assets, recognized net actuarial gain, and amortization of prior service costs. Other components of net periodic benefit recovery was $111 million and $331 million for the three and nine months ended September 30, 2026, an increase of $4 million or 4%, and $10 million or 3%, respectively, compared to the same periods of 2025. These increases were primarily due to an increase in the recognized net actuarial gain for the three and nine months ended September 30, 2026 of $3 million and $8 million, respectively, and an increase in the expected return on plan assets of $2 million and $7 million, respectively.
Net Interest Expense
Net interest expense includes interest on long-term debt, short-term debt, and finance leases. Net interest expense was $239 million in the third quarter of 2026, an increase of $17 million, or 8%, from $222 million in the same period of 2025. The increase was primarily due to interest expense of $20 million incurred on long-term notes issued in 2026, partially offset by lower interest costs of $6 million due to repayment of maturing long-term debt.
Net interest expense was $704 million in the first nine months of 2026, an increase of $58 million, or 9%, from $646 million in the same period of 2025. The increase was primarily due to interest expense of $90 million incurred on long-term notes issued in 2025 and 2026. This increase was partially offset by lower interest costs of $34 million due to repayment of maturing long-term debt, no short-term borrowings in 2026 compared to interest incurred on short-term borrowings in the same period of 2025, and lower interest on outstanding commercial paper borrowings primarily driven by a lower effective interest rate.
Gain on Sale of Equity Investment
On April 1, 2025, CPKC sold its 50% equity method investment in the Panama Canal Railway Company to APM Terminals. The Company recognized a pre-tax gain of U.S. $232 million ($333 million). See Item 1. Financial Statements, Note 4 Gain on sale of equity investment for further details.
Income Tax Expense
Income tax expense was $448 million in the third quarter of 2026, an increase of $152 million or 51%, from $296 million in the same period of 2025. The increase was primarily due to:
•a $94 million Canada Revenue Agency ("CRA") reassessment of prior year taxes related to the Kansas City Southern ("KCS") acquisition;
•higher taxable earnings; and
•a $17 million tax settlement with the Servicio de Administracion Tributaria ("SAT").
Income tax expense was $1,058 million in the first nine months of 2026, an increase of $113 million or 12%, from $945 million in the same period of 2025. The increase was primarily due to:
•a $94 million CRA reassessment of prior year taxes related to the KCS acquisition;
•higher taxable earnings; and
•a $17 million tax settlement with the SAT.
This increase was partially offset by a $51 million decrease from a gain on sale of equity investment recorded in 2025.
The effective income tax rates for the third quarter and first nine months of 2026 were 32.79% and 27.52%, respectively, compared to 24.34% and 23.58% for the same periods in 2025. The Core adjusted effective tax rate for the third quarter and first nine months of 2026 was 24.75%, compared to 24.50% for the same periods in 2025. The Company's 2026 Core adjusted effective tax rate is expected to be approximately 24.75%. 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. 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 Kansas City Southern ("KCS") purchase accounting to provide financial statement users with additional transparency by isolating the impact of KCS purchase accounting. 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 Non-GAAP Measures of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The outlook for the Company’s 2026 Core adjusted effective tax rate is based on certain assumptions about events and developments that may or may not materialize, or that may be offset entirely or partially by new events and developments. This is discussed further in Item 1A. Risk Factors of the Company's 2025 Annual Report on Form 10-K. Refer also to "Forward-Looking Statements" below for further details.
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Impact of FX on Earnings and FX 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 ("Ps."). The value of the Canadian dollar is affected by a number of domestic and international factors, including, without limitation, economic performance, commodity prices, and Canadian, U.S., and international monetary policies. 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. 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.
In the third quarter of 2026, the U.S. dollar strengthened to an average rate of $1.40 Canadian/U.S. dollar and the Mexican peso strengthened to an average rate of Ps. 12.33/Canadian dollar, compared to $1.38 Canadian/U.S. dollar and Ps. 13.53/Canadian dollar in the third quarter of 2025, resulting in an increase in "Total revenues" of $65 million, an increase in "Total operating expenses" of $46 million, and an increase in Net interest expense of $3 million from the same period of 2025.
In the first nine months of 2026, the U.S. dollar weakened to an average rate of $1.38 Canadian/U.S. dollar and the Mexican peso strengthened to an average rate of Ps. 12.56 Mexican Peso/Canadian dollar, compared to $1.40 Canadian/U.S. dollar and Ps. 13.94 Mexican Peso/Canadian dollar in the first nine months of 2025, resulting in an increase in "Total revenues" of $4 million, an increase in "Total operating expenses" of $39 million, and a decrease in "Net interest expense" of $6 million from the same period of 2025.
On an annualized basis, 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 $79 million (December 31, 2025 – approximately $78 million), negatively (or positively) impacts Operating expenses by approximately $51 million (December 31, 2025 – approximately $45 million), and negatively (or positively) impacts "Net interest expense" by approximately $6 million (December 31, 2025 – approximately $6 million).
On an annualized basis, 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 (December 31, 2025 – approximately $7 million) and negatively (or positively) impacts Operating expenses by approximately $9 million (December 31, 2025 – approximately $8 million).
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.
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.
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 the third quarter of 2026, the favourable impact of fuel prices on "Operating income" was $28 million compared to the same period of 2025. Higher fuel prices, partially offset by the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program, resulted in an increase in "Total revenues" of $244 million. Higher fuel prices net of purchasing discounts, resulted in an increase in "Total operating expenses" of $216 million.
In the first nine months of 2026, the favourable impact of fuel prices on "Operating income" was $66 million compared to the same period of 2025. Higher fuel prices, partially offset by the unfavourable impact from the timing of recoveries under the Company's fuel cost adjustment program and lower carbon levy surcharge revenue following the elimination of the Canadian federal carbon tax program effective April 1, 2025, resulted in an increase in "Total revenues" of $461 million. Higher fuel prices net of purchasing discounts, partially offset by lower carbon tax expense due to the elimination of the Canadian federal carbon tax program effective April 1, 2025, resulted in an increase in "Total operating expenses" of $395 million.
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Impact of Share Price on Earnings and Stock-Based Compensation
Fluctuations in the Common Share price affect the Company's Operating expenses because stock-based compensation liabilities are measured at fair value. The Company's Common Shares are listed on the Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") with the ticker symbol "CP".
In the third quarter of 2026, the change in the Company's Common Share price resulted in stock-based compensation recovery of $4 million, a decrease of $10 million, compared to a recovery of $14 million in the same period of 2025.
In the first nine months of 2026, the change in the Company's Common Share price resulted in stock-based compensation expense of $33 million, a change of $34 million, compared to a recovery of $1 million in the same period of 2025.
Based on information available at September 30, 2026 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 $2.4 million to $2.5 million (December 31, 2025 - 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. Stock-based compensation expense may also be impacted by non-market performance conditions and the impact of the change in FX rates on units tied to the NYSE versus the TSX.
Additional information concerning stock-based compensation is included in Item 1. Financial Statements, Note 13 Stock-based compensation.
Liquidity and Capital Resources
The Company's primary sources of liquidity include its Cash and cash equivalents, commercial paper program, revolving credit facility, and bilateral letter of credit facilities. The Company believes that these sources as well as cash flow generated through operations and existing debt capacity are adequate to meet its short-term and long-term cash requirements. The Company is not aware of any material trends, events, or uncertainties that would create any deficiencies in the Company's liquidity.
As at September 30, 2026, the Company had $399 million of Cash and cash equivalents compared to $184 million at December 31, 2025.
During the nine months ended September 30, 2026, the Company repaid, at maturity, U.S. $250 million ($339 million) 3.70% 10.5-year notes and U.S. $250 million ($345 million) 3.125% 10-year notes.
During the nine months ended September 30, 2026, the Company issued U.S. $600 million ($821 million) 4.00% 3-year unsecured notes due March 15, 2029 for net proceeds of U.S. $597 million ($816 million) and U.S. $600 million ($821 million) 5.50% 30-year unsecured notes due March 15, 2056 for net proceeds of U.S. $589 million ($805 million).
On October 6, 2026, the Company issued $500 million 4.20% 3.5-year unsecured notes due April 15, 2030 for net proceeds of $498 million, $550 million 4.60% 7-year unsecured notes due October 15, 2033 for net proceeds of $547 million, $300 million 4.90% 10.5-year unsecured notes due April 15, 2037 for net proceeds of $297 million, and $450 million 5.40% 30-year unsecured notes due October 15, 2056 for net proceeds of $443 million.
Effective July 6, 2026, the Company amended its revolving credit facility agreement (the "facility") to extend the maturity dates of its two-year U.S. $1.1 billion tranche and five-year U.S. $1.1 billion tranche to June 25, 2028, and June 25, 2031, respectively. As at September 30, 2026, the facility was undrawn (December 31, 2025 - undrawn).
The Company has a commercial paper program that enables it to issue commercial paper in the form of unsecured promissory notes. Effective March 27, 2026, the Company increased the maximum size of its commercial paper program through the addition of a Canadian dollar commercial paper program which allows the Company to borrow Canadian dollars in the form of unsecured promissory notes. This increased the maximum amount the Company can borrow under its Canadian and U.S. dollar commercial paper programs from U.S. $1.5 billion to U.S. $2.2 billion, or the Canadian dollar equivalent, on a combined basis. Effective September 10, 2026, the Company increased the maximum amount that may be outstanding under its U.S. dollar commercial paper program from U.S. $1.5 billion to U.S. $2.2 billion, with no change to the U.S. $2.2 billion combined limit for the Canadian and U.S. dollar commercial paper programs. Both the Canadian and U.S. dollar commercial paper programs are backed by the U.S. $2.2 billion revolving credit facility. As at September 30, 2026, the Company had total commercial paper borrowings outstanding of U.S. $1,535 million ($2,179 million) (December 31, 2025 - U.S. $850 million ($1,165 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. Under these agreements, the Company has the option to post collateral in the form of cash or cash equivalents, equal at least to the face value of the letter of credit issued. 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 Interim Consolidated Balance Sheets. As at September 30, 2026, the Company did not have any
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collateral posted on its bilateral letter of credit facilities (December 31, 2025 - $nil) and had letters of credit drawn of $83 million (December 31, 2025 - $79 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 relate to long-term debt and related interest, capital commitments, supplier purchases, leases, and other long term liabilities.
As at September 30, 2026, other than changes to long-term debt, there have been no material changes in our contractual commitments since December 31, 2025, a description of which can be found in Contractual Commitments of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K. For further information concerning long-term debt, refer to Item 1. Financial Statements, Note 9 Debt and to Item 1. Financial Statements, Note 15 Subsequent event.
Concession Duty
The Company's subsidiary, Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("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.
Guarantees
The Company accrues for all guarantees that it expects to pay. As at September 30, 2026, these accruals amounted to $24 million (December 31, 2025 - $16 million).
Cash Flow
Operating Activities
Net cash provided by operating activities increased $276 million and $467 million in the third quarter and the first nine months of 2026, respectively, compared to the same periods in 2025. These increases were primarily due to higher cash generating operating income and favourable changes in operating assets and liabilities.
Investing Activities
Net cash used in investing activities decreased $302 million in the third quarter of 2026, compared to the same period in 2025. This decrease was primarily due to lower additions to properties of $247 million and higher proceeds from the sale of property of $21 million.
Net cash used in investing activities increased $111 million in the first nine months of 2026, compared to the same period in 2025. This increase was primarily due to proceeds received from the sale of an equity investment of $493 million, partially offset by transaction costs paid on the sale in 2025. This increase was also offset by lower additions to properties of $279 million.
Financing Activities
Net cash used in financing activities increased $161 million in the third quarter of 2026, compared to the same period in 2025. The increase was primarily due to lower net issuances of commercial paper of $510 million compared to the same period in 2025, partially offset by lower share repurchases of $380 million.
Net cash used in financing activities decreased $112 million in the first nine months of 2026, compared to the same period in 2025. The decrease was primarily due to higher net issuances of commercial paper of $949 million compared to the same period in 2025, a $277 million decrease in repayments of short-term borrowings, a $242 million decrease in repayments of long-term debt, and lower share repurchases of $157 million. This decrease was partially offset by a $1,481 million decrease in net proceeds from debt issuances.
Credit Measures
Credit ratings provide information relating to the Company’s operations and liquidity, and affect the Company’s ability to obtain short-term and long-term financing and/or the cost of such financing. The margin that applies to outstanding loans under the Company’s revolving credit facility is based on the credit rating assigned to the Company’s senior unsecured and unsubordinated 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.
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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. Their views are affected by numerous factors including, but not limited to, the Company’s financial position and liquidity along with external factors beyond the Company’s control.
As at September 30, 2026, the Company's credit ratings from Standard & Poor's Rating Services ("Standard & Poor's") on its long-term debt and U.S. commercial paper program remain unchanged from December 31, 2025 and the Company's credit rating on its Canadian dollar commercial paper program remains unchanged from March 31, 2026. The following table shows the ratings issued for the Company by the rating agencies noted as at September 30, 2026 and is being presented as it relates to the Company’s cost of funds and liquidity.
Credit ratings as at September 30, 2026(1)
| Long-term debt | Outlook | ||||||||||
| Standard & Poor's | BBB+ | positive | |||||||||
| Moody's | Baa1 | stable | |||||||||
| U.S. Commercial paper program | |||||||||||
| Standard & Poor's | A-2 | N/A | |||||||||
| Moody's | P-2 | N/A | |||||||||
| CAD Commercial paper program | |||||||||||
| Standard & Poor's | A-1 (Low) | 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. 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 wholly owned subsidiary of CPKC, is the issuer of certain securities that are fully and unconditionally guaranteed by CPKC on an unsecured basis. The subsidiaries of CPRC do not guarantee the securities and are referred to below as the “Non-Guarantor Subsidiaries”.
As of the date of filing this Form 10-Q, CPRC had U.S. $14,390 million in 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 £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, as amended (the "Exchange Act"). As of the same date, CPRC also had $5,500 million in principal amount of debt securities outstanding due through 2056, issued in Canada for which CPKC is the guarantor and not subject to the Exchange Act.
CPKC fully and unconditionally guarantees the payment of the principal (and premium, if any) and interest on the debt securities and consolidated debenture stock issued by CPRC; any sinking fund or analogous payments payable with respect to such securities; and any additional amounts payable when they become due, whether at maturity or otherwise. 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 all obligations to the holders are satisfied in accordance with the terms of the respective instruments. More information on the securities under this guarantee structure can be found in Exhibit 22.1 List of Issuers and Guarantor Subsidiaries of this quarterly report.
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.
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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 between CPRC and CPKC; (ii) equity in earnings from and investments in the Non-Guarantor Subsidiaries; and (iii) intercompany dividend income:
Statement of Income Information
| CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) | ||||||||
| (in millions of Canadian dollars) | For the nine months ended September 30, 2026 | For the year ended December 31, 2025 | ||||||
| Total revenues | $ | 5,801 | $ | 7,184 | ||||
| Total operating expenses | 3,607 | 4,398 | ||||||
Operating income(1) | 2,194 | 2,786 | ||||||
Less: Other(2) | 535 | 360 | ||||||
| Income before income tax expense | 1,659 | 2,426 | ||||||
| Net income | $ | 1,096 | $ | 1,803 | ||||
(1)Includes net lease costs incurred from Non-Guarantor Subsidiaries for the nine months ended September 30, 2026 and the year ended December 31, 2025 of $331 million and $441 million, respectively.
(2)Includes "Other (income) expense", "Other components of net periodic benefit recovery", and "Net interest expense".
Balance Sheet Information
| CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) | ||||||||
| (in millions of Canadian dollars) | As at September 30, 2026 | As at December 31, 2025 | ||||||
| Assets | ||||||||
| Current assets | $ | 1,464 | $ | 1,144 | ||||
| Properties | 14,575 | 13,904 | ||||||
| Other non-current assets | 5,793 | 5,462 | ||||||
| Liabilities | ||||||||
| Current liabilities | $ | 5,243 | $ | 4,529 | ||||
| Long-term debt | 22,092 | 19,811 | ||||||
| Other non-current liabilities | 4,455 | 4,150 | ||||||
Excluded from the Statement of Income and Balance Sheet Information above are the following significant intercompany transactions and balances that CPRC and CPKC have with the Non-Guarantor Subsidiaries:
Transactions with Non-Guarantor Subsidiaries
| CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) | ||||||||
| (in millions of Canadian dollars) | For the nine months ended September 30, 2026 | For the year ended December 31, 2025 | ||||||
| Dividend income from Non-Guarantor Subsidiaries | $ | 461 | $ | 690 | ||||
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Balances with Non-Guarantor Subsidiaries
| CPRC (Subsidiary Issuer) and CPKC (Parent Guarantor) | ||||||||
| (in millions of Canadian dollars) | As at September 30, 2026 | As at December 31, 2025 | ||||||
| Assets | ||||||||
| Accounts receivable, intercompany | $ | 415 | $ | 370 | ||||
| Short-term advances to affiliates | 8,739 | 5,193 | ||||||
| Long-term advances to affiliates | 15 | 4,125 | ||||||
| Liabilities | ||||||||
| Accounts payable, intercompany | $ | 440 | $ | 369 | ||||
| Short-term advances from affiliates | 4,342 | 254 | ||||||
| Long-term advances from affiliates | — | 3,968 | ||||||
Share Capital
As of October 27, 2026, the latest practicable date, there were 869,554,740 Common Shares outstanding, which consisted of 12,973 holders of record, and no Preferred Shares outstanding. 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. As of October 27, 2026, 5,428,588 options were outstanding under the MSOIP and stand-alone option agreements entered into with Mr. Keith Creel. There are 19,028,043 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. There are no outstanding options under the DSOP, which has 1,700,000 options available to be issued in the future.
Non-GAAP Measures
The Company presents Non-GAAP measures, namely Core adjusted operating ratio and Core adjusted diluted EPS, to provide a basis for evaluating underlying earnings trends in the Company's current period's financial results that can be compared with the results of operations in prior periods. Management believes these Non-GAAP measures facilitate a multi-period assessment of long-term profitability.
These Non-GAAP measures have no standardized meanings and are 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. 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.
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.
Management believes these Non-GAAP measures provide meaningful supplemental information about our financial results and improved comparability to past performance because they exclude certain significant items that are not considered indicative of future or past financial trends either by nature or amount. As a result, these items are excluded for management's assessment of operational performance, allocation of resources, and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets or equity investments, acquisition-related costs, certain adjustments to provisions and settlements of Mexican taxes, advisory costs related to rail consolidation matters, discrete tax items, changes in income tax rates, changes to uncertain tax items, and certain items that are not typical of normal business activities or are outside the control of management. Acquisition-related costs include legal, consulting, integration costs and expenses including third-party services, system migration and technology rationalization driven by integration, restructuring and special termination benefit costs, employee retention, and synergy incentive costs. These items may not be non-recurring and may include items that are settled in cash. Specifically, due to the magnitude of the KCS acquisition, its significant impact to the Company’s business and complexity of integrating the acquired business and operations, the Company continues to expect to incur acquisition-related costs. 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.
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In addition, Core adjusted operating ratio and Core adjusted diluted EPS exclude KCS purchase accounting. KCS purchase accounting represents the amortization of basis differences being the incremental depreciation or amortization in relation to fair value adjustments to properties, intangible assets, and KCS’s investments, the change in fair value of debt of KCS assumed on April 14, 2023, and fair value adjustments that are attributable to the non-controlling interest, as recognized within "Depreciation and amortization", "Purchased services and other", "Other (income) expense", "Net interest expense", and "Net loss attributable to non-controlling interest", respectively, in the Company's Interim Consolidated Statements of Income. All assets subject to KCS purchase accounting contribute to income generation and will continue to amortize over their estimated useful lives. Excluding KCS purchase accounting from GAAP results provides financial statement users with additional transparency by isolating the impact of KCS purchase accounting.
Significant items recognized in "Net income attributable to controlling shareholders" as reported on a GAAP basis for the first nine months of 2026 and 2025 include:
2026:
•during the first nine months, acquisition-related costs of $48 million in connection with the KCS acquisition ($36 million after current income tax recovery of $12 million) including $28 million recognized in "Compensation and benefits" primarily related to synergy related incentive compensation and restructuring costs, and $20 million recognized in "Purchased services and other" primarily related to system migration and technology rationalization, legal fees, and other third party purchased services, that unfavourably impacted Diluted EPS by 4 cents as follows:
–in the third quarter, acquisition-related costs of $12 million ($9 million after current income tax recovery of $3 million) including $3 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 $27 million ($20 million after current income tax recovery of $7 million) including $21 million recognized in "Compensation and benefits", and $6 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 3 cents;
–in the first quarter, acquisition-related costs of $9 million ($7 million after current income tax recovery of $2 million) including $4 million recognized in "Compensation and benefits", and $5 million recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 1 cent;
•during the first nine months, advisory costs related to the analysis and advocacy in connection with the STB's review of the proposed merger between UP and NS of $44 million ($34 million after current income tax recovery of $10 million) recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 3 cents as follows:
–in the third quarter, advisory costs of $17 million ($13 million after current income tax recovery of $4 million) recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 2 cents;
–in the second quarter, advisory costs of $14 million ($11 million after current income tax recovery of $3 million) recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 1 cent;
–in the first quarter, advisory costs of $13 million ($10 million after current income tax recovery of $3 million) recognized in "Purchased services and other", that unfavourably impacted Diluted EPS by 1 cent;
•in the third quarter, an income tax expense of $94 million (deferred income tax expense of $98 million net of a current income tax recovery of $4 million) related to a reassessment of prior year taxes by the CRA in connection with the KCS acquisition that unfavourably impacted Diluted EPS by 11 cents; and
•in the third quarter, an income tax expense of $17 million (current income tax expense of $20 million net of a deferred income tax recovery of $3 million) related to a tax settlement with the SAT that unfavourably impacted Diluted EPS by 2 cents.
2025:
•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 first nine months, acquisition-related costs of $52 million in connection with the KCS acquisition ($39 million after current income tax recovery of $13 million), including $16 million recognized in "Compensation and benefits" primarily related to synergy related incentive compensation and restructuring costs, $1 million recognized in "Materials", and $35 million recognized in "Purchased services and other" primarily related to system migration, legal fees, and other third party purchased services, that unfavourably impacted Diluted EPS by 4 cents as follows:
–in the third quarter, acquisition-related costs of $13 million ($10 million after current income tax recovery of $3 million) including $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 $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 $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.
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KCS purchase accounting recognized in "Net income attributable to controlling shareholders" as reported on a GAAP basis for the first nine months of 2026 and 2025 was as follows:
2026:
•during the first nine months, KCS purchase accounting of $278 million ($203 million after deferred income tax recovery of $75 million), including costs of $266 million recognized in "Depreciation and amortization", $2 million recognized in "Purchased services and other" related to the amortization of equity investments, $15 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 23 cents as follows:
–in the third quarter, KCS purchase accounting of $94 million ($69 million after deferred income tax recovery of $25 million), including costs of $91 million recognized in "Depreciation and amortization", $1 million recognized in "Purchased services and other", $4 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 $93 million ($68 million after deferred income tax recovery of $25 million), including costs of $88 million recognized in "Depreciation and amortization", $6 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 8 cents; and
–in the first quarter, KCS purchase accounting of $91 million ($66 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", and a recovery of $2 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 8 cents.
2025:
•during the first nine months, KCS purchase accounting of $282 million ($206 million after deferred income tax recovery of $76 million), including costs of $268 million recognized in "Depreciation and amortization", $2 million recognized in "Purchased services and other" related to the amortization of equity investments, $16 million recognized in "Net interest expense", $1 million recognized in "Other (income) expense", and a recovery of $5 million recognized in "Net loss attributable to non-controlling interest", that unfavourably impacted Diluted EPS by 22 cents as follows:
–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.
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Reconciliation of GAAP Performance Measures to Non-GAAP Performance Measures
The following tables reconcile 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 and KCS purchase accounting.
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| Diluted EPS as reported | $ | 1.04 | $ | 1.01 | $ | 3.14 | $ | 3.32 | ||||||
| Less: | ||||||||||||||
| Significant items (pre-tax): | ||||||||||||||
| Gain on sale of equity investment | — | — | — | 0.36 | ||||||||||
| Acquisition-related costs | (0.01) | (0.02) | (0.05) | (0.06) | ||||||||||
| Advisory costs related to rail consolidation matters | (0.03) | — | (0.05) | — | ||||||||||
| KCS purchase accounting | (0.11) | (0.10) | (0.31) | (0.30) | ||||||||||
| Add: | ||||||||||||||
Tax effect of adjustments(1) | (0.04) | (0.03) | (0.11) | (0.04) | ||||||||||
| Income tax reassessment related to prior years | 0.11 | — | 0.11 | — | ||||||||||
| Adjustments to provisions and settlements of Mexican taxes | 0.02 | — | 0.02 | — | ||||||||||
| Core adjusted diluted EPS | $ | 1.28 | $ | 1.10 | $ | 3.57 | $ | 3.28 | ||||||
(1) The tax effect of adjustments was calculated as the pre-tax effect of the significant items and KCS purchase accounting listed above multiplied by the applicable tax rate for the above items of 26.44% and 26.35% for the three and nine months ended September 30, 2026, and 26.69% and 2156.24% for the three and nine months ended September 30, 2025, respectively. The applicable tax rates reflect the taxable jurisdictions and nature, being on account of capital or income, of the adjustments.
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 and advisory costs related to rail consolidation matters) that are reported within Operating income, and (2) KCS purchase accounting recognized in "Depreciation and amortization" and "Purchased services and other".
| For the three months ended September 30 | For the nine months ended September 30 | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||
| Operating ratio as reported | 64.8 | % | 63.5 | % | 65.1 | % | 64.2 | % | ||||||
| Less: | ||||||||||||||
| Acquisition-related costs | 0.3 | % | 0.3 | % | 0.4 | % | 0.5 | % | ||||||
| Advisory costs related to rail consolidation matters | 0.4 | % | — | % | 0.4 | % | — | % | ||||||
| KCS purchase accounting in Operating expenses | 2.2 | % | 2.5 | % | 2.2 | % | 2.4 | % | ||||||
| Core adjusted operating ratio | 61.9 | % | 60.7 | % | 62.1 | % | 61.3 | % | ||||||
Critical Accounting Estimates
To prepare Consolidated Financial Statements that conform with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reported periods. Using the most current information available, the Company reviews estimates on an ongoing basis, including those related to goodwill and intangible assets, pensions and other benefits, properties, contingent liabilities, and deferred income taxes. Additional information concerning critical accounting estimates is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's 2025 Annual Report on Form 10-K.
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The development, selection and disclosure of these estimates, and this MD&A, have been reviewed by the Board of Directors’ Audit and Finance Committee, which is composed entirely of independent directors.
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of Operations and Quarterly Report on Form 10-Q 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"). Forward-looking statements include, but are 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 statements may contain statements with words or headings such as “financial expectations”, “key assumptions”, “anticipate”, “believe”, “expect”, "project", "estimate", "forecast", “plan”, "intend", "target", “will”, “outlook”, "guidance", “should” or similar words suggesting future outcomes. All statements other than statements of historical fact may be forward-looking statements. To the extent that the Company has provided forecasts or targets using Non-GAAP financial measures, the Company may not be able to provide a reconciliation to the most directly comparable GAAP measures without unreasonable efforts, due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value. In recent years, CPKC has recognized acquisition-related costs, KCS purchase accounting, adjustments to provisions and settlements of Mexican taxes, discrete tax items, changes in income tax rates, a gain on the sale of an equity investment, advisory costs related to rail consolidation matters, and a change to an uncertain tax item. 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.
This Management's Discussion and Analysis of Financial Condition and Results of Operations and Quarterly Report on Form 10-Q includes forward-looking statements concerning, but not limited to, the integration of KCS and the realization and timing of anticipated benefits and synergies from the CP-KCS combination, the expected impact of changes in FX rates (including the U.S. dollar and Mexican peso relative to the Canadian dollar), the Company’s expected Core adjusted effective tax rate, share-price sensitivity of stock-based compensation, expectations for 2026 share-based grants, the impact of fuel prices, including the timing of recoveries under the Company’s fuel cost adjustment program, the Company’s operations, anticipated financial performance, business prospects and strategies, the sufficiency of cash flow from operations and available financing to meet short-term and long-term obligations, anticipated capital programs, future payments, including income taxes, and the outcomes of tax and other legal proceedings.
The forward-looking statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quarterly Report on Form 10-Q 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; Core adjusted effective tax rates (as specified herein); performance of the Company's assets and equipment; sufficiency of the Company's 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. Although the Company believes the expectations, estimates, projections and assumptions reflected in the forward-looking statements 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 statements as actual results may differ materially from those expressed or implied by forward-looking statements. 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
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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 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 STB 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 foregoing list of factors is not exhaustive.
These and other factors that could cause actual results to differ materially from those described in the forward-looking statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations and Quarterly Report on Form 10-Q are detailed from time to time in reports filed by CPKC with securities regulators in Canada and the United States, which can be accessed on SEDAR+ (www.sedarplus.ca) and EDGAR (www.sec.gov). Reference should be made to “Part I – Item 1A – Risk Factors” and “Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements” in the Company’s Annual Report on Form 10-K and “Part II – Item 1A – Risk Factors” of the Company’s Quarterly Reports on Form 10-Q.
The forward-looking statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quarterly Report on Form 10-Q are made as of the date hereof. 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information concerning market risk sensitive instruments is set forth under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Impact of FX on Earnings and FX Risk and Impact of Share Price on Earnings and Stock-Based Compensation.
Interest Rate Risk
Debt financing forms part of the Company's capital structure. The debt agreements entered into expose the Company to increased interest costs on future fixed debt instruments and existing variable rate debt instruments, should market rates increase.
As at September 30, 2026, 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. To manage interest rate exposure, the Company may enter into forward rate agreements such as treasury rate locks or bond locks that protect against interest rate increases. The Company may also enter into swap agreements whereby one party agrees to pay a fixed rate of interest while the other party pays a floating rate. Contingent on the direction of interest rates, the Company may incur higher costs depending on the contracted rate.
The fair value of the Company’s fixed rate debt may fluctuate with changes in market interest rates. A hypothetical one percentage point decrease in interest rates as of September 30, 2026 would increase the fair value of the Company's debt as at September 30, 2026 by approximately $1.7 billion (December 31, 2025 - approximately $1.8 billion). Fair 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.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As at September 30, 2026, an evaluation was carried out under the supervision of and with the participation of the Company's management, including its CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures were effective as at September 30, 2026, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the third quarter of 2026, the Company has not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
For further details refer to Item 1. Financial Statements, Note 14 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 uses a threshold of U.S. $1 million for the purposes of determining proceedings requiring disclosure.
From time to time, the Company or its subsidiaries may be subject to information requests from U.S. State or Federal environmental regulatory authorities inquiring as to the Company’s compliance or remediation practices in the U.S. In September 2020, the Company received an initial request for information from the U.S. Environmental Protection Agency ("EPA") inquiring into the Company’s compliance with the mobile source provisions of the Clean Air Act (“CAA”). The Company has been providing information in response to the EPA’s initial and follow-up requests, and the EPA has issued Notices of Violations, which preliminarily identify certain categories of alleged non-compliance with civil provisions of the CAA pertaining to locomotives and locomotive engines. In December 2022, the U.S. 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. Neither 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. 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 1A. RISK FACTORS
There have been no material changes to the risk factors from the information provided in Item 1A. Risk Factors of the Company's 2025 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The Company has established a share repurchase program which is further described in Item 1. Financial Statements, Note 11 Share repurchases. The following table presents the number of Common Shares repurchased during each month of the third quarter of 2026 and the average price paid by CPKC for the repurchase of such Common Shares:
| Period | Total Number of Shares (or Units) Purchased(1) | Average Price Paid per Share (or Unit)(2) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Number of Shares (or Units) that may yet be purchased under the Plans or Programs | ||||||||||
| Common Stock | ||||||||||||||
| July 1-31, 2026 | 3,421,400 | $ | 129.66 | 3,421,400 | 24,852,618 | |||||||||
| August 1-31, 2026 | 3,446,070 | $ | 131.18 | 3,446,070 | 21,406,548 | |||||||||
| September 1-30, 2026 | 4,675,000 | $ | 126.41 | 4,675,000 | 16,731,548 | |||||||||
| Total | 11,542,470 | $ | 128.80 | 11,542,470 | 16,731,548 | |||||||||
(1) Includes shares repurchased but not yet cancelled at end of period.
(2) Includes brokerage fees and applicable tax on share repurchases.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
| Exhibit | Description | ||||
| 101.INS** | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
The following financial information from Canadian Pacific Kansas City Limited's Quarterly Report on Form 10-Q for the third quarter ended September 30, 2026, formatted in Extensible Business Reporting Language (XBRL) includes: (i) the Interim Consolidated Statements of Income for the third quarters and first nine months ended September 30, 2026 and 2025; (ii) the Interim Consolidated Statements of Comprehensive Income for the third quarters and first nine months ended September 30, 2026 and 2025; (iii) the Interim Consolidated Balance Sheets at September 30, 2026, and December 31, 2025; (iv) the Interim Consolidated Statements of Cash Flows for the third quarters and first nine months ended September 30, 2026 and 2025; (v) the Interim Consolidated Statements of Changes in Equity for the third quarters and first nine months ended September 30, 2026 and 2025; and (vi) the Notes to Interim Consolidated Financial Statements. | |||||
| 104** | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
* Management contract or compensatory arrangement
** Filed with this Quarterly Report on Form 10-Q
43
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CANADIAN PACIFIC KANSAS CITY LIMITED | |||||
(Registrant) | |||||
| By: | /s/ NADEEM VELANI | ||||
Nadeem Velani | |||||
Executive Vice-President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||||
Date: October 28, 2026
44
Exhibit 10.2
AMENDMENT NUMBER 6
TO THE CANADIAN PACIFIC RAILWAY COMPANY PENSION PLAN
REVISED AND CONSOLIDATED AS AT JANUARY 1, 2024
AMENDMENTS EFFECTIVE OCTOBER 1, 2026
1.Paragraph 4.08 is deleted and replaced with the following:
“4.08 Option to Become a DC Member for CPPA Service
(a)A Member who is an Employee in a position represented by CPPA on May 12, 2017 shall, subject to subparagraph (c.1), irrevocably elect on or before that date to either remain a DB Member or become a DC Member effective June 1, 2017. If the Member fails to make such an election within the allowable time period, the Member shall be deemed to have elected to remain a DB Member.
(b)An Employee who joins the Plan after May 12, 2017 as an Employee in a position represented by CPPA shall, subject to subparagraph (c.1), irrevocably elect in the manner and within the time prescribed by the Company to either become a DB Member or become a DC Member effective on the date the Member joins the Plan. If the Member fails to make such an election in the manner and within the time prescribed by the Company, the Member shall be deemed to have elected to become a DB Member.
(c)After May 12, 2017, if a Member who is not an Employee in a position represented by CPPA becomes an Employee in a position represented by CPPA, and if the Member has not at any time made or been deemed to have made an election under subparagraph (a) or (b) or under this subparagraph (c), then the Member shall, subject to subparagraph (c.1), irrevocably elect in the manner and within the time prescribed by the Company to participate either as a DB Member or as a DC Member effective on the first day of the month following the date the Member makes such an election. If the Member fails to make such an election in the manner and within the time prescribed by the Company, then:
(i)if the Member is a DB Member immediately prior to becoming an Employee in a position represented by CPPA, the Member shall be deemed to have elected to remain a DB Member, and
(ii)if the Member is a DC Member immediately prior to becoming an Employee in a position represented by CPPA, the Member shall be deemed to have elected to remain a DC Member.
(c.1) A Member who is an Employee in a position represented by CPPA on October 1, 2026 and who has previously elected or been deemed to have elected to participate as a DB Member under subparagraph (a), (b) or (c),
shall irrevocably elect in the manner and within the time prescribed by the Company to either remain a DB Member or become a DC Member effective January 1, 2027. If the Member fails to make such an election in the manner and within the time prescribed by the Company, the Member shall be deemed to have elected to remain a DB Member.
(d)An election made or deemed to have been made by a Member under subparagraph (a), (b) or (c) shall apply to all periods of CPPA Service accrued by the Member on and after the effective date of the election or deemed election, unless such Member elects to participate as a DC Member under subparagraph (c.1), in which case the election made by the Member under subparagraph (c.1) shall apply to all periods of CPPA Service accrued by the Member on and after January 1, 2027.
For greater certainty, any DB Pension Benefits accrued by the Member in respect of Pensionable Service prior to the effective date of an election under subparagraph (a), (b), (c) or (c.1) shall continue to be provided as DB Pension Benefits, and any DC Pension Benefits accrued by the Member in respect of Pensionable Service prior to the effective date of an election under subparagraph (a), (b), (c) or (c.1) shall continue to be provided as DC Pension Benefits.
For greater certainty, any DB Pension Benefits accrued by the Member in respect of Pensionable Service prior to the effective date of an election under subparagraph (a), (b), (c) or (c.1) shall continue to be provided as DB Pension Benefits, and any DC Pension Benefits accrued by the Member in respect of Pensionable Service prior to the effective date of an election under subparagraph (a), (b), (c) or (c.1) shall continue to be provided as DC Pension Benefits.
(e)If a Member who is an Employee in a position represented by CPPA becomes a Management Employee, and if the Member has elected or is deemed to have elected to participate as a DC Member under subparagraph (a), (b), (c) or (c.1), then notwithstanding clause 4.02(d)(i), the Member shall remain a DC Member after becoming a Management Employee and shall continue to accrue DC Pension Benefits for all Management Service accrued by the Member on and after the date the Member becomes a Management Employee.
(f)If a Member who is an Employee in a position represented by CPPA becomes an Employee in a position represented by a Union other than CPPA, then the Member shall participate as a DB Member effective on the date the Member becomes an Employee in a position represented by that other Union.
(g)Notwithstanding Section B.1.10 of Appendix B, if a Member becomes a DC Member or remains a DC Member pursuant to this paragraph 4.08, they will participate as a DC2 Member.”
Exhibit 22.1
List of Issuers and Guarantor Subsidiaries
As of the date of the filing of the Form 10-Q of which this exhibit is a part, Canadian Pacific Kansas City Limited, a corporation incorporated under the laws of Canada (the “Registrant”) has guaranteed each of the following securities issued by Canadian Pacific Railway Company, a corporation incorporated under the laws of Canada and a direct, wholly owned subsidiary of the Registrant (the “Issuer”) subject to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended:
- The Issuer’s 1.750% notes due December 2026;
- The Issuer’s 4.000% notes due June 2028;
- The Issuer’s 4.000% notes due March 2029;
- The Issuer’s 2.875% notes due November 2029;
- The Issuer’s 2.050% notes due March 2030;
- The Issuer’s 4.800% notes due March 2030;
- The Issuer’s 7.125% notes due October 2031;
- The Issuer’s 2.450% notes due December 2031;
- The Issuer’s 5.750% notes due March 2033;
- The Issuer’s 5.200% notes due March 2035;
- The Issuer’s 4.800% notes due September 2035;
- The Issuer’s 5.950% notes due May 2037;
- The Issuer’s 3.000% notes due December 2041;
- The Issuer’s 5.750% notes due January 2042;
- The Issuer’s 4.300% notes due May 2043;
- The Issuer’s 4.800% notes due August 2045;
- The Issuer’s 4.950% notes due August 2045;
- The Issuer’s 4.700% notes due May 2048;
- The Issuer’s 3.500% notes due May 2050;
- The Issuer’s 3.100% notes due December 2051;
- The Issuer’s 5.500% notes due March 2056;
- The Issuer’s 4.200% notes due November 2069;
- The Issuer’s 6.125% notes due September 2115;
- The Issuer’s Perpetual 4% Consolidated Debenture Stock denominated in U.S. dollars; and
- The Issuer’s Perpetual 4% Consolidated Debenture Stock denominated in British Pounds Sterling.
The above list does not include the following securities guaranteed by the Registrant issued in Canada which are not subject to Section 13(a) or 15(d) of the Exchange Act:
- The Issuer’s 2.540% notes due February 2028;
- The Issuer’s 3.150% notes due March 2029;
- The Issuer's 4.200% notes due April 2030;
- The Issuer’s 4.000% notes due June 2032;
- The Issuer's 4.600% notes due October 2033;
- The Issuer’s 4.400% notes due January 2036;
- The Issuer's 4.900% notes due April 2037;
- The Issuer’s 6.450% notes due November 2039;
- The Issuer’s 3.050% notes due March 2050;
- The Issuer’s 4.800% notes due June 2055; and
- The Issuer's 5.400% notes due October 2056.
Exhibit 31.1
Certification by the Chief Executive Officer of the Registrants filed pursuant to Rule 13a-14(a) of the Exchange Act.
Canadian Pacific Kansas City Limited
I, Keith Creel, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Kansas City Limited;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 28, 2026 | /s/ KEITH CREEL | |||||||
| Keith Creel | ||||||||
| President and Chief Executive Officer | ||||||||
Exhibit 31.2
Certification by the Chief Financial Officer of the Registrants filed pursuant to Rule 13a-14(a) of the Exchange Act.
Canadian Pacific Kansas City Limited
I, Nadeem Velani, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Canadian Pacific Kansas City Limited;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 28, 2026 | /s/ NADEEM VELANI | |||||||
| Nadeem Velani | ||||||||
| Executive Vice-President and Chief Financial Officer | ||||||||
Exhibit 32.1
Certifications Furnished Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Canadian Pacific Kansas City Limited
In connection with the Quarterly Report of Canadian Pacific Kansas City Limited (the “Company”) on Form 10-Q for the period ended September 30, 2026 (the “Report”) to which this certificate is an exhibit, I, Keith Creel, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 28, 2026 | /s/ KEITH CREEL | |||||||||||||
| Keith Creel | ||||||||||||||
| President and Chief Executive Officer | ||||||||||||||
Exhibit 32.2
Certifications Furnished Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Canadian Pacific Kansas City Limited
In connection with the Quarterly Report of Canadian Pacific Kansas City Limited (the “Company”) on Form 10-Q for the period ended September 30, 2026 (the “Report”) to which this certificate is an exhibit, I, Nadeem Velani, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 28, 2026 | /s/ NADEEM VELANI | |||||||||||||
| Nadeem Velani | ||||||||||||||
| Executive Vice-President and Chief Financial Officer | ||||||||||||||