CALGARY -- Robert Ritchie, President and Chief Executive Officer of Canadian Pacific Railway, said today CPR closed out 2001 with a solid fourth-quarter performance that capped its successful launch on the equity markets. Excluding non-recurring items, operating income for the fourth quarter of 2001 increased 12 per cent to $261 million, compared with the same period of 2000. The operating ratio improved 2.4 points to 72.5 per cent. Net income for the quarter was $118 million, a decline of $7 million due to increased interest expense associated with the change in CPR's capital structure as a result of its spinoff from Canadian Pacific Limited, as well as higher Other Charges due mainly to foreign exchange gains in the prior year. Diluted earnings per share for fourth- quarter 2001 were $0.74, compared with $0.78 in the fourth quarter of 2000.

Non-recurring items in the fourth quarter of 2001 were $11 million ($6 million after tax) in incentive compensation charges and bridge financing fees related to CPR's spinoff. Non-recurring items in the fourth quarter of 2000 related to a $132-million reduction in the future income tax liability associated with a decrease in the Canadian federal income tax rates.

“We began 2001 as part of a conglomerate and by year end had successfully completed a wholesale transformation to a strong, independent pure-play railway. We accomplished this while looking after the all-important business fundamentals of safety, service and productivity,” Mr. Ritchie said. “I am also pleased that, overall, we were able to maintain our position in key competitive segments of the business in this period of economic uncertainty.”

Total revenues in the fourth quarter of 2001 were $951 million, an increase of $23 million, or 2 per cent over fourth-quarter 2000 due to a timing variance in revenues other than freight, which fluctuate by quarter. Operating expenses, excluding non-recurring items, were $689 million, down $6 million from fourth-quarter 2000.

Freight revenues in the fourth quarter of 2001 were $882 million, matching fourth-quarter 2000 performance. Coal revenues increased 15 per cent reflecting the leading position of CPR's customers in the metallurgical coal market and increases in thermal coal shipments to power generating stations in the United States. Automotive revenues were up about 1 per cent, despite the soft economy, as consumers responded positively to manufacturer financing promotions and demand remained strong for selected models handled by CPR. Revenues held firm in the intermodal business on the continued strength of innovative product offerings and a successful strategy with major retailers to locate their regional distribution facilities adjacent to CPR terminals. Forest products revenues were flat. Grain volumes within the United States increased significantly, however, overall grain revenues slipped 1 per cent due to a reduction in market share from Canada into the United States and a drought that reduced production in Canada. Sulphur and fertilizer revenues were down 5 per cent as a result of weak demand in the North American farm sector and lower export potash shipments. Industrial products revenues were down 10 per cent, largely reflecting weakness in steel and chemical markets.

“Our balanced commodity portfolio enabled CPR to equal its strong performance of fourth-quarter 2000, even as the economic decline accelerated,” Mr. Ritchie said. “Although there are fewer employees, they handled the same workload as in fourth-quarter 2000 -- a significant productivity improvement. The systems, infrastructure and talent were in place to meet the challenge.”

For the full year of 2001, excluding non-recurring items, net income was $370 million, compared with $401 million in 2000. Diluted earnings per share were $2.33, compared with $2.52 in 2000. The decrease was largely due to higher interest expense following the spinoff and Other Charges which were up $43 million and $20 million, respectively.

Operating income of $841 million in 2001, excluding non-recurring items, was virtually unchanged from 2000, despite the worsening economy and difficult operating conditions in the first half of the year. CPR's operating ratio was 77.3 per cent, up 0.4 points from 2000.

Total revenues were $3,699 million, an increase of $44 million over 2000. Canadian and U.S. coal, as well as U.S. grain experienced sharp increases year over year. Growth in the domestic intermodal business more than offset a decline in international intermodal revenue. Further revenue growth was hindered by the effects of the slowing economy, lower Canadian grain shipments in the last half of the year, and weak demand for sulphur and fertilizers.

Operating expenses, excluding non-recurring items, were $2,858 million, up $48 million from 2000. Productivity improvement measures put in place through the year partially mitigated the effect of higher costs resulting from the severe winter and flooding in the first half of the year. For the full year, employee productivity was up 6 per cent, train weights were up 3 per cent, locomotive productivity increased 4 per cent, freight car utilization improved 12 per cent, and fuel consumption rates improved 3 per cent.

Non-recurring items in 2001 were $25 million ($14 million after tax) for spinoff-related and incentive compensation charges, $17 million ($10 million after tax) for bridge financing fees, and $64 million for tax rate recoveries. In 2000, non-recurring items consisted of a $132-million reduction in the future income tax liability associated with a decrease in the Canadian federal income tax rates.

“I'm proud of what our team accomplished in a year that was full of potential distractions,” Mr. Ritchie said. “Our spinoff was an outstanding success. We executed this major change without losing focus on our long-term business plan. Going forward, I expect more from our overall financial performance. I am looking to re-establish the momentum in CPR's earnings growth.”