Canadian Pacific Railway Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

cp-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-01342

Canadian Pacific Railway Limited

(Exact name of registrant as specified in its charter)


Canada		98-0355078
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

7550 Ogden Dale Road S.E.
Calgary	AB	T2C 4X9
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (403) 319-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on which Registered

Common Shares, without par value, of
Canadian Pacific Railway Limited

New York Stock Exchange

Toronto Stock Exchange

Perpetual 4% Consolidated Debenture Stock of Canadian Pacific Railway Company

CP/40

New York Stock Exchange

BC87

London Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o No þ

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.

Large accelerated filer

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

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 June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant, in U.S. dollars, was $34,600,245,541, based on the closing sales price per share as reported by the New York Stock Exchange on such date.

As of the close of business on February 17, 2021, there were 133,297,236 shares of the registrant's common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

EXPLANATORY NOTE

Canadian Pacific Railway Limited ("CPRL" or the "Company"), a corporation incorporated under the Canada Business Corporations Act, qualifies as a foreign private issuer in the U.S. for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although as a foreign private issuer the Company is no longer required to do so, the Company currently continues to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (“SEC”) instead of filing reports on forms available to foreign private issuers.

CPRL prepares and files a management information circular and related material under Canadian requirements. As the Company’s management information circular is not filed pursuant to Regulation 14A, the Company may not incorporate by reference information required by Part III of this Form 10-K from its management information circular. Accordingly, in reliance upon and as permitted by Instruction G(3) to Form 10-K, the Company will be filing an amendment to this Form 10-K containing the Part III information no later than 120 days after the end of the fiscal year covered by this Form 10-K. All references to our websites contained herein do not constitute incorporation by reference of information contained on such websites and such information should not be considered part of this document.

1 CP 2020 ANNUAL REPORT

CANADIAN PACIFIC RAILWAY LIMITED

FORM 10-K TABLE OF CONTENTS


PART I		Page
Item 1.	Business	3
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	25
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	29
	Information about our Executive Officers	30

PART II
Item 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	33
Item 6.	Selected Financial Data	35
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 8.	Financial Statements and Supplementary Data	77
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	123
Item 9A.	Controls and Procedures	123
Item 9B.	Other Information	125

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	127
Item 11.	Executive Compensation	127
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	127
Item 13.	Certain Relationships and Related Transactions, and Director Independence	127
Item 14.	Principal Accounting Fees and Services	127

PART IV
Item 15.	Exhibits, Financial Statement Schedule	129
Item 16.	Form 10-K Summary	135
	Signatures	136

CP 2020 ANNUAL REPORT 2

PART I

3 CP 2020 ANNUAL REPORT

ITEM 1. BUSINESS

Company Overview

Canadian Pacific Railway Limited (“CPRL”), together with its subsidiaries (“CP” or the “Company”), owns and operates a transcontinental freight railway in Canada and the United States (“U.S.”). CP provides rail and intermodal transportation services over a network of approximately 13,000 miles, directly serving the principal business centres of Canada from Montréal, Québec, to Vancouver, British Columbia ("B.C."), and the U.S. Northeast and Midwest regions. CP’s railway network feeds directly into the U.S. heartland from the East and West coasts. Agreements with other carriers extend the Company's market reach in Canada, through the U.S. and into Mexico. CP transports bulk commodities, merchandise freight and intermodal traffic. For additional information regarding CP's network and geographical locations, refer to Item 2. Properties.

CPRL was incorporated on June 22, 2001, under the Canada Business Corporations Act and controls and owns all of the Common Shares of Canadian Pacific Railway Company (“CPRC”), which was incorporated in 1881 by Letters Patent pursuant to an Act of the Parliament of Canada. CPRL's registered, executive and corporate head office is located at 7550 Ogden Dale Road S.E., Calgary, Alberta T2C 4X9. CPRL's Common Shares (the "Common Shares") are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”) under the symbol “CP”.

For purposes of this annual report, all references herein to “CP”, “the Company”, “we”, “our” and “us” refer to CPRL, CPRL and its subsidiaries, CPRL and one or more of its subsidiaries, or one or more of CPRL's subsidiaries, as the context may require. All references to currency amounts included in this annual report, including the Consolidated Financial Statements, are in Canadian dollars unless specifically noted otherwise.

Strategy

CP is continuing the journey to become the best railway in North America, with a culture of responsibility and accountability focused on five key foundations:

•Provide Service: Providing efficient and consistent transportation solutions for the Company’s customers. “Doing what we say we are going to do” is what drives CP in providing a reliable product with a lower cost operating model. Centralized planning aligned with local execution is bringing the Company closer to the customer and accelerating decision-making.

•Control Costs: Controlling and removing unnecessary costs from the organization, eliminating bureaucracy and continuing to identify productivity enhancements are the keys to success.

•Optimize Assets: Through longer and heavier trains, and improved asset utilization, the Company is moving increased volumes with fewer locomotives and cars while unlocking capacity for future growth potential.

•Operate Safely: Each year, CP safely moves millions of carloads of freight across North America while ensuring the safety of our people and the communities through which we operate. Safety is never to be compromised. CP strives for continuous implementation of state-of-the-art safety technology, safety management systems, and safety culture with our employees to ensure safe, efficient operations across our network.

•Develop People: CP recognizes that none of the other foundations can be achieved without its people. Every CP employee is a railroader and the Company has established a culture focused on our values of accountability, diversity and pride, in everything we do. Coaching and mentoring all employees into becoming leaders will continue to drive CP forward.

Starting in 2012, CP transformed its operations by investing in the network and executing a precision scheduled railroading model that lowers costs, optimizes assets, and provides better, more competitive service.

Today, we continue to apply our long-term strategy: leverage our lower cost base, network strengths and improved service to drive sustainable, profitable growth. While the accomplishments during the turnaround were tremendous, CP’s journey to become North America’s best-performing rail carrier is far from over. As a Company, we will remain focused on our next level of service, productivity, and innovation to continue to generate sustainable value for our customers and results for our shareholders.

Business Developments

COVID-19 pandemic

The effects of the COVID-19 pandemic on consumer demand resulted in lower volumes in the following lines of business: Energy, chemicals and plastics, Metals, minerals and consumer products, and Automotive.

As COVID-19 continued to spread throughout Canada and the United States during 2020, CP conducted business as usual, to the greatest extent possible in the circumstances, while continuing to apply the principles of precision scheduled railroading to respond to changes in demand. The Company is continuing to take a variety of measures to ensure the availability of its transportation services throughout our network, promote the safety and security of our

CP 2020 ANNUAL REPORT 4

employees, and support the communities in which we operate. Certain modifications the Company has made in response to the COVID-19 pandemic include but are not limited to: implementing periods of working at home for certain office employees; restricting employee business travel; implementing post-travel employee screening; strengthening clean workplace practices; reinforcing socially responsible sick leave recommendations; limiting visitor and third-party access to Company facilities; launching internal COVID-19 resources for employees; creating a pandemic response team comprised of employees and members of senior management; and encouraging telephonic and video conference-based meetings along with other hygiene and social distancing practices recommended by health authorities including Health Canada, the U.S. Centers for Disease Control and Prevention, and the World Health Organization. CP supported employees by working with labour unions to shorten recall times to be prepared for demand increases while supplementing employment insurance payments and maintaining health benefit coverage for employees during that period. CP also awarded a bonus for our frontline employees who worked or were laid off in 2020 due to the COVID-19 pandemic. CP is responding to this crisis through measures designed to protect our workforce and prevent disruptions to the central role the Company's operations provide to the North American economy. CP's service is deemed essential as part of the transportation industry. We believe that we remain well positioned to adjust to market conditions to assist our customers as they work to manage their supply chain and inventories.

Preventative measures that serve to minimize the risk of exposure to COVID-19 remain in effect, including modifying our workspace to implement physical distancing measures, and continuously reevaluating our efforts with safety as a top priority.

In addition to the above, we have also observed many other companies, including companies in our industry, taking precautionary and preemptive actions to address the COVID-19 pandemic, and companies may take further actions that alter their normal business operations. We will continue to actively monitor the situation and may take further actions that could materially alter our business operations as may be required or recommended by federal, provincial, state or local authorities, or that we determine are in the best interests of our employees, customers, shareholders, partners, suppliers, and other stakeholders.

Additional information concerning the impact COVID-19 may have to our future business and results of operations is provided in Part I, Item 1A. Risk Factors.

Other current business developments

On January 27, 2021, CP announced its Board of Directors will seek shareholder and regulatory approval for the implementation of a five-for-one share split of CP's issued and outstanding common shares. The share split is subject to the approval of shareholders at the Annual and Special Meeting of Shareholders scheduled to be held on April 21, 2021 and to the requirements of the Toronto Stock Exchange ("TSX") and New York Stock Exchange ("NYSE"). CP also announced a normal course issuer bid ("NCIB") commencing January 29, 2021, to purchase up to 3.33 million Common Shares in the open market for cancellation before January 28, 2022.

On December 22, 2020, CP acquired full ownership of the Detroit River Tunnel Partnership ("DRTP"), which owns a 1.6-mile rail tunnel linking Windsor, Ontario, and Detroit, Michigan. The purchase price for the transaction was approximately $398 million, net of cash acquired. CP previously owned a 16.5 percent interest in the partnership and was its designated operator. The acquisition will reduce CP’s operating costs related to movements through the tunnel while further integrating the eastern part of our network. For additional information regarding this acquisition, refer to Item 8. Financial Statements and Supplementary Data, Note 10 Business combination.

In the fourth quarter of 2020, CP announced its plan to develop North America's first line-haul hydrogen-powered locomotive. CP's Hydrogen Locomotive Program will retrofit a line-haul locomotive with hydrogen fuel cells and battery technology to drive the locomotive's electric traction motors. Once operational, CP will conduct rail service trials and qualification testing to evaluate the technology's readiness for the freight-rail sector. The work builds on CP's prior experience with testing low-emitting locomotive technologies, including biofuels, compressed natural gas and battery-powered solutions. This project aligns with CP's focus on finding innovative solutions to support a sustainable future.

In the fourth quarter of 2020, CP received a leadership level score of A- from CDP for its 2020 climate change disclosure. This accomplishment represented a significant milestone in CP's journey to integrate climate-related risks and opportunities into the company's sustainability programs and reporting practices. CDP is an internationally recognized non-profit organization that runs a global environmental disclosure platform assessing companies on their climate-related performance and transparency.

In the fourth quarter of 2020, CP was added to the 2020 Dow Jones Sustainability Index North America. The index measures corporate sustainability leaders' performance through a comprehensive assessment of economic, environmental and social criteria. The top companies were selected from a record number of participants.

In the third quarter of 2020, CP released its first public statement on climate change, acknowledging the effects of rising global temperatures and our commitment to ongoing efforts to mitigate the impacts. The statement supports the goals of the Paris Agreement and the Pan-Canadian Framework on Clean Growth and Climate Change, which seek to limit global temperature rise to well below 2°C above pre-industrial levels. In support of this initiative, we plan to establish a science-based emissions reduction target to guide our climate action.

5 CP 2020 ANNUAL REPORT

On July 21, 2020, CP increased its quarterly dividend to $0.95 per share on the outstanding Common Shares, from $0.83 per share from the prior quarter.

In the second quarter of 2020, CP completed its previously announced acquisition of Central Maine and Québec Railway U.S. Inc. ("CMQ U.S."). Together with the December 30, 2019 completion of the acquisition of Central Maine & Québec Railway Canada Inc. ("CMQ Canada"), the acquisition of CMQ U.S. completed CP's purchase of the entire Central Maine & Québec Railway ("CMQ") network originally announced on November 20, 2019, for approximately $174 million (U.S. $133 million). CMQ U.S. and CMQ Canada will continue to operate in the U.S. and in Canada respectively as subsidiaries of CP. CMQ owns rail lines primarily in Québec and Maine, stretching approximately 481 miles, and primarily moving forest products, refined petroleum products, chemicals and plastics. This acquisition provides CP with strategic access into the U.S. Northeast and Atlantic Canada. The transaction provides CP customers with seamless, safe and efficient access to ports at Searsport, Maine, and to Saint John, New Brunswick, via Eastern Maine Railway Company and New Brunswick Southern Railway. With the CMQ acquisition, CP is now a 13,000-mile rail network connecting the Atlantic coast to the Pacific coast across six Canadian provinces and 11 U.S. states. For additional information regarding this acquisition, refer to Item 8. Financial Statements and Supplementary Data, Note 10 Business combination.

On April 21, 2020, the Company held its annual meeting of shareholders, which was conducted via a virtual only format by live webcast online for the first time. All 11 director nominees were elected.

Prior Developments

On December 17, 2019, the Company announced an NCIB, commencing December 20, 2019, to purchase up to 4.80 million Common Shares in the open market for cancellation before December 19, 2020.

During the first quarter of 2019, the Company experienced severe winter operating conditions and an increase in the frequency and severity of casualty incidents and derailments. As a result, the Company incurred significant costs to manage severe weather conditions, as well as direct casualty costs, and higher operating costs. During this period and the subsequent network recovery the Company also experienced losses and deferrals of potential revenues.

Operations

The Company operates in only one operating segment: rail transportation. Although the Company provides a breakdown of revenue by business line, the overall financial and operational performance of the Company is analyzed as one segment due to the integrated nature of the rail network. Additional information regarding the Company's business and operations, including revenue and financial information, and information by geographic location is presented in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data, Note 27 Segmented and geographic information.

CP 2020 ANNUAL REPORT 6

Lines of Business

The Company transports bulk commodities, merchandise freight, and intermodal traffic. Bulk commodities, which typically move in large volumes across long distances, include Grain, Coal, Potash, and Fertilizers and sulphur. Merchandise freight consists of industrial and consumer products, such as Energy, chemicals and plastics, Metals, minerals and consumer products, Forest products, and Automotive. Intermodal traffic consists largely of retail goods in overseas containers that can be transported by train, ship and truck, and in domestic containers and trailers that can be moved by train and truck.

The Company’s revenues are primarily derived from transporting freight. The following chart shows the Company's Freight revenue by each line of business in 2020, 2019 and 2018:


			2020 Freight Revenues


2019 Freight Revenues			2018 Freight Revenues

7 CP 2020 ANNUAL REPORT

In 2020, the Company generated Freight revenues totalling $7,541 million ($7,613 million in 2019 and $7,152 million in 2018). The following charts compare the percentage of the Company’s total Freight revenues derived from each of the three major business lines in 2020, 2019 and 2018:


2020 Freight Revenues			2019 Freight Revenues			2018 Freight Revenues

BULK

The Company’s Bulk business represented approximately 43% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Bulk freight revenues by commodity business in 2020, 2019 and 2018:


2020 Bulk Revenues	2019 Bulk Revenues	2018 Bulk Revenues
(43% of Freight Revenues)	(40% of Freight Revenues)	(41% of Freight Revenues)

CP 2020 ANNUAL REPORT 8

Grain

The Company’s Grain business represented approximately 58% of Bulk revenues, and was 24% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Grain freight revenues generated from Canadian and U.S. shipments in 2020, 2019 and 2018:


2020 Grain Revenues	2019 Grain Revenues	2018 Grain Revenues
(58% of Bulk Revenues; 24% of Freight Revenues)	(55% of Bulk Revenues; 22% of Freight Revenues)	(53% of Bulk Revenues; 22% of Freight Revenues)

CP's Grain network is unique among railways in North America as it is strategically positioned in the heart of grain-producing regions of western Canada and the Northern Plains of the U.S. Canadian grain transported by CP consists of both whole grains, such as wheat, canola, durum, pulses, and barley, and processed products such as oils, meals, and malt. This business is centred in the Canadian Prairies (Saskatchewan, Alberta, and Manitoba), with grain shipped primarily west to the Port of Vancouver, and east to the Port of Thunder Bay for export. Grain is also shipped to the U.S., to eastern Canada, and to Mexico for domestic consumption.

Canadian grain includes a division of business that is regulated by the Canadian government through the Canada Transportation Act (“CTA”). This regulated business is subject to a maximum revenue entitlement (“MRE”). Under the CTA, railways can set their own rates for individual movements. However, the MRE governs aggregate revenue earned by the railway based on a formula that factors in the total volumes, length of haul, average revenue per ton, and inflationary adjustments. The regulation applies to western Canadian export grain shipments to the ports of Vancouver and Thunder Bay.

U.S. grain transported by CP consists of both whole grains, such as wheat, soybeans, corn and durum, and processed products such as feed, meals and flour. This business is centred in the states of Minnesota, North Dakota, and Iowa. Grain destined for domestic consumption moves east via Chicago, to the U.S. Northeast or is interchanged with other carriers to the U.S. Pacific Northwest and U.S. Southeast. In partnership with other railways, CP also moves grain to export terminals in the U.S. Pacific Northwest and the Gulf of Mexico. Export grain traffic is also shipped to ports at Superior and Duluth.

9 CP 2020 ANNUAL REPORT

Coal

The Company’s Coal business represented approximately 18% of Bulk revenues, and was 8% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Coal freight revenues generated from Canadian and U.S. shipments in 2020, 2019 and 2018:


2020 Coal Revenues	2019 Coal Revenues	2018 Coal Revenues
(18% of Bulk Revenues; 8% of Freight Revenues)	(22% of Bulk Revenues; 9% of Freight Revenues)	(23% of Bulk Revenues; 9% of Freight Revenues)

In Canada, CP handles mostly metallurgical coal destined for export for use in the steelmaking process. CP’s Canadian coal traffic originates mainly from Teck Resources Limited’s mines in southeastern B.C. CP moves coal west from these mines to port terminals for export to world markets (Pacific Rim, Europe and South America), and east for the U.S. Midwest markets.

In the U.S., CP moves primarily thermal coal from connecting railways, serving the thermal coal fields in the Powder River Basin in Montana and Wyoming, which is delivered to power-generating facilities in the U.S. Midwest.

Potash

The Company's Potash business represented approximately 15% of Bulk revenues, and was 7% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Potash freight revenues generated from export and domestic potash shipments in 2020, 2019 and 2018:


2020 Potash Revenues	2019 Potash Revenues	2018 Potash Revenues
(15% of Bulk Revenues; 7% of Freight Revenues)	(15% of Bulk Revenues; 6% of Freight Revenues)	(16% of Bulk Revenues; 7% of Freight Revenues)

The Company’s Potash traffic moves mainly from Saskatchewan to offshore markets through the ports of Vancouver, Portland, and Thunder Bay, and to markets in the U.S. All potash shipments for export beyond Canada and the U.S. are marketed by Canpotex Limited and K+S Potash Canada. Canpotex is an

CP 2020 ANNUAL REPORT 10

export company owned in equal shares by Nutrien Ltd. and The Mosaic Company. Independently, these producers move domestic potash with CP primarily to the U.S. Midwest for local application.

Fertilizers and Sulphur

The Company's Fertilizers and sulphur business represented approximately 9% of Bulk revenues, and was 4% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Fertilizers and sulphur freight revenues generated from dry fertilizers, wet fertilizers and sulphur transportation in 2020, 2019 and 2018:


2020 Fertilizers & Sulphur Revenues	2019 Fertilizers & Sulphur Revenues	2018 Fertilizers & Sulphur Revenues
(9% of Bulk Revenues; 4% of Freight Revenues)	(8% of Bulk Revenues; 3% of Freight Revenues)	(8% of Bulk Revenues; 3% of Freight Revenues)

Dry fertilizers include: phosphate, urea, ammonium sulphate, and nitrate. Wet fertilizers are primarily anhydrous ammonia. More than half of CP's fertilizer shipments originate from production facilities in Alberta, where abundant sources of natural gas and other chemicals provide feedstock for fertilizer production.

Most sulphur is produced in Alberta as a byproduct of processing sour natural gas, refining crude oil, and upgrading bitumen produced in the Alberta oil sands. Sulphur is a raw material used primarily in the manufacturing of sulphuric acid, which is used most extensively in the production of phosphate fertilizers.

MERCHANDISE

The Company’s Merchandise business represented approximately 36% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Merchandise freight revenue by commodity business in 2020, 2019 and 2018:


2020 Merchandise Revenues	2019 Merchandise Revenues	2018 Merchandise Revenues
(36% of Freight Revenues)	(39% of Freight Revenues)	(37% of Freight Revenues)

11 CP 2020 ANNUAL REPORT

Merchandise products move in both mixed freight and unit trains, in a variety of car types. Service involves delivering products to many different customers and destinations. In addition to traditional rail service, CP moves merchandise traffic through a network of truck-rail transload facilities, expanding the reach of CP's network to non-rail served facilities.

Forest Products

The Company’s Forest products business represented approximately 12% of Merchandise revenues, and was 4% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Forest products freight revenues generated from pulp and paper (wood pulp, paperboard, newsprint, and paper), lumber and panel, and other shipments in 2020, 2019 and 2018:


2020 Forest Products Revenues	2019 Forest Products Revenues	2018 Forest Products Revenues
(12% of Merchandise Revenues; 4% of Freight Revenues)	(10% of Merchandise Revenues; 4% of Freight Revenues)	(11% of Merchandise Revenues; 4% of Freight Revenues)

Forest products traffic includes pulp and paper, and lumber and panel shipped from key producing areas in B.C., Ontario, Québec, Alberta, and New Brunswick, to destinations throughout North America, including Vancouver and Montreal to export markets.

Energy, Chemicals and Plastics

The Company’s Energy, chemicals and plastics business represented approximately 54% of Merchandise revenues, and was 20% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Energy, chemicals and plastics freight revenues generated from petroleum products, crude, chemicals, biofuels, and plastics shipments in 2020, 2019 and 2018:


2020 Energy, Chemicals & Plastics Revenues	2019 Energy, Chemicals & Plastics Revenues	2018 Energy, Chemicals & Plastics Revenues
(54% of Merchandise Revenues; 20% of Freight Revenues)	(52% of Merchandise Revenues; 20% of Freight Revenues)	(47% of Merchandise Revenues; 17% of Freight Revenues)

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Petroleum products consist of commodities such as liquefied petroleum gas ("LPG"), fuel oil, asphalt, gasoline, condensate (diluent), and lubricant oils. The majority of the Company’s western Canadian energy traffic originates in the Alberta Industrial Heartland, Canada's largest hydrocarbon processing region, and Saskatchewan. The Bakken formation region in Saskatchewan and North Dakota is another source of condensate, LPG, and other refined petroleum. Interchanges with several rail interline partners give the Company access to destination and export markets in the U.S. West Coast, the U.S. Midwest, and Mexico, as well as the Texas and Louisiana petrochemical corridor and port connections.

Crude moves from production facilities throughout Alberta, North Dakota, and Saskatchewan. CP provides efficient routes to refining markets in the Gulf Coast, the U.S. Northeast, and the West Coast through connections with our railway partners.

The Company’s chemical traffic includes products such as ethylene glycol, caustic soda, sulphuric acid, methanol, styrene, and soda ash. These shipments originate from western Canada, the Gulf of Mexico, the U.S. Midwest, and eastern Canada, and move to end markets in Canada, the U.S. and overseas.

CP's biofuels traffic originates mainly from facilities in the U.S. Midwest, shipping primarily to destinations in the U.S. Northeast.

The most commonly shipped plastics products are polyethylene and polypropylene. Approximately half of the Company’s plastics traffic originates in central and northern Alberta and moves to various North American destinations.

Metals, Minerals and Consumer Products

The Company’s Metals, minerals and consumer products business represented approximately 22% of Merchandise revenues, and was 8% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Metals, minerals and consumer products freight revenues generated from aggregates (excluding frac sand), steel, frac sand, food and consumer products, and non-ferrous metals transportation in 2020, 2019 and 2018:


2020 Metals, Minerals & Consumer Products Revenues	2019 Metals, Minerals & Consumer Products Revenues	2018 Metals, Minerals & Consumer Products Revenues
(22% of Merchandise Revenues; 8% of Freight Revenues)	(26% of Merchandise Revenues; 10% of Freight Revenues)	(30% of Merchandise Revenues; 11% of Freight Revenues)

Aggregate products include coarse particulate and composite materials such as cement, limestone, clay, and gypsum. Cement is the leading commodity within aggregates, and is shipped directly from production facilities in Alberta, Québec, and Ontario to energy and construction projects in the U.S. Midwest, Canadian Prairies, and the U.S. Pacific Northwest.

The majority of frac sand originates at mines located along the Company’s network in Wisconsin and moves to the Bakken, Marcellus Shale, Permian Basin, and other shale formations across North America.

CP transports steel in various forms from mills in the U.S. Midwest, Ontario, and Saskatchewan to a variety of industrial users. The Company carries base metals such as aluminum, zinc, and lead. CP also moves ores from mines to smelters and refineries for processing, and the processed metal to automobile and consumer products manufacturers.

Food, consumer, and other products traffic consists of a diverse mix of goods, including food products, railway equipment, building materials, and waste products.

13 CP 2020 ANNUAL REPORT

Automotive

The Company’s Automotive business represented approximately 12% of Merchandise revenues, and was 4% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Automotive freight revenues generated by movements of finished vehicles from Canadian, U.S., overseas, and Mexican origins, machinery, and parts and other in 2020, 2019 and 2018:


2020 Automotive Revenues	2019 Automotive Revenues	2018 Automotive Revenues
(12% of Merchandise Revenues; 4% of Freight Revenues)	(12% of Merchandise Revenues; 5% of Freight Revenues)	(12% of Merchandise Revenues; 5% of Freight Revenues)

CP’s Automotive portfolio consists of four finished vehicle traffic components: Canadian-produced vehicles that ship to the U.S. from Ontario production facilities; U.S.-produced vehicles that ship within the U.S. as well as cross border shipments to Canadian markets; vehicles from overseas that move through the Port of Vancouver to eastern Canadian markets; and Mexican-produced vehicles that ship to the U.S. and Canada. In addition to finished vehicles, CP ships machinery, pre-owned vehicles, and automotive parts. A comprehensive network of automotive compounds is utilized to facilitate final delivery of vehicles to dealers throughout Canada and in the U.S.

INTERMODAL

The Company’s Intermodal business represented approximately 21% of total Freight revenues in 2020.

The following charts compare the percentage of the Company's Intermodal freight revenues generated from Canada, ports, cross border transportation, other international, and U.S. in 2020, 2019 and 2018:


2020 Intermodal Revenues	2019 Intermodal Revenues	2018 Intermodal Revenues
(21% of Freight Revenues)	(21% of Freight Revenues)	(22% of Freight Revenues)

Domestic intermodal freight consists primarily of manufactured consumer products that are predominantly moved in 53-foot containers within North America. International intermodal freight moves in marine containers to and from ports and North American inland markets.

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CP’s domestic intermodal business moves goods from a broad spectrum of industries including wholesale, retail, food, forest products, and various other commodities. Key service factors in domestic intermodal include consistent on-time delivery, the ability to provide door-to-door service, and the availability of value-added services. The majority of the Company’s domestic intermodal business originates in Canada, where CP markets its services directly to retailers and manufacturers, providing complete door-to-door service and maintaining direct relationships with its customers. In the U.S., the Company’s service is delivered mainly through intermodal marketing companies.

CP’s international intermodal business consists primarily of containerized traffic moving between the ports of Vancouver, Montréal, Saint John, and inland points across Canada and the U.S. Import traffic from the Port of Vancouver is mainly long-haul business destined for eastern Canada and the U.S. Midwest and Northeast. CP works closely with the Port of Montréal, a major year-round East Coast gateway to Europe, to serve markets primarily in the U.S. Midwest and Canada. CP's access to the Port of Saint John provides the fastest rail service from the east coast to the Canadian and U.S. Midwest markets for import and export cargo from Europe, South America, and Asia.

Fuel Cost Adjustment Program

The short-term volatility in fuel prices may adversely or positively impact revenues. CP employs a fuel cost adjustment program designed to respond to fluctuations in fuel prices and help reduce volatility to changing fuel prices. Fuel surcharge revenues are earned on individual shipments and are based primarily on the price of On-Highway Diesel. As such, fuel surcharge revenues are a function of freight volumes and fuel prices. Fuel surcharge revenues accounted for approximately 4% of the Company's Freight revenues in 2020. The Company is also subject to carbon taxation systems and levies in some jurisdictions in which it operates, the costs of which are passed on to the shipper. As such, fuel surcharge revenue includes carbon taxes and levy recoveries.

Freight revenues included fuel surcharge revenues of $297 million in 2020, a decrease of $167 million, or 36%, from $464 million in the same period of 2019. This decrease was primarily due to lower fuel prices. This decrease was partially offset by the timing of recoveries from CP's fuel cost adjustment program and increased carbon tax recoveries.

Non-freight Revenues

Non-freight revenues accounted for approximately 2% of the Company’s Total revenues in 2020. Non-freight revenues are generated from leasing certain assets; other arrangements, including logistical services and contracts with passenger service operators; and switching fees.

Significant Customers

For each of the years ended December 31, 2020, 2019 and 2018, the company's revenues and operations were not dependent on any major customers.

Competition

The Company is in the ground transportation and logistics business. The Company sees competition in this segment from other railways, motor carriers, ship and barge operators, and pipelines. Depending on the specific market, competing railways, motor carriers, and other competitors may exert pressure on price and service levels. The Company continually evaluates the market needs and the competition. The Company responds as it deems appropriate to provide competitive services to the market. This includes developing new offerings such as transload facilities, new train services, and other logistics services.

Seasonality

Volumes and revenues from certain goods are stronger during different periods of the year. First-quarter revenues are typically lower mainly due to winter weather conditions, closure of the Port of Thunder Bay, and reduced transportation of retail goods. Second and third quarter revenues generally improve compared to the first quarter, as fertilizer volumes are typically highest during the second quarter and demand for construction-related goods is generally highest in the third quarter. Revenues are typically strongest in the fourth quarter, primarily as a result of the transportation of grain after the harvest, fall fertilizer programs, and increased demand for retail goods moved by rail. Operating income is also affected by seasonal fluctuations. Operating income is typically lowest in the first quarter, due to lower freight revenue and higher operating costs associated with winter conditions.

15 CP 2020 ANNUAL REPORT

Government Regulation

The Company’s railway operations are subject to extensive federal laws, regulations, and rules in both Canada and the U.S., which directly affect how operations and business activities are managed.

Economic Regulation - Canada

The Company’s rail operations in Canada are subject to economic regulation by the Canadian Transportation Agency (the "Agency”) as delegated by the Canada Transportation Act. The Canada Transportation Act indirectly regulates rates by providing remedies for freight rates, including ancillary charges, remedies for level of service, long-haul interswitching rates, and regulated interswitching rates in Canada. The CTA regulates the MRE for the movement of export grain, construction and abandonment of railways, commuter and passenger access, and noise and vibration-related disputes.

In 2018, the Transportation Modernization Act became law. The legislation amended the Canada Transportation Act and the Railway Safety Act ("RSA"), among other Acts, to (1) replace the previous 160 kilometre extended interswitching limit and the competitive line rate provisions with a new long-haul interswitching regime; (2) modify the existing Level of Service remedy for shippers by instructing the Agency to determine, upon receipt of a complaint, if a railway company is fulfilling its common carrier obligation to the “highest level of service that is reasonable in the circumstances”; (3) allow the existing Service Level Agreement arbitration remedy to include the consideration of reciprocal financial penalties; (4) increase the threshold for summary Final Offer Arbitration from $750,000 to $2 million; (5) bifurcate the Volume-Related Composite Price Index component of the annual MRE determination for transportation of regulated grain, to encourage hopper car investment by CP and Canadian National Railway ("CN"); (6) mandate the installation of locomotive voice and video recorders ("LVVRs"), with statutory permission for random access by railway companies and Transport Canada ("TC") to the LVVR data in order to proactively strengthen railway safety in Canada; and (7) compel railways to provide additional data to the federal government.

Economic Regulation - U.S.

The Company’s U.S. rail operations are subject to economic regulation by the Surface Transportation Board (the “STB”). The STB provides economic regulatory oversight and administers Title 49 of the United States Code and related Code of Federal Regulations. The STB has jurisdiction over railroad rate and service issues and proposed railroad mergers and other transactions.

The STB Reauthorization Act of 2015 resulted in numerous changes to the structure and composition of the STB, removing it from under the Department of Transport and establishing the STB as an independent U.S. agency, as well as increasing STB Board membership from three to five members. Notably, the law vests in the STB certain limited enforcement powers, by authorizing it to investigate rail carrier violations on the STB Board’s own initiative. The law also requires the STB to establish a voluntary binding arbitration process to resolve rail rate and practice disputes.

Safety Regulation - Canada

The Company’s operations in Canada are subject to safety regulatory oversight by TC pursuant to the RSA. The RSA regulates safety-related aspects of railway operations in Canada, including the delegation of inspection, investigation and enforcement powers to TC. TC is also responsible for overseeing the transportation of dangerous goods as set out under the Transportation of Dangerous Goods Act ("TDGA").

After the tragic accident in Lac-Mégantic, Québec, in July 2013 involving a non-related short-line railway company, the Government of Canada implemented several measures pursuant to the RSA and the TDGA. These modifications implemented changes with respect to rules associated with securing unattended trains; the classification of crude being imported, handled, offered for transport, or transported; and the provision of information to municipalities through which dangerous goods are transported by rail. The U.S. federal government has taken similar actions. These changes did not have a material impact on CP’s operating practices.

In 2015, An Act to amend the Canada Transportation Act and the Railway Safety Act became law. The legislation sets out minimum insurance requirements for federally regulated railways based on amounts of crude and toxic inhalation hazards ("TIH") or poisonous inhalation hazards moved. It also imposes strict liability; limits railway liability to the minimum insurance level; mandates the creation of a fund paid for by levies on crude shipments, to be utilized for damages beyond a railway's liability; allows railways and insurers to maintain rights to pursue other parties (subrogation); and prevents shifting liability to shippers from railways except through written agreement.

The Company is allocating resources, including working with public and private rail crossing owners, to meet the Grade Crossings Regulations, under the RSA, which came into force in 2014. The regulations require existing crossings to meet specified safety standards by November 2021.

On November 25, 2020, the Minister of Transport announced updated Duty and Rest Period Rules for Railway Operating Employees. The new rules, founded on modern-day fatigue management principles, reduce the length of a duty period and increase the length of the minimum rest period between shifts. The rules establish limits on the total number of duty hours, 60 hours in a seven-day period and 192 hours in a 28-day period. These requirements will be phased in 30 months from the date of the announcement. The new rules also require federally regulated railways, including the Company, to complete a Fatigue Management Plan by November 25, 2021, and implement the Fitness for Duty provisions by November 25, 2022.

CP 2020 ANNUAL REPORT 16

Safety Regulation - U.S.

The Company’s U.S. operations are subject to safety regulations enforced by the Federal Railroad Administration (“FRA”), and the Pipelines and Hazardous Materials Safety Administration (“PHMSA”). The FRA regulates safety-related aspects of the Company’s railway operations in the U.S. under the Federal Railroad Safety Act, as well as rail portions of other safety statutes. The PHMSA regulates the safe transportation of all hazardous materials by rail.

On October 29, 2015, the Surface Transportation Extension Act of 2015 ("STEA") was signed into law. The law extends, by three years, the deadline for the U.S. rail industry to implement Positive Train Control (“PTC”), a set of highly advanced technologies designed to prevent train-to-train collisions, speed-related derailments, and other accidents caused by human error by determining the precise location, direction and speed of trains, warning train operators of potential problems, and taking immediate action if an operator does not respond. Legislation passed by the U.S. Congress in 2008 mandated that PTC systems be operable by the end of 2015 on rail lines used to transport passengers or toxic-by-inhalation materials. The STEA extended the deadline to install and activate PTC to December 31, 2018, with an optional two-year extension (December 31, 2020) under certain circumstances. The Company received the two-year extension to ensure safe and effective implementation of PTC on its rail network. CP successfully implemented PTC and was PTC compliant as of December 1, 2020.

For further details on the capital expenditures associated with compliance with the PTC regulatory mandate, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.

Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental, and other matters.

Environmental Laws and Regulations

The Company’s operations and real estate assets are subject to extensive federal, provincial, state, and local environmental laws and regulations governing emissions to the air, management and remediation of historical contaminant sites, discharges to waters and the handling, storage, transportation, and disposal of waste and other materials. If the Company is found to have violated such laws or regulations, it could have a material adverse effect on the Company’s business, financial condition, or operating results. In addition, in operating a railway, it is possible that releases of hazardous materials during derailments or other accidents may occur that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company’s operating results, financial condition, and reputation.

The Company has implemented an Environmental Management System to facilitate the reduction of environmental risk. Specific environmental programs are in place to address areas such as air emissions, wastewater, management of vegetation, chemicals and waste, storage tanks, and fueling facilities. CP has also undertaken environmental impact assessments and risk assessments to identify, prevent, and mitigate environmental risks. There is continued focus on preventing spills and other incidents that have a negative impact on the environment. There is an established strategic emergency response contractor network, and spill equipment kits are located across Canada and the U.S. to ensure a rapid and efficient response in the event of an environmental incident. In addition, emergency preparedness and response plans are regularly updated and tested. In 2020, updates to CP's comprehensive oil spill response plan were made in accordance with the changes in the PHMSA regulations.

The Company has developed an environmental audit program that comprehensively, systematically, and regularly assesses the Company’s facilities for compliance with legal requirements and the Company’s policies for conformance to accepted industry standards. Included in this is a corrective action follow-up process and semi-annual review by senior management.

CP focuses on key strategies, identifying tactics and actions to support and operationalize our environmental commitments. The Company’s strategies include:

•Implementing measures to minimize or prevent environmental impacts from our operations and facilities, and to ensure compliance with applicable environmental laws and regulations;

•Maintaining an Environmental Management System to provide consistent, effective guidance and resources to CP employees in regard to the management of air emissions, dangerous goods and waste materials, emergency preparedness and response, petroleum products management, and water and wastewater systems;

•Reducing environmental and safety risk through business processes to identify and mitigate potential environmental impacts related to all CP operations and activities;

•Ensuring that new or altered operations and other business activities are evaluated, planned, permitted in accordance with applicable regulations, and executed to mitigate environmental risk;

•Engaging with relevant stakeholders to consider and discuss CP’s environmental management practices and environmental issues and concerns associated with our operations;

•Employing best practices, proven technologies, and safe operating standards for activities involving elevated environmental risk; and

•Planning and preparing for emergency responses to ensure all appropriate steps are taken in the event of a derailment, spill, or other incident involving a release to the environment.

17 CP 2020 ANNUAL REPORT

Security

CP is subject to statutory and regulatory directives in Canada and the U.S. that address security concerns. CP plays a critical role in the North American transportation system. Rail lines, facilities and equipment, including railcars carrying hazardous materials, could be direct targets or indirect casualties of terrorist attacks, actions by criminal and non-criminal organizations, and activities by individuals. Regulations by the U.S. Department of Transportation and the Department of Homeland Security in the U.S. include speed restrictions, chain of custody and security measures, which can impact service and increase costs for the transportation of hazardous materials, especially TIH materials. New regulations published by TC under the TDGA have added requirements for railway companies to take actions to mitigate security risks of transporting dangerous goods by rail. In addition, insurance premiums for some or all of the Company’s current coverage could increase significantly, or certain coverage may not be available to the Company in the future. While CP will continue to work closely with Canadian and U.S. government agencies, future decisions by these agencies on security matters or decisions by the industry in response to security threats to the North American rail network could have a material adverse effect on the Company's business, financial condition, or operating results.

CP takes the following security measures:

•CP employs its own police service that works closely with communities and other law enforcement and government agencies to promote railway safety and infrastructure security. As a railway law enforcement agency, CP Police Services is headquartered in Calgary, with police officers assigned to over 25 field offices responsible for railway police operations in six Canadian provinces and 14 U.S. states. CP Police Services operates on the CP rail network as well as in areas where CP has non-railway operations;

•CP’s Police Communication Centre (“PCC”) operates 24 hours a day. PCC receives reports of emergencies, dangerous or potentially dangerous conditions, and other safety and security issues from our employees, the public, and law enforcement and other government officials. PCC ensures that proper emergency responders are notified as well as governing bodies;

•CP’s Security Management Plan is a comprehensive, risk-based plan modelled on and developed in conjunction with the security plan prepared by the Association of American Railroads post-September 11, 2001. Under this plan, CP routinely examines and prioritizes railway assets, physical and cyber vulnerabilities, and threats, as well as tests and revises measures to provide essential railway security. To address cyber security risks, CP implements mitigation programs that evolve with the changing technology threat environment. The Company has also worked diligently to establish backup sites to ensure a seamless transition in the event that the Company's operating systems are the target of a cyber-attack. By doing so, CP is able to maintain network fluidity; and

•CP security efforts consist of a wide variety of measures including employee training, periodic security assessments, engagement with our customers, and training of emergency responders.

Human Capital Management

CP is focused on attracting, developing, and retaining a resilient, high performing workforce that delivers on providing service for our customers. CP's culture is guided by three core values: Accountability, Diversity, and Pride. These values drive our actions. Everything we do is grounded in precision scheduled railroading and our five foundations of Provide Service, Control Costs, Optimize Assets, Operate Safely, and Develop People.

At CP, our approximately 12,000-strong team of railroaders across North America underpin CP’s success and bring value to our customers and shareholders. Accordingly, Develop People is one foundation of how we do business, illustrating our focus and energy towards empowering our people, providing an engaging culture and cultivating an industry leading team.

Total Employees and Workforce

An employee is defined by the Company as an individual currently engaged in full-time, part-time, or seasonal employment with CP. The total number of employees as of December 31, 2020, was 11,890, a decrease of 804, or 6%, compared to 12,694 as at December 31, 2019, due to reduced workload as measured in GTMs and more efficient resource planning.

Workforce is defined as total employees plus contractors and consultants. The total workforce as at December 31, 2020 was 11,904, a decrease of 828, or 7%, compared to 12,732 as at December 31, 2019, due to more efficient resource planning. .

Unionized Workforce

Class I railways are party to collective bargaining agreements with various labour unions. The majority of CP's employees belong to labour unions and are subject to these agreements. CP manages collaborative relationships with union members in both Canada and the U.S.

CP employs approximately 12,000 active employees across North America with three-quarters based in Canada and the remainder in the United States. Unionized employees represent nearly 72% of our workforce and are represented by 36 active bargaining units.

Canada

Within Canada there are eight bargaining units representing approximately 6,600 Canadian unionized active employees. From time to time, we negotiate to renew collective agreements with various unionized groups of employees. In such cases, the collective agreements remain in effect until the bargaining process has been exhausted (pursuant to the Canada Labour Code). One agreement is pending ratification and one other remains open for renewal and is

CP 2020 ANNUAL REPORT 18

under negotiation as of December 31, 2020. Agreements are in place with the other six bargaining units in Canada, two are effective until December 31, 2021, and four are effective until 2022.

U.S.

In the U.S., there are currently 28 active bargaining units on three subsidiary railroads representing nearly 1,900 unionized active employees. Nine agreements are open for amendment and are under negotiation at this time. 15 agreements will become amendable in 2021 and one in 2022. Negotiations have been concluded with respect to the remaining three agreements which will expire beyond 2022.

Health and Safety

CP is an industry leader in rail safety and we are committed to protecting our employees, our communities, our environment, and our customers’ goods. This is CP's 15th consecutive year as industry leader in train accident statistics. Operate Safely is one of our five foundations of successful railroading and it starts with knowing and following the rules. Aside from running trains, many of our employees work in yards, terminals, and shops across our network with machinery and heavy equipment, or in extreme weather conditions. Their safety and security is of utmost importance to CP and is foundational to the way we view employee safety education and training. CP HomeSafeTM is an initiative designed to improve our safety culture by tapping into the human side of safety and promoting both safety engagement and feedback. HomeSafeTM puts everyone on the same level and empowers all employees to begin a safety conversation, no matter the rank or position. Safety performance is disclosed publicly on a quarterly basis using standardized metrics set out by the FRA. Additional information on FRA safety measures is included in Performance Indicators in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Talent Management

CP’s approach for talent management begins with our Human Resources department, which oversees recruitment, hiring, development, engagement, and retention with the current and future workforce and leadership of CP.

The Management Resources and Compensation Committee of the Board of Directors reviews and informs CP’s compensation plan and programming, and makes recommendations to the Board on succession planning for senior management and processes to identify, develop, and retain executive talent. Additionally, as part of CP’s succession planning program, senior leaders are actively engaged in building the pool of future leaders, and present their development plans to the Board.

CP maintains a number of internal policies related to recruitment, relocation, compensation, employment equity, and diversity and inclusion. The effective implementation of these policies alongside our ongoing workforce initiatives ensures CP’s attraction and recruitment, employee development, succession, engagement, and diversity and inclusion practices are consistent and aligned with CP’s commitments, foundations and values.

Attraction and Recruitment

With a rail network spanning Canada and the U.S., we employ a number of recruitment and retention tactics to attract the best and diverse talent across North America. CP offers many rewarding career opportunities in a variety of roles within the organization in both operating and support functions. We base our recruitment strategy on workforce planning needs, and our focus is on ensuring that we have a diverse candidate pool to fill our open positions.

CP recognizes the valuable skills and experience that veterans have gained from serving their country. Our veteran program was recognized as part of Canada's Best Diversity Employers® of 2020 and we were named part of the top 10 Military Friendly® employers in the U.S. for 2021.

CP tracks recruitment performance and success rates to better understand which tactics, benefits, and strategic partnerships are most successful in bringing in and retaining new talent.

Talent Development & Succession

As part of our core foundation and commitment to Develop People, we encourage all employees to take an active role in their career planning and development. We believe that investing in our employees leads to improved workplace morale and fosters a supportive working environment.

Training and Development

CP offers a variety of training courses through our Learning Management System that provides online and technical training, including mandatory, role-specific and voluntary courses. This enables our employees to succeed in their current roles and prepares them for career advancement opportunities.

Non-union employees also complete annual performance management and development action plans with their supervisors to set individual goals and track progress against Company expectations as well as long-term career goals.

19 CP 2020 ANNUAL REPORT

CP offers key development programs for current and emerging leaders. For our Operations groups, CP’s Leadership Management Trainee program provides internal and external candidates with comprehensive training on the critical skills necessary for railway operations and people leadership. Upon successful completion of the six to seven month program, participants qualify for a variety of operations frontline leader roles.

Leadership skills are long considered a core trait of CP employees. We encourage staff to develop leadership expertise as part of ongoing training and development through regular performance reviews and CP-specific skill development programs. Our Consequence Leadership training program focuses on creating a high-performance culture and feedback-rich environment at CP. The online learning module and interactive workshops introduce a practical set of tools and thought processes for instilling communications skills and management capabilities in our leaders and our employees. The goal is to create a constructive environment that improves bottom-line results and enables employees to perform at their best. To complement the Consequence Leadership training program, CP has developed in-house training to enhance leadership capabilities among leaders across the organization to ensure a long-term focus on our foundation to Develop People. For employees interested in further developing their leadership skills, CP also offers on-demand learning through Harvard ManageMentor.

Succession Management

CP undergoes extensive succession planning for both executive and management level positions. We measure the retention of our most critical positions and develop potential successors to be ready to fill critical roles as soon as positions become available. Looking ahead, CP is developing succession and development goals for the many high-potential successors for all critical positions, and will begin to measure the success rate of placing emerging leaders in those key positions.

Retention & Engagement

CP’s career development programs and diverse and inclusive workplace culture help drive employee retention and engagement. In addition, we have adopted a performance-based culture, and reward employees for dedication and hard work. CP’s competitive compensation and benefits packages are benchmarked yearly to ensure they reflect changes in the market. CP offers employees a wellness and fitness subsidy program. Along with our community investment programs, CP’s employee programs and resources illustrate our dedication to our employees’ well-being and satisfaction with their careers at CP.

CP periodically administers non-union surveys to measure employee perspectives and engagement. In 2019, we administered a new Employee Perspective survey to continue gathering actionable data regarding employee satisfaction and engagement, and to gain insight into what motivates and inspires our employees. These surveys help CP to better tailor our development and retention efforts.

Employee recognition programs are in place to celebrate wins and highlight the great work of our employees. CP’s CEO on the Spot awards, Annual Safety Awards and Broken Wheel Awards recognize good performance, heroic acts, milestones, and safety excellence with cash rewards. In addition, CP’s annual CEO Awards of Excellence and gala recognizes employees who have gone above and beyond the call of duty to exemplify CP’s five foundations and support our focus on providing superior service to our customers and driving value for our shareholders.

Diversity and Inclusion

Diversity is one of our core values at CP. We believe that different backgrounds, experiences, and perspectives enhance creativity and innovation and encourage diversity of thought in the workplace. Fostering an inclusive environment where all employees feel empowered to strive for and achieve success supports our high-performance culture and is integral to our growth and success as an organization.

CP recognizes the importance of Board member diversity as a critical component of objective oversight and continuous improvement. As of December 31, 2020, women represented 46% of CP's 2020 Board Membership.

CP has regulatory requirements to report on workforce diversity representation in Canada (Employment Equity Act) and the U.S. (Equal Employment Opportunity Commission). CP currently collects diversity data on the following categories: women, persons with disabilities, minorities (visible minorities), and Indigenous peoples (Canada) from employees through voluntary self-disclosure. CP continues to focus our efforts on attracting, recruiting, and developing a diverse workforce. This data is shared in various disclosures and government reporting, internally with employees and leaders as well as our Board of Directors.

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Year over Year Diversity Representation


Canada and U.S. Diversity Percentages(1)	2020		2019		2018
Women	10	%	10	%	10	%
Persons with disabilities	3	%	3	%	2	%
Minorities (visible minorities)(2)	13	%	13	%	13	%
Indigenous peoples (Canada only)	3	%	4	%	3	%

(1) Percentages are based on total workforce (total number of active employees) at year-end.

(2) Minority is a term used in the U.S., Visible Minority is a term used in Canada.

CP continues to work collaboratively with our employees, communities along our network, and partner organizations in Canada and the U.S. to progress and support CP’s commitment toward a more representative and inclusive workplace. Some of our initiatives include:

•Establishing three diversity councils (Indigenous, Gender and Racial). Each council is chaired by a CP executive and represents a diverse group of employees. The councils work to ensure we consider diversity and inclusion when we make decisions, provide feedback on corporate directions and promote initiatives that relate to each council’s area of focus;

•Continuing our existing partnerships with associations and organizations that attract, recruit, and support skilled immigrants, transitioning veterans, persons with disabilities, and women;

•Working with Indigenous groups to develop relationships that are more meaningful, create targeted outreach programs and employment opportunities, and better understand their history, culture, and opportunities for collaboration.

•Supporting the development and advancement of women at CP; and

•Increasing employee awareness regarding CP’s workplace diversity and inclusion practices through communications, education, and training.

Further, CP recently published a Diversity Commitment. This commitment re-enforces the efforts we have made, and will continue to make, in our journey to becoming a more diverse and inclusive company, one that we and those we do business with are proud to be a part.

We pride ourselves on offering a diverse workplace with a variety of careers in both our corporate and field locations. We recruit and hire talent based on relevant skills and experience, and seek to attract the highest quality candidates regardless of gender, age, cultural heritage, or ethnic origin. One of our primary objectives is attracting, recruiting, retaining, and developing a workforce representative of the communities in which we operate.

Available Information

CP makes available on or through its website www.cpr.ca 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 U.S. Securities and Exchange Commission (“SEC”). Our website also contains charters for each of the committees of our Board of Directors, our corporate governance guidelines and our Code of Business Ethics. This Form 10-K and other SEC filings made by CP are also accessible through the SEC’s website at www.sec.gov.

The Company has included the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") certifications regarding the Company's public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 and applicable securities laws in Canada as Exhibits to this annual report.

All references to our websites contained herein do not constitute incorporation by reference of information contained on such websites and such information should not be considered part of this document.

21 CP 2020 ANNUAL REPORT

ITEM 1A. RISK FACTORS

The risks set forth in the following risk factors could have a materially adverse effect on the Company's business, financial condition, results of operations, and liquidity, and could cause those results to differ materially from those expressed or implied in the Company's forward-looking statements and forward-looking information (collectively, "forward-looking statements").

The information set forth in this Item 1A. Risk Factors should be read in conjunction with the rest of the information included in this annual report, including Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.

Business Risks

The COVID-19 pandemic has negatively affected and may continue to negatively affect the Company's business and operating results. The effects of the COVID-19 pandemic on consumer demand resulted in lower volumes in several of the Company's lines of business, including Energy, chemicals and plastics, Metals, minerals and consumer products, and Automotive. The future impacts of COVID-19 on the Company's business or operating and financial results are unpredictable and cannot be identified or assessed with certainty at this time. The COVID-19 pandemic has adversely affected the global economy and resulted in a widespread economic downturn which has adversely impacted and could continue to adversely impact demand for our services and otherwise cause interruptions, including fluctuations to commodity prices, disruptions or restrictions on the ability to transport freight in the ordinary course, temporary closures of facilities and ports, or the facilities and ports of our customers, partners, suppliers or other third-party service providers, and/or changes to export/import restrictions. The pandemic caused by COVID-19 has impacted and may continue to impact the seasonal trends that typically characterize our revenues and operating income. There is no assurance that the outbreak will not continue to have a material and adverse impact on our business or results of operations. Additionally, our operations could be further negatively affected if a significant number of our employees are unable to perform their normal duties, including because of contracting COVID-19 or based on further direction from governments, public health authorities or regulatory agencies. The extent of the impact, if any, will depend on developments, many of which are beyond our control, including actions taken by governments, financial institutions, monetary policy authorities, and public health authorities to contain and respond to public health concerns and general economic conditions as a result of the pandemic. The COVID-19 pandemic may also result in continued substantial market volatility and declines, which could adversely impact future net periodic benefit costs and funding requirements of CP’s pension plans. Furthermore, certain impacts of the COVID-19 pandemic, including demand for our services and to economic conditions generally, could continue following the pandemic or the expiration or termination of government actions in respect of the pandemic.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required or recommended by federal, provincial, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, shareholders and other stakeholders. We cannot be certain of potential effects that any such alterations or modifications may have on our business or operating and financial results in future fiscal periods.

To the extent COVID-19 adversely affects our business or operating and financial results, it may also have the effect of heightening many of the other risks described above and below.

As a common carrier, the Company is required by law to transport dangerous goods and hazardous materials, which could expose the Company to significant costs and claims. Railways, including CP, are legally required to transport dangerous goods and hazardous materials as part of their common carrier obligations regardless of risk or potential exposure to loss. CP transports dangerous goods and hazardous materials, including but not limited to crude oil, ethanol and TIH materials such as chlorine gas and anhydrous ammonia. A train accident involving hazardous materials could result in significant claims against CP arising from personal injury, property or natural resource damage, environmental penalties and remediation obligations. Such claims, if insured, could exceed the existing insurance coverage commercially available to CP, which could have a material adverse effect on CP’s financial condition, operating results, and liquidity. CP is also required to comply with rules and regulations regarding the handling of dangerous goods and hazardous materials in Canada and the U.S. Noncompliance with these rules and regulations can subject the Company to significant penalties and could factor in litigation arising out of a train accident. Changes to these rules and regulations could also increase operating costs, reduce operating efficiencies and impact service delivery.

The Company is subject to significant governmental legislation and regulation over commercial, operating and environmental matters. The Company’s railway operations are subject to extensive federal laws, regulations and rules in both Canada and the U.S. Operations are subject to economic and safety regulations in Canada primarily by the Agency and TC. The Company’s U.S. operations are subject to economic and safety regulation by the STB and the FRA. Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental and other matters. Additional economic regulation of the rail industry by these regulators or the Canadian and U.S. federal and state or provincial legislative bodies, whether under new or existing laws, could have a significant negative impact on the Company’s ability to determine prices for rail services and result in a material adverse effect in the future on the Company’s business, financial position, results of operations, and liquidity in a particular year or quarter. This potential material adverse effect could also result in reduced capital spending on the Company’s rail network or in abandonment of lines.

CP 2020 ANNUAL REPORT 22

The Company’s compliance with safety and security regulations may result in increased capital expenditures and operating costs. For example, compliance with the Rail Safety Improvement Act of 2008 has resulted in additional capital expenditures associated with the statutorily mandated implementation of PTC. In addition to increased capital expenditures, implementation of such regulations may result in reduced operational efficiency and service levels, as well as increased operating expenses.

The Company’s operations are subject to extensive federal, state, provincial and local environmental laws concerning, among other matters, emissions to the air, land and water and the handling of hazardous materials and wastes. Violation of these laws and regulations can result in significant fines and penalties, as well as other potential impacts on CP’s operations. These laws can impose strict, and in some circumstances, joint and several liability on both current and former owners, and on operators of facilities. Such environmental liabilities may also be raised by adjacent landowners or third parties. In addition, in operating a railway, it is possible that releases of hazardous materials during derailments or other accidents may occur that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company’s operating results and reputation. The Company has been, and may in the future be, subject to allegations or findings to the effect that it has violated, or is strictly liable under, environmental laws or regulations. The Company currently has obligations at existing sites for investigation, remediation and monitoring, and will likely have obligations at other sites in the future. The actual costs associated with both current and long-term liabilities may vary from the Company’s estimates due to a number of factors including, but not limited to changes in: the content or interpretation of environmental laws and regulations; required remedial actions; technology associated with site investigation or remediation; and the involvement and financial viability of other parties that may be responsible for portions of those liabilities.

The Company faces competition from other transportation providers and failure to compete effectively could adversely affect financial results. The Company faces significant competition for freight transportation in Canada and the U.S., including competition from other railways, motor carriers, ship and barge operators, and pipelines. Competition is based mainly on quality of service, freight rates and access to markets. Other transportation modes generally use public rights-of-way that are built and maintained by government entities, while CP and other railways must use internal resources to build and maintain their rail networks. Competition with the trucking industry is generally based on freight rates, flexibility of service and transit time performance. Any future improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of transportation, or legislation that eliminates or significantly reduces the burden of the size or weight limitations currently applicable to trucking carriers, could have a material adverse effect on CP's financial results.

The operations of carriers with which the Company interchanges may adversely affect operations. The Company's ability to provide rail services to customers in Canada and the U.S. also depends upon its ability to maintain cooperative relationships with connecting carriers with respect to, among other matters, revenue division, car supply and locomotive availability, data exchange and communications, reciprocal switching, interchange, and trackage rights. Deterioration in the operations or services provided by connecting carriers, or in the Company's relationship with those connecting carriers, could result in CP's inability to meet customers' demands or require the Company to use alternate train routes, which could result in significant additional costs and network inefficiencies and adversely affect our business, operating results, and financial condition.

The Company may be subject to litigation and other claims that could result in significant expenditures. By nature of its operations, the Company is exposed to potential for litigation and other claims, including personal injury claims, labour and employment disputes, commercial and contract disputes, environmental liability, freight claims and property damage claims. Accruals are made in accordance with applicable accounting standards and based on an ongoing assessment of the likelihood of success of the claim together with an evaluation of the damages or other monetary relief sought. Material changes to litigation trends, a catastrophic rail incident or series of incidents involving freight loss, property damage, personal injury, environmental liability, or other claims, and other significant matters could have a material adverse impact to the Company's results of operations, financial position and liquidity, in each case, to the extent not covered by insurance.

The Company may be affected by acts of terrorism, war, or risk of war. CP plays a critical role in the North American transportation system and therefore could become the target for acts of terrorism or war. CP is also involved in the transportation of hazardous materials, which could result in CP's equipment or infrastructure being direct targets or indirect casualties of terrorist attacks. Acts of terrorism, or other similar events, any government response thereto, and war or risk of war could cause significant business interruption to CP and may adversely affect the Company’s results of operations, financial condition and liquidity.

Severe weather or natural disasters could result in significant business interruptions and costs to the Company. CP is exposed to severe weather conditions and natural disasters including earthquakes, hurricanes, floods, fires, avalanches, mudslides, extreme temperatures and significant precipitation that may cause business interruptions that can adversely affect the Company’s entire rail network. This could result in increased costs, increased liabilities and decreased revenues, which could have a material adverse effect on the Company’s results of operations, financial condition, and liquidity. Insurance maintained by the Company to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of the Company's damages or damages to others, and may not continue to be available at commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic interruption of services, the Company may not be able to restore services without a significant interruption in operations.

23 CP 2020 ANNUAL REPORT

Human Capital Risks

The availability of qualified personnel could adversely affect the Company's operations. Changes in employee demographics, training requirements and the availability of qualified personnel, particularly locomotive engineers and trainpersons, could negatively impact the Company’s ability to meet demand for rail services. Unpredictable increases in the demand for rail services may increase the risk of having insufficient numbers of trained personnel, which could have a material adverse effect on the Company’s results of operations, financial condition and liquidity. In addition, changes in operations and other technology improvements may significantly impact the number of employees required to meet the demand for rail services.

Strikes or work stoppages could adversely affect the Company's operations. Class I railways are party to collective bargaining agreements with various labour unions. The majority of CP's employees belong to labour unions and are subject to these agreements. Disputes with regard to the terms of these agreements or the Company's potential inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns or lockouts, which could cause a significant disruption of the Company's operations and have a material adverse effect on the Company's results of operations, financial condition and liquidity. Additionally, future national labour agreements, or provisions of labour agreements related to health care, could significantly increase the Company's costs for health and welfare benefits, which could have a material adverse impact on its financial condition and liquidity.

Volatility Risks

The Company may be affected by fluctuating fuel prices. Fuel expense constitutes a significant portion of the Company’s operating costs. Fuel prices can be subject to dramatic fluctuations, and significant price increases could have a material adverse effect on the Company's results of operations. The Company currently employs a fuel cost adjustment program to help reduce volatility in changing fuel prices, but the Company cannot be certain that it will always be able to fully mitigate rising or elevated fuel costs through this program. Factors affecting fuel prices include worldwide oil demand, international politics, weather, refinery capacity, supplier and upstream outages, unplanned infrastructure failures, environmental and sustainability policies, and labour and political instability.

Technology Risks

The Company relies on technology and technological improvements to operate its business. Information technology is critical to all aspects of CP’s business. If the Company were to experience a significant disruption or failure of one or more of its information technology or communications systems (either as a result of an intentional cyber or malicious act, or an unintentional error) it could result in service interruptions or other failures, misappropriation of confidential information and deficiencies, which could have a material adverse effect on the Company's results of operations, financial condition, and liquidity. If CP is unable to acquire or implement new technology, the Company may suffer a competitive disadvantage, which could also have an adverse effect on its results of operations, financial condition, and liquidity.

Supply Chain Risks

Disruptions within the supply chain could negatively affect the Company's operational efficiencies and increase costs. The North American transportation system is integrated. CP’s operations and service may be negatively impacted by service disruptions of other transportation links, such as ports, handling facilities, customer facilities and other railways. A prolonged service disruption at one of these entities could have a material adverse effect on the Company's results of operations, financial condition, and liquidity.

The Company is dependent on certain key suppliers of core railway equipment and materials that could result in increased price volatility or significant shortages of materials, which could adversely affect results of operations, financial condition, and liquidity. Due to the complexity and specialized nature of core railway equipment and infrastructure (including rolling stock equipment, locomotives, rail and ties), there can be a limited number of suppliers of rail equipment and materials available. Should these specialized suppliers cease production or experience capacity or supply shortages, this concentration of suppliers could result in CP experiencing cost increases or difficulty in obtaining rail equipment and materials, which could have a material adverse effect on the Company's results of operations, financial condition and liquidity. Additionally, CP’s operations are dependent on the availability of diesel fuel. A significant fuel supply shortage arising from production decreases, increased demand in existing or emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to refinery or pipeline infrastructure, political unrest, war or other factors could have a material adverse effect on the Company's results of operations, financial position and liquidity in a particular year or quarter.

General Risk Factors

Global Risks

Global economic conditions could negatively affect demand for commodities and other freight transported by the Company. A decline or disruption in domestic, cross border or global economic conditions that affect the supply or demand for the commodities that CP transports may decrease CP’s freight volumes and may result in a material adverse effect on CP’s financial or operating results and liquidity. Economic conditions resulting in bankruptcies of one or more large customers could have a significant impact on CP's financial position, results of operations, and liquidity in a particular year or quarter.

The Company may be directly and indirectly affected by the impacts of global climate change. There is potential for significant impacts to CP’s business and rail infrastructure due to changes in global climate conditions. Increasing frequency, intensity and duration of extreme weather events such as

CP 2020 ANNUAL REPORT 24

flooding, storms and forest fires may result in substantial costs to respond during the event, to recover from the event and possibly to modify existing or implementing new infrastructure to prevent recurrence. The Company is currently subject to emerging regulatory programs that place a price on carbon emissions associated with railway operations in Canada. Government bodies at the provincial and federal level are imposing carbon taxation systems and cap and trade market mechanisms in the Canadian jurisdictions in which CP operates. As a significant consumer of diesel fuel, an escalating price on carbon emissions will lead to a corresponding increase of the Company’s business costs. Programs that place a price on carbon emissions or other government restrictions on certain market sectors may further impact current and potential customers including thermal coal, petroleum crude oil and renewable fuel sectors. Introduction of, or changes to, regulations by government bodies in response to these anticipated impacts could result in a significant increase in expenses and could adversely affect our business performance, results of operations, financial position, and liquidity.

Liquidity Risks

The state of capital markets could adversely affect the Company's liquidity. Weakness in the capital and credit markets could negatively impact the Company’s access to capital. From time to time, the Company relies on the capital markets to provide some of its capital requirements, including the issuance of long-term debt instruments and commercial paper. Significant instability or disruptions of the capital markets and the credit markets, or deterioration of the Company's financial condition due to internal or external factors could restrict or eliminate the Company's access to, and/or significantly increase the cost of, various financing sources, including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets and deterioration of the Company's financial condition, alone or in combination, could also result in a reduction in the Company's credit rating to below investment grade, which could also further prohibit or restrict the Company from accessing external sources of short-term and long-term debt financing, and/or significantly increase the associated costs.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

25 CP 2020 ANNUAL REPORT

ITEM 2. PROPERTIES

Network Geography

The Company’s network in Canada extends from the Port of Vancouver on Canada’s Pacific Coast to the Port of Montréal and eastern Québec up into the Port of Saint John, New Brunswick via haulage, and to the U.S. industrial centres of Chicago, Illinois; Detroit, Michigan; Buffalo and Albany, New York; Kansas City, Missouri; and Minneapolis, Minnesota.

The Company’s network is composed of three primary corridors: Western, Central and Eastern.

The Western Corridor: Vancouver to Thunder Bay

Overview – The Western Corridor links Vancouver with Thunder Bay, which is the Western Canadian terminus of the Company’s Eastern Corridor. With service through Calgary, the Western Corridor is an important part of the Company’s routes between Vancouver and the U.S. Midwest, and between Vancouver and eastern Canada. The Western Corridor provides access to the Port of Thunder Bay, Canada’s primary Great Lakes bulk terminal.

Products – The Western Corridor is the Company’s primary route for bulk and resource products traffic from western Canada to the Port of Vancouver for export. CP also handles significant volumes of international intermodal containers and domestic general merchandise traffic.

Feeder Lines – CP supports its Western Corridor with four significant feeder lines: the “Coal Route”, which links southeastern B.C. coal deposits to the Western Corridor and to coal terminals at the Port of Vancouver; the “Edmonton-Calgary Route”, which provides rail access to Alberta’s Industrial Heartland (north of Edmonton, Alberta) in addition to the petrochemical facilities in central Alberta; the “Pacific CanAm Route”, which connects Calgary and Medicine Hat in Alberta with Pacific Northwest rail routes at Kingsgate, B.C. via the Crowsnest Pass in Alberta; and the “North Main Line Route” that provides rail service to customers between Portage la Prairie, Manitoba, and Wetaskiwin, Alberta, including intermediate stations at Yorkton and Saskatoon in Saskatchewan. This line is an important collector of Canadian grain and fertilizer, serving the potash mines located east and west of Saskatoon and many high-throughput grain elevators and processing facilities. In addition, this line provides direct access to refining and upgrading facilities at Lloydminster, Alberta, and western Canada’s largest pipeline terminal at Hardisty, Alberta.

Connections – The Company’s Western Corridor connects with the Union Pacific Railroad (“UP”) at Kingsgate and with Burlington Northern Santa Fe Railway ("BNSF") at Coutts, Alberta, and at New Westminster and Huntingdon in B.C. This corridor also connects with CN at many locations including Thunder Bay, Winnipeg, Manitoba, Regina and Saskatoon in Saskatchewan, Red Deer, Camrose, Calgary and Edmonton in Alberta, Kamloops and several locations in the Greater Vancouver area in B.C.

Yards and Repair Facilities – CP supports rail operations on the Western Corridor with main rail yards at Vancouver, Calgary, Edmonton, Moose Jaw in Saskatchewan, Winnipeg and Thunder Bay. The Company has locomotive and railcar repair facilities at Golden in B.C., Vancouver, Calgary, Moose Jaw and Winnipeg. CP also has major intermodal terminals at Vancouver, Calgary, Edmonton, Regina and Winnipeg.

CP 2020 ANNUAL REPORT 26

The Central Corridor: Moose Jaw and Winnipeg to Chicago and Kansas City

Overview – The Central Corridor connects with the Western Corridor at Moose Jaw and Winnipeg. By running south to Chicago and Kansas City, through the Twin Cities of Minneapolis and St. Paul, Minnesota, and through Milwaukee, Wisconsin, CP provides a direct, single-carrier route between western Canada and the U.S. Midwest, providing access to Great Lakes and Mississippi River ports. From La Crosse, Wisconsin, the Central Corridor continues south towards Kansas City via the Quad Cities (Davenport and Bettendorf in Iowa, and Rock Island and Moline in Illinois), providing an efficient route for traffic destined for southern U.S. and Mexican markets. CP’s Kansas City line also has a direct connection into Chicago and by extension to points east on CP’s network such as Toronto, Ontario and the Port of Montréal in Québec.

Products – Traffic transported on the Central Corridor includes intermodal containers from the Port of Vancouver, fertilizers, chemicals, crude, frac sand, Automotive, and Grain and other agricultural products.

Feeder Lines – The Company has operating rights over BNSF tracks between Minneapolis and St. Paul along with connectivity to the twin ports of Duluth, Minnesota and Superior, Wisconsin. CP maintains its own yard facilities that provide an outlet for grain from the U.S. Midwest to the grain terminals at these ports. This is a strategic entry point for large dimensional shipments that can be routed via CP's network to locations such as Alberta's Industrial Heartland to serve the needs of the oil sands and energy industry. CP's route from Winona, Minnesota, to Tracy, Minnesota, provides access to key agricultural and industrial commodities. CP’s feeder line between Drake and New Town in North Dakota is geographically situated in a highly strategic region for Bakken oil production. CP also owns two significant feeder lines in North Dakota and western Minnesota operated by the Dakota Missouri Valley and Western Railroad and the Northern Plains Railroad, respectively. Both of these short lines are also active in providing service to agricultural and Bakken-oil-related customers.

Connections – The Company’s Central Corridor connects with all major railways at Chicago. Outside of Chicago, CP has major connections with BNSF at Minneapolis, Minot, North Dakota, and the Duluth-Superior Terminal and with UP at St. Paul and Mankato, Minnesota. CP connects with CN at Milwaukee and Chicago. At Kansas City, CP connects with Kansas City Southern (“KCS”), BNSF, Norfolk Southern Railway ("NS") and UP. CP’s Central Corridor also links to several short-line railways that primarily serve grain and coal producing areas in the U.S., and extend CP’s market reach in the rich agricultural areas of the U.S. Midwest. A haulage arrangement with Genesee & Wyoming Inc., provides Intermodal service to Jeffersonville, Ohio.

Yards and Repair Facilities – The Company supports rail operations on the Central Corridor with main rail yards in Chicago, Milwaukee, St. Paul and Glenwood in Minnesota, and Mason City and Davenport in Iowa. In addition, CP has a major locomotive repair facility at St. Paul and car repair facilities at St. Paul and Chicago. CP shares a yard with KCS in Kansas City. CP owns 49% of the Indiana Harbor Belt Railroad, a switching railway serving Greater Chicago and northwest Indiana. CP is also part owner of the Belt Railway Company of Chicago, which is the largest intermediate switching terminal railroad in the U.S. CP has major intermodal terminals in Minneapolis and Chicago as well as a dried distillers' grains transload facility that complements the service offering in Chicago.

The Eastern Corridor: Thunder Bay to Eastern Québec, Detroit and Albany

Overview – The Eastern Corridor extends from Thunder Bay through to the Port of Montréal, Searsport, Maine and the Port of Saint John, via haulage agreement, and from Toronto to Chicago via Detroit or Buffalo. The Company’s Eastern Corridor provides shippers direct rail service from Toronto, Montréal, and Saint John to Calgary and Vancouver via the Company’s Western Corridor and to the U.S. via the Central Corridor. This is a key element of the Company’s transcontinental intermodal service. The corridor also supports the Company’s market position at the Port of Montréal by providing one of the shortest rail routes for European cargo destined to the U.S. Midwest, using the CP-owned route between Montréal and Detroit, coupled with a trackage rights arrangement on NS tracks between Detroit and Chicago or the CP-owned route between Montréal and Buffalo coupled with a haulage arrangement on CSX Corporation (“CSX”) tracks between Buffalo and Chicago. CP’s 2019 acquisition of CMQ Canada and the 2020 acquisition of CMQ U.S. extends access through southern and eastern Québec to Saint John, New Brunswick and the U.S. Northeast including Searsport, Maine. In 2020, CP acquired full ownership of the DRTP. The 1.6-mile tunnel linking Windsor and Detroit will continue to be operated by CP.

Products – Major traffic categories transported in the Eastern Corridor include Forest products, chemicals and plastics, crude, ethanol, Metals, minerals and consumer products, Intermodal, automotive products and general merchandise.

Feeder Lines – A major feeder line serves the steel industry at Hamilton, Ontario and provides connections with both CSX and NS at Buffalo. The Delaware & Hudson Railway Company, Inc. ("D&H") feeder line extends from Montréal to Albany.

Connections – The Eastern Corridor connects with a number of short-line railways including routes from Montréal to Québec City, Québec and Brownsville Junction, Maine to Saint John, New Brunswick. Connections are also made with PanAm Southern at Mechanicville, New York, for service to the Boston and New England areas, the Vermont Railway at Whitehall, New York, and at Northern Main Junction. Through haulage arrangements, CP has service to Fresh Pond, New York, to connect with New York & Atlantic Railway as well as direct access to the Bronx and Queens, New York. CP can also access Philadelphia as well as a number of short-lines in Pennsylvania. Connections are also made with CN at a number of locations, including Sudbury, North Bay, Windsor, London, Hamilton and Toronto in Ontario, and Montréal in Québec. CP also connects in New York with the two eastern Class I railways; NS and CSX at Buffalo, NS at Schenectady and CSX at Albany.

27 CP 2020 ANNUAL REPORT

Yards and Repair Facilities – CP supports its rail operations in the Eastern Corridor with major rail yards at Sudbury, Toronto, London and Montréal. The Company has locomotive repair facilities at Montréal and Toronto and car repair facilities at Thunder Bay, Toronto and Montréal. The Company’s largest intermodal facility is located in the northern Toronto suburb of Vaughan and serves the Greater Toronto and southwestern Ontario areas. CP also operates intermodal terminals at Montréal and Detroit. CP also has transload facilities in Agincourt, Milton, and Hamilton, Ontario and in Montréal, Québec to meet a variety of commodity needs in these areas.

Right-of-Way

The Company’s rail network is standard gauge, which is used by all major railways in Canada, the U.S. and Mexico. Continuous welded rail is used on the core main line rail network.

CP uses different train control systems on portions of the Company’s owned track, depending on the volume of rail traffic. Remotely controlled centralized traffic control signals are used in various corridors to authorize the movement of trains. CP has implemented PTC on 2,117 miles of its U.S. network.

In other corridors, train movements are directed by written instructions transmitted electronically and by radio from rail traffic controllers to train crews. In some specific areas of intermediate traffic density, CP uses an automatic block signalling system in conjunction with written instructions from rail traffic controllers.

Network Investment

The Company continually assesses its network to ensure appropriate capacity to meet market demand. As part of CP's annual capital program, the Company has made substantial investments to support current and future volumes, including upgrading the network to handle longer and heavier trains, such as extending sidings to accommodate new train lengths. The Company’s operating metrics, such as average train speed, length, and weight, demonstrate efficient utilization of network capacity, discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Performance Indicators.

Track and Infrastructure

CP operates on a network of approximately 13,000 miles of track, of which 2,300 miles CP accesses under trackage rights. The Company's owned track miles include leases with wholly owned subsidiaries where the term of the lease exceeds 99 years. CP's track network represents the size of the Company's operations that connects markets, customers and other railways. Of the total mileage operated, approximately 5,400 miles are located in western Canada, 2,500 miles in eastern Canada (including CMQ Canada), 4,500 miles in the U.S. Midwest and 700 miles in the U.S. Northeast. CP’s network accesses the U.S. markets directly through four wholly owned subsidiaries: Soo Line Railroad Company (“Soo Line”), a Class I railway operating in the U.S. Midwest; the Dakota, Minnesota & Eastern Railroad ("DM&E"), which operates in the U.S. Midwest; the D&H, which operates between eastern Canada and the U.S. Northeast; and the CMQ U.S., which operates in the U.S. Northeast.

At December 31, 2020, the breakdown of CP operated track miles is as follows:


			Total
First main track			13,046
Second and other main track			1,051
Passing sidings and yard track			4,261
Industrial and way track			878
Total track miles			19,236

Rail Facilities

CP operates numerous facilities including: terminals for intermodal, transload, automotive and other freight; classification rail yards for train-building and switching, storage-in-transit and other activities; offices to administer and manage operations; dispatch centres to direct traffic on the rail network; crew quarters to house train crews along the rail line; shops and other facilities for fuelling; maintenance and repairs of locomotives; and facilities for maintenance of freight cars and other equipment. The Company continues to invest in terminal upgrades and new facilities to accommodate incremental growth in volumes, such as creating additional capacity with the redesign of the classification yard at Alyth in Calgary. The Company’s average terminal dwell is an indicator of efficient utilization of yard capacity, discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Performance Indicators. Typically in all of our major yards, CP Police Services has offices to ensure the safety and security of the yards and operations.

CP 2020 ANNUAL REPORT 28

The following table includes the major yards, terminals and transload facilities on CP's network:


Classification Yards	Intermodal Terminals	Transload Facilities
Vancouver, British Columbia	Vancouver, British Columbia	Vancouver, British Columbia
Calgary, Alberta	Calgary, Alberta	Toronto, Ontario
Edmonton, Alberta	Edmonton, Alberta	Hamilton, Ontario
Moose Jaw, Saskatchewan	Regina, Saskatchewan	Côte Saint-Luc, Québec
Winnipeg, Manitoba	Winnipeg, Manitoba
Toronto, Ontario	Vaughan, Ontario
Montréal, Québec	Lachine, Québec
Chicago, Illinois	Chicago, Illinois
St. Paul, Minnesota	Minneapolis, Minnesota

Equipment

CP's equipment includes: owned and leased locomotives and railcars; heavy maintenance equipment and machinery; other equipment and tools in our shops, offices and facilities; and vehicles for maintenance, transportation of crews, and other activities. In this section, owned equipment includes units acquired by CP, equipment leased to third parties, and units held under finance leases, and leased equipment includes units under a short-term or long-term operating lease.

The Company’s locomotive fleet is composed of largely high-adhesion alternating current locomotives that are more fuel efficient and reliable and have superior hauling capacity as compared with standard direct current locomotives. The Company is continuing a modernization program on several of the oldest locomotives in the fleet in order to improve reliability and availability, as well as to introduce new technology to the fleet. CP’s locomotive productivity, defined as the daily average GTMs divided by daily average operating horsepower, for the years ended December 31, 2020, 2019, and 2018, was 207, 202, and 198 GTMs per Operating horsepower, respectively. Operating horsepower excludes units offline, tied up or in storage, or in use on other railways, and includes foreign units online. As of December 31, 2020, the Company had 310 locomotives in storage. As of December 31, 2020, CP owned or leased the following locomotive units:


Locomotives	Owned	Leased	Total	Average Age (in years)
Line haul	770	62	832	14
Road switcher	566	14	580	30
Total locomotives	1,336	76	1,412	20

CP’s average in-service utilization percentage for freight cars, for the years ended December 31, 2020, 2019, and 2018, was 81%, 81%, and 84%, respectively. Average in-service utilization is defined as average active fleet for the year divided by total cars, excluding company service cars and tank cars as these are utilized only as required for non-revenue movements. As of December 31, 2020, CP owned and leased the following units of freight cars:


Freight cars	Owned	Leased	Total	Average Age (in years)
Box car	2,502	545	3,047	31
Covered hopper	8,623	7,693	16,316	21
Flat car	1,436	998	2,434	26
Gondola	3,623	1,595	5,218	22
Intermodal	1,315	150	1,465	16
Multi-level autorack	2,800	1,017	3,817	26
Company service car	2,413	176	2,589	45
Open top hopper	113	—	113	34
Tank car	33	32	65	14
Total freight cars	22,858	12,206	35,064	24

29 CP 2020 ANNUAL REPORT

As of December 31, 2020, CP owned and leased the following units of intermodal equipment:


Intermodal equipment	Owned	Leased	Total	Average Age (in years)
Containers	8,150	—	8,150	7
Chassis	6,374	109	6,483	12
Total intermodal equipment	14,524	109	14,633	9

Headquarters Office Building

CP owns and operates a multi-building campus in Calgary encompassing the head office building, a data centre, training facility and other office and operational buildings.

The Company's main dispatch centre is located in Calgary, and is the primary dispatching facility in Canada. Rail traffic controllers coordinate and dispatch crews, and manage the day-to-day locomotive management along the network, 24 hours a day, and seven days a week. The operations centre has a complete backup system in the event of any power disruption.

In addition to fully operational redundant systems, CP has a fully integrated Business Continuity Centre, should CP's operations centre be affected by any natural disaster, fire, cyber-attack or hostile threat.

CP also maintains a secondary dispatch centre located in Minneapolis, where a facility similar to the one in Calgary exists. It services the dispatching needs of locomotives and train crews working in the U.S.

Capital Expenditures

The Company incurs expenditures to expand and enhance its rail network, rolling stock and other infrastructure. These expenditures are aimed at improving efficiency and safety of our operations. Such investments are also an integral part of the Company's multi-year capital program and support growth initiatives. For further details, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.

Encumbrances

Refer to Item 8. Financial Statements and Supplementary Data, Note 16 Debt, for information on the Company's finance lease obligations and assets held as collateral under these agreements.

ITEM 3. LEGAL PROCEEDINGS

For further details, refer to Item 8. Financial Statements and Supplementary Data, Note 25 Commitments and 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.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

CP 2020 ANNUAL REPORT 30

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Our executive officers are appointed by the Board of Directors and they hold office until their successors are appointed, subject to resignation, retirement or removal by the Board of Directors. There are no family relationships among our officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. As of the date of this filing, the executive officers’ names, ages and business experience are:


Name, Age and Position			Business Experience
Keith Creel, 52 President and Chief Executive Officer			Mr. Creel became President and CEO of CP on January 31, 2017. Previously, he was President and Chief Operating Officer ("COO") from February 5, 2013, to January 30, 2017. Prior to joining CP, Mr. Creel was Executive Vice-President and COO at CN from January 2010 to February 2013. During his time at CN, Mr. Creel held various positions including Executive Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of the Prairie Division. Mr. Creel began his railroad career at Burlington Northern Railway in 1992 as an intermodal ramp manager in Birmingham, Alabama. He also spent part of his career at Grand Trunk Western Railroad as a superintendent and general manager, and at Illinois Central Railroad as a trainmaster and director of corridor operations, prior to its merger with CN in 1999.
Mark Redd, 50 Executive Vice-President, Operations			Mr. Redd has been Executive Vice-President Operations since September 1, 2019. Before this appointment, he was Senior Vice-President Operations Western Region from February 2, 2017, to August 31, 2019, and Vice-President Operations Western Region from April 20, 2016, to February 1, 2017. Previous to these roles, he was General Manager Operations U.S. West and General Manager Operations Central Division. He was named CP's 2016 Railroader of the Year. Prior to joining CP in October 2013, Mr. Redd worked for over 20 years at Kansas City Southern Railway where he held a variety of leadership positions in network and field operations. Mr. Redd holds bachelor and Master of Business Administration ("MBA") degrees from the University of Missouri – Kansas City.
Nadeem Velani, 48 Executive Vice-President and Chief Financial Officer			Mr. Velani has been Executive Vice-President and CFO of CP since October 17, 2017. Previous to this appointment, he was the Vice-President and CFO of CP from October 19, 2016, to October 16, 2017, Vice-President, Investor Relations from October 28, 2015, and Assistant Vice-President, Investor Relations from March 11, 2013. Prior to joining CP, Mr. Velani spent 15 years at CN where he worked in a variety of positions in Strategic and Financial Planning, Investor Relations, Sales and Marketing, and the Office of the President and CEO. Mr. Velani holds a Bachelor of Economics degree from Western University and an MBA in Finance/International Business from McGill University.
John Brooks, 50 Executive Vice-President and Chief Marketing Officer			Mr. Brooks has been Executive Vice-President and Chief Marketing Officer ("CMO") of CP since February 14, 2019. Previous to this appointment, he was the Senior Vice-President and CMO of CP from February 14, 2017, to February 13, 2019. He has worked in senior marketing roles at CP since he joined the Company in 2007, most recently as Vice-President, Marketing – Bulk and Intermodal. Mr. Brooks began his railroading career with UP and later helped start I&M Rail Link, LLC, which was purchased by DM&E in 2002. Mr. Brooks was Vice-President, Marketing at DM&E prior to it being acquired by CP in 2007. With more than 20 years in the railroading business, Mr. Brooks brings a breadth of experience to the CMO role that is pivotal to CP's continued and future success.

31 CP 2020 ANNUAL REPORT


Laird Pitz, 76 Senior Vice-President and Chief Risk Officer			Mr. Pitz has been Senior Vice-President and Chief Risk Officer ("CRO") of CP since October 17, 2017. Previously, he was the Vice-President and CRO of CP from October 29, 2014, to October 16, 2017, and the Vice-President, Security and Risk Management of CP from April 2014 to October 2014. Prior to joining CP, Mr. Pitz was retired from March 2012 to April 2014, and Vice-President, Risk Mitigation of CN from September 2003 to March 2012. Mr. Pitz, a Vietnam War veteran and former Federal Bureau of Investigation special agent, is a 40-year career professional who has directed strategic and operational risk mitigation, security and crisis management functions for companies operating in a wide range of fields, including defence, logistics and transportation.
James Clements, 51 Senior Vice-President, Strategic Planning and Technology Transformation			Mr. Clements has been Senior Vice-President, Strategic Planning and Technology Transformation since September 1, 2019. Before this appointment, he was the Vice-President, Strategic Planning and Transportation Services of CP from 2014. Mr. Clements has responsibilities that include strategic network issues, Network Service Centre operations and Information Services. In addition, he has responsibility for all of CP’s facilities and real estate across North America. Mr. Clements has been at CP for 26 years and his previous experience covers a wide range of areas of CP’s business, including car management, finance, joint facilities agreements, logistics, grain marketing and sales in both Canada and the U.S., as well as marketing and sales responsibility for various other lines of business at CP. He has an MBA in Finance/International Business from McGill University and a Bachelor of Science in Computer Science and Mathematics from McMaster University.
Jeffrey Ellis, 53 Chief Legal Officer and Corporate Secretary			Mr. Ellis has been Chief Legal Officer and Corporate Secretary of CP since November 23, 2015. Mr. Ellis is accountable for the overall strategic leadership, oversight and performance of the legal, corporate secretarial, government relations and public affairs functions of CP in Canada and the U.S. Prior to joining CP in 2015, Mr. Ellis was the U.S. General Counsel at BMO Financial Group ("BMO"). Before joining BMO in 2006, Mr. Ellis was with the law firm of Borden Ladner Gervais LLP in Toronto, Ontario. Mr. Ellis has Bachelor of Arts and Master of Arts degrees from the University of Toronto, Juris Doctor and Master of Laws degrees from Osgoode Hall Law School, and an MBA from the Richard Ivey School of Business, Western University. Mr. Ellis is a member of the bars of New York, Illinois, Ontario and Alberta.
Mike Foran, 47 Vice-President, Market Strategy and Asset Management			Mr. Foran has been Vice-President, Market Strategy and Asset Management of CP since February 14, 2017. His prior roles with CP include Vice-President Network Transportation from 2014 to 2017, Assistant Vice-President Network Transportation from 2013 to 2014, and General Manager – Asset Management from 2012 to 2013. In over 20 years at CP, Mr. Foran has worked in operations, business development, marketing and general management. Mr. Foran holds an Executive MBA from the Ivey School of Business at Western University and a Bachelor of Commerce from the University of Calgary.
Michael Redeker, 60 Vice-President and Chief Information Officer			Mr. Redeker has been Vice-President and Chief Information Officer ("CIO") of CP since October 15, 2012. Prior to joining CP, Mr. Redeker was Vice-President and CIO of Alberta Treasury Branch from May 2007 to September 2012. He also spent 11 years at IBM Canada, where he focused on delivering quality information technology services within the financial services industry.
Chad Rolstad, 44 Vice-President, Human Resources and Chief Culture Officer			Mr. Rolstad has been Vice-President, Human Resources since February 14, 2019, and the Chief Culture Officer since September 1, 2019. Previous to this appointment, he was Assistant Vice-President, Human Resources of CP from August 1, 2018, to February 13, 2019, and Assistant Vice-President, Strategic Procurement of CP from April 10, 2017, to July 31, 2018. Prior to joining CP, Mr. Rolstad held various leadership positions at BNSF Railway in marketing and operations. Mr. Rolstad has a Bachelor of Science from the Colorado School of Mines and an MBA from Duke University.

CP 2020 ANNUAL REPORT 32

PART II

33 CP 2020 ANNUAL REPORT

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Share Information

The Common Shares are listed on the TSX and on the NYSE under the symbol "CP".

Share Capital

At February 17, 2021, the latest practicable date prior to the date of this Annual Report on Form 10-K, there were 133,297,236 Common Shares and no preferred shares issued and outstanding, which consists of 13,779 holders of record of the Common Shares. In addition, CP has a Management Stock Option Incentive Plan (“MSOIP”), under which key officers and employees are granted options to purchase the Common Shares. Each option granted can be exercised for one Common Share. At February 17, 2021, 1,521,584 options were outstanding under the MSOIP and stand-alone option agreements entered into with Mr. Keith Creel. There are 733,836 options available to be issued by the Company’s MSOIP in the future. CP has a Director's Stock Option Plan (“DSOP”), under which directors are granted options to purchase Common Shares. There are no outstanding options under the DSOP, which has 340,000 options available to be issued in the future.

Stock Performance Graph

The following graph provides an indicator of cumulative total shareholder return on the Common Shares, of an assumed investment of $100, as compared to the TSX 60 Index (“TSX 60”), the Standard & Poor's 500 Stock Index (“S&P 500”), and the peer group index (comprising CN, KCS, UP, NS and CSX) on December 31 for each of the years indicated. The values for the assumed investments depicted on the graph and in the table have been calculated assuming that any dividends are reinvested.

CP 2020 ANNUAL REPORT 34

Issuer Purchase of Equity Securities

CP has established a share repurchase program which is further described in Item 8. Financial Statements and Supplementary Data, Note 20 Shareholders' equity. The following table presents the number of Common Shares repurchased during each month of the fourth quarter of 2020 and the average price paid by CP for the repurchase of such Common Shares.


2020	Total number of shares purchased(1)	Average price paid per share(2)		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
October 1 to October 31	230,195	$	407.28	230,195	1,620,676
November 1 to November 30	451,299	425.89		451,299	1,169,377
December 1 to December 31	640,000	429.23		640,000	nil(3)
Ending Balance	1,321,494	$	424.26	1,321,494	N/A

(1) Includes shares repurchased but not yet cancelled at quarter end.

(2) Includes brokerage fees.

(3) The Company's NCIB expired on December 19, 2020. At the time of expiration, 529,377 Common Shares authorized for repurchase had not yet been purchased by the Company.

35 CP 2020 ANNUAL REPORT

ITEM 6. SELECTED FINANCIAL DATA

The following table presents as of, and for the years ended, December 31, selected financial data related to the Company’s financial results for the last five fiscal years. The selected financial data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.

For information regarding historical exchange rates, please see Impact of Foreign Exchange on Earnings in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.


(in millions, except per share data, percentage and ratios)	2020			2019			2018			2017			2016
Financial Performance and Liquidity
Total revenues	$	7,710		$	7,792		$	7,316		$	6,554		$	6,232
Operating income	3,311			3,124			2,831			2,519			2,411
Adjusted operating income(1)	3,311			3,124			2,831			2,468			2,411
Net income	2,444			2,440			1,951			2,405			1,599
Adjusted income(1)	2,403			2,290			2,080			1,666			1,549
Basic earnings per share ("EPS")	18.05			17.58			13.65			16.49			10.69
Diluted EPS	17.97			17.52			13.61			16.44			10.63
Adjusted diluted EPS(1)	17.67			16.44			14.51			11.39			10.29
Dividends declared per share	3.5600			3.1400			2.5125			2.1875			1.8500
Cash provided by operating activities	2,802			2,990			2,712			2,182			2,089
Cash used in investing activities	(2,030)			(1,803)			(1,458)			(1,295)			(1,069)
Cash used in financing activities	(764)			(1,111)			(1,542)			(700)			(1,493)
Free cash(1)	1,157			1,357			1,289			874			1,007
Financial Position
Total assets	$	23,640		$	22,367		$	21,254		$	20,135		$	19,221
Total long-term debt, including current portion	9,771			8,757			8,696			8,159			8,684
Total shareholders' equity	7,319			7,069			6,636			6,437			4,626
Financial Ratios
Operating ratio(2)	57.1		%	59.9		%	61.3		%	61.6		%	61.3		%
Adjusted operating ratio(1)	57.1		%	59.9		%	61.3		%	62.4		%	61.3		%
Return on average shareholders' equity(3)	34.0		%	35.6		%	29.8		%	43.4		%	33.9		%

Adjusted return on invested capital ("Adjusted ROIC")(1)	16.7		%	16.9		%

Price	220.40	EPS	17
Shares	140	P/E	13
MCap	30,812	P/FCF	16
Net Debt	10,275	EBIT	3,037
TEV	41,087	TEV/EBIT	14
TTM 2019-09-30, in MM, except price, ratios

10-K	2020-12-31	Filed 2021-02-18
10-Q	2020-09-30	Filed 2020-10-20
10-Q	2020-06-30	Filed 2020-07-22
10-Q	2020-03-31	Filed 2020-04-22
10-K	2019-12-31	Filed 2020-02-20
10-Q	2019-09-30	Filed 2019-10-24
10-Q	2019-06-30	Filed 2019-07-16
10-Q	2019-03-31	Filed 2019-04-24
10-K	2018-12-31	Filed 2019-02-15
10-Q	2018-09-30	Filed 2018-10-19
10-Q	2018-06-30	Filed 2018-07-19
10-Q	2018-03-31	Filed 2018-04-19
10-K	2017-12-31	Filed 2018-02-16
10-Q	2017-09-30	Filed 2017-10-18
10-Q	2017-06-30	Filed 2017-07-20
10-Q	2017-03-31	Filed 2017-04-20
10-K	2016-12-31	Filed 2017-02-16
10-Q	2016-09-30	Filed 2016-10-19
10-Q	2016-06-30	Filed 2016-07-20
10-Q	2016-03-31	Filed 2016-04-20
10-K	2015-12-31	Filed 2016-02-29

8-K	2021-02-18	Other Events, Exhibits
8-K	2021-02-08	Other Events, Exhibits
8-K	2021-02-02	Other Events, Exhibits
8-K	2021-02-01	Other Events, Exhibits
8-K	2021-01-27	Other Events, Exhibits
8-K	2021-01-27	Earnings, Exhibits
8-K	2021-01-26	Other Events, Exhibits
8-K	2021-01-04	Other Events, Exhibits
8-K	2020-12-22	Other Events, Exhibits
8-K	2020-12-17	Other Events, Exhibits
8-K	2020-12-08	Other Events, Exhibits
8-K	2020-12-01	Other Events, Exhibits
8-K	2020-11-03
8-K	2020-10-20
8-K	2020-10-20
8-K	2020-10-19
8-K	2020-10-16
8-K	2020-10-02
8-K	2020-09-14
8-K	2020-08-12
8-K	2020-08-11
8-K	2020-08-06
8-K	2020-08-05
8-K	2020-07-27
8-K	2020-07-22
8-K	2020-07-21
8-K	2020-07-07
8-K	2020-06-02
8-K	2020-05-04
8-K	2020-04-21
8-K	2020-04-21
8-K	2020-04-20
8-K	2020-04-20
8-K	2020-03-20
8-K	2020-03-19
8-K	2020-03-19
8-K	2020-03-05
8-K	2020-03-03
8-K	2020-03-03
8-K	2020-02-20
8-K	2020-02-05
8-K	2020-01-31
8-K	2020-01-29
8-K	2020-01-28
8-K	2020-01-06
8-K	2019-12-30
8-K	2019-12-17
8-K	2019-12-16
8-K	2019-12-04
8-K	2019-12-02
8-K	2019-11-22
8-K	2019-11-20
8-K	2019-11-14
8-K	2019-11-14
8-K	2019-10-23
8-K	2019-09-27
8-K	2019-08-07
8-K	2019-08-01
8-K	2019-07-16
8-K	2019-07-15
8-K	2019-07-15
8-K	2019-06-19
8-K	2019-06-06
8-K	2019-06-04
8-K	2019-05-31
8-K	2019-05-07
8-K	2019-05-06
8-K	2019-05-03
8-K	2019-04-23
8-K	2019-03-20
8-K	2019-03-12
8-K	2019-03-08
8-K	2019-02-15
8-K	2019-02-15
8-K	2019-02-14
8-K	2019-02-08
8-K	2019-01-24
8-K	2019-01-23
8-K	2019-01-14
8-K	2018-12-27
8-K	2018-12-18
8-K	2018-12-18
8-K	2018-12-17
8-K	2018-12-04
8-K	2018-12-04
8-K	2018-11-07
8-K	2018-10-19
8-K	2018-10-18
8-K	2018-10-18
8-K	2018-10-04
8-K	2018-10-01
8-K	2018-09-25
8-K	2018-09-17
8-K	2018-09-12
8-K	2018-09-10
8-K	2018-08-20
8-K	2018-07-20
8-K	2018-07-18
8-K	2018-06-29
8-K	2018-06-08
8-K	2018-06-07
8-K	2018-05-30
8-K	2018-05-30
8-K	2018-05-29
8-K	2018-05-25
8-K	2018-05-16
8-K	2018-05-14
8-K	2018-05-14
8-K	2018-05-10
8-K	2018-05-10
8-K	2018-05-03
8-K	2018-04-28
8-K	2018-04-23
8-K	2018-04-19
8-K	2018-04-18
8-K	2018-04-16
8-K	2018-03-16
8-K	2018-03-15
8-K	2018-03-08
8-K	2018-03-07
8-K	2018-02-28
8-K	2018-02-16
8-K	2018-02-16
8-K	2018-02-15
8-K	2018-02-14
8-K	2018-02-09
8-K	2018-02-01
8-K	2018-01-23
8-K	2018-01-18

EX-10.49	exhibit104910-k2020.htm
EX-10.50	exhibit105010-k2020.htm
EX-10.51	exhibit105110-k2020.htm
EX-10.52	exhibit105210-k2020.htm
EX-10.53	exhibit105310-k2020.htm
EX-10.54	exhibit105410-k2020.htm
EX-10.55	exhibit105510-k2020.htm
EX-21.1	exhibit211-subsidiariesoft.htm
EX-22.1	exhibit22110-k2020.htm
EX-23.1	exhibit23110-k2020.htm
EX-31.1	exhibit31110-k2020.htm
EX-31.2	exhibit31210-k2020.htm
EX-32.1	exhibit32110-k2020.htm
EX-32.2	exhibit32210-k2020.htm

CP 10K Annual Report

Canadian Pacific Railway Earnings 2020-12-31