Net income at Canadian Pacific Railway increased 5 percent to $390 million Canadian in second quarter 2015 compared to second quarter 2014, according to the company’s most recent financial statements.
Canadian Pacific Railway Ltd. announced the sudden resignation of Chairman Gary Colter and another board director, Krystyna Hoeg, Tuesday along with the company’s quarterly financial results.
CP cited “disagreements relating to corporate governance matters” as the reason for Colter and Hoeg’s resignation, and the Wall Street Journal reported the decision resulted from the mishandling of another recent board director’s resignation. Colter “caused the company to issue a press release” announcing that Stephen Tobias had resigned from the board on June 29, despite the fact that Tobias didn’t notify Colter of his plans until July 3, according to a statement from the railway.
This may seem like a small detail, but because Tobias is a U.S. citizen, the exact date of his resignation makes a difference to how the U.S. Securities and Exchange Commission classifies the company. The composition of the board on June 30 is a determining factor as to whether the SEC treats CP as a Canadian or U.S. company.
“Because Mr. Tobias was a continuing director of the company through June 30, a majority of CP’s directors were U.S. citizens, and thus CP is no longer eligible for the SEC’s Foreign Private Issuer Exemption and will become a U.S. Issuer beginning in 2016,” the company said.
“Further, CP will no longer be exempt from the regular SEC reporting requirements in 2016 because a majority of its board was comprised of U.S. citizens or residents as of June 30, 2015 (the relevant date for determining foreign private issuer status for U.S. SEC reporting purposes in 2016). This follows a determination that the resignation of Stephen Tobias from the board occurred on July 3, 2015.
“Accordingly, CP plans to follow the regular SEC reporting requirements effective January 1, 2016, file an annual report on Form 10-K for the year ended December 31, 2015 and file regular periodic reports under both Canadian and U.S. law thereafter.”
CP announced Andrew Reardon was unanimously elected chairman of the board following Colter’s resignation.
Meanwhile, CP reported record income for the second quarter of 2015. Net income at the railway increased 5 percent to $390 million Canadian (U.S. $300 million) in second quarter 2015 compared to second quarter 2014, the highest ever for the period according to the company’s most recent financial statements.
Earnings per share grew 12 percent to $2.36 Canadian per diluted share on second quarter revenues of $1.65 billion Canadian.
An economic slowdown in Canada and weakness in key Canadian commodity markets, however, caused CP to negatively adjust revenue and earnings expectations for the full year 2015. CP said revenues from crude-oil freight dropped 29 percent in Q2 2015 as a result of lower oil prices, while automotive revenue fell 13 percent and U.S. grain revenue was down 8 percent compared with Q2 2014.
The railway maintained its operating-ratio expectations of below 62 percent for 2015, but decreased its guidance for revenues and earnings. CP dropped its target revenue growth from 7-8 percent to 2-3 percent and expected EPS to $10-$10.40 Canadian per share.
“CP remains disciplined during this period of economic uncertainty in identifying opportunities to control costs and improve efficiency to offset near-term headwinds,” said CEO E. Hunter Harrison. ”CP’s achievement on the bottom line came even as a sluggish North American recovery and stubborn global economic softness weighed on commodity prices, forcing producers to reduce output and cut shipments.
“Even in the face of this economic slowdown, CP’s commitment to providing the best service at the lowest cost will continue to serve us well moving forward,” added Harrison. “The positive CP story is based on a business model that allows for flexibility – we are nimble, efficient, and able to respond to the ever-changing economic climate.”
CP chairman resigns as railway reports record Q2 income
