Canadian Pacific Kansas City Limited

Good afternoon. My name is Gretchen and I will be your conference operator today. At this time, I would like to welcome everyone to Canadian Pacific fourth quarter 2022 conference call. The slides accompanying today's call are available at investor.cpr.ca. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. I would now like to introduce Megan Albiston, Vice President, Capital Markets, to begin the conference.

Thank you, Gretchen. Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you that this presentation contains forward-looking information and actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide two in the press release and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures, which are outlined on slide three. With me here today is Keith Creel, President and CEO, John Brooks, Chief Marketing Officer, and we're welcoming back Nadim Balani, our Chief Financial Officer and CP's newest conductor. The formal remarks will be followed by Q&A and in the interest of time, we'd appreciate if you could limit your questions to one. It's now my pleasure to introduce President and CEO, Mr. Keith Creel.

Thanks, Megan. Let me start by thanking our 12,000 strong CP family for their efforts that have allowed us to produce these results in the fourth quarter and certainly over the course of 2022, and I can tell you what I'm most proud of, which I know is only enabled by their individual and collective efforts, is the safety performance that the team produced in 2022, producing our lowest ever FRA accident-precision ratio in the company's history and our 17th consecutive year of being best in class, best in industry as it's related to reportable train derailments in the industry, something to be extremely proud of. And then to Megan's point, You know, our bench is only getting better. I'm tickled to death that we've got our CFO, Mr. Nadine Villani, who adds another acronym to his title, Chief Financial Conductor Officer, CFC, CFO, whatever you want to call it. He's had a very rich experience. He's obviously, his business acumen from his time at Harvard has increased, but most importantly, his railroad acumen and ability to apply his expertise Business talent has increased with the railroad knowledge that he's obtained the last five years, five years it seems like, probably five years and it's 25 below. The last five months specifically out on the railroad, boots on the ground in the ballast, spending time not only getting conductor qualified but also riding trains, time in the mechanical department, time with the track department, time in the locomotive department, all the functions that truly make this company run day in and day out by the great professional railroaders we have, the men and women that make CP what it is. So with that said, again, welcome back. Nadine, glad to get you back in the seat. And I also want to commend Chris and Megan and Ian for the great work they did when you were gone in your absence. They certainly made you proud. Now, moving on to the results, in the fourth quarter, we produced revenues of $2.5 billion, an operating ratio of 59.1, and core EPS of $1.14. For the year, the total revenues were up 10%. We delivered an operating ratio of 61.4. Core APS of 377, which was flat versus last year. We knew from the beginning 22 would be a year of two halves, and particularly we had high expectations for the fourth quarter, which we were ready and resourced to meet. Unfortunately, there were some factors that impeded our fourth quarter to some degree. But with that said, I'm very pleased with how we began the year. Strong revenue and operating performance in January, which is going to carry great momentum into the first quarter of this year and as we play out in 2023. We're in a great place from a network and resource perspective in spite of a historically tight labor market in 22. It was a record year of hiring at CP. We added more than 1,600 conductors over the course of last year, and we made some significant progress with our labor agreements with the recent tentative collective agreements, both with the UNIFOR as well as the BLET. Both of those agreements are out for ratification. Specific to the BLET, and this has to do with the consolidated territories, which are obviously contingent upon the SDB approving our merger application. This agreement with the BLET, which are the locomotive engineers, and the earlier agreement that we signed with SMART, the conductors, for the KCS in Kansas and Missouri, they're both progressively hourly agreements, which will improve our operational flexibility as well as predictability in our employees' quality of life. Again, it's an agreement that gives us flexibility and in turn enables our employees to realize higher pay, scheduled jobs, and a better quality of life compared to what a traditional labor agreement is in the U.S. rail space. Parts of these agreements, of course, remain subject to the SDB's approval of the merger agreement, But we certainly see additional opportunities down the road pending and assuming, depending upon an approval, to create a framework for the benefit of all employees in a combined CPKC network and also, obviously, the reliability benefits in service that this agreement will provide for a combined CPKC. I'll say a couple words about the transaction on the CPKC front. Both of our teams at both CP and KCS are hard at work preparing to seamlessly integrate these two iconic companies. I can tell you there's been a ton of tremendous work that's been accomplished by teams at both railways to ensure the smooth transition. I'm extremely pleased last week also to note the release of the final environmental impact statement. Certainly that's no small feat and a huge quantum award by the SDB to get that done in the meticulous, thoughtful way that they handled not only just the environmental impact statement, but in handling this entire file. So I commend the team for the work they did. Throughout the process, as I've said, the SDV has been very thorough, they've been meticulous, and we continue to eagerly anticipate their decision on our merger applications, which we expect this quarter. On the environmental front, a couple of words. CP continues also to make strong progress In this space, specifically in sustainability, I'm pleased to see that the company's efforts continue to be recognized for the first time in our history. CP was named to the Dow Jones Sustainability World Index, which is a tremendous achievement for the entire CP family that we can be proud of. We were also named to the Dow Jones Sustainability North American Index for the third consecutive year, and finally named to the CDPA list, which is an absolute reflection of our commitment to comprehensive climate disclosure at the Canadian Pacific. We continue to demonstrate our leadership and commitment to a more sustainable future. Also, through our hydrogen locomotive project, which is unique in the industry, in late October that project hit a significant milestone when the locomotive performed its second mainline test and first revenue move, and we're soon to experience the second hydrogen locomotive, which is the GP38, a four-axle DC locomotive over the next month, which will be making its debut, so to speak, as we get it out rolling and operating so we can work the bugs out of it. So let me close by saying 23, we're poised and ready to roll. It's going to be a very special year for two-story companies. We can't wait to get to work about these two great companies and creating value for our customers, our employees, and the North American economy. We're focused on executing the plan, and I'm very pleased with the start that we've had this year to what I expect will be a historic year. So with that said, I'm going to hand it over to John to bring some color in the markets, and then Nadine will wrap up elaborating on the numbers, and then we'll open it up to Q&A.