Okay, good afternoon. My name's Scott MacDonald. I'm the Senior Vice President of Operations at Canadian Pacific. At CP, safety is extremely important, so it's my job here very quickly is to walk through our emergency procedures. If there's a medical emergency, I'm first aid qualified as a number of the operating officers in the room are. We will provide initial assistance, and we have a CP employee in the room here which will call security. They will come up and assist, and of course, 911 will be called, and they'll respond with medical services as well. In the event of a fire emergency, we will reside in the room here. We will take directions from the hotel staff over the public address system. If we do have to evacuate, we just go through the doors that we came in.
If you go out to the lobby, there's two exits on each side of the elevator bank. The elevator or the stairwell will take us down to the front of the building, and then again, the hotel staff will tell us where to congregate, and we'll take further directions. So with, with that, welcome once again, and, welcome to our annual general meeting of shareholders. Thank you.
Thank you, Scott. Good afternoon, ladies and gentlemen. My name is Andrew Reardon. I am Chairman of the Board of Directors of Canadian Pacific. It is indeed my pleasure to welcome you here today to the annual meeting of shareholders of Canadian Pacific Railway Limited here in Toronto. This is CP's 134th annual general meeting, and I also want to welcome those who are listening to our meeting today, via the webcast over the Internet. With me on the platform today are Hunter Harrison, our Chief Executive Officer, Keith Creel, our President and Chief Operating Officer, and also Jeff Ellis, our Chief Legal Officer and Corporate Secretary. I hereby appoint Mark Thompson and Hatim Walji of Computershare Investor Services to act as scrutineers for today's meeting.
The Secretary has deposited with me a statutory declaration establishing the sending of notice of the time and place of this meeting to each shareholder entitled to vote, to the directors, and to the auditors of Canadian Pacific, all as required by law. The scrutineers have confirmed that a quorum is present. The scrutineers' final report will be kept with the records of this meeting. I declare that the meeting has been regularly called and properly constituted for the transaction of business. However, before we commence the formal business of the meeting, I would like to share with you a few thoughts, both with regard to the past year of 2015 and with respect to some recent developments. Broadly speaking, 2015 was a challenging year for businesses around the world. One adjective being used to describe last year's global economic activity was subdued. I think that's a fairly accurate descriptor.
While the outlook is for modest recovery in the coming year, there is no doubt that railways all around the world have been seeing the impacts of lower demand for goods and commodities. By now, you have seen CP's annual report, CP Works. It was to reflect the fact that no matter what is going on in the world, no matter what is happening with economic conditions, CP has an operating model that performs consistently and strongly in every economic climate. In a year that will be remembered for market headwinds, 2015 should also be remembered as a year in which CP performed extraordinarily well, posting records in each consecutive quarter. The success is owing to the company's leadership, Hunter Harrison, Keith Creel, and the dedicated railroaders who are the backbone of this organization. I've been in the railroad industry 40 years.
I have never seen a team like this one at Canadian Pacific, and I would like to thank all of the men and women of Canadian Pacific and this management team on behalf of the entire board of directors for their tremendous achievements in 2015. You have learned about CP's recent decision to step away from the proposed business combination with Norfolk Southern. This merger proposal was brought about for the purpose of improving North America's rail network, to provide customers with a wider range of service options, and to drive considerable shareholder value creation. However, owing to political headwinds and other opposition, your board felt that it was in CP's best interest to step away from this proposal. However, even though this process is concluded, CP's journey continues.
Our model of precision railroading that is consistently executed by your management team transcends all levels of the company, ensuring that optimization of assets, control of expenditures, and the generation of revenue are addressed with the same focus and sense of urgency demanded by precision railroading. This is CP's cultural foundation, which serves as a guide for our management team in their creation of value for the shareholders. The framework that ties everything together at Canadian Pacific is safety. All employees are aware of the requirement that they perform their jobs safely each and every day, which makes the report of an injury all the more acute to all of us who railroad. At this time, I would like to honor the memory of a member of the CP family who was fatally injured in March of this year. Jeffrey Harsh was an engineer trainee in St. Paul, Minnesota.
Mr. Harsh was 43 years old, had worked for the Canadian Pacific for 19 years. It is difficult to accept the loss of a member of our railway family, and I ask you to join me in a moment of silence as we remember Jeffrey Harsh. Our desire to keep our people and our communities safe is the core of Canadian Pacific's operating philosophy. There's always more that can be done to improve safety, and Canadian Pacific continues to be a very active participant in this conversation at all levels. Safety is everyone's responsibility, and CP is committed to furthering this dialogue not only in the industry but in carrying this message to the public. CP's operational achievements have been mirrored by the success we have seen in our community program, CP Has Heart.
At last year's AGM, some of you may recall it, we announced a visionary partnership with the Heart and Stroke Foundation, and CP donated CAD 3 million in order to move cardiac research forward, save lives, and promote recovery. I'm very pleased to share with you that through CP's other sponsorships, the CP Women's Open, Spruce Meadows, and the Canadian Football League, we have been able to raise an additional CAD 3 million for local heart charities, making CP's total contribution more than CAD 6 million for this important cause. 2015 was also a year that saw some changes to your management team. Mark Erceg was welcomed as our new Senior Vice President and Chief Financial Officer and added his experienced and disciplined approach to our capital resources.
Late last fall, Jeff Ellis, our Chief Legal Officer, joined our staff pending the retirement of our esteemed legal counsel, Paul Guthrie, who had served this enterprise most effectively for the past 26 years. Your board of directors has also undergone some changes in 2015. In July of 2015, I was selected as Chairman of the Board of Directors. Keith Creel and the Honorable John Baird were elected at last year's Annual General Meeting and have been impactful additions to this board. We also saw the departure of five gifted and committed individuals from the CP board. Paul Haggis, Krystyna Hoeg, Gary Colter, and Stephen Tobias were all valued members of this board who served the company's interests very well. I would like to thank each of them for their service to CP and wish them well in all of their future endeavors.
I would also like to take this opportunity to remember Linda Morgan, who passed away in November of 2015. Linda had been on the board of Canadian Pacific since 2006 and was a respected figure in the world of transportation. Linda's contributions to Canadian Pacific were many, and we will miss her presence on this board. Earlier this year, Paul Hilal stepped down from the board in order to address a new opportunity, and I would like to thank Paul for all the work he has done since joining the CP board in 2012. I'm happy to say that Paul is an honored guest with us today. And Paul, would you please stand? As a result of these changes, we also welcomed Matthew Paull to the board of directors. Matthew is now serving as our Chairperson of the Audit Committee.
Rebecca MacDonald is serving as Chair of our Governance Committee. Isabelle Courville is serving as Chair of our Management Resources and Compensation Committee. Our board of directors is a highly talented group of men and women who are steeped in a combination of industry, government, financial, and management experience. Moreover, we are relatively small and very cohesive, or focused upon long-term value creation. This board listens. This board makes a difference. It is my privilege to serve as Chairman of such a dedicated group of men and women. Now, onto the formal part of the meeting. Please note that after the formal business is concluded and the meeting is terminated, Hunter Harrison will present his formal address to the shareholders, after which he and Keith Creel will take questions relating to CP's operations.
To expedite matters, a number of shareholders or proxy holders have agreed to, propose and second various motions with respect to the business of this meeting. While this will help speed the handling of the formal matters, it should not discourage any shareholder or proxy holder from speaking to any motion after it has been made and seconded, and from raising any questions or comments properly within the scope of the meeting. If you do have any such questions or comments, the proper time to ask them would be at the time of the topic. Please proceed through the aisle microphones, identify yourself, and advise whether you are a shareholder or a proxy holder. Kindly keep your comments brief and ask only one question at a time.
Shareholders who do not wish to address the meeting but who would like to submit a question or a comment, may do so in writing on the bottom of the agenda, a copy of which has been placed on each chair. At the conclusion of the meeting, please hand your agenda with the comments written on it to an employee of CP, and management will address your question in the near future. There are five matters set out in the notice of this meeting to be voted upon by the shareholders. We will conduct all substantive items of business by way of a single ballot. If you are a registered shareholder or a proxy holder and you have advised that you wish to vote in person at this meeting, you should have received your ballot when you registered for the meeting.
If you completed and returned your form of proxy or voting instruction form, it is not necessary for you to vote today. However, you may wish, if you wish, to change your vote. You may do so by voting in person at this meeting by submitting a ballot. Anyone wishing to vote at this meeting who does not have a ballot, please raise your hand, and you will be provided by a ballot with a ballot. I would request that the Secretary provide instructions in respect of completing the ballot. Mr. Secretary?
Thank you. Each shareholder or proxy holder may use the ballot provided to vote on all matters at this meeting. In particular, one, the appointment of an auditor by placing a mark beside either for or withhold. one, CP's approach to executive compensation, commonly known as say-on-pay, by placing a mark beside either for or against.
three, the frequency of say-on-pay voting by placing a mark beside either one, two, or three years, or abstain. four, the election of directors by placing a mark opposite the names of the nominees for whom they wish to vote. Finally, five, approval of the corporation's Section 162(m) incentive plan by placing a mark beside either for, against, or abstain. The ballot should be clearly signed. If you are a shareholder or proxy holder and the space for your name has not been pre-completed, please print your name on the ballot. Ballots will be collected later in the meeting after all matters have been voted on.
Thank you, Mr. Secretary. The first step in today's meeting is the receipt of the consolidated financial statements as included in the 2015 annual report. A copy of the annual report has been made available to shareholders, in either hard copy or electronically. I now place before the meeting the consolidated financial statements and the report of the auditor thereon for the year ended December 31, 2015. Mr. Secretary? The first item of business is the appointment of an auditor. Jade Wong, may I have a motion?
I move that Deloitte LLP be appointed auditor of Canadian Pacific to hold office until the close of the next annual meeting of shareholders.
Mr. Chairman, my name is Marnie Sortland, and I second that motion.
Is there any discussion on the motion? I declare the polls open for the vote on the appointment of an auditor. The next item of business is a non-binding vote, advisory vote to approve compensation of the corporation's named executive officers, commonly known as say-on-pay. Scott Cedergren, may I have a motion?
I move that on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders approve the compensation of the named executive officers of Canadian Pacific as disclosed disclosed in the corporation's proxy statement delivered in advance of the 2016 annual meeting.
Mr. Chairman, my name is Maeghan Albiston, and I second the motion.
Is there any discussion on the motion? I declare the polls open for the vote on the advisory vote to approve compensation of the corporation's named executive officers. The next item of business is a non-binding advisory vote on the frequency of say-on-pay votes. Chris Burns, may I have a motion?
I move that on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders approve that an advisory shareholder vote on the compensation of the company's named executive officers be held every one year.
Mr. Chairman, my name is Katie Hill, and I second the motion.
Is there any discussion on this motion? I declare the polls open for the non-binding advisory vote on the frequency of say-on-pay votes. The next item of business is the election of directors. In accordance with the articles and bylaws of Canadian Pacific, the board of directors has determined that nine directors are to be elected at this meeting. I now declare the meeting open for nominations.
Mr. Chairman, my name is Jeremy Berry, and I nominate the following nine Canadian Pacific director nominees: William Ackman, the Honorable John Baird, Isabelle Courville, Keith Creel, Hunter Harrison, Rebecca MacDonald, Anthony Melman, Matthew Paull, and Andrew Reardon.
I've been advised that no further nominees have been nominated pursuant to the provisions of CP's bylaws. Therefore, I now declare the nominations closed. Christine Brown, may I have a motion?
I move that the persons nominated be elected directors of Canadian Pacific, each to hold office until the close of the next annual meeting of shareholders or until such person's successor is elected or appointed.
Mr. Chairman, my name is Scott Cedergren, and I second the motion.
Is there any discussion on the motion? I declare the polls open for the vote on the election of directors. The next item of business is the approval of the corporation's Section 162(m) incentive plan. Bill Hewson, may I have a motion?
I move that the Section 162(m) incentive plan be and is hereby authorized and approved as an incentive plan of the corporation.
Is there any discussion on that motion?
Mr. Chairman, my name is Nizam Hasham, and I second that motion.
I declare the polls open for the vote on the corporation's Section 162(m) incentive plan. We will now pause so that the scrutineers can collect the ballots. If you have a ballot, kindly raise it so that the scrutineers can recognize you. Will the scrutineers please proceed to collect the ballots? Have the scrutineers now received all of the ballots? I hereby declare that the polls have now closed with respect to all items of business. The scrutineers have provided a preliminary report based upon the proxies received prior to the meeting.
I call upon the Secretary to report on the preliminary results of those votes. I note that the company will report the detailed final voting results, including those votes submitted in person by ballot following this meeting once the tabulation is complete. Jeff?
Deloitte LLP has been reappointed auditor of Canadian Pacific. The say-on-pay vote received 50.1% of the votes against the non-binding advisory resolution. The frequency of say-on-pay votes received 94.9% of the votes cast in favor of holding an advisory vote every one year. Each of the nine nominees has been elected as a director of Canadian Pacific with greater than 94.4% of votes in favor of their election. The corporation's Section 162(m) incentive plan is approved with 92.5% of votes cast in favor.
Thank you, Mr. Secretary. I adopt the preliminary report of the scrutineers and declare that the nine director nominees, duly elected directors of Canadian Pacific and each of the other matters of business passed. I direct that the scrutineers' report be annexed to the minutes of this meeting. Ladies and gentlemen, your duly elected directors of Canadian Pacific Railway, and I ask each of the directors to stand as their name is called: William Ackman, the Honorable John Baird, Isabelle Courville, Keith Creel, Hunter Harrison, Rebecca MacDonald, Anthony Melman, Matthew Paull, and myself, Andrew Reardon. As there is no other business that may properly be brought before this meeting, that concludes the formal business of the meeting. I wish to thank all of you for attending. I now declare this meeting terminated. Hunter, you have the floor.
Thank you.
Thank you, Mr. Chairman. Fellow railroaders and fellow shareholders, I want to add my welcome to each and every one of you today. It is with mixed emotions that I stand before you today. Most of you are aware that my contract runs out next June, and so this will be probably my last appearance in this role here. I think probably next year this time, I'll be passing the gavel on to Keith, and we'll be hearing about his vision for this organization for the future. I guess the second emotional issue is I've already failed retirement once, and people say, "How do you fail retirement?" Well, I figured out a way.
But I owe a special debt of gratitude, and I would suggest that all of us as shareholders of this organization do too to two individuals, one who's been recognized already, that if it wasn't for their vision and foresight, I wouldn't be standing here today, and most of us wouldn't be in our present capacity, and that's Bill Ackman and Paul Hilal. So would both of you just be recognized for the contribution that in fact, if I could just digress for a moment, the reason why I came out of retirement or was coaxed or lulled or whatever the case might be, Paul called me one afternoon. We had not met. Called me on the telephone. Said he wanted to talk about railroading. He really wanted to talk. We had about a four-hour conversation.
And I got off the phone, and my wife said, "It's time for you to go back to work." And she was one of them who had before, with all her insight, said, "It's time to retire." But it wasn't the first time she was a little inconsistent with her direction or instructions. So I said, "Why do you say that?" And she said, "You know, you've been retired now for two years and a little bit, and I've never seen you so, passionate or enthusiastic about anything in that time frame. It's time for you to go back to work." So in a short period of time, well, some would argue that, I, was honored then to be able to join this organization as your CEO. This is the fourth time I've stood before you as, as your CEO. And, it's been a, a wonderful experience for me.
I've been part of three turnarounds in the industry, and I can tell you this: this was by far the most challenging, happened the fastest, but at the same time, the most rewarding, experience I've had professionally. And there's a reason for that. Some of you remember, and we're here with us four years ago when we announced this aggressive plan that we talked about. And I've brought it to some of your attentions today. Not many of you were believers. We were able to convert some of you, and we had some maybe non-natural experiences to convince you of some things that could be accomplished and done. But I get the question all the time, "We don't quite understand how this team has been able to accomplish this." And I said, "Well, let me try to explain it to you this way.
You know, we operate with the same gauge as other rails. We effectively use the same locomotives and cars, infrastructure, signal systems. What's the difference in this company and other organizations? And I think that a lot of business would be served well if they thought about it this way. The difference is the people. Now, if you think back when we started this journey, CP was called, not by me but by others, the worst railroad in North America. Now, and I didn't believe it then, and I don't believe it now, and I think today, we can all hold our heads high and say that we're part of the top railroad in North America. And all every employee, every one of us should be extremely proud of those accomplishments, for a lot of reasons.
Part of that is that Keith and I have both spent a lot of our careers on developing, developing people, making people understand what we're trying to do, what we're trying to get accomplished, and why we're trying to do it. And hence the, the initial book of how we work and why, which was going to be a little three- or four-page pamphlet that turned into a, a book. And then there was a sequel to the book. And, now if you want a copy, you can get it on eBay for like $1,100. I'll get you a better deal than that. But, one thing I do notice when my granddaughters visit, they're into eBay, and they see the books on my library there, and they see $1,100, and the book supply keeps diminishing over time, so I have to call, call the books back in.
Well, one of the things that we've talked about, this is a pretty simple formula, this so-called Precision Scheduled Railroading that we believe deeply in. And I think that's one of the that's one of the keys to it. You know, you will not go around our offices today and see any mission statements, okay? But everybody knows what the mission is. We don't have to put it on the wall. And it's been the mission. It's been our operating strategy for 20 years now plus. So it doesn't change every year with new initiatives. And it, and it's very simple. We're trying to provide the customer a first-class product that we're proud of, in our case, transportation service. You know, one of the first challenges we had was trying to define what is good service. And I looked in tariffs. I looked in contracts.
Never did I see a definition for service. So that's what we said, "We got to decide what is good service. What does the customer expect?" Well, we came upon something that was very unique. Just do what you say you're going to do. You tell the customer you're going to have a car here then. Do what you say you're going to do. One of the areas in this recent M&A activity, I could call it something else, but let's stay with activity for the time being, that people missed was this: this is a real opportunity that sits before this industry to make huge gains in market share, huge quantum leaps, not just words. And the reason why that mergers served that well is because here's our issue and challenge.
We have one of our sales marketing people call on a customer, and they say, "What do you need?" "I need to get my product from Winnipeg to Dallas. What's your service there?" "Well, I can tell you what we're going to do going to Chicago. I don't want to go to Chicago. I want to go to Dallas. I don't control Dallas." So we have a fragmented product. We one of the last major holidays, Keith was making plans with the operating team until we found out that the other roads were shutting down in Chicago. Now, how can we do what we say we're going to do if we don't have a consistency between us and what we like to think of as our partners? So that's what kind of brings on phase two of this Schedule Precision Railroading.
And now we're entering a phase that we call trip plans, where we have now developed the ability—it'll be probably online within 60 days—that we quote service to the customer in hours, from release at your door to arrival at your customer's door in 84 hours, 93 hours, whatever it might be. We still don't have the ability to control the full-through movement, which is why the trucker has a distinct advantage over us. So we've got to wake up in this industry and understand what they can do for us, what it can bring to us, at the same time preserving competition. And, and there's a way to do it. So that's kind of the next phase. Part of the training development of people, I would rather say, that we spend time on is this: we talk about we would much rather have leaders than managers.
What we say back home is this, okay? Managers do things right. Leaders do the right things. There's so many things we do that don't need to be done, that don't add value. So that is kind of a core value of ours that we have, that we have preached throughout this journey. Now, the second value is controlling cost because, you know, you'd like to be able to reward a shareholder. You'd like to make a buck. That's fine. We do a very, very good job there. The third that we talk a lot about, which probably as the press is trying to corner me today, the one issue that people overlooked that had most impact on our success is asset utilization. The sound bite used to say it's the missing ingredient in the recipe of success in the rail industry.
This organization right now, our operating group, our operating—we have 600 locomotives stored, waiting for business, through the leverage of scheduling. Fourth thing, just don't get anybody hurt. Let's don't have to go through what we went through in recognizing earlier, employees, that if you ever go through the experience of having to go to somebody's front door and break that news to them, it hits home with you, and it stays with you. The fifth is the importance, and the people that accomplish these things are our people, our employees. They are the most important asset we have. We look at people as not a liability but an asset. I was reading the other day about a well-respected railroader going back too many years that I shouldn't remember. He was famous for some of his accomplishments.
The one great exception I took is I was reading these two-volume books about his strategy. His strategy was this: get rid of people at all costs. Now, how would you like to be an employee of that organization, and the organization's driving force is to get rid of people? Now, I think if you think about what I've described here, and you think about that we take those core values and season them with passion and integrity, that's what this CP Railroad is all about. And I want to, want to bring a few things to your, your attention. It's okay to brag internally, okay? And I've been doing this for a long time, 50+ years. In fact, Andy and I go way back, longer than he wants me to repeat.
But we started with a railroad that most of you probably have never heard of called the Frisco Railroad. And little did I dream in 1963 that I'd be standing in Toronto, sharing the podium with my distinguished colleague here. But fate has its way of working. Let's talk about what Keith, the operating team, the people, some of the people that you were introduced to over the last couple of days have accomplished. Market cap is up $14 billion. Share price has increased 140%. Outperformed the TSX by 120%. Operating ratio was improved 2,000 basis points from 81.3%-61%, and it's going lower. Revenues increased 30%. Thank you. Fuel efficiency is improved by 16%. Return on invested capital. We got questions about that this morning, you know, that we're so obsessed with operating ratio. What's the return on capital, okay? We're very sensitive to that. It's doubled.
Train speed is up 39%. That just doesn't happen. Fuel of, train weight's up 26%. Train length's up 19%. Now, those of you that have been associated with the industry or, or part of the industry recognize and understand those numbers. It just don't happen without a lot of hard work from dedicated employees that were tired of being called the worst, and now all of us can take great pride in being part of the best railroad in North America. Now, I want to leave time for Keith and I to take some questions. But I want to leave you with a quote, and it's a quote that I use a lot, but it, it's especially appropriate this year given the experience we've, have been through with, our merger activities. And by the way, you know, the press reports sometimes aren't very accurate.
You know, we made a trip to Florida, and we were rebuffed with the offer. We met an hour and a half, okay? You think, you know, you can we're going to make an offer an hour and a half, and we, we know I've been accused of kind of shooting from the hip, but I know a little bit more about due diligence than to make some offer. But it's a quote by George Bernard Shaw that says, "Forget about the likes and dislikes. Just do what must be done." This might not be happiness, but it's greatness, and that's what this railroad will continue to pursue. Thank you. Questions?
Thank you for the informative. My name is Richard Horn from Wisconsin, and I would like to know what your feeling is about the proposed ring around Chicago, the bypass. I was wondering what you felt as you think about it. I mean, in general terms, not specifics or anything. Thank you.
Yes. But maybe we'll share two perspectives. There was a group formed, about 15 years ago to address the problem called CREATE. And I wasn't a big proponent of CREATE. It started off with a budget, if I remember correctly, like, $800 million. The last time I heard the overrun was several billion, and Chicago hadn't improved yet. My former employer takes great delight, rightfully so, in sharing their vision, which we helped develop, in acquiring a route around Chicago. And it wasn't $8 billion. We paid U.S. Steel $300,000 for it. And just a little side note, I was a little concerned with the negotiations because the CEO said to me, he said, "You know, I don't even know if I want to do this.
I'm just going to have problems with the board of what to do with the cash." So I don't think that the, I think the project you're referring to and I got questions about the press, and if I'm accurate in my assessment, this was a group of, of retired railroaders, well-respected, who were given a challenge by all the class ones, which we participated in, to find a route around Chicago, taking a lot of things into account. And the $8 billion came up. And it's my understanding that some of the rails said, "You know, if that gets out, somebody's going to make us pay the $8 billion. Why don't we scrap that project?" So that's my view.
Yeah. I would add, you know, our, our thesis on consolidation, at the end of the day, of doing more with what we have. There's the physical plant there now. It's obviously Chicago. How soon we forget. I, I lived there. I lived through the pain and suffering of the winter of 2014. You know, I got roasted on Capitol Hill. I got roasted in Ottawa. I got roasted everywhere I went as a result of that mess in Chicago. So it's a solution begging for an answer. But at this point, people just don't have the appetite for change. Eventually, out of survival, it's going to have to happen.
But to build an $8 billion bypass around Chicago, it creates, in my mind, a whole another set of challenges and complexities that ignores the fact that all the other railroads south, crew bases, a crew base, we have asset bases. I just don't think it's a viable solution. I think there's a much more reasonable and efficient opportunity to do more with what we have in Chicago down the line. And eventually, in my career, I think we'll get there.
One final note on that. We have, over the last several years, we have offered to buy the Belt Railroad. We've offered to buy the IHB Railroad. We've offered to buy both railroads. We've offered to guarantee service. And if we don't provide the service, we say they can buy it back from us at a discount. We've done everything that we can reasonably, I think, be expected to do, and they just don't want us in Chicago.
Yes, sir.
My name is Raymond Kennedy. I'm fourth-generation, CP railroader here in Toronto, retired, after 40 years.
Thank you for your time.
In the operating department. And for almost 20 years now, I've been enjoying a modest pension. I would like to ask, what is the company's plans for celebrating the 150th anniversary next year of Canada's Confederation?
You know what, Mark? We've put a plan together, obviously. Why don't if you will step up and stand up and share with the group. Certainly a very memorable date. It's an important date. Mark, go ahead if you want.
Sure. We're actually working on that kind of thing too, you know, in the wintertime, we run our own trains, but we just basically host for different communities. And so what the plan is now is we're going to run a similar train, probably, stopping in various communities to celebrate Canada's 150th. Very well. I'm also.
Well, a member of the CP Pensioners Club here in Toronto. And we have volunteers, conductors and engineers retired that have volunteered for these activities in the past. And I'm sure I was involved in it and in charge of the group. I'm sure I can come up with more volunteers for whatever the company is planning.
Well, thank you for that.
Thanks.
Commitment. I apologize. Mark Wallace is Hunter's Chief of Staff. He actually runs public relations, investor relations, all those other areas for the company, so. He's one-stop shopping in Calgary.
My name is Les Harris. I'd just like to ask you what has happened at CP now after the disaster in Quebec? Could you just give us an update? I know it was nothing to do with CP, but I would like to hear your thoughts.
When you say happen, relative to the changes that we have made or relative to?
both the changes you've made and how you got out of being made liable.
Okay. Well, you know, not our crew, not our locomotives, not our equipment, not our responsibility. It's a very tragic accident. What we focused on is learning from the mistakes that were made. You know, at the end of the day, it speaks to a commitment to safety culture. It speaks to the commitment to complying with operating rules. It's our responsibility, both morally, ethically, to the communities we operate in and through, and we take it very seriously. Our employees take it very seriously. That said, we're never going to be perfect. Certainly, we're striving for that excellence. And we've continued to drive significant year-over-year improvements on safety, both from a derailment standpoint as well as from an injury standpoint. Now, again, one is too many. And I feel, you know, very reluctant to say that given that we just lost an employee three weeks ago.
I've been one of those guys that had to go knock on the doors and deal with those issues. And I'll tell you, I wouldn't wish it on my worst enemy. This entire leadership team recognizes that responsibility. So we're committed to that. We hold steadfast to that day in and day out. And you can expect, as a shareholder, to see continued improvement in that area. Thanks for the question.
Let me add something. You know, I think something that's misunderstood to some degree, and this board had a great deal of dialogue about that, of hauling hazardous material. We don't have a choice. It's the law. We have a common carrier obligation that we're bound by law to move the crude, for example. And, you know, I mean, I don't, I'm not trying to try this in court here. But to Keith's point, we did everything that we were supposed to do. You know, we had nothing to do with the loading of the car. We, by law, had to accept that it interchanged. By law, we had to deliver it to whoever the shipper said. There was a choice between Canadian National and MMA. They said to give it to them. We gave it to them. It was a tragic accident.
You know what concerns me as a railroader and as a human being? All the legislation has hung up. You don't see much in the press because they're arguing about the tank cars again and the specs. And it's my understanding that there's been some dialogue between the two countries that until you pass the law, we won't pass the law, and it gets all hung up in bureaucracy, which is too bad. And so, I think the other comment I would make is this. I know the court systems are at work, and I'm not trying to be judge and jury. And I read just the reports that you get, like, in the paper. If the press is accurate and the individual failed to follow the rules and set the brakes, technology's not going to solve that.
You know, what solves that is human behavior. And the most safest device in the world is a safe human being. We try too much, in my view, to rely on technology. When there's a mistake made by a human being, then we want to put in another system to take care of it. And that's the wrong reaction.
Jeremy Berry, CP shareholder. This is a question for Hunter. Just curious what's next for you and what you hope to achieve between now and June 2017.
Well, you know, I want to—I'd like to go out with a bang.
He bangs every day.
You know, I mean, I'm a shareholder like the rest of you. I have an interest in seeing that this company continues to perform, to assist Keith. You know, I spent three days with him last week in Chicago with his operating leadership. He's brought on some three or four new employees to blend with the glue from the past. We got to spend time with them. That's fun for me. So, I've got an expensive hobby called horses, and they got to eat. So I need to keep things going. From a shareholder perspective, I'm going to hopefully we're on the U.S. Olympic team, and hopefully, we bring a medal home from Rio. By that time, Keith will say enough.
You know, it reminds me of something. I'm in a pretty unique position. I've gone through this transition with Hunter once in his career, his last retirement. So he left, said he was leaving, said he wasn't coming back. But I'll remind him, when you left at our previous employer, you retired, and you turned the reins over to me, you had a bracelet made for him. And on the back of the bracelet, it said, "Make me proud, EHH." This team in this room's going to make you proud when you retire from here.
It's a deal.
Sure.
There was a little one more little tidbit. Not long after I retired, one of the publications here in Canada ran a kind of a special, "Where Are They Now?" about retired CEOs. Alongside my picture's here. Guess whose picture's here? Mr. Cleghorn. And I understood he took great exception to being on the same page with me. But, I mean, it's life. Other questions?
Chris Burns, and I'm a shareholder. When you look at the franchise, where do you see further opportunities for growth?
Well, I think well, let me give you my perspective, and Keith can give you a more fresher outlook. You know, I see some opportunities, and I can't talk a lot about them, but I see some opportunities for some vertical integration that not necessarily is railroad merger directly related. I see a lot of opportunities that this organization will have as a result of a very talented team of railroaders here. Now, I'm not going to be part of that, but I can tell you that when rail organizations look today at their bench, they look at their bench strength. If they see where their weaknesses are, the other ones share with me, not publicly, but they share with me that they need a stronger team. Now, this team is going to be, if it's not already, the strongest in the business.
That will open up a lot of doors and opportunities. Now, you know, there's some; it's not all a great story. I have some concerns, longer term, about crude, fossil fuels. You know, we put a lot of eggs in one basket there, and it didn't work. But I think that the one thing about this model is that it serves us well even better than others in the hard times. You know, if you run after that, what I call my snowcat theory, if you chase that business at the top of the mountain, just to gain market share, and it doesn't have the right returns on capital and all, and you don't do that in a variable cost structure way, and you have to buy assets or what, when you hit a valley, you get eaten alive. You can't survive.
Well, this organization's not going to be caught like that. I think we understand those issues. But there's no more valuable asset that this company can have in this franchise than the team and the people that are represented in this room. I'm telling you, you bring me some good railroaders, and I can do a whole lot of things with them.
Yeah. And, a couple I'd add to that, Hunter, echo those comments. But this network, this franchise, and nobody ever taught me this when I was competing against it, actually has a significant advantage. Franchise strengths. We're shorter in the key markets, be it Vancouver to Chicago, Toronto to, to Vancouver, Toronto to Calgary. So the key Canadian markets, especially, we have shorter routes. We always focused on all the excuses, the mountains, and the challenges. And every railroad has challenges. But what this team has been able to do over the past three years through our investments and through our operating model and changing this culture, the way we execute day in and day out, and not just in here, I'm talking about the running trades employees that operate the railway day in and day out. I'm talking about the engineering employees. I'm talking about the mechanical employees.
Collectively, as a team, this created a service that customers are starting to recognize. So it's not just intermodal business. The key to organic growth, which we still have a lot of opportunity to find at this company, is that service offering. So talking to Hunter's points about trip plans, taking the credibility that we've gotten from doing what we said we would do with customers, a lot of the customers that have done business with us in the past did it because the rate was cheap. They didn't do it because they could depend upon the service.
So it allows us now to go out and have conversations with our customers and with our competitors' customers, be it truck or be it the other road, that's headquartered in Montreal, to give them a very compelling service offering, to show them how, because of our shorter routes and our higher velocity and our train speed, we can turn their assets faster. And while our rate may be the same or a little bit more than our competitor, their cost, total cost from a transportation spend, is down because they don't need to own as many cars or because we can continue to give them capacity in an up environment, car capacity, to continue to ship their product. So we're in the beginning journeys of that. We're starting to win business. It's only going to increase.
You know, this struggle that we're going through in the economy, it's causing everyone to look at their costs to try to survive themselves. Well, you'd be very foolish to see a low-cost transportation service available to you so that you could save money if you can rely on and not convert your transportation mode. So that's, that's an area that we're really starting to mine. And as the economy comes back, the work we're doing now will pay dividends. And you hit it with this operating, this operating model we have, and the leverage is going to be great, returning, you know, a return to our shareholders. It's something we're very proud of, and it's something we're extremely looking forward to converting.
You know, in fact, I'd remind you, keep in mind that we go back four years, and what did you hear everywhere? "Oh, it's not in the cards for CP because they got these structural issues." They just they can't do it with these structural issues. I hadn't heard anything about our structural issues for four years. And we're breaking records, not just surviving. So, you know, sometimes you have to, you have to give some thought about where the source is. And I'm not a big fan of consultants, because the consultants that were telling us that were washout railroaders. They couldn't make it as railroaders, so they went in business consulting, advising railroaders, which never made a lot of sense to me.
My name is Gordon Dyer. I'd just like to ask, Hunter, he's made us a lot of money as a shareholder. If an offer comes in the door, as most executives who are successful, word spread throughout the industry, if you get an offer, will we get first kick of the cat?
Yeah. I don't know if you want it, but you're going to have it. You know, I haven't run out of gas yet, but at some point, I'm going to run out of gas. I can tell you one thing. You've got coming behind me, as good as there is, in my view. And as I've said to people before, if this organization slips at all, then I haven't done my job. And he knows that in spite of the fact that maybe he doesn't work for me anymore, I still reserve the right to be critical and second guess.
One more question.
Sure.
At the last meeting, I live in Guelph, and the GO train doesn't get in here until 9:30 A.M. I sent a letter to you in Calgary requesting that if you have another meeting, would you make it later in the day, which you have already done. Thank you very much.
Quite welcome.
Thank you, sir.
Anybody else? Well, thanks very much for the confidence you've shown in this organization. Thanks for your attendance and your participation here. I look forward to spending at least one more year with you. You get the first kick of the can. Okay?