🧾 What This Document Is

This is an Amendment No. 1 to the Annual Report (Form 10-K/A) for Canadian Pacific Kansas City Limited (CPKC). Think of it as an add-on or update to their original 2025 annual report. The company filed this specifically to add the "Part III" information—details about its board of directors, executive pay, and governance—that was missing from the initial filing. It does not change the financial numbers or business results from the original report.

🏢 What The Company Does

👉 In simple terms: CPKC is one of North America's largest railroad networks. It was formed by combining Canadian Pacific (CP) and Kansas City Southern (KCS), creating the only railway linking Canada, the U.S., and Mexico. They move everything from grain and lumber to cars and consumer goods.

• Ticker: CP (on NYSE and TSX)
• Industry: Transportation / Railroads
• Unique Angle: Their "Precision Scheduled Railroading" model focuses on efficiency and on-time performance. Their merger created the first single-line rail network spanning three countries.

👥 Board & Governance: Who's In Charge?

This section details the people overseeing the company. The board has 14 director nominees standing for election in April 2026.

• Key Highlights:
  • Independence: 93% of nominees are independent (not company employees).
  • Diversity: 36% are women; 21% are ethnically diverse.
  • Refreshment: 6 new directors joined in the last 3 years.
  • Chair: Isabelle Courville, an independent director with deep energy and telecom experience.
• CEO: Keith Creel is the only non-independent director on the board. He's been CEO since the merger and has over 30 years of railroad experience.
• Expertise Mix: The board boasts a wide range of skills crucial for a multinational railroad: transportation operations, finance, legal/regulatory affairs, environmental/climate expertise, technology, and international (especially Mexico-U.S.) relations.
• Oversight Committees:
  • Audit & Finance Committee: Chaired by Janet Kennedy. Includes 4 "financial experts" as defined by the SEC.
  • Compensation Committee: Chaired by Matthew Paull.
  • Governance Committee: Chaired by Hon. John Baird.
  • Risk & Sustainability Committee: Chaired by Gordon Trafton.
  • Integration Committee: Focused on the CP-KCS merger, chaired by Hon. Edward Hamberger.

👉 Why it matters: A diverse, experienced, and independent board provides strong oversight of management and strategy, which is critical for navigating a complex, global industry.

💼 Executive Compensation: How Leaders Are Paid

The core principle is "Pay for Performance." A huge portion of executive pay is "at-risk"—meaning it's tied directly to company performance and stock price.

• Philosophy: Reward long-term growth, align leaders with shareholders, and attract top talent.
• Key Components:
  1. Base Salary: Fixed cash, reviewed annually.
  2. Short-Term Incentive (STIP): Annual cash bonus (target % of salary) based on corporate (75% weight) and individual (25%) goals. Payouts can range from 0% to 200% of target.
  3. Long-Term Incentive (LTI): Equity awards, vesting over years.
     • Performance Share Units (PSUs - 60% of LTI): Vest based on 3-year performance vs. goals.
     • Stock Options (40% of LTI): Vest over 4 years, give the right to buy stock at a set price.
• Share Ownership: Executives must own significant company stock (e.g., CEO must hold shares worth 7x his salary). This ensures their wealth is tied to the same outcome as shareholders.
• 2025 Performance: The company delivered record revenue ($15.1B) and a record-low core operating ratio (59.9%). The corporate performance factor for bonuses was 121% of target.
• CEO Pay Example: Keith Creel's 2025 salary was $1.35M USD. With a target bonus of 200% of salary and strong performance, his actual cash bonus was $3.27M CAD.

👉 Why it matters: This structure is designed to make executives think and act like owners, focusing on long-term value creation rather than short-term wins.

⚖️ Big Picture: Strengths & Risks

👍 Strengths

• Strategic Network: The only transcontinental railway connecting Canada, the U.S., and Mexico—a powerful competitive moat.
• Operational Focus: Consistent application of Precision Scheduled Railroading drives efficiency (reflected in the industry-leading 59.9% core operating ratio).
• Safety Leadership: Led all Class I railroads in safety for the third straight year in 2025.
• Aligned Governance: Strong board independence, rigorous executive share ownership, and pay tied to performance promote shareholder alignment.

⚠️ Risks & Challenges

• Economic Sensitivity: Rail volumes are highly tied to the broader economy; trade policy and macroeconomic headwinds can impact results.
• Merger Integration: Successfully integrating the massive CP and KCS networks into one seamless operation is an ongoing, complex challenge.
• Regulation & Labor: Operating across three countries involves navigating different regulatory environments and managing labor relations.

🧠 The Analogy

Running CPKC is like captaining a massive, high-tech container ship that just merged with another fleet. The captain (CEO) and officers (executives) are paid mostly based on how efficiently and safely the new, larger fleet reaches its destinations (performance metrics) and how much the value of the shipping company itself grows (stock price). The owners of the company (shareholders) have placed a highly experienced and diverse harbor pilot board (the directors) on the bridge to ensure the journey is well-managed, on course, and prepared for storms (risks).

🧩 Final Takeaway

This filing is all about accountability and alignment. It shows the people running CPKC (the board and executives) are deeply experienced, their pay is overwhelmingly tied to the company's long-term success, and they are required to own a significant amount of stock themselves—ensuring their fortunes rise and fall with every other shareholder.