Good afternoon ladies and gentleman. Thank you for standing by. Welcome to Canadian Pacific third quarter 2009 results conference call. (Operator Instructions) I would now to turn the conference over to Ms. Janet Weiss, Assistant Vice President, and Investor Relations of Canadian Pacific. Please go ahead.

Good morning and thank you for joining us for our 2009 third quarter conference call. The presenters today will be Fred Green, our President and Chief Executive Officer; Kathryn McQuade, our Executive Vice President and Chief Financial Officer; Ray Foot, our Group VP of Sales; and Brock Winter, our Senior VP of Operations. Also joining us on the call today is Brian Grassby, our VP and Controller. The slides accompanying today’s teleconference are available on our website. Before we get started, let me remind you that this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties and other factors that could influence actual results are described on slide one in the press release and in the MD&A filed with Canadian and U.S. Securities regulators. Please read carefully as these assumptions could change throughout the year. All dollars quoted in the presentation are Canadian, unless otherwise stated. This presentation also contains non-GAAP measures. Please read slide two. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions). Here then is our President and CEO, Mr. Fred Green.

Thanks Janet. This morning CP released its third quarter results reporting adjusted earnings per share of $0.85. The impact of lower volumes continues to be a challenge; however the company performed well sustaining the operational improvements we realized earlier this year. Our long train strategy continues to support our cost management efforts and our success is being reflected in key metrics. I’m very pleased with our results in these circumstances. This quarter we set some new records with average train lengths and weight leading our previous desks by 5% and 6% respectively. A huge accomplishment given the volume challenges. We also set a new benchmark in the area of fuel efficiency. Overall, the team did a great job in executing the plan. As you’ll hear today, we have the challenges associated with today’s reduced volumes Permian end. Our pricing performance continues to track well and our balance sheet objectives are progressing nicely. I’ll now turn it over to Kathryn for our financial results, Ray for an overview of revenues and then Brock for an operations update. I’ll come back at the end and wrap up with the few closing comments. Over to you Kathryn.

Thank you Fred and good afternoon everyone. First let me speak to the GAAP, non-GAAP earnings that we referred to adjusted earnings and the items that reconcile between the two. During the quarter, we completed two major land transactions Windsor Stations and a Corridor in Western Canada. The gains from these transactions totaled $68 million after-tax; we also had a slight gain on our asset backed commercial paper. These items are included in our GAAP earnings, but have been excluded from our adjusted earnings. These gains, net of the FX loss on long-term debt increased diluted earnings per share by $0.31. The remainder of our presentations will speak to adjusted earnings that exclude these items. Q3 was another strong quarter for cost control with our operating ratio remaining essentially flat despite carload declines of 18%. Starting at the top of slide seven, I will focus my comments on the percentage variances. The far right column represents our FX adjusted performance based on a weaker Canadian dollar this year versus last year. As a heads up, we are seeing a reversal of this FX relationship in Q4. The Canadian dollar has recently strengthened significantly, where it weakened in Q4 of last year based on a Canadian $0.95 per U.S dollar, FX will be a headwind of about $0.05 next quarter. Now turning to the details; total revenues were down 20%, FX adjusted revenues were down 23%, lower volumes and fuel prices were the key drivers of the decline. Operating expenses were down 20%, foreign exchange adjusted expenses were down 24%. A fluid railway, strong cost management and lower fuel prices were the primary drivers. Operating income was down 21% with almost no impact from FX. Other income and interest expense were inline with last year, but down versus Q2 due to…

Thank you Kathryn and good afternoon. Starting on slide 17 let’s begin with revenues. While volumes continued to suffer from the economic downturn, its effects began to moderate. Volumes in Q3 were up 7% when compared to Q2, 2009 and September was the strongest month of the year. We are hopeful that this up tick will prove sustainable. Reported freight revenue was down 21%. With the impact of foreign exchange removed revenues were off 24%. Volume was the largest driver accounting for an 18% decline. Lower fuel surcharge revenue also had a significant impact reducing revenues by 10% on the quarter. This quarter we saw a reversal of the first half trend with revenue ton miles following less than current loads. This resulted in positive mix of a couple of percent. On the quarter, there were two noteworthy price items. One was a Teck Coal rate decision; the second was the 7.4% reduction to regulated grain rates. Combine these two items had a negative price impact of approximately 1.5%. During the quarter, renewals came in at just under 4% in line with our price strategy. Moving to slide 18. I will now walk through the markets and give you some color on the quarter and the remainder of the year, and for clarity I will speak to current fee adjusted revenues from here on. Grain continued to be strong with Canadian volumes up 10% over the last year, while US originations were up modestly. Overall, revenues were up 3%. The Crop across the CP network has benefited from a warm September improving both quality and yield expectations. The Canadian crop is now around what we would call normal levels, which for comparison purposes is still 15% smaller than last year’s crop. On the US side, although late, production is forecasted…

Thanks Ray. Q3 was another very strong quarter for the team. You are seeing evidence of our ability to manage variable cost in line with volume and we are sustaining our operational performance. At the same time, we’ve been making good progress to test and advance new ideas for efficiency, and our long term structural initiatives are moving forward as planned. I’m pleased with our results from both our variable and structural cost management actions. Looking more specifically at our results, let’s start with safety on slide 25. Our FRA train incident frequency improved by 60% on CP and 8% on the DM&E. For the core CP operation, we continue to be the industry leader in train operation safety with a year-to-date improvement of 30%. This is driving significant benefits and reduced casualty costs. Our FRA personal injury frequency for the DM&E improved by 22%. For the core CP operation, we were up by 10%, but this is a significant improvement from our Q2 performance and demonstrates that our efforts are paying off. Please turn to slide 26. We’ve had good success with our efficiency efforts. We’ve improved train speed by 8%, while disciplined execution of our long train strategy helped to increase train weights by 9%. With GTMs down by 15%, our focus on productivity enabled us to reduce train miles by 21% resulting in 23% fewer crew starts. I want to take a minute to explain how we are achieving these results. We’re already the industry leader in the development and implementation of distributed power or DP, with 17% of our locomotive fleet equipped with DP operations. Our most recent breakthrough has come from the integration of DP technology with our new train area marshalling or tram software tool. This is giving us the ability to safely run…

Thanks Brock. I’ll summarize by saying that this quarter CP posted some good operational results, showing that our variable cost management efforts are working well. We’re becoming increasingly comfortable that our ability to sustain our performance is solid. With the train design improvements and our lean process improvements, we will not be bringing back resources on a one-to-one basis as volumes of return. Our focus continues to be on flexibility in all aspects of our business, this position us well to quickly respond to any volume recoveries. As we complete 2009 and enter 2010 you can expect that the team to continue to focus on our top five priorities. Preserving and pursuing growth opportunities, delivering a reliable product that supports price increases, managing variable costs aggressively, pursuing our agenda of structural cost reductions and managing our balance sheet. We are ready for volume recovery, but we are not counting on it. With that let me open it up to questions.

Thank you. (Operator Instructions). Your first question comes from Walter Spracklin with RBC Capital Markets.

Thanks very much. Good afternoon everyone. Just on the grain, you’ve been doing very well on that side and I know you had some pressure on your rates given the Cap. Can you update us on what impact that your grain business is having on the Cap as you get some market share here and it looks likes actually your, maybe I’m calculating a little differently here, but it looks your overall revenue for revenue tone model is actually up compared to last year. So can you just talk to where the actual negative implication on the Cap came into that number?

Walter it’s Ray, let me answer that in seg. So first of all, our product does continue to be very strong in the quarter, so we are pleased with that. The issue around the VRCPI is basically, it’s a 7.4% impact to revenue entitlement over the 2009-2010 crop year. So, if we handle more business it doesn’t mean that we don’t get the revenue for handling that business, it’s just that a 7.5% impact overall. On the RTMs basically, we had extremely good volumes and strong volumes to Vancouver on the basis of that strong product offering we had in the market place to the third quarter, whereas some of our business within the US on the shorter haul lanes was down a bit. So that was the difference there.

That’s great, thank you. My second question that was just on pricing, you mentioned you were just getting just under 4% on your renewal business. Can you talk to us a bit about what percent of your contracted base is locked in for 2010 and is it roughly around that 4%.

Will be locked in and around 55% to 60% right now Walter, and what I can tell you is that, I think we’ve been pretty consistent in our comments over the quarters that we have been coming in on renewals around the 4% range. So Fred has been saying for quite some time our goal is to exceed inflation going forward and that’s what we are targeting on.

Okay, that’s my two questions. Thanks very much guys.

Thanks Walter.

Your next question comes from Tom Wadewitz with JPMorgan, please go ahead.

Good afternoon

Hi Tom,

Wanted to get a sense of your confidence and how you would think about the operating leverage as the volume comes back, clearly you have done a good job in increasing train lengths and managing some of the expenses in the downturn, but if you see another sequential increase in volumes looking in the next couple of quarters lets say 5%, will you have to put some inefficiencies in the system or do you think you can handle that and show off operating leverage in response to that?

Tom, this is Brock. Yes, to your point we do believe we can generate more operating leverage there. We do have consumable space on some of our merchandised trains to add more volume, and in fact, where we can we will even add both volumes to those IOP trains as well. So from my perspective Tom, I see that there is opportunity gaining, more volume on our existing trains on a go forward basis. There is an impact of mix of course with regards to both volumes, for instance coal, where you would actually have to start an extra train, but for the most part with 5% growth on a general broad base we could accommodate in our current train models.

Can you give a sense of where you are at in terms of average train lengths and what the constraint would be if it’s siding lengths constraint to or just how to think about the parameters for that opportunity on further train length expansion?

Tom our average train lengths are about 6,000 feet on average. It depends on the train, and clearly as I mentioned in my comments, we are now moving out intermodal trains at upwards of 10,000 feet, and even looking for longer trains. So as I said, I just don’t see any issues with being able to leverage our current train models to put more volume on existing trains. Tom Wadewitz – JPMorgan: Okay great. Thanks for the time.

Your next question comes from AV Delton [ph] with Macquarie Capital. Please go ahead.

Thank you. In last quarter’s conference call, you indicated that you were focusing about 80% of our efforts on cost cutting. At that time you were not yet seeing your rebound, and now listening to Fred’s priorities, the five priorities, it doesn’t seem to be weighted as much towards cost cutting, is that a hint of something positive.

Well it could be a hint I suppose. It’s Fred. My view is pretty simple. Situationally as we went into a difficult environment, the organization was heavily focused as you would want us to be, and as I think the people expect us to be, on getting our arms around the cost management side. We have now delivered several quarters as the data is evidence of our ability to manage those costs effectively. In obviously at a leadership level, we can move our attention to making sure that we are not just preserving those growth opportunities, but actually stimulating the market place wherever we can, through more active sales activities, better product quality, to see if we can nip and tuck some of the truck volumes or other volumes that are available to us. So it is fair to say, that as the market stabilizes, it’s our own confidence in our ability to deliver materialized. Yes, we are dialing up more sales activities and my focus is not as much on pure cost control, but I want to also tell you that there is an awful lot of focus on cost control, because that to my mind is a prerequisite for our future success.

Clearly based on what you are seeing, you’d be able to show improvement on operating ratio going forward, because you are able to hold it steady, with the 18% drop in volume during the third quarter, with some improvements in top line and continuing some focus on cost cutting that will be better going forward?

Well, I have to let each of you model the business as you see fit. What we believe is that there is operating leverage left in this enterprise on the basis of the successful work we’ve done with Tram II and the long trains. Just two weeks ago we ran a 12,000 foot, 12,000 ton train across the continent successfully, so we know there is more there. What we need to do now is to now prove that what are the other perquisites for us to make sure we can do that consistently and reliable. Sure there is leverage there and that’s what we’re excited about.

If I can get a data point for you on the labor expense, your labor headcount at the end of Q3 was 13,352. Where do you stand now and where do you expect to be at the end of the year and in Q1 2010?

I think Kathryn said about 13.6 for the fourth quarter is a good assessment on expense employees.

I’m just going to jump in. In fairness to your peers, I am going to ask everyone to limit their first round on questions to two, and then if there is time you can re-queue in line and we’ll be glad to do any follow up questions.

Thank you.

Your next question comes from Randy Cousins with BMO Capital Markets.

Good morning or good afternoon. Ray, you gave us pretty decent run down of the components of individual business units you are going to perform. Could you comment in aggregate looking to the fourth quarter, do you see a situation where the RTMs are going to be up quarter to quarter results, from Q3 to Q4, given the strong grain offset by some of the other things that you are looking at?

Randy, as I went through it there was a series of puts and takes obviously. As we look forward to Q4, we don’t see it being materially different than what we saw in Q3.

Okay. And then with Kathryn, I wonder if you could comment on the deferred tax line within the cash flow statement. You got $117 million positive; what’s going on there, how should we think about that on a go forward, and I’ll just loop in, could you speak to funding of the pension plan for the fourth quarter and what you are thinking about in terms of sort of putting cash into the pension plan.

Okay, you got a couple of things there, so let me talk on the deferred tax. I don’t know off the top of my head. I mean, on the total basis, the 26% tax rate is inline. We did in the second quarter have the Ontario, which would have impacted deferred taxes, but off-hand I don’t have anything that I know about in this quarter, so if we can get back to you on that one, we will. Then in terms of our pensions; in the fourth quarter as we’ve stated, we see that 2009 will be about $100 million. In terms of 2010, there is a lot of moving pieces, in terms of the assessment of whether we will use temporary regulation today, they are supposed to be coming out with permanent regulation. There is a lot of things that will determine whether we’ll do evaluation, not do evaluations, so it’s too early to say. We do know that 2010 will be higher than it is in 2009, but to what extent, we don’t know that at this point.

Okay, thank you.

Your next question comes from Ken Hoexter with the Banc of America, please go ahead. Ken Hoexter - Banc of America/Merrill Lynch: Ray, good afternoon. Can you just talk a bit about on the pole side, that you hand off the volumes at Canloom, so are you expecting that to accelerate and on the US side with the short term coal, I just want to understand. I guess the shorter haul, is that the run rate you would expect to continue, is that all in the quarter. I guess, was there a new contract and can you talk about that at all? Thanks.

It’s Ray, Ken. In the US we expect volumes in the fourth quarter to be similar to what they were in the third quarter. So that run rate should continue.

And Ken, I think on the tech hand off, they work very active in the second quarter, but they pretty well would be in near normal run rate I think for the third quarter. That’s what you should expect going forward, might be I guess a touch everywhere if they were a little slow in July? Ken Hoexter - Banc of America/Merrill Lynch: So to clarify that, the third quarter is a pretty good run rate of everything being in there as far as the tack and the short haul.

We think so. Ken Hoexter - Banc of America/Merrill Lynch: Okay. And then lastly, Kathryn on the cost for employee was up 9% in the quarter. I know you ran over some other cost, but was there anything in there that would keep that run rate going forward on were there some things that are more one time in nature, like on the catch up on the accruals there?

The catch up on the accrual definitely impacts us this time, that’s probably the biggest item. So quarter-over-quarter of course it’s quite significant, because you had the reversal last year and then you had the catch up this year. So on the run rate for the fourth quarter would be more around the $10 million. That would be higher than the fourth quarter of last year since we had no accrual in the fourth quarter. Ken Hoexter - Banc of America/Merrill Lynch: Thanks.

Your next question comes from Matt Troy with Citigroup.

Thank you. I was wondering if you could just refresh up on potash. I know we are somewhat captive to negotiating process there, but in terms of sign posts I guess consensus expectation is to develop that we should get something in the next couple of weeks, but kind of feels like pushing on the strength. What are you watching; and if you could just talk about potentially what some of the pricing implications could be wherever that contract falls out is it completely price agnostic in terms of rail rates or other sensitivities there just trying to get a sense for 2010.

Matt, it’s Fred. The story on potash will be whatever it is. We just have no insight anymore than one else. Obviously, we are in contact with senior folks in the critical companies, but they are in the middle of obviously a global negotiation. So we are on standby ready to go, fully capable to meet their needs and obviously we hope they are successful sooner rather than later, and from the pricing perspective there is no impact.

No impact. Okay, thanks. And Fred you’ve been a little bit more candid or conservative in your comments in terms of your expectations for the pacing in the overall recovery. I’m just wondering, what are you hearing from customers, and Ray if you want to weigh in, in terms of 2010 the capacity needs, where would you expect to see a demand recovery in earnest as opposed to just the simple math of easing comps. What have you kind of excited about 2010 in terms of what areas might be coupled first? Thanks for the time.

Thanks Matt. Well we’d like to be able to skew up a bunch of things, but quite honestly, when we talk to our customers, they don’t have a very clear picture of it yet, and I think Fred’s commented on potash. So when we look forward, we’re certainly hopeful as we said, that the uptick that we seen and the trends that we’ve seen will continue, but it’s pretty tough to tell right now, lots of uncertainty, but we continue to work the markets and pickup business and are hopeful to see that continue.

I think Matt, I’ll just jump in and say this; there is some that are unique to us. Obviously we’ll have the better potash here next year than this year. Obviously we think we will have one based on our recovery eventually, and I think on the metcoal side, the first half of the year will probably be stronger than the first half of 2009. In addition to the general economy, there is a handful of things that really whacked our company in the first half of the year, that probably won’t repeat themselves, at least not the same order of magnitude. Then obviously the toughest part of the market place is that merchandise sector is not as important to us as a company compared to others, but it’s a still big chunk of business. So if the forest products doesn’t materialize because of slow housing starts, or the autos don’t rebound, those are things that are obviously give us a slow steady growth as opposed to any kind of step function improvement.

Thank you.

The next question comes from Jacob Bout with CIBC World Markets.

Good afternoon, a question on pricing. So for that book of business, if you don’t have repriced for 2010, can you talk a little bit about the push-backs that you have seeing there on pricing, and such as the timing issue, where there is a push back on pricing, maybe some of the areas you’re actually seeing that pushback.

Jacob, as we’ve gone through 2009, we’ve had pretty in-depth conversations with all of the customers as we negotiate. As we have said in previous calls and as we continue to discuss with them, it comes down to the value of the product that we offer. So we have discussion around the value of that product and the price that it warrants. So, there is no question that there is difficulties out there in the market place, but I think our first nine months of performance speaks pretty well. To echo what Fred has been saying, as we look forward, we continue to look to exceed inflation.

How much pressure are you seeing in the intermodal side?

Well, our business, if you think about those three quarters, we have a variety of business that comes up in each of the segments, and intermodal is included in that. So we have differences in all segments, but we are continuing to track close to that 4% number that we talked about.

Jacob, its Fred. One of the thing worthy of note though is, you put a container on in Vancouver, it’s going 3000 miles to the east coast. You put on a domestic container in Toronto headed to the west, it’s going 2500 miles. We are not in a lane or a series of lanes, because of the natures of our the majority of our franchisee is east west, that is subject to the whims of a trucker having surplus capacity. You are seeing some of that in other lanes and particularly in the US, but it’s not to say there is no truck competition, it’s just that the nature of it tends to be on the shorter haul lanes and most of what we do on intermodal tends to be pretty long haul stuff.

Okay, fair enough. And just last question, your ability to ramp up volume at current headcount.

Again, as I said earlier Jacob, it’s Brock. Again we would love to ramp up and put most of that volume, again it depends on the mix, but certainly we ramp up most of that volume on existing train start. So I really wouldn’t see a large ramp on headcount

So Jacob, I will compliment that, just by saying that if we all have a great news the potash business pops, they are going to start running 125, 135 potash trains, but you are not going be filling out merchandize trains with that orders of magnitude. So Brock’s opening comments was watch the mix. So if we are creeping back with some housing starts and models, then yes we are going to fill out trainings. If we pick up a few more containers, we will fill out trains, but if you see a big pop happening in one our sectors like potash, then obviously you are going to see some train starts and with that you will see some more people coming back to repair the incremental locomotives etc

Okay, thank you.

You are welcome.

Your next questions comes form Cherilyn Radbourne with Scotia Capital. Please go ahead.

Thanks very much and good afternoon. Just a question on foreign exchange sensitivity. You gave the headwind for Q4. Just curious if we look forward to the potential $4 parity in 2010, is $0.001 in EPS for very penny in the Canadian dollar still the right way to be thinking about that sensitivity or has it increased some what.

No Cherilyn. When we look at it, right now we believe it is, but remember that’s for the year. So you get some noise on a quarter-by-quarter basis depending on what it moves for, but if you look at on a year it does tend to hold based upon the US dollars that we are generating in revenues and expense.

Okay. And then with respect to your 2010 debt maturity, I believe there is one that’s a little bit chunkier. Did I hear correctly that your intention is to repay that versus refinance that?

It is at this point, yes.

Okay. Thanks very much, that’s my two.

Thank you.

Your next question comes from Jason Seidl with Dahlman Rose. Please go ahead.

Thank you. Good afternoon everyone. You guys mentioned that the incentive comp accrual was $20 million in the quarter, but then a portion was cash up for Q1 and Q2. Could you break up the catch up potion of that $20 million please?

Well, just earlier I mentioned that you should look for about $10 million in the fourth quarter, which would be $10 million increase over fourth quarter of last year since we had no accrual last year.

Okay, but in that $20 million, the accrual that you had was about $10 million for Q1 and Q2 then?

We had a $10 million accrual in Q2, and $20 million in Q3. So you can assume that $10 million would have been accrued in Q1.

Okay, and you also talked a little bit about some spot business in the quarter for export potash. Is there any more expected for 4Q?

Very hard to say. I mean we are modeling on Q4 for potash to be very similar to Q3. So, the big issue there is when will China break really.

The short answer Jason is we just don’t know.

Fair enough guys. Thanks for the time as always.

Thank you.

Your next question comes from Umar Allen with National Bank Finical

Hi good afternoon. For the third quarter you mentioned that $0.57 of every dollar lost volume had been taken off cost, and so as volumes come back and lets say going back recovering that dollar, can you give an indication as to what type of cost reductions we would have, then I’m just trying to get a sense of too the permanent type of cost reductions that are there?

Well of course, we did take out price on fuel. So, for the most part what we’re seeing is consistency around, a good portion of our variability with volumes. So I think Brock tried to answer that. We shouldn’t see it coming off in the same level, that when volumes come back, because if we’re not putting on and we’re selling out trains, then we should see good cost management even as volumes start coming back.

Okay, thank you. Then finally, how are your shippers or customers feeling about the prospects for recovery, and has their inventory been worked down, so that once they start shipping you will see the volume right away. Is that something that you are seeing right now?

I’d have to repeat what Fred said when we talked to them, they just don’t know. I mean when they are looking out we’ll know expectation in terms where their volumes are going to go.

And what about their inventory levels, do you have a sense on that?

Well, if I thought about automotive, the inventory levels there are definitely depleted through the cash for clunkers program. So we expect continued good production through the fourth quarter, but don’t have a real good picture of it across the various lines.

Okay, thank you.

Thank you.

Your next question comes from Bill MacKenzie with TD Newcrest.

Thanks. I just wanted to drill into the operating metrics a little bit more Brock, highlighted the improvements that you’ve realized quarter-over-quarter, but I just wanted to ask a little bit more about some of the more recent performance. If I look at the train speed, sort of June-July when things are kind of at their best, your average turn around 26, 27 miles per hour, in last four weeks, but 25 miles an hour to all times have ticked up by sort of an hour or two from the lows. I mean just wondering if you could comment a little bit more on some of the recent performance and is that just a mix issue with pulp taking a bigger percentage of the overall volumes or with volumes overall coming back, is the network slowing down a little or just any other commentary you could provide on that?

Well Bill, you answered the question, so you are right. There is a mix issue and we’re seeing a little strength, as Ray indicated in our bulk business and those trains can be a little slower, and as we complete our capital programs this year, which are right on schedule, they usually ramp up very heavily in the July, August, September timeframe. So that did have some impact on our fluidity in terms of getting the capital work done that we need to get done. Those are the two biggest issues Bill impacting the train speeds.

So, as the CapEx program winds down in Q4, we should see those numbers starting to come back?

Yes, you should.

Great, and then secondly, I guess Brock sticking with you, could you talk a little about more about the structural initiatives and you guys haven’t put out kind of a dollar target, but I was wondering if you could comment a little bit about in terms of where you think you are at in terms of realizing the benefits of the various different structural initiatives that you have underway here, and how much longer it’s going to take to get through the other initiatives that you’ve got on the plate right now.

Bill, it’s Fred. So I kind of put the kibosh on Brock here, who’d love to tell you stories, but where I’m at is, we said we’ll do $100 million in variable costs and we are clearly going to do that. We also said that we were going to attack the structural cost. We didn’t know exactly how big it was, but that we thought it was probably at least as big as the variable cost component, but it would take a couple of years to deliver that. All I would say is, directionally everything is consistent with our expectations in that regard, and as far as an up side or where we are in the program, we believe that we’re off to a good start, but our challenge is to ensure that the things that we do, structural change, has to be sustainable, and I want to have a confidence level and some evidence under my feet before we start making commitments and promises to the shareholders about the sustainability of the longer bigger numbers. So, we are into it, we are working these files hard, the mechanical shop rationalization that you’ve seen somehow, the longer trains, these are all ways and means to improve our long term structural costs, and there will be more about that in the spring when we get together and talk about our longer term aspirations.

Thank you

Thank you.

Your next question comes from Chris Ceraso with Credit Suisse.

Thanks, good afternoon.

Hi.

You made an interesting point before about, you can’t just look at intermodal and assume that it’s truck competitive, because some of it’s going to be very long haul. If you look across your whole network, can you give us a ballpark percentage of how much of all of your business is competitive either with trucks or with another rail roads or another form of transportation?

Well, it’s all competitive in some way, shape or form Chris. I mean at the end of today, whether it’s a regulatory competitiveness or whether it’s modal competitiveness or an alternate rail competitiveness, there is not a piece of businesses out there that doesn’t have some form of competition to deal with. I think what Ray’s point is that, the nature of the intermodal business is that we’ve got to very short-haul business expressway running between Montreal and Toronto. That is pure us versus the truck in the 350 mile haul. Then we’ve got the vast majority of the balance of running the modal business, is moving literally 2,500 and 3,000 miles. We would argue that there is very few trucks other than the specialty nature of a service or a refrigerated product or something unique about it that can compete with us. Then, when we move into the merchandize sector, depending on the location of the mills and the destinations, for instance in pulp or in paper. We’ve had zones where there are a lot of trucks, and we have zones where there are fewer trucks and so we have to price them in a fashion that ensures we are competitive. So, it’s a broad answer, because the nature of the portfolio is that there is competition everywhere.

Considering that though, I mean maybe if I rephrase it, how much of the business is where things are most competitive, either because of short-haul or because of the type of traffic it is?

Chris I don’t know how to answer that question to be candid with you, because there is different forms of competition, and I can assure you that it’s a competitive world out there and it’s our responsibility to deliver a great product on a consistent basis that enables us to secure our fair share of the market.

Fair enough. And then I’m sorry if I missed this, but did you break out what actual price was in Q3 on a year-over-year basis?

What we said was that our renewals came in at 4%. If you walk down the components, we are saying volumes were down 18, fuel was down 10, mix and the Teck kind of offset themselves, FX was three and price was four.

Okay, thank you.

Thank you.

Your next question comes from Edward Wolfe with Wolfe Research. Please go ahead.

Thanks. Good afternoon guys. The renewal around 4% does that include fuel or does that not include fuel?

That’s excludes fuel.

And the goal of keeping above CPI, if CPI excluding fuel was flattish, does that mean that renewals next year could be below 4% as part of the plan?

What I think have been pretty consistent in, literally for the last four or five quarters is, I want you guys to grow with a 4% price strategy. I think that’s a fair and balanced aspiration for us to have. We are assuming inflation has been in that 2.5 to 3.5 range depending on the industry etc, and I think we ought to be commanding given the quality of product we have, a slight premium for that. So that’s why Ray and his team are charged with going up with a 4% price strategy. I mean obviously if inflation drifts down a couple of points, then I’d still like them to get four, but the ability to get four maybe influenced somewhat. So, all we are saying is that I don’t want to ever see a time come when we are not doing something better than inflation, and then I want productivity out of Brock on top of that, which is how we will build out margins.

I get that Fred, but Ray just said that the pricing component of the quarter was up four, give or take now, and you had mentioned earlier in the call that now that you’re very comfortable with the cost side of things and you got cost in check, then you might want to stimulate sales a little bit. So I inferred from those two things that that might mean next year going a little bit under four if need be; am I interpreting that right or still not correct?

Well, I think the full statement that I made at the time Ed, probably if you look back, and I don’t have it in front of me, because I was answering the question, but I referred to the quality of the product, I referred to the penetrating markets that we are not active in today. So, my view is, I don’t think we need to be price stimulating markets at this point in time. I’m not convinced to be candid with you that knocking a nickel off price is going to stimulate the housing market to go. What I want is for Ray and his team to be out there looking for markets that we are not active in. I want them to be stimulating further, going another 500 miles deeper into the space or deeper to the east that we haven’t gone with our customers. So Ray has got the responsibility to pursue the 4% price strategy, and I’m sure he will find the right balance, but when we stimulate a market, we are going to do it through sales effort and market development effort, and value added product offerings and I’m convinced that there is more opportunities for us.

Thank you. I appreciate those responses in the time.

Your next question comes from Benoit Poirier with Desjardins Securities. Please go ahead.

Thank you very much. First question is, when we look at your safety metrics obviously you show a very strong improvement versus last year, but when we look between CP and DM&E there are still used discrepancy. I’m just wondering how long do you think it will take to close the gap and what kind of initiatives are you putting in place in order to address the issue?

Benoit, its Brock. It’s certainly as Kathryn has said in the past, we worked really hard to bring our culture of safety here at Canadian Pacific, to the DM&E. It will take many years. Again, the safety culture doesn’t change overnight, but we know we have learned a lot here at Canadian Pacific, and team on the DM&E is doing a really good job of adopting the practices and procedures that we are now applying across that property. I’m very, very pleased with how that team has accepted that, and moving forward with the improvements that you are seeing. We also as we stated in the past made a commitment over a five year plus period, to investing capital to improve the infrastructure of that property, and on the train incident front, that will have a large positive impact over that period of time. So Benoit, I would expect to see continuous improvement over a number of years, but I have no doubt that the level of performance will match our share at Canadian Pacific over that timeframe.

And Benoit, it’s Fred. I’ll just jump in and reinforce that. The attitude, the receptiveness, the open mindedness of the people who joined us as the former DM&E and now are Canadian Pacific employees is outstanding. So, whether it happens in two years, three years or four years as a function of development and education and experience, and we will go as fast as we possibly can, but it’s not for lack of effort on the people’s part down there or our own, and we will get there probably faster than people think we will.

Okay, very good answer. My second question is related to your cash position. When you look at your debt to cap ratio, obviously almost a record level for the last six years. You have a good cash position, but I understand that you want to pay down the debt next year. I am just wondering right now, are you able to take advantage of that? Does it change a little bit your strategy going forward, any color?

During these times, I think most companies watch us, and we talked at lengths about wanting to build financial flexibility. Our focus is on reducing indebtedness at this point, and we will continue to focus on that, but certainly look at opportunities, whether it’s capital opportunities to improve productivity, information technology capital that might also improve productivity. We will look at how to deploy that cash in the highest invest returns for the shareholders.

Okay. Thank you very much.

Your next question comes from Jeff Kauffman with Sterne Agee, please go ahead.

Thanks so much. Congratulations on the solid quarter in a tough environment. I apologize if you addressed this earlier, because I got disconnected a little bit. You had so much that effected the Rev system. I mean you have the effect change, you have the grain rate adjustment, you had the mix issues on the potash and domestic intermodal, and fuels surcharge on top of it. You mentioned 4% pricing because that’s what you are doing on renewals, but how do I shift through all of this and figure out really where your yields are right now.

As I said, if you look at our renewal percentages, we are coming at the 4% range. I think I took you through all the different components. So volumes were up 18, fuel we were saying was at 10, if you look at FX it was plus 3, our mix and the impacts of the Teck regulated grain sort of traded each other off at 1.5 and the prices four. So those were the components.

Okay, and then second question. Fred I think you mentioned that you’re not planning or promising anybody growth next year if it becomes great, you had some new business opportunities, but of the cyclical businesses you do participate in, is there anything you are seeing that gives you more encouragement and discouragement or is it really kind of neutral signals either way?

Jeff, I think I mentioned potash, just because it’s so far down, it’s inevitable absent the – I get another year of problems that we are going to see a rebound in that space, and of course that’s under contract for a couple of more years. The first half of the year on met coal was a very, very soft period of time, and the run rate lately on coal has been more favorable. So even if it’s stays where it’s at, it will be a bit of a boost for us. My bigger issues are not with those ones, because they are quite identifiable. The bigger issues is just how long is it going to take for all the houses to get washed over in the states, so that all of our foreclosures have occurred, and the lumber market actually makes it legitimate and sustained come back, and we don’t see any evidence of that. We hope it happens. We think it obviously will eventually assist it. I don’t have any signs right now that people are going to be buying cars and building houses in a big way, certainly in the first half of the year.

Right, and we are heading in the winter now. Well congratulations and thank you.

Thank you, Jeff.

Mr. Green there are no further questions at this time, please continue.

Okay very good. Well, thank you everybody. I appreciate everybody’s time and look forward to talking to you at the end of the fourth. Bye now.

Ladies and Gentlemen this concludes the conference call for today. Thank you participating. You may now disconnect your lines.