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And finally, you will notice on the tables in front of you index cards. Please use these cards to write out any questions you might have throughout the morning. We will be collecting these cards throughout the morning, so if you'd pass them to one of the aisles, that would be really terrific. And with that and my preamble complete, I'd like to welcome the members of the CP management team and the board to come up and join me.[Presentation] Janet Weiss And it's now my pleasure to introduce Mr. John Cleghorn, the Chairman of the Board. John E. Cleghorn Thank you, Janet. On behalf of the Board of Directors of Canadian Pacific, I'd like to extend a welcome to everyone joining us today for the Canadian Pacific 2012 Investor Day. We have an informative program for you. Our senior management team, including Fred Green, Mike Franczak, Jane O'Hagan and Kathryn McQuade will be presenting. I'll then be making a presentation on behalf of the board. You'll also have the opportunity to hear from Allan Kaulbach of Oliver Wyman, retained by the Board of Directors in November 2011. There will be a short 15-minute break proceeding the question-and-answer section of our program. Members of the board and management will all be available to answer questions during the Q&A portion. Don Campbell, our Head of Strategy, will host the Q&A session. With that, I'll turn it now to Fred Green, our President and CEO of Canadian Pacific. Frederic J. Green Well, good morning, everyone, and thanks for joining us. This morning, my team and I are going to share with you the deliverables of our Multi-Year Plan. We're going to give you examples of how and why we are winning in the marketplace, details behind our record-setting operating performance, and how we have successfully dealt with the turbulent financial markets and how we are positioning CP with the financial flexibility to execute our Multi-Year Plan. The Multi-Year Plan, which we originally developed, is the same plan that CP is successfully executing today. This plan was specifically designed to unlock the potential of this franchise. It enables both profitable growth and efficiency, and is endorsed by an engaged and informed Board of Directors. We believe, based on our in-depth knowledge of CP's network, operations and its markets and customers that this is the right approach. It's the right plan, one that drives maximum shareholder value from this unique franchise. The key elements of the Multi-Year Plan are clear. One, grow the top line through price, service and volume. We will do this through a consistent, reliable service and strong customer relationships, which Jane O'Hagan will talk about today.
Two, improve the productivity and contain cost through safe, disciplined execution of the Integrated Operating Plan and the programs that enhance it. These productivity improvements will come from strategic investments, as well as through the cost containment. Mike Franczak will walk you through the programs underway to accomplish this.And third, the third key element of the Multi-Year Plan, expand our length of haul and network capacity by making capital investments which deliver returns in excess of our cost of capital. Kathryn McQuade will present on the financial flexibility that supports investment in the railroad and the execution of the plan. Our Multi-Year Plan is delivering results. In June of 2010, we held our Investor Day, and at that time, we set out a detailed 5-year plan that would take us to a low 70s operating ratio. Earlier this year, we narrowed the targeted OR range to between 70% and 72% by 2014. We were able to do this because 2 years of hard work in executing our plan gave us the increased clarity into base traffic levels, revenue growth and how quickly we can realize the financial benefits of our ongoing productivity improvements. As we've said all along, as we achieve our goals, we will set new targets. Today, we've looked further out to 2016 and see an OR target range of between 68.5% and 70.5%, reflecting the continued successful execution of the Multi-Year Plan. Let me take a few minutes to explain some of the strategies that underpin our plan. Back when we were developing this plan, we knew that CP didn't have the network capacity that it needed to efficiently handle the potential volume growth that was going to be driven by the rapidly growing Asian economies. We knew we had to act quickly and decisively to put that capacity in place, and to give our customers the confidence that CP would continue to be their preferred partner into the future. We needed to be the enabler of their growth, not the governor of their growth engine. In 2006, we completed our major $200 million Western Corridor expansion, and in 2007, we recorded our lowest ever operating ratio, 75.6%. However, during the great recession in 2008 and 2009, we temporarily and appropriately paused the discretionary spend within our multiyear capital plan. At our Investor Day in 2010, we announced the inception of an accelerated capital plan to continue on our path of investing for both productivity and profitable growth. The result CP is posting today proves that investing in the network was the right strategy. As we look to 2006 and beyond, we are investing to grow for substantially more than just Asian growth. We are making new markets in energy, and our acquisition of the DM&E is opening up new opportunities to grow volumes, expand our North American reach and create shareholder value. The DM&E is an excellent example of CP's success in investing to expand network reach. In 2012, we will meet our goal of doubling, doubling the DM&E EBITDA within 5 years of the acquisition. Like the Delaware & Hudson, it is a key strategic asset, and it's driving value for the property. As a result of the DM&E acquisition, we have the most diversified grain franchise in North America, mitigating production volatility by expanding our geographic presence. However, the real key value of these acquisitions is length of haul and strategic gateway access to the U.S. In 2008, the DM&E was moving 385 million gallons of ethanol 400 miles. And today, we are moving 1.2 billion gallons of ethanol, much of it up to 1,300 miles, by leveraging the extended CP network.
Similarly, we talk about oil and major new volumes originating in the Bakken. If we didn't own the DM&E and its Kansas City gateway, we would have to hand it over to another railroad at Minneapolis or Chicago to get that oil to the refineries on the Gulf Coast or the East Coast. We can leverage the Kansas City gateway in other ways, as Canada and CP is an originator of an abundance of natural resources. So if you think about it, CP wants to be able to haul product originating in Canada as deep into the south as we can, and that's where the DM&E Kansas City gateway becomes critical. If we're going to Mexico with grain, we'd much rather take it all the way to Kansas City then hand it off in Minneapolis or Chicago. So the DM&E was accretive to earnings right out of the gate, will have doubled 2008 EBITDA in 2012 and has exceeded our expectations. We're growing volumes, and we're growing length of haul, and that is how you drive shareholder value.A key to success at CP is the disciplined execution of our Integrated Operating Plan or IOP. Every railway has its own version of the IOP and its own name for it. NS has the Thoroughbred Operating Plan. CSX has the One Plan. CN has the precision railway. And they are all the same, a coordinated plan of cross-functional activity. Our IOP clearly sets out who is responsible and accountable or to put it another way, how things should be done and when. The IOP explicitly defines what we expect from everyone when delivering our product in terms of both quality and cost. We don't think it's possible to deliver great results without a detailed plan. Our operating environment and our commercial marketplace are just too complex to simply rely on wishful thinking, best efforts and what might have worked on a very different property. We need to know what our targets -- we need to know that our targets are supported by appropriately detailed plans. That's who we are. That's how we lead. And that's why we insist that the whole team leads exactly this way. Our closest competitor is rightly recognized as a very productive and efficient railway. They are, of course, a natural benchmark and as you'll see today, CP's operating metrics stack up very well.
Two key elements of our forecast are improvement to CP's operating ratio or improved productivity and cost savings. Mike's going to take you through the programs in our Integrated Operating Plan in detail. The point we'd like to make is that these programs are contributing directly to the record metrics that you are seeing today. The figures reported by the AAR each week tell you that we have sustained, and in fact, gained momentum over the course of the first quarter. Year-to-date February versus our 3-year average, workload is up 15%. Train speed is up 15%. We are more fuel efficient. Car dwell is down 29%, and car miles per day is up 45%. Car miles per day is a standard by which fluidity and efficiency is measured in the railroad industry. We are setting new performance benchmarks and expect continued improvements. This is not about a soft winter and easy year-over-year comparisons. The metrics say we are becoming a more productive, more efficient railway. We are setting new records, and they reflect the foundational improvements that we have been making. Our network is stronger and more productive. Our people are rising to the challenge and the momentum has been building since 2010.Read the rest of this transcript for free on seekingalpha.com