Revenue and expense results were unfavourably impacted by extensive flooding.

“Throughout the second quarter we experienced difficult operating conditions as a result of widespread and prolonged flooding along our right of way. We had almost 90 separate outages during the quarter and our engineering team worked as swiftly as possible to bring the track back,” stated Fred Green, CP President and Chief Executive Officer. “We rerouted and detoured traffic over other railways and incurred significantly higher operating costs to ensure delivery of our customers’ shipments. Repairs are now complete and service levels are returning to normal.”

Second quarter results compared to a year earlier:

• Total revenues were $1.3 billion, an increase of $30.3 million
• Operating expenses were $1.0 billion, an increase of $73.9 million
• Average fuel price increased 37 per cent to $3.50 U.S. dollars per U.S. gallon
• Operating income was $230.5 million, a decrease of $43.6 million
• Net income was $128.0 million, a decrease of $38.6 million
• Diluted earnings per share were $0.75 per share, a decline of $0.23 per share

The increased dividend is payable on July 25, 2011 to holders of record at the close of business onJune 24, 2011, and is an eligible dividend pursuant to subsection 89(14) of the Income Tax Act.

“With the growing demand in our bulk and energy franchises, we feel positive about the long-term fundamentals of our business,” statedKathryn McQuade, Executive Vice-President and Chief Financial Officer. “The Company believes that increasing the dividends as earnings grow provides a balanced approach to total shareholder return.”

As previously announced, operations were impacted by unusually severe winter weather decreasing shipping volumes and increasing costs.

“We are intensely focused on improving network velocity and service reliability,” said Fred Green, President and Chief Executive Officer. “Demand is strong and we have additional resources coming online to meet our customers’ growth.”

– Total revenues were $1.2 billion, essentially flat

– Operating expenses were $1.1 billion, an increase of $94.0 million

– Average fuel price was $3.12 U.S. dollars per U.S. gallon, an increase of 28 percent

– Operating income was $109.2 million, a decrease of $97.4 million

– Net income was $33.7 million, a decrease of $67.3 million

– Diluted earnings per share were $0.20 per share, a decline of $0.40 per share

“The first quarter was an extremely difficult winter with weather-related outages significantly constraining our capacity and our service to our customers,” added Fred Green. “We remain committed to delivering our two- to four-year target of a low 70’s operating ratio and providing a quality service offering.”

“North Dakota is a source of growth for CP and the Midwest’s economy with its increased grain production, vast oil deposits in the Bakken Formation and the continued strength of ethanol,” said Jane O’Hagan, Executive Vice-President, Marketing & Sales and Chief Marketing Officer. “CP has been a key part of North Dakota’s economy for the past century. We look forward to providing service to our customers far into the future and know these improvements will help alleviate current concerns, and meet our customers’ future demands for consistent, reliable rail transportation alternatives.”

North Dakota Governor Jack Dalrymple said CP’s announcement is a positive development for the state.

“This is another step forward in our continuing efforts to expand our market access for farmers, for oil production and other industry,” the Governor stated.

Current year infrastructure investment will begin in the spring with a majority of work expected to be completed in Fall 2011. CP’s 2011 North Dakota investment plan includes:

– Hiring over 70 new employees to expand CP’s train crew base in 2011, growing CP’s workforce in North Dakota by 18 percent.

– A new Superintendent of Operations territory focused on traffic between Enderlin and Portal.

– Capacity expansion over the next two years on the Newtown, Portal and Carrington subdivisions including yard track extensions in Max and Flaxton, and installation of a new runaround track in Newtown.

– Increased budget for maintenance work on the Newtown subdivision. The installation of over 17 miles of rail replacement between Drake and Max including upgrades to 41 crossings.

– Strategic installation of snow fence and grading projects to reduce winter snow drifting between Drake and Max.

The severity and length of winter events on our operations combined with the lag in fuel recoveries have reduced diluted earnings per share (EPS) by approximately 40 cents versus last year. CP expects diluted EPS for first quarter 2011 to be within the range of 12 to 22 cents.

“Since the new year, multiple severe weather events have caused significant disruptions to train operations across our network. Slower train speeds have reduced productivity and asset velocity thereby constraining network capacity and limiting our ability to meet market demands,” said Fred Green, President and Chief Executive Officer. “The impact of avalanche disruptions are just one factor that increased fivefold this year in our busiest corridor through the mountains causing very inefficient stop-start operations.”

“We have been increasing resources to meet strong demand and improve service reliability,” Mr. Green added. “With moderating weather CP is seeing fluidity return to the network and our operating metrics are showing improvement. Our two- to four-year target of delivering a low 70s operating ratio remains unchanged.”

Mike Franczak, currently Senior Vice President, Operations, will succeed Harris and be appointed Executive Vice President, Operations. Franczak will assume responsibility for operations activity across Canadian Pacific’s 14,800 mile North American network.

“Ed’s leadership has paved the way for refinements of yard processes which improve service reliability for the benefit of CP’s customers and supply chain partners,” said Green.

Harris, 61, joined CP in 2010 and leveraged more than 30 years of railroading experience to lead CP’s Operations team through various enhancements and to develop a successor.

Franczak, 48, joined CP in 1987 after working as a geologist in the Canadian exploration industry. He has held a variety of increasingly senior railway operating positions and has been a member of CP’s Executive Committee for the past three years. He holds a Bachelor of Science degree in Geology from the University of Western Ontario and a Master of Business Administration degree from Western’s Richard Ivey School of Business.

Harris will act as an advisor to Franczak through 2011.

The agreement outlines key performance indicators relating to the flow of containers through the Vancouver Gateway. Meeting the performance indicators will improve productivity, enhance reliability, and increase efficiency. The agreement period is three years.

“This Service Level Agreement continues to move us along the path of a high performance, efficient and reliable supply chain to ensure thatVancouver is a preferred intermodal gateway.” said Michael E. Moore, President and Chief Executive Officer of Global Container Terminals. “Our partnership with CP and our commitment to collaborate on delivering high-level service to our mutual customers will ensure success.”

“Canadian Pacific’s customer focused partnerships, upgraded infrastructure, innovative technology and industry leading safety practices give us the means to grow our franchise over the long term,” said Fred Green, President and Chief Executive Officer of Canadian Pacific. “As import and export volumes grow through the Pacific Gateway, CP and TSI are mutually committed to service improvements in the world-class Vancouver gateway.”

TSI is the largest container terminal operator in Canada, handling more than 70 percent of the containerized cargo that moves through theVancouver gateway. This is the sixth collaboration agreement announced by Canadian Pacific in the past 12 months.

“This collaboration agreement continues to strengthen our long partnership with the Port of Montreal, setting the stage for a cross-supply chain collaboration that improves performance and service of the Continental Gateway,” said CP Executive Vice-President and Chief Marketing Officer Jane O’Hagan. “Our collaboration will create the most efficient and reliable routing for freight traffic moving between Europeand the American Midwest.”

“This new service agreement reflects the commitment of the port and the Canadian Pacific to improve efficiency and productivity of our management of containers traffic and strengthen the Port of Montreal’s competitiveness,” said Sylvie Vachon, president and chief executive officer of the MPA.

Canadian Pacific’s tracks already provide the most direct routing between the Port of Montreal and distribution centers in the US Midwest and Northeast. In a typical year, CP freight trains carry the equivalent of more than 1 million truckloads of merchandise through the Detroit River Tunnel, moving goods from Canada’s industrial heartland and trans-Atlantic trade from the Port of Montreal to the American market. This is the fifth collaboration agreement announced by Canadian Pacific in the past 12 months.

The renewal collective agreement, which covers Canadian Pacific’s mechanical services employees in Canada, is four years in duration, extending to the end of 2014.

The dividend is payable on April 25, 2011, to holders of record at the close of business on March 25, 2011, and is an eligible dividend pursuant to subsection 89(14) of the Income Tax Act.