Key questions and answers from the second quarter fiscal 2008 earnings call conducted by Canadian Pacific Railway Limited (CP: chart) on July 22, 2008.

Cherylin Radbourne (Scotia Capital): We have heard about how the Midwest flooding impacted CP zone operations. Could you just speak to how the DM&E and the IC&E were impacted by the flooding and whether they fully recovered their operations as yet?

Kathryn McQuade: DM&E did have some line outages particularly on the ice property. However they are back in service as of several weeks ago and they are still on plan for the financial targets that they set us at the beginning of the year.

Cherylin Radbourne (Scotia Capital): A question with respect to the confidence that you expressed in terms of the bulk volumes in the second half of the year. Can you speak to what gives you confidence and visibility to those bulk volumes in the fourth quarter?

Marcella Szel: We expect the crop to come off a couple of weeks later than last year but we will be seeing those volumes through the second half particularly in the fourth quarter. On the Potash site, there was a significant mine shut down this quarter, which was unplanned so we will see more seasonalized movement of the Potash volumes and we will continue to see the steady increase in the coal side through the second quarter as we planned.

Thomas Wadewitz (JP Morgan): You referred to Legacy contracts in 2009. Can you elaborate on that? I think you have implied that maybe you get a chance to take off right some of the Legacy contracts earlier than expected or that there might be some benefit in 2009?

Marcella Szel: We are accelerating our efforts around the fuel side, and we are addressing some of those Legacy contracts that have less effect to fuel recovery when we would like to see and so those that are not otherwise turning over, let us say in the next three quarters, we are in dialogue with customers and indeed we have seen some success with them.

Thomas Wadewitz (JP Morgan): Can you give us a few more thoughts on the magnitude of that?

Marcella Szel: Legacy contracts were about 10% of the book, in total.

Thomas Wadewitz (JP Morgan): You are talking about bulk volumes being better and I think, we would say, all of the North American Railroads should be the least economically sensitive, and yet the outlook for second half seems pretty muted. So, is the expense performances worse than you expect?

Fred Green: We had to make an evaluation based on what we see happening and when we look at the lumber and panel sector, where volumes are down 39% as of this morning and when we look at the auto sector it is clearly uncertain as to what plants will remain open and if so what the distribution patterns will be.

There is clearly a correlation between the demand in the United States and the activity in Canada to supply that demand. But our belief is that there is no reason to believe at this point in time that we are going to see a resurgence of the economy in the second half and as a consequence, I don’t think I would call it conservative, I would simply say that we think it is realistic and if there is great news. If the economy grows by 2% in the US instead of maybe 1%, then that is going to be great news for us because we have got the capability and the capacity and the resources that will enable us to leverage that and there would be more cars on the train. We need to plan for the possibility to sustain or slightly deteriorate in that case we need to be focused on efficiency.

Mike Lambert: Let me add color around the magnitude of our reduction and guidance. We reduced our guidance by about $0.40 EPS, $0.30 of that is the fuel headwind and the remaining $0.10 is our outlook on the economy that Fred talked about somewhat offset by a reduced tax rate. But three quarters of our reduction is actually the fuel headwind.

Randy Cousins (BMO Capital Markets): With reference to the DM&E, this is supposed to be accretive after financing cost. But if I look at the results, year-to-date, you have got $24 million worth of contribution on net basis and if I just annualize that, that is like $48 for the full year on a $1.5 billion investment that does not look particularly accretive. Are you looking for just an absolutely bang-up second half or how are you supposed to think about sort of the contribution from the DM&E in the second half?

Mike Lambert: We are still projecting it for it to be accretive, that is number one. Number two, the results are seasonal. They are right in the middle of the breadbasket of the US and so they will have higher earnings from the second half than in the first half. The third item around that is we have structured it in a very tax efficient way and so when you take this total net impact after tax, our projections is either it will be accretive of $0.15 to $0.17 this year and growing from that.

Randy Cousins (BMO Capital Markets): Could you give us some sense as to what you estimate the accretion to have been through the first six months then?

Mike Lambert: The first six months, I think we sized up on each on the quarterly calls. The last quarter, if memory serves, about $0.03 and this quarter about $0.04. So, we are looking for a good bang on the second half.

Jacob Bout (CIBC World Market): As far as the switch and freight volumes from truck to rail, what has been the impact that you have seen to date on your book of business?

Marcella Szel: We have been seeing some modest change moving from truck to rail in the shorter haul markets. A lot of that is massed by the general economic environment because while that short-haul environment is also affected by the economy, the move is between the cross boards or the move’s particularly Canada and United States but we have been seeing some migration to rail.

Walter Spracklin (RBC Capital Markets): What kind of CapEx would it be for you to get set up for that Brownfield expansion?