CN (TSX: CNR) (NYSE: CNI) today reported its financial and
operating results for the second quarter ended June 30, 2020.
"By being adaptable, we were able to swiftly
rightsize our resources and continue to provide our essential
transportation services to our customers, the economy, and the
communities we serve. I could not be prouder of our railroaders as
they never stopped working to keep our customers’ goods and the
North American economy moving safely and efficiently throughout
this pandemic. The decisive actions we took early on in March, well
before the pandemic impacted the North American economy, allowed us
to deliver over C$1B of free cash flow during this recessionary
quarter. I'm pleased to reaffirm our commitment in encouraging the
economic recovery through our C$2.9B capital investment plan for
2020 as well as our new investment announcement of the purchase of
approximately 1,500 new, efficient, high-capacity, covered hopper
cars to expand our grain export business for delivery starting in
January of 2021. Our strategic long-term approach to investments,
together with our continued focus on cost and deployment of
innovative technology, as well as our commitment to enabling trade,
position us to keep delivering long-term value to our
stakeholders."- JJ Ruest, President and Chief Executive Officer of
CN
Financial results
highlightsSecond-quarter 2020 compared to
second-quarter 2019
- Second quarter results were adversely impacted by the
pandemic.
- CN recorded a charge of C$486 million, or C$363 million
after-tax (C$0.51 per diluted share), resulting from the decision
to market for sale for on-going rail operations, certain non-core
lines.
- Revenues of C$3,209 million, a decrease of C$750 million or 19
per cent.
- Diluted earnings per share (EPS) of C$0.77, a decrease of 59
per cent, and adjusted diluted EPS of C$1.28, a decrease of 26 per
cent. (1)
- Operating ratio of 75.5 per cent, an increase of 18.0 points,
and adjusted operating ratio of 60.4 per cent, an increase of
2.9 points. (1)
- Operating income of C$785 million, a decrease of 53 per cent,
and adjusted operating income of C$1,271 million, a decrease
of 24 per cent. (1)
- Free cash flow of C$1,008 million, an increase of C$495
million. (1)
- Moody's reaffirmed CN's investment grade credit rating of A2
with stable outlook.
Second-quarter 2020 revenues, traffic
volumes and expensesRevenues for the second quarter of
2020 were C$3,209 million, a decrease of C$750 million or 19 per
cent, when compared to the same period in 2019. The decrease in
revenues was mainly due to lower volumes across most commodity
groups caused by the COVID-19 pandemic and lower applicable fuel
surcharge rates, which were partly offset by increased shipments of
Canadian grain, higher Canadian coal exports via west coast ports
as well as freight rate increases. RTMs, measuring the relative
weight and distance of freight transported by CN, declined by 18
per cent from the year-earlier period. Freight revenue per RTM
decreased by one per cent over the year-earlier period.
Operating expenses for the second quarter
increased by six per cent to C$2,424 million, mainly driven by a
loss on assets held for sale resulting from the Company's decision
to market for sale for on-going rail operations, certain non-core
lines, partly offset by lower fuel and labor costs. Excluding this
one-time charge, operating expenses were down 15% versus last
year.
(1) Non-GAAP MeasuresCN reports
its financial results in accordance with United States generally
accepted accounting principles (GAAP). CN also uses non-GAAP
measures in this news release that do not have any standardized
meaning prescribed by GAAP, such as adjusted performance measures.
These non-GAAP measures may not be comparable to similar measures
presented by other companies. For further details of these non-GAAP
measures, including a reconciliation to the most directly
comparable GAAP financial measures, refer to the attached
supplementary schedule, Non-GAAP Measures.
(2) Forward-Looking
StatementsCertain statements included in this news release
constitute "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
under Canadian securities laws. By their nature, forward-looking
statements involve risks, uncertainties and assumptions. The
Company cautions that its assumptions may not materialize and that
current economic conditions render such assumptions, although
reasonable at the time they were made, subject to greater
uncertainty. Forward-looking statements by their nature address
matters that are, to different degrees, uncertain, such as
statements about the impacts of the COVID-19 pandemic on our
business operations, financial results and financial position and
on the global supply chain. Forward-looking statements may be
identified by the use of terminology such as "believes," "expects,"
"anticipates," "assumes," "outlook," "plans," "targets," or other
similar words.
Forward-looking statements are not guarantees of
future performance and involve risks, uncertainties and other
factors which may cause the actual results or performance of the
Company to be materially different from the outlook or any future
results or performance implied by such statements. Accordingly,
readers are advised not to place undue reliance on forward-looking
statements. Important risk factors that could affect the
forward-looking statements include, but are not limited to, the
duration and effects of the COVID-19 pandemic, general economic and
business conditions, particularly in the context of the COVID-19
pandemic; industry competition; inflation, currency and interest
rate fluctuations; changes in fuel prices; legislative and/or
regulatory developments; compliance with environmental laws and
regulations; actions by regulators; increases in maintenance and
operating costs; security threats; reliance on technology and
related cybersecurity risk; trade restrictions or other changes to
international trade arrangements; transportation of hazardous
materials; various events which could disrupt operations, including
illegal blockades of rail networks, and natural events such as
severe weather, droughts, fires, floods and earthquakes; climate
change; labor negotiations and disruptions; environmental claims;
uncertainties of investigations, proceedings or other types of
claims and litigation; risks and liabilities arising from
derailments; timing and completion of capital programs; and other
risks detailed from time to time in reports filed by CN with
securities regulators in Canada and the United States. Reference
should be made to Management’s Discussion and Analysis (MD&A)
in CN’s annual and interim reports, Annual Information Form and
Form 40-F, filed with Canadian and U.S. securities regulators and
available on CN’s website, for a description of major risk
factors.
Forward-looking statements reflect information
as of the date on which they are made. CN assumes no obligation to
update or revise forward-looking statements to reflect future
events, changes in circumstances, or changes in beliefs, unless
required by applicable securities laws. In the event CN does update
any forward-looking statement, no inference should be made that CN
will make additional updates with respect to that statement,
related matters, or any other forward-looking statement.
This earnings news release, as well as
additional information, including the Financial Statements, Notes
thereto and MD&A, is contained in CN’s Quarterly Review
available on the Company's website at www.cn.ca/financial-results
and on SEDAR at www.sedar.com as well as on the U.S. Securities and
Exchange Commission's website at www.sec.gov through EDGAR.
CN is a true backbone of the economy
transporting more than C$250 billion worth of goods annually for a
wide range of business sectors, ranging from resource products to
manufactured products to consumer goods, across a rail network of
approximately 20,000 route-miles spanning Canada and mid-America.
CN – Canadian National Railway Company, along with its operating
railway subsidiaries – serves the cities and ports of
Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and
Mobile, Ala., and the metropolitan areas of Toronto, Edmonton,
Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth,
Minn./Superior, Wis., and Jackson, Miss., with connections to all
points in North America. For more information about CN, visit the
Company's website at www.cn.ca.
Contacts: |
Media |
Investment
Community |
Jonathan Abecassis |
Paul Butcher |
Senior Manager |
Vice-President |
Media Relations |
Investor Relations |
(514) 399-7956 |
(514) 399-0052 |
Media@cn.ca |
|
Selected Railroad Statistics – unaudited
|
Three months ended June 30 |
Six months ended June 30 |
|
2020 |
2019 |
2020 |
2019 |
Financial measures |
|
|
|
|
Key financial
performance indicators (1) |
|
|
|
|
Total revenues ($
millions) |
3,209 |
3,959 |
6,754 |
7,503 |
Freight revenues ($
millions) |
3,038 |
3,759 |
6,462 |
7,172 |
Operating income ($
millions) |
785 |
1,682 |
2,000 |
2,762 |
Adjusted operating income ($
millions) (2) |
1,271 |
1,682 |
2,486 |
2,846 |
Net income ($ millions) |
545 |
1,362 |
1,556 |
2,148 |
Adjusted net income ($
millions) (2) |
908 |
1,250 |
1,778 |
2,098 |
Diluted earnings per share
($) |
0.77 |
1.88 |
2.18 |
2.96 |
Adjusted diluted earnings per
share ($) (2) |
1.28 |
1.73 |
2.49 |
2.90 |
Free cash flow ($ millions)
(2) |
1,008 |
513 |
1,581 |
799 |
Gross property additions ($
millions) |
714 |
1,182 |
1,317 |
2,100 |
Share repurchases ($
millions) |
— |
445 |
379 |
877 |
Dividends per share ($) |
0.5750 |
0.5375 |
1.1500 |
1.0750 |
Financial
position (1) |
|
|
|
|
Total assets ($ millions) |
45,199 |
43,002 |
45,199 |
43,002 |
Total liabilities ($
millions) |
26,424 |
25,020 |
26,424 |
25,020 |
Shareholders' equity ($ millions) |
18,775 |
17,982 |
18,775 |
17,982 |
Financial
ratio |
|
|
|
|
Operating ratio (%) |
75.5 |
57.5 |
70.4 |
63.2 |
Adjusted operating ratio (%) (2) |
60.4 |
57.5 |
63.2 |
62.1 |
Operational
measures (3) |
|
|
|
|
|
|
|
|
|
Statistical operating
data |
|
|
|
|
Gross ton miles (GTMs)
(millions) |
102,386 |
127,606 |
216,365 |
243,465 |
Revenue ton miles (RTMs)
(millions) |
52,517 |
64,329 |
110,887 |
123,396 |
Carloads (thousands) |
1,294 |
1,538 |
2,629 |
2,956 |
Route miles (includes Canada
and the U.S.) |
19,500 |
19,500 |
19,500 |
19,500 |
Employees (end of period) |
22,112 |
27,215 |
22,112 |
27,215 |
Employees (average for the period) |
22,431 |
27,116 |
23,848 |
26,570 |
Key operating
measures |
|
|
|
|
Freight revenue per RTM
(cents) |
5.78 |
5.84 |
5.83 |
5.81 |
Freight revenue per carload
($) |
2,348 |
2,444 |
2,458 |
2,426 |
GTMs per average number of
employees (thousands) |
4,564 |
4,706 |
9,073 |
9,163 |
Operating expenses per GTM
(cents) |
2.37 |
1.78 |
2.20 |
1.95 |
Labor and fringe benefits
expense per GTM (cents) |
0.55 |
0.53 |
0.60 |
0.61 |
Diesel fuel consumed (US
gallons in millions) |
90.2 |
114.9 |
199.1 |
232.4 |
Average fuel price ($ per US
gallon) |
2.08 |
3.31 |
2.53 |
3.17 |
Fuel efficiency (US gallons of
locomotive fuel consumed per 1,000 GTMs) |
0.88 |
0.90 |
0.92 |
0.95 |
Train weight (tons) |
9,922 |
9,311 |
9,491 |
9,002 |
Car velocity (car miles per
day) |
201 |
214 |
190 |
192 |
Through dwell (entire
railroad, hours) |
8.4 |
7.2 |
8.4 |
7.9 |
Through network train speed
(miles per hour) |
19.9 |
19.0 |
18.9 |
18.0 |
Locomotive utilization (trailing GTMs per total horsepower) |
204 |
212 |
192 |
199 |
Safety
indicators (4) |
|
|
|
|
Injury frequency rate (per
200,000 person hours) |
1.45 |
1.77 |
1.85 |
2.01 |
Accident rate (per million train miles) |
1.76 |
1.56 |
1.82 |
2.32 |
(1) |
Amounts expressed in Canadian dollars and prepared in accordance
with United States generally accepted accounting principles (GAAP),
unless otherwise noted. |
(2) |
See supplementary schedule entitled Non-GAAP Measures for an
explanation of these non-GAAP measures. |
(3) |
Statistical operating data, key operating measures and safety
indicators are unaudited and based on estimated data available at
such time and are subject to change as more complete information
becomes available. Definitions of gross ton miles, fuel efficiency,
train weight, car velocity. through dwell and through network train
speed are included within the Company’s Management’s Discussion and
Analysis. Definitions of all other indicators are provided on CN's
website, www.cn.ca/glossary. |
(4) |
Based on Federal Railroad Administration (FRA) reporting
criteria. |
|
|
Supplementary Information – unaudited
|
Three months ended June 30 |
Six months ended June 30 |
|
2020 |
2019 |
% ChangeFav (Unfav) |
% Change at constantcurrencyFav (Unfav) (1) |
2020 |
2019 |
% Change Fav (Unfav) |
% Change at constant currency Fav (Unfav) (1) |
Revenues ($
millions) (2) |
|
|
|
|
|
|
|
|
Petroleum and chemicals |
585 |
775 |
(25 |
%) |
(26 |
%) |
1,376 |
1,510 |
(9 |
%) |
(10 |
%) |
Metals and minerals |
308 |
440 |
(30 |
%) |
(32 |
%) |
713 |
861 |
(17 |
%) |
(18 |
%) |
Forest products |
413 |
487 |
(15 |
%) |
(17 |
%) |
846 |
943 |
(10 |
%) |
(12 |
%) |
Coal |
140 |
177 |
(21 |
%) |
(22 |
%) |
283 |
340 |
(17 |
%) |
(17 |
%) |
Grain and fertilizers |
649 |
641 |
1 |
% |
— |
% |
1,259 |
1,218 |
3 |
% |
2 |
% |
Intermodal |
874 |
992 |
(12 |
%) |
(13 |
%) |
1,723 |
1,842 |
(6 |
%) |
(7 |
%) |
Automotive |
69 |
247 |
(72 |
%) |
(72 |
%) |
262 |
458 |
(43 |
%) |
(43 |
%) |
Total freight revenues |
3,038 |
3,759 |
(19 |
%) |
(21 |
%) |
6,462 |
7,172 |
(10 |
%) |
(11 |
%) |
Other
revenues |
171 |
200 |
(15 |
%) |
(17 |
%) |
292 |
331 |
(12 |
%) |
(13 |
%) |
Total
revenues |
3,209 |
3,959 |
(19 |
%) |
(20 |
%) |
6,754 |
7,503 |
(10 |
%) |
(11 |
%) |
Revenue ton miles
(RTMs) (millions) (3) |
|
|
|
|
|
|
|
|
Petroleum and chemicals |
8,832 |
14,357 |
(38 |
%) |
(38 |
%) |
22,520 |
27,106 |
(17 |
%) |
(17 |
%) |
Metals and minerals |
3,881 |
6,832 |
(43 |
%) |
(43 |
%) |
10,357 |
13,402 |
(23 |
%) |
(23 |
%) |
Forest products |
6,029 |
7,271 |
(17 |
%) |
(17 |
%) |
12,351 |
14,089 |
(12 |
%) |
(12 |
%) |
Coal |
4,242 |
4,699 |
(10 |
%) |
(10 |
%) |
8,320 |
8,993 |
(7 |
%) |
(7 |
%) |
Grain and fertilizers |
15,062 |
15,045 |
— |
% |
— |
% |
29,261 |
28,912 |
1 |
% |
1 |
% |
Intermodal |
14,157 |
15,034 |
(6 |
%) |
(6 |
%) |
26,919 |
28,882 |
(7 |
%) |
(7 |
%) |
Automotive |
314 |
1,091 |
(71 |
%) |
(71 |
%) |
1,159 |
2,012 |
(42 |
%) |
(42 |
%) |
Total
RTMs |
52,517 |
64,329 |
(18 |
%) |
(18 |
%) |
110,887 |
123,396 |
(10 |
%) |
(10 |
%) |
Freight revenue / RTM
(cents) (2) (3) |
|
|
|
|
|
|
|
|
Petroleum and chemicals |
6.62 |
5.40 |
23 |
% |
20 |
% |
6.11 |
5.57 |
10 |
% |
8 |
% |
Metals and minerals |
7.94 |
6.44 |
23 |
% |
20 |
% |
6.88 |
6.42 |
7 |
% |
6 |
% |
Forest products |
6.85 |
6.70 |
2 |
% |
— |
% |
6.85 |
6.69 |
2 |
% |
1 |
% |
Coal |
3.30 |
3.77 |
(12 |
%) |
(14 |
%) |
3.40 |
3.78 |
(10 |
%) |
(11 |
%) |
Grain and fertilizers |
4.31 |
4.26 |
1 |
% |
— |
% |
4.30 |
4.21 |
2 |
% |
1 |
% |
Intermodal |
6.17 |
6.60 |
(7 |
%) |
(8 |
%) |
6.40 |
6.38 |
— |
% |
— |
% |
Automotive |
21.97 |
22.64 |
(3 |
%) |
(4 |
%) |
22.61 |
22.76 |
(1 |
%) |
(1 |
%) |
Total
freight revenue / RTM |
5.78 |
5.84 |
(1 |
%) |
(3 |
%) |
5.83 |
5.81 |
— |
% |
(1 |
%) |
Carloads
(thousands) (3) |
|
|
|
|
|
|
|
|
Petroleum and chemicals |
131 |
174 |
(25 |
%) |
(25 |
%) |
304 |
342 |
(11 |
%) |
(11 |
%) |
Metals and minerals |
217 |
269 |
(19 |
%) |
(19 |
%) |
458 |
504 |
(9 |
%) |
(9 |
%) |
Forest products |
83 |
100 |
(17 |
%) |
(17 |
%) |
171 |
196 |
(13 |
%) |
(13 |
%) |
Coal |
71 |
90 |
(21 |
%) |
(21 |
%) |
148 |
170 |
(13 |
%) |
(13 |
%) |
Grain and fertilizers |
162 |
167 |
(3 |
%) |
(3 |
%) |
312 |
316 |
(1 |
%) |
(1 |
%) |
Intermodal |
609 |
663 |
(8 |
%) |
(8 |
%) |
1,157 |
1,287 |
(10 |
%) |
(10 |
%) |
Automotive |
21 |
75 |
(72 |
%) |
(72 |
%) |
79 |
141 |
(44 |
%) |
(44 |
%) |
Total
carloads |
1,294 |
1,538 |
(16 |
%) |
(16 |
%) |
2,629 |
2,956 |
(11 |
%) |
(11 |
%) |
Freight revenue /
carload ($) (2) (3) |
|
|
|
|
|
|
|
|
Petroleum and chemicals |
4,466 |
4,454 |
— |
% |
(2 |
%) |
4,526 |
4,415 |
3 |
% |
1 |
% |
Metals and minerals |
1,419 |
1,636 |
(13 |
%) |
(16 |
%) |
1,557 |
1,708 |
(9 |
%) |
(10 |
%) |
Forest products |
4,976 |
4,870 |
2 |
% |
— |
% |
4,947 |
4,811 |
3 |
% |
1 |
% |
Coal |
1,972 |
1,967 |
— |
% |
(1 |
%) |
1,912 |
2,000 |
(4 |
%) |
(5 |
%) |
Grain and fertilizers |
4,006 |
3,838 |
4 |
% |
3 |
% |
4,035 |
3,854 |
5 |
% |
4 |
% |
Intermodal |
1,435 |
1,496 |
(4 |
%) |
(5 |
%) |
1,489 |
1,431 |
4 |
% |
3 |
% |
Automotive |
3,286 |
3,293 |
— |
% |
(2 |
%) |
3,316 |
3,248 |
2 |
% |
1 |
% |
Total
freight revenue / carload |
2,348 |
2,444 |
(4 |
%) |
(6 |
%) |
2,458 |
2,426 |
1 |
% |
— |
% |
(1) |
See supplementary schedule entitled Non-GAAP Measures for an
explanation of this non-GAAP measure. |
(2) |
Amounts expressed in Canadian dollars. |
(3) |
Statistical operating data and related key operating measures are
unaudited and based on estimated data available at such time and
are subject to change as more complete information becomes
available. |
|
|
Non-GAAP Measures – unaudited
In this supplementary schedule, the "Company" or "CN" refers to
Canadian National Railway Company, together with its wholly-owned
subsidiaries. Financial information included in this schedule is
expressed in Canadian dollars, unless otherwise noted.
CN reports its financial results in accordance with United
States generally accepted accounting principles (GAAP). The Company
also uses non-GAAP measures that do not have any standardized
meaning prescribed by GAAP, including adjusted performance
measures, constant currency, free cash flow and adjusted
debt-to-adjusted earnings before interest, income taxes,
depreciation and amortization (EBITDA) multiple. These non-GAAP
measures may not be comparable to similar measures presented by
other companies. From management's perspective, these non-GAAP
measures are useful measures of performance and provide investors
with supplementary information to assess the Company's results of
operations and liquidity. These non-GAAP measures should not be
considered in isolation or as a substitute for financial measures
prepared in accordance with GAAP.
Adjusted performance measures
Management believes that adjusted net income, adjusted earnings
per share, adjusted operating income and adjusted operating ratio
are useful measures of performance that can facilitate
period-to-period comparisons, as they exclude items that do not
necessarily arise as part of CN's normal day-to-day operations and
could distort the analysis of trends in business performance.
Management uses adjusted performance measures, which exclude
certain income and expense items in its results that management
believes are not reflective of CN's underlying business operations,
to set performance goals and as a means to measure CN's
performance. The exclusion of such income and expense items in
these measures does not, however, imply that these items are
necessarily non-recurring. These measures do not have any
standardized meaning prescribed by GAAP and therefore, may not be
comparable to similar measures presented by other companies.
For the three and six months ended June 30, 2020, the Company's
adjusted net income was $908 million, or $1.28 per diluted share,
and $1,778 million, or $2.49 per diluted share, respectively. The
adjusted figures for the three and six months ended June 30, 2020
exclude a loss of $486 million, or $363 million after-tax ($0.51
per diluted share) resulting from the Company's decision to market
for sale for on-going rail operations, certain non-core lines in
Wisconsin, Michigan and Ontario. The adjusted figures for the six
months ended June 30, 2020 also exclude a current income tax
recovery of $141 million ($0.20 per diluted share) in the first
quarter resulting from the enactment of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, a U.S. tax-and-spending
package aimed at providing additional stimulus to address the
economic impact of the COVID-19 pandemic.
For the three and six months ended June 30, 2019, the Company's
adjusted net income was $1,250 million, or $1.73 per diluted share,
and $2,098 million, or $2.90 per diluted share, respectively. The
adjusted figures for the three and six months ended June 30, 2019
exclude a deferred income tax recovery of $112 million ($0.15 per
diluted share), resulting from the enactment of a lower provincial
corporate income tax rate. The adjusted figures for the six months
ended June 30, 2019 also exclude a depreciation and amortization
expense of $84 million, or $62 million after-tax ($0.09 per
diluted share) in the first quarter, related to costs previously
capitalized for a Positive Train Control (PTC) back office system
following the deployment of a replacement system.
The following table provides a reconciliation of net income and
earnings per share, as reported for the three and six months ended
June 30, 2020 and 2019, to the adjusted performance measures
presented herein:
|
|
|
|
|
Three months ended June 30 |
|
Six months ended June 30 |
In
millions, except per share data |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income |
$ |
545 |
|
|
$ |
1,362 |
|
|
$ |
1,556 |
|
|
$ |
2,148 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation expense |
— |
|
|
— |
|
|
— |
|
|
84 |
|
Loss on assets held for sale |
486 |
|
|
— |
|
|
486 |
|
|
— |
|
Income tax recovery (1) |
(123 |
) |
|
(112 |
) |
|
(264 |
) |
|
(134 |
) |
Adjusted net income |
$ |
908 |
|
|
$ |
1,250 |
|
|
$ |
1,778 |
|
|
$ |
2,098 |
|
Basic earnings per share |
$ |
0.77 |
|
|
$ |
1.89 |
|
|
$ |
2.19 |
|
|
$ |
2.97 |
|
Impact
of adjustments, per share |
0.51 |
|
|
(0.16 |
) |
|
0.31 |
|
|
(0.07 |
) |
Adjusted basic earnings per share |
$ |
1.28 |
|
|
$ |
1.73 |
|
|
$ |
2.50 |
|
|
$ |
2.90 |
|
Diluted earnings per
share |
$ |
0.77 |
|
|
$ |
1.88 |
|
|
$ |
2.18 |
|
|
$ |
2.96 |
|
Impact
of adjustments, per share |
0.51 |
|
|
(0.15 |
) |
|
0.31 |
|
|
(0.06 |
) |
Adjusted diluted earnings per share |
$ |
1.28 |
|
|
$ |
1.73 |
|
|
$ |
2.49 |
|
|
$ |
2.90 |
|
(1) |
Includes the tax impact of: (i) adjustments based on the nature of
the item for tax purposes and related tax rates in the applicable
jurisdiction; or (ii) tax law changes and rate enactments. |
|
|
The following table provides a reconciliation of operating
income and operating ratio, as reported for the three and six
months ended June 30, 2020 and 2019, to the adjusted performance
measures presented herein:
|
|
|
|
|
Three months ended June 30 |
|
Six months ended June 30 |
In millions, except percentage |
2020 |
|
|
2019 |
|
|
2020 |
|
2019 |
|
Operating income |
$ |
785 |
|
|
$ |
1,682 |
|
|
$ |
2,000 |
|
$ |
2,762 |
|
Adjustments: |
|
|
|
|
|
|
Depreciation expense |
— |
|
|
— |
|
|
— |
|
84 |
|
Loss on assets held for sale |
486 |
|
|
— |
|
|
486 |
|
— |
|
Adjusted operating income |
$ |
1,271 |
|
|
$ |
1,682 |
|
|
$ |
2,486 |
|
$ |
2,846 |
|
Operating ratio (1) |
75.5 |
% |
|
57.5 |
% |
|
70.4 |
% |
63.2 |
% |
Impact
of adjustment |
(15.1)-pts |
|
— |
|
|
(7.2)-pts |
(1.1)-pts |
Adjusted operating ratio |
60.4 |
% |
|
57.5 |
% |
|
63.2 |
% |
62.1 |
% |
(1) |
Operating ratio is defined as operating expenses as a percentage of
revenues. |
|
|
Constant currency
Financial results at constant currency allow results to be
viewed without the impact of fluctuations in foreign currency
exchange rates, thereby facilitating period-to-period comparisons
in the analysis of trends in business performance. Measures at
constant currency are considered non-GAAP measures and do not have
any standardized meaning prescribed by GAAP and therefore, may not
be comparable to similar measures presented by other companies.
Financial results at constant currency are obtained by translating
the current period results denominated in US dollars at the foreign
exchange rates of the comparable period in the prior year. The
average foreign exchange rates were $1.39 and $1.37 per US$1.00 for
the three and six months ended June 30, 2020, respectively, and
$1.34 and $1.33 per US$1.00 for the three and six months ended June
30, 2019, respectively.
On a constant currency basis, the Company's net income for the
three and six months ended June 30, 2020 would have been lower by
$13 million ($0.02 per diluted share).
Free cash flow
Management believes that free cash flow is a useful measure of
liquidity as it demonstrates the Company's ability to generate cash
for debt obligations and for discretionary uses such as payment of
dividends, share repurchases, and strategic opportunities. The
Company defines its free cash flow measure as the difference
between net cash provided by operating activities and net cash used
in investing activities, adjusted for the impact of business
acquisitions, if any. Free cash flow does not have any standardized
meaning prescribed by GAAP and therefore, may not be comparable to
similar measures presented by other companies.
The following table provides a reconciliation of net cash
provided by operating activities as reported for the three and six
months ended June 30, 2020 and 2019, to free cash flow:
|
|
|
|
|
Three months ended June 30 |
|
Six months ended June 30 |
In millions |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net cash provided by operating activities |
$ |
1,757 |
|
|
$ |
1,716 |
|
|
$ |
2,937 |
|
|
$ |
2,713 |
|
Net
cash used in investing activities |
(749 |
) |
|
(1,203 |
) |
|
(1,356 |
) |
|
(2,081 |
) |
Net cash provided before
financing activities |
1,008 |
|
|
513 |
|
|
1,581 |
|
|
632 |
|
Adjustment: Acquisition, net of cash acquired (1) |
— |
|
|
— |
|
|
— |
|
|
167 |
|
Free
cash flow |
$ |
1,008 |
|
|
$ |
513 |
|
|
$ |
1,581 |
|
|
$ |
799 |
|
(1) |
Relates to the acquisition of the TransX Group of Companies
("TransX"). See Note 3 - Business combinations to CN's unaudited
Interim Consolidated Financial Statements for additional
information. |
|
|
Adjusted debt-to-adjusted EBITDA multiple
Management believes that the adjusted debt-to-adjusted EBITDA
multiple is a useful credit measure because it reflects the
Company's ability to service its debt and other long-term
obligations. The Company calculates the adjusted debt-to-adjusted
EBITDA multiple as adjusted debt divided by adjusted EBITDA. These
measures do not have any standardized meaning prescribed by GAAP
and therefore, may not be comparable to similar measures presented
by other companies.
The following table provides a reconciliation of debt and net
income to the adjusted measures presented below, which have been
used to calculate the adjusted debt-to-adjusted EBITDA
multiple:
|
|
|
|
|
|
|
In
millions, unless otherwise indicated |
As at and for the twelve months ended June 30, |
2020 |
|
|
2019 |
|
Debt |
$ |
14,162 |
|
|
$ |
13,354 |
|
Adjustments: |
|
|
|
Operating lease liabilities, including current portion |
451 |
|
|
543 |
|
Pension plans in deficiency |
523 |
|
|
475 |
|
Adjusted debt |
$ |
15,136 |
|
|
$ |
14,372 |
|
Net income |
$ |
3,624 |
|
|
$ |
4,425 |
|
Interest
expense |
554 |
|
|
510 |
|
Income tax
expense |
1,004 |
|
|
1,249 |
|
Depreciation and
amortization |
1,555 |
|
|
1,479 |
|
Loss on
assets held for sale |
486 |
|
|
— |
|
EBITDA |
7,223 |
|
|
7,663 |
|
Adjustments: |
|
|
|
Other income |
(35 |
) |
|
(166 |
) |
Other components of net periodic benefit income |
(316 |
) |
|
(312 |
) |
Operating lease cost |
156 |
|
|
202 |
|
Adjusted EBITDA |
$ |
7,028 |
|
|
$ |
7,387 |
|
Adjusted debt-to-adjusted EBITDA multiple (times) |
2.15 |
|
|
1.95 |
|
Canadian National Railway (TSX:CNR)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
Canadian National Railway (TSX:CNR)
Historical Stock Chart
Von Apr 2023 bis Apr 2024