Railroad Remains Nimble and Responsive to Market Demand
"CN's people never stopped working since the beginning of the pandemic and I am proud of the essential transportation service they have provided. As we look at the fourth quarter and beyond, we continue to see sequential improvements and momentum leading us to have a cautious optimism about the future. We remain confident in our ability to continue delivering long-term shareholder value."
- JJ Ruest, President and Chief Executive Officer of CN
Financial results highlights
Third-quarter 2020 compared to third-quarter 2019
- Volumes, in terms of revenue ton miles (RTMs), improved sequentially in each month of the third quarter of 2020 and September volumes increased on a year-over-year basis, reflecting demand for certain commodities in-line with 2019 levels.
- Revenues of
C$3,409 million , a decrease ofC$421 million or 11 per cent. - Diluted earnings per share of
C$1.38 , a decrease of 17 per cent. - Operating ratio of 59.9 per cent, an increase of 2.0 points.
- Operating income of
C$1,366 million , a decrease of 15 per cent. - Free cash flow for the first nine months of 2020 was
C$2,087 million , an increase ofC$588 from the prior period. (1)
Third-quarter 2020 revenues, traffic volumes and expenses
Revenues for the third quarter of 2020 were
Operating expenses for the third quarter decreased by eight per cent to
(1)Non-GAAP Measures
CN reports its financial results in accordance with
(2) Forward-Looking Statements
Certain 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 the business operations, financial results and financial position and on the global supply chain, and statements about the economic recovery and its future impact on CN. 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
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
About CN
CN is a world-class transportation leader and trade-enabler. Essential to the economy, to the customers, and to the communities it serves, CN safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout
Contacts: | |
Media | Investment Community |
Senior Manager | Vice-President |
Media Relations | Investor Relations |
(514) 399-7956 | (514) 399-0052 |
media@cn.ca | investor.relations@cn.ca |
Selected Railroad Statistics – unaudited
Three months ended | Nine months ended | ||||
2020 | 2019 | 2020 | 2019 | ||
Financial measures | |||||
Key financial performance indicators (1) | |||||
Total revenues ($ millions) | 3,409 | 3,830 | 10,163 | 11,333 | |
Freight revenues ($ millions) | 3,249 | 3,618 | 9,711 | 10,790 | |
Operating income ($ millions) | 1,366 | 1,613 | 3,366 | 4,375 | |
Adjusted operating income ($ millions) (2) | 1,366 | 1,613 | 3,852 | 4,459 | |
Net income ($ millions) | 985 | 1,195 | 2,541 | 3,343 | |
Adjusted net income ($ millions) (2) | 985 | 1,195 | 2,763 | 3,293 | |
Diluted earnings per share ($) | 1.38 | 1.66 | 3.56 | 4.62 | |
Adjusted diluted earnings per share ($) (2) | 1.38 | 1.66 | 3.87 | 4.56 | |
Free cash flow ($ millions) (2) | 506 | 700 | 2,087 | 1,499 | |
Gross property additions ($ millions) | 691 | 961 | 2,008 | 3,061 | |
Share repurchases ($ millions) | — | 394 | 379 | 1,271 | |
Dividends per share ($) | 0.5750 | 0.5375 | 1.7250 | 1.6125 | |
Financial position (1) | |||||
Total assets ($ millions) | 45,158 | 44,096 | 45,158 | 44,096 | |
Total liabilities ($ millions) | 25,845 | 25,596 | 25,845 | 25,596 | |
Shareholders' equity ($ millions) | 19,313 | 18,500 | 19,313 | 18,500 | |
Financial ratio | |||||
Operating ratio (%) | 59.9 | 57.9 | 66.9 | 61.4 | |
Adjusted operating ratio (%) (2) | 59.9 | 57.9 | 62.1 | 60.7 | |
Operational measures (3) | |||||
Statistical operating data | |||||
Gross ton miles (GTMs) (millions) | 113,693 | 124,410 | 330,058 | 367,875 | |
Revenue ton miles (RTMs) (millions) | 56,296 | 60,849 | 167,183 | 184,245 | |
Carloads (thousands) | 1,440 | 1,531 | 4,069 | 4,487 | |
Route miles (includes | 19,500 | 19,500 | 19,500 | 19,500 | |
Employees (end of period) | 24,008 | 27,290 | 24,008 | 27,290 | |
Employees (average for the period) | 23,177 | 27,269 | 23,624 | 26,803 | |
Key operating measures | |||||
Freight revenue per RTM (cents) | 5.77 | 5.95 | 5.81 | 5.86 | |
Freight revenue per carload ($) | 2,256 | 2,363 | 2,387 | 2,405 | |
GTMs per average number of employees (thousands) | 4,905 | 4,562 | 13,971 | 13,725 | |
Operating expenses per GTM (cents) | 1.80 | 1.78 | 2.06 | 1.89 | |
Labor and fringe benefits expense per GTM (cents) | 0.58 | 0.56 | 0.60 | 0.59 | |
Diesel fuel consumed (US gallons in millions) | 97.2 | 110.1 | 296.3 | 342.5 | |
Average fuel price ($ per US gallon) | 2.27 | 3.05 | 2.44 | 3.13 | |
Fuel efficiency (US gallons of locomotive fuel consumed per 1,000 GTMs) | 0.85 | 0.88 | 0.90 | 0.93 | |
Train weight (tons) | 9,635 | 9,259 | 9,543 | 9,088 | |
Train length (feet) | 8,987 | 8,462 | 8,596 | 8,189 | |
Car velocity (car miles per day) | 175 | 209 | 184 | 198 | |
Through dwell (entire railroad, hours) | 9.6 | 7.7 | 8.8 | 7.9 | |
Through network train speed (miles per hour) | 17.8 | 18.7 | 18.5 | 18.2 | |
Locomotive utilization (trailing GTMs per total horsepower) | 199 | 201 | 194 | 200 | |
Safety indicators (4) | |||||
Injury frequency rate (per 200,000 person hours) | 1.70 | 2.09 | 1.82 | 2.03 | |
Accident rate (per million train miles) | 1.57 | 2.01 | 1.78 | 2.22 |
(1) | Amounts expressed in Canadian dollars and prepared in accordance with |
(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, train length, 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 |
Supplementary Information – unaudited
Three months ended | Nine months ended | ||||||||||||
2020 | 2019 | % Change Fav (Unfav) | % Change at constant currency Fav (Unfav) (1) | 2020 | 2019 | % Change Fav (Unfav) | % Change at constant currency Fav (Unfav) (1) | ||||||
Revenues ($ millions) (2) | |||||||||||||
Petroleum and chemicals | 591 | 788 | (25 | %) | (26 | %) | 1,967 | 2,298 | (14 | %) | (15 | %) | |
Metals and minerals | 342 | 425 | (20 | %) | (20 | %) | 1,055 | 1,286 | (18 | %) | (19 | %) | |
Forest products | 421 | 450 | (6 | %) | (7 | %) | 1,267 | 1,393 | (9 | %) | (10 | %) | |
Coal | 118 | 168 | (30 | %) | (30 | %) | 401 | 508 | (21 | %) | (21 | %) | |
Grain and fertilizers | 608 | 552 | 10 | % | 10 | % | 1,867 | 1,770 | 5 | % | 5 | % | |
Intermodal | 992 | 1,018 | (3 | %) | (3 | %) | 2,715 | 2,860 | (5 | %) | (6 | %) | |
Automotive | 177 | 217 | (18 | %) | (19 | %) | 439 | 675 | (35 | %) | (36 | %) | |
Total freight revenues | 3,249 | 3,618 | (10 | %) | (11 | %) | 9,711 | 10,790 | (10 | %) | (11 | %) | |
Other revenues | 160 | 212 | (25 | %) | (25 | %) | 452 | 543 | (17 | %) | (18 | %) | |
Total revenues | 3,409 | 3,830 | (11 | %) | (11 | %) | 10,163 | 11,333 | (10 | %) | (11 | %) | |
Revenue ton miles (RTMs) (millions) (3) | |||||||||||||
Petroleum and chemicals | 9,398 | 14,042 | (33 | %) | (33 | %) | 31,918 | 41,148 | (22 | %) | (22 | %) | |
Metals and minerals | 5,419 | 6,458 | (16 | %) | (16 | %) | 15,776 | 19,860 | (21 | %) | (21 | %) | |
Forest products | 6,552 | 6,813 | (4 | %) | (4 | %) | 18,903 | 20,902 | (10 | %) | (10 | %) | |
Coal | 3,667 | 4,563 | (20 | %) | (20 | %) | 11,987 | 13,556 | (12 | %) | (12 | %) | |
Grain and fertilizers | 14,565 | 12,722 | 14 | % | 14 | % | 43,826 | 41,634 | 5 | % | 5 | % | |
Intermodal | 15,916 | 15,294 | 4 | % | 4 | % | 42,835 | 44,176 | (3 | %) | (3 | %) | |
Automotive | 779 | 957 | (19 | %) | (19 | %) | 1,938 | 2,969 | (35 | %) | (35 | %) | |
Total RTMs | 56,296 | 60,849 | (7 | %) | (7 | %) | 167,183 | 184,245 | (9 | %) | (9 | %) | |
Freight revenue / RTM (cents) (2) (3) | |||||||||||||
Petroleum and chemicals | 6.29 | 5.61 | 12 | % | 11 | % | 6.16 | 5.58 | 10 | % | 9 | % | |
Metals and minerals | 6.31 | 6.58 | (4 | %) | (5 | %) | 6.69 | 6.48 | 3 | % | 2 | % | |
Forest products | 6.43 | 6.61 | (3 | %) | (3 | %) | 6.70 | 6.66 | 1 | % | (1 | %) | |
Coal | 3.22 | 3.68 | (13 | %) | (13 | %) | 3.35 | 3.75 | (11 | %) | (11 | %) | |
Grain and fertilizers | 4.17 | 4.34 | (4 | %) | (4 | %) | 4.26 | 4.25 | — | % | — | % | |
Intermodal | 6.23 | 6.66 | (6 | %) | (7 | %) | 6.34 | 6.47 | (2 | %) | (3 | %) | |
Automotive | 22.72 | 22.68 | — | % | (1 | %) | 22.65 | 22.73 | — | % | (1 | %) | |
Total freight revenue / RTM | 5.77 | 5.95 | (3 | %) | (4 | %) | 5.81 | 5.86 | (1 | %) | (2 | %) | |
Carloads (thousands) (3) | |||||||||||||
Petroleum and chemicals | 138 | 177 | (22 | %) | (22 | %) | 442 | 519 | (15 | %) | (15 | %) | |
Metals and minerals | 236 | 270 | (13 | %) | (13 | %) | 694 | 774 | (10 | %) | (10 | %) | |
Forest products | 84 | 93 | (10 | %) | (10 | %) | 255 | 289 | (12 | %) | (12 | %) | |
Coal | 68 | 86 | (21 | %) | (21 | %) | 216 | 256 | (16 | %) | (16 | %) | |
Grain and fertilizers | 162 | 145 | 12 | % | 12 | % | 474 | 461 | 3 | % | 3 | % | |
Intermodal | 694 | 693 | — | % | — | % | 1,851 | 1,980 | (7 | %) | (7 | %) | |
Automotive | 58 | 67 | (13 | %) | (13 | %) | 137 | 208 | (34 | %) | (34 | %) | |
Total carloads | 1,440 | 1,531 | (6 | %) | (6 | %) | 4,069 | 4,487 | (9 | %) | (9 | %) | |
Freight revenue / carload ($) (2) (3) | |||||||||||||
Petroleum and chemicals | 4,283 | 4,452 | (4 | %) | (4 | %) | 4,450 | 4,428 | — | % | (1 | %) | |
Metals and minerals | 1,449 | 1,574 | (8 | %) | (8 | %) | 1,520 | 1,661 | (8 | %) | (10 | %) | |
Forest products | 5,012 | 4,839 | 4 | % | 3 | % | 4,969 | 4,820 | 3 | % | 2 | % | |
Coal | 1,735 | 1,953 | (11 | %) | (11 | %) | 1,856 | 1,984 | (6 | %) | (7 | %) | |
Grain and fertilizers | 3,753 | 3,807 | (1 | %) | (2 | %) | 3,939 | 3,839 | 3 | % | 2 | % | |
Intermodal | 1,429 | 1,469 | (3 | %) | (3 | %) | 1,467 | 1,444 | 2 | % | 1 | % | |
Automotive | 3,052 | 3,239 | (6 | %) | (7 | %) | 3,204 | 3,245 | (1 | %) | (2 | %) | |
Total freight revenue / carload | 2,256 | 2,363 | (5 | %) | (5 | %) | 2,387 | 2,405 | (1 | %) | (2 | %) |
(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
CN reports its financial results in accordance with
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 nine months ended
For the nine months ended
The following table provides a reconciliation of net income and earnings per share, as reported for the three and nine months ended
Three months ended | Nine months ended | ||||||||||||||
In millions, except per share data | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income | $ | 985 | $ | 1,195 | $ | 2,541 | $ | 3,343 | |||||||
Adjustments: | |||||||||||||||
Depreciation expense | — | — | — | 84 | |||||||||||
Loss on assets held for sale | — | — | 486 | — | |||||||||||
Income tax recovery (1) | — | — | (264 | ) | (134 | ) | |||||||||
Adjusted net income | $ | 985 | $ | 1,195 | $ | 2,763 | $ | 3,293 | |||||||
Basic earnings per share | $ | 1.39 | $ | 1.66 | $ | 3.57 | $ | 4.63 | |||||||
Impact of adjustments, per share | — | — | 0.31 | (0.07 | ) | ||||||||||
Adjusted basic earnings per share | $ | 1.39 | $ | 1.66 | $ | 3.88 | $ | 4.56 | |||||||
Diluted earnings per share | $ | 1.38 | $ | 1.66 | $ | 3.56 | $ | 4.62 | |||||||
Impact of adjustments, per share | — | — | 0.31 | (0.06 | ) | ||||||||||
Adjusted diluted earnings per share | $ | 1.38 | $ | 1.66 | $ | 3.87 | $ | 4.56 |
(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 nine months ended
Three months ended | Nine months ended | ||||||||||||||
In millions, except percentage | 2020 | 2019 | 2020 | 2019 | |||||||||||
Operating income | $ | 1,366 | $ | 1,613 | $ | 3,366 | $ | 4,375 | |||||||
Adjustments: | |||||||||||||||
Depreciation expense | — | — | — | 84 | |||||||||||
Loss on assets held for sale | — | — | 486 | — | |||||||||||
Adjusted operating income | $ | 1,366 | $ | 1,613 | $ | 3,852 | $ | 4,459 | |||||||
Operating ratio (1) | 59.9 | % | 57.9 | % | 66.9 | % | 61.4 | % | |||||||
Impact of adjustment | — | — | (4.8 | )-pts | (0.7 | )-pts | |||||||||
Adjusted operating ratio | 59.9 | % | 57.9 | % | 62.1 | % | 60.7 | % |
(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
On a constant currency basis, the Company's net income for the three and nine months ended
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 nine months ended
Three months ended | Nine months ended | ||||||||||||||
In millions | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net cash provided by operating activities | $ | 1,220 | $ | 1,692 | $ | 4,157 | $ | 4,405 | |||||||
Net cash used in investing activities | (722 | ) | (992 | ) | (2,078 | ) | (3,073 | ) | |||||||
Net cash provided before financing activities | 498 | 700 | 2,079 | 1,332 | |||||||||||
Adjustment: Acquisition, net of cash acquired (1) | 8 | — | 8 | 167 | |||||||||||
Free cash flow | $ | 506 | $ | 700 | $ | 2,087 | $ | 1,499 |
(1) | Relates to the acquisitions of |
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 | 2020 | 2019 | |||||
Debt | $ | 13,786 | $ | 13,768 | ||||
Adjustments: | ||||||||
Operating lease liabilities, including current portion | 434 | 536 | ||||||
Pension plans in deficiency | 521 | 476 | ||||||
Adjusted debt | $ | 14,741 | $ | 14,780 | ||||
Net income | $ | 3,414 | $ | 4,486 | ||||
Interest expense | 556 | 524 | ||||||
Income tax expense | 936 | 1,278 | ||||||
Depreciation and amortization | 1,574 | 1,521 | ||||||
Loss on assets held for sale | 486 | — | ||||||
EBITDA | 6,966 | 7,809 | ||||||
Adjustments: | ||||||||
Other income | (8 | ) | (144 | ) | ||||
Other components of net periodic benefit income | (314 | ) | (317 | ) | ||||
Operating lease cost | 152 | 190 | ||||||
Adjusted EBITDA | $ | 6,796 | $ | 7,538 | ||||
Adjusted debt-to-adjusted EBITDA multiple (times) | 2.17 | 1.96 |
Source:
2020 GlobeNewswire, Inc., source