Adjusted diluted earnings per share
(EPS) (1) decreased by three per cent to
C$1.11
Record second-quarter operating ratio of
54.5 per cent
MONTREAL, July 25, 2016 /CNW/ - CN (TSX: CNR) (NYSE:
CNI) today reported its financial and operating results for the
second quarter and six-month period ended June 30, 2016.
Second-quarter 2016 financial
highlights
- Net income was C$858 million,
compared with net income of C$886
million for second-quarter 2015. Q2-2016 diluted EPS
remained flat at C$1.10. The decrease
in net income was mainly due to lower operating income and other
income, and higher interest expense; net of related income
taxes.
- Adjusted diluted EPS (1) of C$1.11 declined three per cent from year-earlier
adjusted diluted EPS of C$1.15. The
adjusted figures exclude the impact of deferred income tax
adjustments resulting from higher provincial corporate income tax
rates in both years.
- Operating income declined five per cent to C$1,293 million.
- Revenues decreased by nine per cent to C$2,842 million. Carloadings declined 12 per cent
and revenue ton-miles declined 11 per cent.
- Operating expenses declined 12 per cent to C$1,549 million.
- Operating ratio of 54.5 per cent was a second-quarter record
and an improvement of 1.9-points over the prior-year quarter.
- Free cash flow (1) for the first six months of 2016
was C$1,169 million, compared with
C$1,051 million for the year-earlier
period.
Luc Jobin,
president and chief executive officer, said: "CN continued to face
a very challenging volume environment in the second quarter and
maintained strong discipline in realigning resources to keep them
in line with reduced freight demand. Service remained solid, key
operating metrics advanced, and we continued to improve our safety
record. An important product of our cost-management and
productivity focus was a record second-quarter operating ratio of
54.5 per cent.
"We expect the second quarter to be the volume
trough for the year. For the balance of 2016, we continue to expect
some markets to remain strong, including lumber and panels,
automotive, and refined petroleum products, and we anticipate a
bumper grain crop in Canada. At
the same time, international intermodal volumes are expected to
remain challenging while shipments of commodities related to oil
and gas development, such as crude oil, frac sand and drilling
pipe, are expected to decrease relative to last year.
"Given these expectations, we reiterate our
April 25, 2016, financial outlook of
aiming to deliver 2016 EPS in line with last year's adjusted
diluted EPS (1) of C$4.44." (2)
Foreign currency impact on results
Although CN reports its earnings in Canadian dollars, a large
portion of its revenues and expenses is denominated in U.S.
dollars. The fluctuation of the Canadian dollar relative to the
U.S. dollar affects the conversion of the Company's
U.S.-dollar-denominated revenues and expenses. On a constant
currency basis, (1) CN's net income for the second
quarter of 2016 would have been lower by C$23 million, or C$0.03 per diluted share.
Second-quarter 2016 revenues, traffic volumes
and expenses
Revenues for the second quarter of 2016 were C$2,842 million, a decrease of nine per cent,
when compared to the same period in 2015. Revenues increased for
forest products (four per cent), but were more than offset by
revenue declines for coal (36 per cent), metals and minerals (17
per cent), petroleum and chemicals (16 per cent), grain and
fertilizers (12 per cent), intermodal (four per cent), and
automotive (one per cent).
The revenue decline was mainly attributable to
decreased shipments of energy-related commodities including crude
oil, frac sand, drilling pipe and semi-finished steel products as a
result of declining energy markets; reduced shipments of coal due
to weaker North American and global demand; lower volumes of
Canadian grain to North American and export markets due to lower
available supply; and lower applicable fuel surcharge rates. These
factors were partly offset by the positive translation impact of
the weaker Canadian dollar on U.S.-dollar-denominated revenues;
freight rate increases; as well as increased shipments of lumber
and panels to U.S. markets, and increased domestic retail
intermodal shipments.
Carloadings for the quarter declined by 12 per
cent to 1,249 thousand.
Revenue ton-miles (RTMs), measuring the relative
weight and distance of rail freight transported by CN, declined by
11 per cent from the year-earlier quarter. Rail freight revenue per
RTM, a measurement of yield defined as revenue earned on the
movement of a ton of freight over one mile, increased by one per
cent over the year-earlier period, driven by the positive
translation impact of the weaker Canadian dollar and freight rate
increases, partly offset by a significant increase in the average
length of haul and lower applicable fuel surcharge rates.
Operating expenses for the second quarter
decreased by 12 per cent to C$1,549
million, mainly due to lower costs resulting from decreased
volumes of traffic, lower fuel prices, lower pension expense and
cost-management initiatives, partly offset by the negative
translation impact of a weaker Canadian dollar on
U.S.-dollar-denominated expenses.
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 may be identified by the
use of terminology such as "believes," "expects," anticipates,"
"assumes," "outlook," "plans," "targets," or other similar words.
To the extent that CN has provided non-GAAP financial measures in
its outlook, the Company may not be able to provide a
reconciliation to the GAAP measures, due to unknown variables and
uncertainty related to future results.
2016 key assumptions
CN has made a number of economic and market assumptions in
preparing its 2016 outlook. The Company now assumes that North
American industrial production for the year will be slightly
negative (compared with its April 25,
2016, assumption that North American industrial production
would increase by less than one per cent) and assumes U.S. housing
starts in the range of 1.2 million units and U.S. motor vehicle
sales of approximately 17.5 million units. For the 2015/2016 crop
year, the Canadian grain crop was in line with the five-year
average and the U.S. grain crop was above the five-year average.
The Company now assumes 2016/2017 grain crops in both Canada and the U.S. will be above their
respective five-year averages (compared with its April 25, 2016, assumption that both the Canadian
and U.S. 2016/2017 grain crops would be in line with their
respective five-year averages). With these assumptions, CN now
expects total carloads for 2016 will decrease in the
mid-single-digit range (compared with its April 25, 2016, assumption that total carloadings
for the year would decline four to five per cent versus 2015). CN
expects continued pricing improvement above inflation. CN assumes
that in 2016 the value of the Canadian dollar in U.S. currency will
be in the range of $0.75 to $0.80,
and that the average price of crude oil (West Texas Intermediate)
will be in the range of US$35 to
US$45 per barrel. CN plans to invest approximately
C$2.75 billion in its capital
program, of which C$1.5 billion is
targeted toward track infrastructure.
Forward-looking statements are not guarantees of
future performance and involve known and unknown 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 effects of general economic and business
conditions; 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; security threats; reliance on
technology; transportation of hazardous materials; various events
which could disrupt operations, including natural events such as
severe weather, droughts, floods and earthquakes; effects of
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; 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.
1)
|
See discussion and reconciliation of non-GAAP
measures in the attached supplementary schedule, Non-GAAP
Measures.
|
2)
|
See Forward-Looking Statements for a summary of the
key assumptions and risks regarding CN's 2016
outlook.
|
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/quarterly-releases and on SEDAR at
www.sedar.com as well as on EDGAR at www.sec.gov.
CN is a true backbone of the economy,
transporting more than C$250 billion
worth of goods annually for a wide range of business sectors,
ranging from resource products to manufactured products to consumer
goods, across a rail network of approximately 20,000 route-miles
spanning Canada and mid-America.
CN – Canadian National Railway Company, along with its operating
railway subsidiaries – serves the cities and ports of Vancouver, Prince
Rupert, B.C., Montreal,
Halifax, New Orleans, and Mobile, Ala., and the metropolitan areas of
Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth,
Minn./Superior, Wis., and
Jackson, Miss., with connections
to all points in North America.
For more information about CN, visit the Company's website at
www.cn.ca.
Selected Railroad Statistics – unaudited
|
|
Three months ended June
30
|
|
Six months ended June
30
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
Financial
measures
|
|
|
|
|
|
|
|
|
|
|
|
Key financial performance
indicators (1)
|
|
|
|
|
|
Total revenues ($
millions)
|
2,842
|
3,125
|
|
5,806
|
6,223
|
Rail freight revenues ($
millions)
|
2,646
|
2,927
|
|
5,491
|
5,907
|
Operating income ($
millions)
|
1,293
|
1,362
|
|
2,510
|
2,425
|
Net income ($
millions)
|
858
|
886
|
|
1,650
|
1,590
|
Diluted earnings per share
($)
|
1.10
|
1.10
|
|
2.10
|
1.96
|
Adjusted diluted earnings per share ($)
(2)
|
1.11
|
1.15
|
|
2.11
|
2.01
|
Free cash flow ($ millions)
(2)
|
585
|
530
|
|
1,169
|
1,051
|
Gross property additions ($
millions)
|
670
|
659
|
|
1,139
|
1,127
|
Share repurchases ($
millions)
|
533
|
404
|
|
1,053
|
833
|
Dividends per share
($)
|
0.3750
|
0.3125
|
|
0.7500
|
0.6250
|
|
|
|
|
|
|
Financial position (1)
|
|
|
|
|
|
Total assets ($ millions)
(3)
|
36,094
|
33,498
|
|
36,094
|
33,498
|
Total liabilities ($ millions)
(3)
|
21,281
|
19,544
|
|
21,281
|
19,544
|
Shareholders' equity ($
millions)
|
14,813
|
13,954
|
|
14,813
|
13,954
|
|
|
|
|
|
|
Financial
ratio
|
|
|
|
|
|
Operating ratio
(%)
|
54.5
|
56.4
|
|
56.8
|
61.0
|
|
|
|
|
|
|
Operational measures (4)
|
|
|
|
|
|
|
|
|
|
|
|
Statistical operating
data
|
|
|
|
|
|
Gross ton miles (GTMs)
(millions)
|
99,999
|
110,709
|
|
203,467
|
222,099
|
Revenue ton miles (RTMs)
(millions)
|
49,717
|
55,713
|
|
101,973
|
112,842
|
Carloads
(thousands)
|
1,249
|
1,414
|
|
2,504
|
2,767
|
Route miles (includes Canada and the
U.S.)
|
19,600
|
19,500
|
|
19,600
|
19,500
|
Employees (end of
period)
|
22,162
|
24,529
|
|
22,162
|
24,529
|
Employees (average for the
period)
|
22,230
|
24,897
|
|
22,462
|
24,981
|
|
|
|
|
|
|
Key operating
measures
|
|
|
|
|
|
Rail freight revenue per RTM
(cents)
|
5.32
|
5.25
|
|
5.38
|
5.23
|
Rail freight revenue per carload
($)
|
2,118
|
2,070
|
|
2,193
|
2,135
|
GTMs per average number of employees
(thousands)
|
4,498
|
4,447
|
|
9,058
|
8,891
|
Operating expenses per GTM
(cents)
|
1.55
|
1.59
|
|
1.62
|
1.71
|
Labor and fringe benefits expense per GTM
(cents)
|
0.47
|
0.49
|
|
0.52
|
0.54
|
Diesel fuel consumed (US gallons in
millions)
|
93.6
|
106.0
|
|
197.3
|
220.3
|
Average fuel price ($/US
gallon)
|
2.30
|
2.73
|
|
2.18
|
2.79
|
GTMs per US gallon of fuel
consumed
|
1,068
|
1,044
|
|
1,031
|
1,008
|
Terminal dwell
(hours)
|
13.6
|
14.6
|
|
14.0
|
15.7
|
Train velocity (miles per
hour)
|
27.6
|
26.2
|
|
27.5
|
25.5
|
|
|
|
|
|
|
Safety indicators (5)
|
|
|
|
|
|
Injury frequency rate (per 200,000 person
hours)
|
1.48
|
1.46
|
|
1.57
|
1.55
|
Accident rate (per million train
miles)
|
1.57
|
2.49
|
|
1.33
|
2.48
|
|
|
(1)
|
Amounts expressed in Canadian dollars and prepared
in accordance with United States generally accepted accounting
principles, unless otherwise
noted.
|
(2)
|
See supplementary schedule entitled Non-GAAP
Measures for an explanation of this non-GAAP
measure.
|
(3)
|
As a result of the retrospective adoption of new
accounting standards in the fourth quarter of 2015, certain 2015
balances have been restated. See Note 2 – Recent accounting
pronouncements to the Company's 2015 Annual Consolidated Financial
Statements for additional
information.
|
(4)
|
Statistical operating data, key operating measures
and safety indicators are based on estimated data available at such
time and are subject to change as more complete information becomes
available, as such, certain of the comparative data have been
restated. Definitions of these indicators are provided on our
website,
www.cn.ca/glossary.
|
(5)
|
Based on Federal Railroad Administration (FRA)
reporting
criteria.
|
|
|
Supplementary Information – unaudited
|
Three months ended June
30
|
|
Six months ended June
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
2015
|
%
Change
Fav
(Unfav)
|
|
%
Change at
constant
currency
Fav (Unfav)
(2)
|
|
2016
|
2015
|
%
Change
Fav
(Unfav)
|
|
%
Change at
constant
currency
Fav (Unfav)
(2)
|
Revenues ($ millions) (1)
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and
chemicals
|
492
|
586
|
(16%)
|
|
(19%)
|
|
1,070
|
1,229
|
(13%)
|
|
(17%)
|
Metals and
minerals
|
292
|
351
|
(17%)
|
|
(19%)
|
|
602
|
728
|
(17%)
|
|
(22%)
|
Forest
products
|
439
|
424
|
4%
|
|
-
|
|
901
|
842
|
7%
|
|
1%
|
Coal
|
95
|
148
|
(36%)
|
|
(38%)
|
|
188
|
307
|
(39%)
|
|
(42%)
|
Grain and
fertilizers
|
432
|
489
|
(12%)
|
|
(14%)
|
|
954
|
1,024
|
(7%)
|
|
(11%)
|
Intermodal
|
697
|
728
|
(4%)
|
|
(6%)
|
|
1,390
|
1,417
|
(2%)
|
|
(5%)
|
Automotive
|
199
|
201
|
(1%)
|
|
(4%)
|
|
386
|
360
|
7%
|
|
1%
|
Total rail freight
revenues
|
2,646
|
2,927
|
(10%)
|
|
(12%)
|
|
5,491
|
5,907
|
(7%)
|
|
(11%)
|
Other
revenues
|
196
|
198
|
(1%)
|
|
(4%)
|
|
315
|
316
|
-
|
|
(4%)
|
Total
revenues
|
2,842
|
3,125
|
(9%)
|
|
(12%)
|
|
5,806
|
6,223
|
(7%)
|
|
(11%)
|
Revenue ton miles (RTMs)
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and
chemicals
|
9,575
|
12,425
|
(23%)
|
|
(23%)
|
|
20,881
|
26,042
|
(20%)
|
|
(20%)
|
Metals and
minerals
|
4,751
|
5,430
|
(13%)
|
|
(13%)
|
|
9,454
|
11,141
|
(15%)
|
|
(15%)
|
Forest
products
|
7,807
|
7,605
|
3%
|
|
3%
|
|
15,736
|
14,847
|
6%
|
|
6%
|
Coal
|
2,686
|
3,916
|
(31%)
|
|
(31%)
|
|
4,934
|
8,126
|
(39%)
|
|
(39%)
|
Grain and
fertilizers
|
10,353
|
11,783
|
(12%)
|
|
(12%)
|
|
22,883
|
24,727
|
(7%)
|
|
(7%)
|
Intermodal
|
13,519
|
13,493
|
-
|
|
-
|
|
26,182
|
26,086
|
-
|
|
-
|
Automotive
|
1,026
|
1,061
|
(3%)
|
|
(3%)
|
|
1,903
|
1,873
|
2%
|
|
2%
|
Total
RTMs
|
49,717
|
55,713
|
(11%)
|
|
(11%)
|
|
101,973
|
112,842
|
(10%)
|
|
(10%)
|
Rail freight revenue / RTM
(cents)
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and
chemicals
|
5.14
|
4.72
|
9%
|
|
5%
|
|
5.12
|
4.72
|
8%
|
|
3%
|
Metals and
minerals
|
6.15
|
6.46
|
(5%)
|
|
(8%)
|
|
6.37
|
6.53
|
(2%)
|
|
(8%)
|
Forest
products
|
5.62
|
5.58
|
1%
|
|
(3%)
|
|
5.73
|
5.67
|
1%
|
|
(5%)
|
Coal
|
3.54
|
3.78
|
(6%)
|
|
(9%)
|
|
3.81
|
3.78
|
1%
|
|
(4%)
|
Grain and
fertilizers
|
4.17
|
4.15
|
-
|
|
(2%)
|
|
4.17
|
4.14
|
1%
|
|
(3%)
|
Intermodal
|
5.16
|
5.40
|
(4%)
|
|
(6%)
|
|
5.31
|
5.43
|
(2%)
|
|
(5%)
|
Automotive
|
19.40
|
18.94
|
2%
|
|
(1%)
|
|
20.28
|
19.22
|
6%
|
|
-
|
Total rail freight revenue per
RTM
|
5.32
|
5.25
|
1%
|
|
(1%)
|
|
5.38
|
5.23
|
3%
|
|
(2%)
|
Carloads
(thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and
chemicals
|
141
|
158
|
(11%)
|
|
(11%)
|
|
294
|
322
|
(9%)
|
|
(9%)
|
Metals and
minerals
|
186
|
243
|
(23%)
|
|
(23%)
|
|
364
|
480
|
(24%)
|
|
(24%)
|
Forest
products
|
110
|
112
|
(2%)
|
|
(2%)
|
|
223
|
221
|
1%
|
|
1%
|
Coal
|
73
|
105
|
(30%)
|
|
(30%)
|
|
152
|
220
|
(31%)
|
|
(31%)
|
Grain and
fertilizers
|
129
|
147
|
(12%)
|
|
(12%)
|
|
275
|
301
|
(9%)
|
|
(9%)
|
Intermodal
|
542
|
581
|
(7%)
|
|
(7%)
|
|
1,065
|
1,103
|
(3%)
|
|
(3%)
|
Automotive
|
68
|
68
|
-
|
|
-
|
|
131
|
120
|
9%
|
|
9%
|
Total
carloads
|
1,249
|
1,414
|
(12%)
|
|
(12%)
|
|
2,504
|
2,767
|
(10%)
|
|
(10%)
|
Rail freight revenue / carload
($)
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and
chemicals
|
3,489
|
3,709
|
(6%)
|
|
(9%)
|
|
3,639
|
3,817
|
(5%)
|
|
(10%)
|
Metals and
minerals
|
1,570
|
1,444
|
9%
|
|
5%
|
|
1,654
|
1,517
|
9%
|
|
3%
|
Forest
products
|
3,991
|
3,786
|
5%
|
|
2%
|
|
4,040
|
3,810
|
6%
|
|
-
|
Coal
|
1,301
|
1,410
|
(8%)
|
|
(11%)
|
|
1,237
|
1,395
|
(11%)
|
|
(16%)
|
Grain and
fertilizers
|
3,349
|
3,327
|
1%
|
|
(2%)
|
|
3,469
|
3,402
|
2%
|
|
(2%)
|
Intermodal
|
1,286
|
1,253
|
3%
|
|
1%
|
|
1,305
|
1,285
|
2%
|
|
(1%)
|
Automotive
|
2,926
|
2,956
|
(1%)
|
|
(4%)
|
|
2,947
|
3,000
|
(2%)
|
|
(7%)
|
Total rail freight revenue per
carload
|
2,118
|
2,070
|
2%
|
|
-
|
|
2,193
|
2,135
|
3%
|
|
(2%)
|
|
Statistical operating data and related key
operating measures are based on estimated data available at such
time and are subject to change as more complete
information becomes
available.
|
(1) Amounts expressed in Canadian
dollars.
|
(2) See supplementary schedule entitled
Non-GAAP Measures for an explanation of this non-GAAP
measure.
|
Non-GAAP Measures - unaudited
This supplementary schedule includes non-GAAP measures that do
not have any standardized meaning prescribed by GAAP and therefore,
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.
All financial information included in this supplementary
schedule is expressed in Canadian dollars, unless otherwise
noted.
Adjusted performance measures
Management believes that adjusted net income and adjusted
earnings per share are useful measures of performance that can
facilitate period-to-period comparisons, as they exclude items that
do not necessarily arise as part of the normal day-to-day
operations of Canadian National Railway Company, together with its
wholly-owned subsidiaries, collectively the "Company", and could
distort the analysis of trends in business performance. The
exclusion of such items in adjusted net income and adjusted
earnings per share does not, however, imply that such items are
necessarily non-recurring. These adjusted 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, 2016, the Company reported adjusted net income of
$865 million, or $1.11 per diluted share, and $1,657 million, or $2.11 per diluted share, respectively. The
adjusted figures for the three and six months ended June 30, 2016 exclude a deferred income tax
expense of $7 million ($0.01 per diluted share) resulting from the
enactment of a higher provincial corporate income tax rate.
For the three and six months ended June
30, 2015, the Company reported adjusted net income of
$928 million, or $1.15 per diluted share, and $1,632 million, or $2.01 per diluted share, respectively. The
adjusted figures for the three and six months ended June 30, 2015 exclude a deferred income tax
expense of $42 million ($0.05 per diluted share) resulting from the
enactment of a higher provincial corporate income tax rate.
The following table provides a reconciliation of net income and
earnings per share, as reported for the three and six months ended
June 30, 2016 and 2015, to the
adjusted performance measures presented herein:
|
|
Three months ended June
30
|
|
Six months ended June
30
|
In millions, except per share
data
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
Net income as
reported
|
$
|
858
|
$
|
886
|
|
$
|
1,650
|
$
|
1,590
|
Adjustment: Income tax
expense
|
|
7
|
|
42
|
|
|
7
|
|
42
|
Adjusted net
income
|
$
|
865
|
$
|
928
|
|
$
|
1,657
|
$
|
1,632
|
Basic earnings per share as
reported
|
$
|
1.10
|
$
|
1.10
|
|
$
|
2.11
|
$
|
1.97
|
Impact of adjustment, per
share
|
|
0.01
|
|
0.05
|
|
|
0.01
|
|
0.05
|
Adjusted basic earnings per
share
|
$
|
1.11
|
$
|
1.15
|
|
$
|
2.12
|
$
|
2.02
|
Diluted earnings per share as
reported
|
$
|
1.10
|
$
|
1.10
|
|
$
|
2.10
|
$
|
1.96
|
Impact of adjustment, per
share
|
|
0.01
|
|
0.05
|
|
|
0.01
|
|
0.05
|
Adjusted diluted earnings per
share
|
$
|
1.11
|
$
|
1.15
|
|
$
|
2.11
|
$
|
2.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 of the prior year. The
average foreign exchange rates were $1.29 and $1.33 per
US$1.00, respectively, for the three
and six months ended June 30, 2016,
and $1.23 per US$1.00, for both the three and six months ended
June 30, 2015.
On a constant currency basis, the Company's net income for the
three and six months ended June 30,
2016 would have been lower by $23
million ($0.03 per diluted
share) and $80 million ($0.10 per diluted share), respectively.
Free cash flow
Management believes that free cash flow is a useful measure of
performance 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 changes in
restricted cash and cash equivalents and the impact of major
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, 2016 and 2015,
to free cash flow:
|
Three months ended June
30
|
|
Six months ended June
30
|
In
millions
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
Net cash provided by operating
activities
|
$
|
1,271
|
$
|
1,203
|
|
$
|
2,336
|
$
|
2,195
|
Net cash used in investing
activities
|
|
(674)
|
|
(662)
|
|
|
(1,154)
|
|
(1,143)
|
Net cash provided before financing
activities
|
|
597
|
|
541
|
|
|
1,182
|
|
1,052
|
Adjustment: Change in restricted cash and cash
equivalents
|
|
(12)
|
|
(11)
|
|
|
(13)
|
|
(1)
|
Free cash
flow
|
$
|
585
|
$
|
530
|
|
$
|
1,169
|
$
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted debt-to-adjusted EBITDA multiple
Management believes that the adjusted debt-to-adjusted earnings
before interest, income taxes, depreciation and amortization
(EBITDA) multiple is a useful credit measure because it reflects
the Company's ability to service its debt. 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,
|
|
2016
|
|
2015
|
Debt
(1)
|
|
|
$
|
10,322
|
$
|
9,308
|
Adjustment: Present value of operating lease
commitments
(2)
|
|
|
561
|
|
647
|
Adjusted
debt
|
|
|
$
|
10,883
|
$
|
9,955
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
$
|
3,598
|
$
|
3,287
|
Interest
expense
|
|
|
|
469
|
|
397
|
Income tax
expense
|
|
|
|
1,315
|
|
1,318
|
Depreciation and
amortization
|
|
|
|
1,180
|
|
1,118
|
EBITDA
|
|
|
|
6,562
|
|
6,120
|
Adjustments:
|
|
|
|
|
|
|
|
Other
income
|
|
|
|
(31)
|
|
(31)
|
|
Deemed interest on operating
leases
|
|
|
|
27
|
|
30
|
Adjusted
EBITDA
|
|
|
$
|
6,558
|
$
|
6,119
|
Adjusted debt-to-adjusted EBITDA multiple
(times)
|
|
|
|
1.66
|
|
1.63
|
|
|
(1)
|
As a result of the retrospective adoption of a new
accounting standard in the fourth quarter of 2015, the prior period
debt balance has
been adjusted. There was no impact to the related
financial ratio. See Note 2 - Recent accounting pronouncements to
the Company's
2015 Annual Consolidated Financial Statements for
additional
information.
|
(2)
|
The operating lease commitments have been
discounted using the Company's implicit interest rate for each of
the periods
presented.
|
|
|
The increase in the Company's adjusted debt-to-adjusted EBITDA
multiple at June 30, 2016, as
compared to the same period in 2015, was mainly due to an increased
debt level as at June 30, 2016,
resulting from the net issuance of debt and a weaker Canadian-to-US
dollar foreign exchange rate, partly offset by a higher net income
earned during the twelve months ended June
30, 2016, as compared to the twelve months ended
June 30, 2015.
SOURCE CN