Diluted earnings per share (EPS) increased 21 per
cent
MONTREAL,
Oct. 27, 2015 /CNW/ - CN (TSX: CNR)
(NYSE: CNI) today reported its financial and operating results for
the third quarter ended Sept. 30,
2015.
Third-quarter 2015 financial
highlights
- Net income increased 18 per cent to C$1,007 million, while diluted EPS increased 21
per cent to C$1.26.
- Q3-2015 operating income increased 16 per cent to C$1,487 million.
- Third-quarter 2015 revenues increased three per cent to
C$3,222 million. Carloadings and
revenue ton-miles each declined by six per cent.
- CN's operating ratio for Q3-2015 improved by five percentage
points to a record 53.8 per cent.
- Free cash flow for the first nine months of 2015 was
C$1,741 million, compared with
C$2,045 million for the year-earlier
period. (1)
Luc Jobin, CN executive vice-president and chief
financial officer, said: "CN delivered record third-quarter results
thanks to strong team execution in safely and efficiently meeting
our customers' needs while recalibrating resources to the weaker
volume environment.
"We remain committed to our long-term agenda of
Operational and Service Excellence, investing in the safety and
integrity of our network, and fulfilling our role as a true
backbone of the economy.
"With CN's continued strong performance this
year, we are pleased to reaffirm our outlook for double-digit
adjusted EPS growth in 2015 versus last year's adjusted diluted EPS
of C$3.76." (1) (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, CN's net income for the third quarter of 2015 would
have been lower by C$107 million
(C$0.13 per diluted share).
(1)
Third-quarter 2015 revenues, traffic volumes
and expenses
Revenues for the third quarter of 2015 increased by three per cent
to C$3,222 million. Revenues
increased for automotive (13 per cent), forest products (12 per
cent), intermodal (five per cent), petroleum and chemicals (three
per cent), and grain and fertilizers (two per cent). Revenues
declined for coal (13 per cent) and metals and minerals (three per
cent).
The revenue performance was mainly attributable
to the positive translation impact of the weaker Canadian dollar on
U.S.-dollar-denominated revenues; freight rate increases; strong
overseas intermodal demand, higher volumes of finished vehicle
traffic, and increased shipments of lumber and panels to U.S.
markets. These factors were partly offset by a lower applicable
fuel surcharge rate; decreased shipments of coal due to weaker
North American and global demand; reduced shipments of
energy-related commodities including crude oil, frac sand and
drilling pipe; lower volumes of semi-finished steel products and
short-haul iron ore; as well as lower volumes of Canadian grain
versus the prior year's record crop.
Carloadings for the quarter declined by six per
cent to 1,393 thousand.
Revenue ton-miles, measuring the relative weight
and distance of rail freight transported by CN, declined by six per
cent over the year-earlier quarter. Rail freight revenue per
revenue ton-mile, a measurement of yield defined as revenue earned
on the movement of a ton of freight over one mile, increased by 10
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 lower applicable fuel surcharge rate
and an increase in the average length of haul.
Operating expenses for the quarter decreased by
five per cent to C$1,735 million,
mainly due to lower fuel costs and lower casualty and other
expense, partly offset by the negative translation impact of a
weaker Canadian dollar on U.S.-dollar-denominated expenses.
Update on recovery of President and CEO
Claude Mongeau
Claude Mongeau had successful
surgery in Montreal to remove a
rare type of soft-tissue tumour. Mr. Mongeau underwent a
procedure to remove his larynx and a voice prosthesis was placed in
his throat. He is currently receiving radiation treatment and
is expected to return to work early in the new year following
his complete recovery.
"Claude is upbeat, recovering well, and remains
engaged in the business," said Robert
Pace, chairman of CN. "We wish him a speedy and full
recovery as he focuses on his health.
"The Board has every confidence in the
experienced leadership team to continue to deliver strong results,
and all of us look forward to Claude's return."
Forward-Looking Statements
Certain information included in this news release constitutes
"forward-looking statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and under Canadian securities laws.
CN cautions that, by their nature, these 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. Such
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 or the rail industry to be materially different from the
outlook or any future results or performance implied by such
statements. To the extent that CN has provided guidance that are
non-GAAP financial measures, the Company may not be able to provide
a reconciliation to the GAAP measures, due to unknown variables and
uncertainty related to future results. Key assumptions used in
determining forward-looking information are set forth below.
2015 key assumptions
CN has made a number of economic and market assumptions in
preparing its 2015 outlook. The Company is assuming that North
American industrial production for the year will increase by
approximately one per cent and is now assuming U.S. housing starts
in the range of 1.1 million units and U.S. motor vehicle sales of
approximately 17 million units, versus its previous (July 20, 2015) assumptions of 1.2 million and
16.7 million, respectively. The 2014/2015 Canadian grain crop
represented a significant reduction toward the historical trend
line after a record 2013/2014 grain crop, while the 2014/2015 U.S.
grain crop was above trend. For the 2015/2016 crop year, the
Company now assumes that the Canadian grain crop will be below the
five-year average and that the U.S. grain crop will be above the
five-year average, compared with its previous assumption that both
crops would be in-line with trend yields. CN also now expects
2015 customer shipments of energy-related commodities, namely crude
oil and frac sand, to be below 2014 levels, versus its previous
assumption of no growth. With these assumptions, CN now
assumes total carloads for all freight categories in 2015 will be
approximately 2 per cent below 2014 levels, compared with its
previous assumption that 2015 shipments would be comparable with
those in 2014. CN expects continued pricing improvement above
inflation. CN now assumes that in 2015 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$45 to US$50 per barrel, versus
its previous assumptions of approximately $0.80 and US$50 per
barrel, respectively. In 2015, CN plans to invest
approximately C$2.7 billion in its
capital program, of which approximately C$1.4 billion is targeted toward maintaining the
safety and integrity of the network, particularly track
infrastructure.
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, various events which could disrupt operations,
including natural events such as severe weather, droughts, floods
and earthquakes, 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" in CN's annual and interim reports, Annual
Information Form and Form 40-F filed with Canadian and U.S.
securities regulators, available on CN's website, for a summary of
major risk factors.
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
Canadian 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 adjusted performance 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 2015
outlook.
This earnings news release, as well as
additional financial information, including the Financial
Statements, Notes thereto and Management's Discussion and Analysis,
is contained in the CN 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 whose team
of approximately 25,000 railroaders transports more than
C$250 billion worth of goods annually
for a wide range of business sectors, ranging from resource
products to manufactured products to consumer goods, across a rail
network of approximately 20,000 route-miles spanning Canada and mid-America. CN - Canadian National
Railway Company, along with its operating railway subsidiaries -
serves the cities and ports of Vancouver, Prince
Rupert, B.C., Montreal,
Halifax, New Orleans, and Mobile, Ala., and the metropolitan areas of
Toronto, Edmonton, Winnipeg, Calgary, Chicago, Memphis, Detroit, Duluth,
Minn./Superior, Wis., and
Jackson, Miss., with connections
to all points in North America.
For more information about CN, visit the Company's website at
www.cn.ca.
Selected Railroad Statistics - unaudited
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
2015 |
2014 |
|
2015 |
2014 |
|
|
|
|
|
|
Financial measures |
|
|
|
|
|
|
|
|
|
|
|
Key financial performance
indicators |
|
|
|
|
|
Total revenues ($ millions) |
3,222 |
3,118 |
|
9,445 |
8,927 |
Rail freight revenues ($ millions) |
3,011 |
2,920 |
|
8,918 |
8,440 |
Operating income ($ millions) |
1,487 |
1,286 |
|
3,912 |
3,364 |
Net income ($ millions) |
1,007 |
853 |
|
2,597 |
2,323 |
Diluted earnings per share ($) |
1.26 |
1.04 |
|
3.21 |
2.81 |
Adjusted diluted earnings per share ($)
(1) |
1.26 |
1.04 |
|
3.26 |
2.72 |
Free cash flow ($ millions)
(1) |
690 |
775 |
|
1,741 |
2,045 |
Gross property additions ($ millions) |
937 |
620 |
|
2,064 |
1,350 |
Share repurchases ($ millions) |
417 |
365 |
|
1,250 |
1,095 |
Dividends per share ($) |
0.3125 |
0.2500 |
|
0.9375 |
0.7500 |
|
|
|
|
|
|
Financial position |
|
|
|
|
|
Total assets ($ millions) |
35,823 |
31,673 |
|
35,823 |
31,673 |
Total liabilities ($ millions) |
21,356 |
17,926 |
|
21,356 |
17,926 |
Shareholders' equity ($ millions) |
14,467 |
13,747 |
|
14,467 |
13,747 |
|
|
|
|
|
|
Financial ratio |
|
|
|
|
|
Operating ratio (%) |
53.8 |
58.8 |
|
58.6 |
62.3 |
|
|
|
|
|
|
Operational measures (2) |
|
|
|
|
|
|
|
|
|
|
|
Statistical operating data |
|
|
|
|
|
Gross ton miles (GTMs) (millions) |
109,740 |
115,348 |
|
331,839 |
333,067 |
Revenue ton miles (RTMs) (millions) |
55,334 |
58,946 |
|
168,176 |
172,361 |
Carloads (thousands) |
1,393 |
1,475 |
|
4,160 |
4,177 |
Route miles (includes Canada and the
U.S.) |
19,600 |
19,600 |
|
19,600 |
19,600 |
Employees (end of period) |
23,929 |
25,032 |
|
23,929 |
25,032 |
Employees (average for the period) |
24,305 |
24,915 |
|
24,905 |
24,412 |
|
|
|
|
|
|
Key operating measures |
|
|
|
|
|
Rail freight revenue per RTM (cents) |
5.44 |
4.95 |
|
5.30 |
4.90 |
Rail freight revenue per carload ($) |
2,162 |
1,980 |
|
2,144 |
2,021 |
GTMs per average number of employees
(thousands) |
4,515 |
4,630 |
|
13,324 |
13,644 |
Operating expenses per GTM (cents) |
1.58 |
1.59 |
|
1.67 |
1.67 |
Labor and fringe benefits expense per GTM
(cents) |
0.54 |
0.50 |
|
0.54 |
0.52 |
Diesel fuel consumed (US gallons in
millions) |
98.8 |
108.1 |
|
319.1 |
327.3 |
Average fuel price ($ per US gallon) |
2.58 |
3.62 |
|
2.72 |
3.80 |
GTMs per US gallon of fuel consumed |
1,111 |
1,067 |
|
1,040 |
1,018 |
Terminal dwell (hours) |
14.2 |
16.0 |
|
15.2 |
17.0 |
Train velocity (miles per hour) |
26.9 |
26.3 |
|
26.0 |
25.5 |
|
|
|
|
|
|
Safety indicators
(3) |
|
|
|
|
|
Injury frequency rate (per 200,000 person
hours) |
1.90 |
2.15 |
|
1.66 |
1.91 |
Accident rate(per million train miles) |
1.79 |
3.24 |
|
2.25 |
2.69 |
(1) See supplementary schedule entitled Non-GAAP
Measures for an explanation of this non-GAAP
measure. |
(2) 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. |
(3) Based on Federal
Railroad Administration (FRA) reporting criteria.
|
Supplementary Information - unaudited
|
|
|
Three
months ended September 30 |
|
Nine
months ended September 30 |
|
|
|
2015 |
|
2014 |
|
% Change
Fav (Unfav) |
|
% Change at
constant
currency
Fav (Unfav) (1) |
|
2015 |
|
2014 |
|
% Change
Fav (Unfav) |
|
% Change at
constant
currency
Fav (Unfav) (1) |
Revenues ($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
|
|
609 |
|
594 |
|
3% |
|
(9%) |
|
1,838 |
|
1,726 |
|
6% |
|
(3%) |
Metals and minerals |
|
|
377 |
|
388 |
|
(3%) |
|
(15%) |
|
1,105 |
|
1,066 |
|
4% |
|
(7%) |
Forest products |
|
|
441 |
|
393 |
|
12% |
|
(2%) |
|
1,283 |
|
1,125 |
|
14% |
|
3% |
Coal |
|
|
161 |
|
185 |
|
(13%) |
|
(23%) |
|
468 |
|
568 |
|
(18%) |
|
(25%) |
Grain and fertilizers |
|
|
479 |
|
469 |
|
2% |
|
(7%) |
|
1,503 |
|
1,426 |
|
5% |
|
(1%) |
Intermodal |
|
|
764 |
|
731 |
|
5% |
|
(2%) |
|
2,181 |
|
2,068 |
|
5% |
|
- |
Automotive |
|
|
180 |
|
160 |
|
13% |
|
(2%) |
|
540 |
|
461 |
|
17% |
|
5% |
Total rail freight revenues |
|
|
3,011 |
|
2,920 |
|
3% |
|
(7%) |
|
8,918 |
|
8,440 |
|
6% |
|
(3%) |
Other revenues |
|
|
211 |
|
198 |
|
7% |
|
(7%) |
|
527 |
|
487 |
|
8% |
|
(2%) |
Total revenues |
|
|
3,222 |
|
3,118 |
|
3% |
|
(7%) |
|
9,445 |
|
8,927 |
|
6% |
|
(3%) |
Revenue ton miles (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
|
|
12,445 |
|
13,576 |
|
(8%) |
|
(8%) |
|
38,487 |
|
39,234 |
|
(2%) |
|
(2%) |
Metals and minerals |
|
|
5,626 |
|
6,664 |
|
(16%) |
|
(16%) |
|
16,767 |
|
17,691 |
|
(5%) |
|
(5%) |
Forest products |
|
|
7,647 |
|
7,581 |
|
1% |
|
1% |
|
22,494 |
|
21,718 |
|
4% |
|
4% |
Coal |
|
|
4,122 |
|
5,289 |
|
(22%) |
|
(22%) |
|
12,248 |
|
16,316 |
|
(25%) |
|
(25%) |
Grain and fertilizers |
|
|
11,399 |
|
12,116 |
|
(6%) |
|
(6%) |
|
36,126 |
|
37,502 |
|
(4%) |
|
(4%) |
Intermodal |
|
|
13,221 |
|
12,868 |
|
3% |
|
3% |
|
39,307 |
|
37,577 |
|
5% |
|
5% |
Automotive |
|
|
874 |
|
852 |
|
3% |
|
3% |
|
2,747 |
|
2,323 |
|
18% |
|
18% |
Total revenue ton miles |
|
|
55,334 |
|
58,946 |
|
(6%) |
|
(6%) |
|
168,176 |
|
172,361 |
|
(2%) |
|
(2%) |
Rail freight revenue / RTM
(cents) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
|
|
4.89 |
|
4.38 |
|
12% |
|
(1%) |
|
4.78 |
|
4.40 |
|
9% |
|
(1%) |
Metals and minerals |
|
|
6.70 |
|
5.82 |
|
15% |
|
1% |
|
6.59 |
|
6.03 |
|
9% |
|
(2%) |
Forest products |
|
|
5.77 |
|
5.18 |
|
11% |
|
(3%) |
|
5.70 |
|
5.18 |
|
10% |
|
(1%) |
Coal |
|
|
3.91 |
|
3.50 |
|
12% |
|
(2%) |
|
3.82 |
|
3.48 |
|
10% |
|
- |
Grain and fertilizers |
|
|
4.20 |
|
3.87 |
|
9% |
|
(1%) |
|
4.16 |
|
3.80 |
|
9% |
|
2% |
Intermodal |
|
|
5.78 |
|
5.68 |
|
2% |
|
(5%) |
|
5.55 |
|
5.50 |
|
1% |
|
(4%) |
Automotive |
|
|
20.59 |
|
18.78 |
|
10% |
|
(4%) |
|
19.66 |
|
19.85 |
|
(1%) |
|
(11%) |
Total rail freight revenue per RTM |
|
|
5.44 |
|
4.95 |
|
10% |
|
(1%) |
|
5.30 |
|
4.90 |
|
8% |
|
- |
Carloads (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
|
|
161 |
|
168 |
|
(4%) |
|
(4%) |
|
483 |
|
489 |
|
(1%) |
|
(1%) |
Metals and minerals |
|
|
221 |
|
295 |
|
(25%) |
|
(25%) |
|
701 |
|
769 |
|
(9%) |
|
(9%) |
Forest products |
|
|
111 |
|
111 |
|
- |
|
- |
|
332 |
|
324 |
|
2% |
|
2% |
Coal |
|
|
113 |
|
126 |
|
(10%) |
|
(10%) |
|
333 |
|
392 |
|
(15%) |
|
(15%) |
Grain and fertilizers |
|
|
143 |
|
153 |
|
(7%) |
|
(7%) |
|
444 |
|
465 |
|
(5%) |
|
(5%) |
Intermodal |
|
|
584 |
|
563 |
|
4% |
|
4% |
|
1,687 |
|
1,567 |
|
8% |
|
8% |
Automotive |
|
|
60 |
|
59 |
|
2% |
|
2% |
|
180 |
|
171 |
|
5% |
|
5% |
Total carloads |
|
|
1,393 |
|
1,475 |
|
(6%) |
|
(6%) |
|
4,160 |
|
4,177 |
|
- |
|
- |
Rail freight revenue / carload
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
|
|
3,783 |
|
3,536 |
|
7% |
|
(5%) |
|
3,805 |
|
3,530 |
|
8% |
|
(2%) |
Metals and minerals |
|
|
1,706 |
|
1,315 |
|
30% |
|
13% |
|
1,576 |
|
1,386 |
|
14% |
|
2% |
Forest products |
|
|
3,973 |
|
3,541 |
|
12% |
|
(2%) |
|
3,864 |
|
3,472 |
|
11% |
|
- |
Coal |
|
|
1,425 |
|
1,468 |
|
(3%) |
|
(14%) |
|
1,405 |
|
1,449 |
|
(3%) |
|
(12%) |
Grain and fertilizers |
|
|
3,350 |
|
3,065 |
|
9% |
|
- |
|
3,385 |
|
3,067 |
|
10% |
|
3% |
Intermodal |
|
|
1,308 |
|
1,298 |
|
1% |
|
(6%) |
|
1,293 |
|
1,320 |
|
(2%) |
|
(7%) |
Automotive |
|
|
3,000 |
|
2,712 |
|
11% |
|
(4%) |
|
3,000 |
|
2,696 |
|
11% |
|
- |
Total rail freight revenue per carload |
|
|
2,162 |
|
1,980 |
|
9% |
|
(2%) |
|
2,144 |
|
2,021 |
|
6% |
|
(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) See supplementary
schedule entitled Non-GAAP Measures for an explanation of this
non-GAAP measure.
|
Non-GAAP Measures - unaudited
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. The reader is advised to
read all information provided in the Company's 2015 unaudited
Interim Consolidated Financial Statements, and Notes thereto.
For the three and nine months ended September 30, 2015, the Company reported adjusted
net income of $1,007 million, or
$1.26 per diluted share and
$2,639 million, or $3.26 per diluted share, respectively. The
adjusted figures for the nine months ended September 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.
For the three and nine months ended September 30, 2014, the Company reported adjusted
net income of $853 million, or
$1.04 per diluted share and
$2,251 million, or $2.72 per diluted share, respectively. The
adjusted figures for the nine months ended September 30, 2014 exclude a gain on disposal of
the Deux-Montagnes subdivision,
including the Mont-Royal tunnel,
together with the rail fixtures (collectively the
"Deux-Montagnes"), of $80 million, or
$72 million after-tax ($0.09 per diluted share).
The following table provides a reconciliation of
net income and earnings per share, as reported for the three and
nine months ended September 30, 2015
and 2014, to the adjusted performance measures presented
herein.
|
|
|
|
|
Three
months ended September 30 |
|
Nine
months ended September 30 |
In millions, except per share
data |
|
|
|
|
2015 |
|
2014 |
|
|
2015 |
|
2014 |
Net income as reported |
|
|
|
$ |
1,007 |
$ |
853 |
|
$ |
2,597 |
$ |
2,323 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
|
|
- |
|
- |
|
|
- |
|
(80) |
|
Income tax expense |
|
|
|
|
- |
|
- |
|
|
42 |
|
8 |
Adjusted net income |
|
|
|
$ |
1,007 |
$ |
853 |
|
$ |
2,639 |
$ |
2,251 |
Basic earnings per share as
reported |
|
|
|
$ |
1.26 |
$ |
1.04 |
|
$ |
3.23 |
$ |
2.83 |
Impact of adjustments, per
share |
|
|
|
|
- |
|
- |
|
|
0.05 |
|
(0.09) |
Adjusted basic earnings per
share |
|
|
|
$ |
1.26 |
$ |
1.04 |
|
$ |
3.28 |
$ |
2.74 |
Diluted earnings per share as
reported |
|
|
|
$ |
1.26 |
$ |
1.04 |
|
$ |
3.21 |
$ |
2.81 |
Impact of adjustments, per
share |
|
|
|
|
- |
|
- |
|
|
0.05 |
|
(0.09) |
Adjusted diluted earnings per
share |
|
|
|
$ |
1.26 |
$ |
1.04 |
|
$ |
3.26 |
$ |
2.72 |
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 $1.31 and $1.26 per
US$1.00, respectively, for the three
and nine months ended September 30,
2015, and $1.09 per
US$1.00, for both the three and nine
months ended September 30, 2014.
On a constant currency basis, the Company's net
income for the three and nine months ended September 30, 2015 would have been lower by
$107 million ($0.13 per diluted share) and $227 million ($0.28
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 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.
|
|
|
Three months ended September 30 |
|
Nine months ended September 30 |
In millions |
|
|
|
2015 |
|
2014 |
|
|
2015 |
|
2014 |
Net cash provided by operating activities |
|
|
$ |
1,652 |
$ |
1,328 |
|
$ |
3,847 |
$ |
3,246 |
Net cash used in investing activities |
|
|
|
(1,023) |
|
(552) |
|
|
(2,166) |
|
(1,220) |
Net cash provided before financing
activities |
|
|
|
629 |
|
776 |
|
|
1,681 |
|
2,026 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment: Change in
restricted cash and cash equivalents |
|
|
|
61 |
|
(1) |
|
|
60 |
|
19 |
Free cash flow |
|
|
$ |
690 |
$ |
775 |
|
$ |
1,741 |
$ |
2,045 |
Credit measures
Management believes that the adjusted debt-to-total capitalization
ratio is a useful credit measure that aims to show the true
leverage of the Company. Similarly, the adjusted debt-to-adjusted
earnings before interest, income taxes, depreciation and
amortization (EBITDA) multiple is another useful credit measure
because it reflects the Company's ability to service its debt. The
Company excludes Other income in the calculation of 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.
Adjusted debt-to-total capitalization
ratio |
|
|
|
|
|
|
|
|
|
September 30, |
|
2015 |
|
|
2014 |
Debt-to-total capitalization ratio
(1) |
|
|
|
42.0% |
|
|
36.3% |
Add: Impact of present
value of operating lease commitments (2) |
|
|
|
1.5% |
|
|
1.7% |
Adjusted debt-to-total capitalization
ratio |
|
|
|
43.5% |
|
|
38.0% |
|
|
|
|
|
|
|
|
Adjusted debt-to-adjusted EBITDA
multiple |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions, unless otherwise
indicated |
|
Twelve months ended September
30, |
|
2015 |
|
|
2014 |
Debt |
|
|
$ |
10,486 |
|
$ |
7,841 |
Add: Present value of operating lease
commitments (2) |
|
|
|
668 |
|
|
583 |
Adjusted debt |
|
|
$ |
11,154 |
|
$ |
8,424 |
|
|
|
|
|
|
|
|
Operating income |
|
|
$ |
5,172 |
|
$ |
4,331 |
Add: Depreciation and amortization |
|
|
|
1,147 |
|
|
1,025 |
EBITDA (excluding Other income) |
|
|
|
6,319 |
|
|
5,356 |
Add: Deemed interest on operating
leases |
|
|
|
31 |
|
|
29 |
Adjusted EBITDA |
|
|
$ |
6,350 |
|
$ |
5,385 |
Adjusted debt-to-adjusted EBITDA multiple |
|
|
|
1.76 times |
|
|
1.56 times |
(1) Debt-to-total capitalization is calculated
as total Long-term debt plus Current portion of long-term debt,
divided by the sum of total
debt plus Total shareholders'
equity. |
(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-total capitalization ratio at September 30, 2015, as compared to the same
period in 2014, was mainly due to an increased debt level,
reflecting a weaker Canadian-to-US dollar foreign exchange rate in
effect at the balance sheet date and the issuance of $850 million of notes. The Company's adjusted
debt-to-adjusted EBITDA multiple also increased, which was driven
by the increased debt level as at September
30, 2015 as compared to September 30,
2014, partly offset by a higher operating income earned for
the twelve months ended September 30,
2015, as compared to the twelve months ended September 30, 2014.
SOURCE CN