CN (TSX: CNR) (NYSE: CNI) today reported its financial and
operating results for the second quarter ended June 30, 2024.
“I am encouraged by our quarterly volume gains,
particularly our CN specific growth initiatives. Our team of
railroaders has continued to deliver outstanding service to our
customers despite some transient challenges on a key portion of our
Western Region that impacted our costs, and traffic diversions due
to ongoing labor uncertainty. As we look forward, we are focused on
the disciplined execution of our plan, delivering sustainable
growth, and resolving labor uncertainty.”
- Tracy Robinson,
President and Chief Executive Officer, CN
Quarterly highlights
- Revenue ton miles (RTMs) of 59,936
(millions), an increase of 7%.
- Revenues of C$4,329 million, an
increase of C$272 million, or 7%.
- Operating income of C$1,558
million, a decrease of C$42 million or 3% and adjusted operating
income of C$1,636 million, an increase of C$36 million or 2%.
(1)
- Operating ratio, defined as
operating expenses as a percentage of revenues, of 64.0%, an
increase of 3.4-points and adjusted operating ratio of 62.2%, an
increase of 1.6-points. (1)
- Diluted earnings per share (EPS) of
C$1.75, a decrease of 1% and adjusted diluted earnings per share of
C$1.84, an increase of 5%. (1)
Updated 2024 guidance and reiterated
long-term financial outlook (1)
(2)Accounting for second quarter results and the ongoing volume
impact of the current labor uncertainty, CN now expects to deliver
adjusted diluted EPS growth in the mid to high single-digit range
(compared to its April 23, 2024 expectation of approximately 10%).
The Company continues to expect to invest approximately C$3.5
billion in its capital program, net of amounts reimbursed by
customers. The Company now expects adjusted return on invested
capital (ROIC) to be approximately 15% (compared to its April 23,
2024 expectation to be within the targeted range of 15%-17%).
CN reiterates its longer-term financial
perspective and continues to target compounded annual diluted EPS
growth in the range of 10%-15% over the 2024-2026 period driven by
growing volumes more than the economy, pricing above rail inflation
and incrementally improving efficiency, all of which assumes a
supportive economy. CN continues to target ROIC in the range of
15%-17%. (2)
CONFERENCE CALL DETAILSCN's
senior officers will review the results and the railway's outlook
in a conference call starting at 4:30 p.m. Eastern Time on July 23.
Tracy Robinson, CN President and Chief Executive Officer, will lead
the call. Parties wishing to participate via telephone may dial
1-800-715-9871 (Canada/U.S.), or 1-647-932-3411 (International),
using 2135176 as the passcode. Participants are advised to dial in
10 minutes prior to the call.
(1) Non-GAAP MeasuresCN reports
its financial results in accordance with United States generally
accepted accounting principles (GAAP). CN uses non-GAAP measures in
this news release that do not have any standardized meaning
prescribed by GAAP, including adjusted earnings per share (EPS),
adjusted operating income and adjusted operating ratio (referred to
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.
CN's full-year adjusted diluted EPS outlook and
full-year adjusted ROIC outlook (2) exclude certain adjustments,
which are expected to be comparable to adjustments made in prior
years. However, management cannot individually quantify on a
forward-looking basis the impact of these adjustments on its
adjusted diluted EPS or its adjusted ROIC because these items,
which could be significant, are difficult to predict and may be
highly variable. As a result, CN does not provide a corresponding
GAAP measure for, or reconciliation to, its adjusted diluted EPS
outlook or its adjusted ROIC outlook.
(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, including statements based on
management’s assessment and assumptions and publicly available
information with respect to CN. By their nature, forward-looking
statements involve risks, uncertainties and assumptions. CN
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.
2024 key assumptionsCN has made
a number of economic and market assumptions in preparing its 2024
outlook. The Company continues to assume slightly positive North
American industrial production in 2024. For the 2023/2024 crop
year, the grain crop in Canada was below its three-year average
(also below when excluding the significantly lower 2021/2022 crop
year) and the U.S. grain crop was above its three-year average. The
Company continues to assume that the 2024/2025 grain crop in Canada
will be in line with its three-year average (excluding the
significantly lower 2021/2022 crop year) and now assumes that the
U.S. grain crop will be above its three-year average (compared to
its April 23, 2024 assumption that the 2024/2025 grain crop in the
U.S. will be in line with its three-year average). CN now assumes
RTM growth will be in the range of 3%-5% (compared to its April 23,
2024 assumption of mid-single digit growth). CN assumes continued
pricing above rail inflation upon contract renewals. CN also
continues to assume that in 2024, the value of the Canadian dollar
in U.S. currency will be approximately $0.75, and that in 2024 the
average price of crude oil (West Texas Intermediate) will
be in the range of US$80 - US$90 per barrel. Additionally, CN
assumes that there will be no rail or port labor disruptions in
2024.
2024-2026 key assumptionsCN has
made a number of economic and market assumptions in preparing its
three-year financial perspective. CN assumes that the North
American industrial production will increase by at least two
percent CAGR over the 2024 to 2026 period. CN assumes continued
pricing above rail inflation. CN assumes that the value of the
Canadian dollar in U.S. currency will be approximately $0.75 and
that the average price of crude oil (West Texas Intermediate) will
be approximately US$80 per barrel during this period.
Forward-looking statements are not guarantees of
future performance and involve risks, uncertainties and other
factors which may cause actual results, performance or achievements
of CN to be materially different from the outlook or any future
results, performance or achievements 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 in this news release include,
but are not limited to, general economic and business conditions,
including factors impacting global supply chains such as pandemics
and geopolitical conflicts and tensions; 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 and other types of claims and litigation; risks and
liabilities arising from derailments; timing and completion of
capital programs; the availability of and cost competitiveness of
renewable fuels and the development of new locomotive propulsion
technology; reputational risks; supplier concentration; pension
funding requirements and volatility; and other risks detailed from
time to time in reports filed by CN with securities regulators in
Canada and the United States. Reference should also 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 relating to
CN.
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.
Information contained on, or accessible through, our website is not
incorporated by reference into this news release.
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.sedarplus.ca as well as on the U.S. Securities and
Exchange Commission's website at www.sec.gov through
EDGAR.
About CNCN powers the economy
by safely transporting more than 300 million tons of natural
resources, manufactured products, and finished goods throughout
North America every year for its customers. With its nearly
20,000-mile rail network and related transportation services, CN
connects Canada’s Eastern and Western coasts with the U.S. Midwest
and the Gulf of Mexico, contributing to sustainable trade and the
prosperity of the communities in which it operates since 1919.
|
Contacts: |
|
| Media |
Investment
Community |
| Jonathan Abecassis |
Stacy Alderson |
| Director |
Assistant Vice-President |
| Public Affairs and Media
Relations |
Investor Relations |
| (438) 455-3692 |
(514) 399-0052 |
| media@cn.ca |
investor.relations@cn.ca |
| |
|
SELECTED RAILROAD STATISTICS – UNAUDITED
|
|
Three months ended June 30 |
Six months ended June 30 |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Financial measures |
|
|
|
|
|
|
|
|
|
Key financial performance indicators
(1) |
|
|
|
|
|
|
|
|
|
Total revenues ($ millions) |
4,329 |
|
4,057 |
|
8,578 |
|
8,370 |
|
|
Freight revenues ($ millions) |
4,153 |
|
3,894 |
|
8,290 |
|
8,113 |
|
|
Operating income ($ millions) |
1,558 |
|
1,600 |
|
3,104 |
|
3,262 |
|
|
Adjusted operating income ($ millions) (2)(3) |
1,636 |
|
1,600 |
|
3,182 |
|
3,262 |
|
|
Net income ($ millions) |
1,114 |
|
1,167 |
|
2,217 |
|
2,387 |
|
|
Adjusted net income ($ millions) (2)(3) |
1,172 |
|
1,167 |
|
2,275 |
|
2,387 |
|
|
Diluted earnings per share ($) |
1.75 |
|
1.76 |
|
3.47 |
|
3.58 |
|
|
Adjusted diluted earnings per share ($) (2)(3) |
1.84 |
|
1.76 |
|
3.56 |
|
3.58 |
|
|
Free cash flow ($ millions) (2)(4) |
947 |
|
1,100 |
|
1,476 |
|
1,693 |
|
|
Gross property additions ($ millions) |
853 |
|
875 |
|
1,429 |
|
1,336 |
|
|
Share repurchases ($ millions) |
1,116 |
|
1,043 |
|
2,071 |
|
2,242 |
|
|
Dividends per share ($) |
0.8450 |
|
0.7900 |
|
1.6900 |
|
1.5800 |
|
|
Financial ratio |
|
|
|
|
|
|
|
|
|
Operating ratio (%) (5) |
64.0 |
|
60.6 |
|
63.8 |
|
61.0 |
|
|
Adjusted operating ratio (%) (2)(3) |
62.2 |
|
60.6 |
|
62.9 |
|
61.0 |
|
|
Operational measures (6) |
|
|
|
|
|
|
|
|
|
Statistical operating data |
|
|
|
|
|
|
|
|
|
Gross ton miles (GTMs) (millions) |
117,852 |
|
109,693 |
|
233,479 |
|
225,135 |
|
|
Revenue ton miles (RTMs) (millions) |
59,936 |
|
55,877 |
|
119,685 |
|
115,838 |
|
|
Carloads (thousands) |
1,419 |
|
1,369 |
|
2,762 |
|
2,722 |
|
|
Route miles (includes Canada and the U.S.) |
18,800 |
|
18,600 |
|
18,800 |
|
18,600 |
|
|
Employees (end of period) |
25,656 |
|
25,178 |
|
25,656 |
|
25,178 |
|
|
Employees (average for the period) |
25,570 |
|
25,005 |
|
25,381 |
|
24,704 |
|
|
Key operating measures |
|
|
|
|
|
|
|
|
|
Freight revenue per RTM (cents) |
6.93 |
|
6.97 |
|
6.93 |
|
7.00 |
|
|
Freight revenue per carload ($) |
2,927 |
|
2,844 |
|
3,001 |
|
2,981 |
|
|
GTMs per average number of employees (thousands) |
4,609 |
|
4,387 |
|
9,199 |
|
9,113 |
|
|
Operating expenses per GTM (cents) |
2.35 |
|
2.24 |
|
2.34 |
|
2.27 |
|
|
Labor and fringe benefits expense per GTM (cents) |
0.72 |
|
0.68 |
|
0.75 |
|
0.69 |
|
|
Diesel fuel consumed (US gallons in millions) |
103.0 |
|
97.4 |
|
206.6 |
|
201.5 |
|
|
Average fuel price ($ per US gallon) |
4.57 |
|
4.24 |
|
4.54 |
|
4.52 |
|
|
Fuel efficiency (US gallons of locomotive fuel consumed per 1,000
GTMs) |
0.874 |
|
0.888 |
|
0.885 |
|
0.895 |
|
|
Train weight (tons) |
9,097 |
|
9,062 |
|
9,092 |
|
9,099 |
|
|
Train length (feet) |
8,015 |
|
7,934 |
|
7,902 |
|
7,843 |
|
|
Car velocity (car miles per day) |
210 |
|
216 |
|
208 |
|
213 |
|
|
Through dwell (entire railroad, hours) |
6.9 |
|
6.8 |
|
7.0 |
|
6.9 |
|
|
Through network train speed (miles per hour) |
18.3 |
|
19.9 |
|
18.5 |
|
20.0 |
|
|
Locomotive utilization (trailing GTMs per total horsepower) |
188 |
|
189 |
|
188 |
|
192 |
|
|
Safety indicators (7) |
|
|
|
|
|
|
|
|
|
Injury frequency rate (per 200,000 person hours) |
1.17 |
|
1.04 |
|
1.16 |
|
1.01 |
|
|
Accident rate (per million train miles) |
1.54 |
|
1.98 |
|
1.61 |
|
1.75 |
|
|
(1) |
Amounts expressed in Canadian dollars and prepared in accordance
with United States generally accepted accounting principles (GAAP),
unless otherwise noted. |
|
(2) |
These non-GAAP measures do not have any standardized meaning
prescribed by GAAP and therefore, may not be comparable to similar
measures presented by other companies. |
|
(3) |
See the supplementary schedule entitled Non-GAAP Measures –
Adjusted performance measures for an explanation of these non-GAAP
measures. |
|
(4) |
See the supplementary schedule entitled Non-GAAP Measures – Free
cash flow for an explanation of this non-GAAP measure. |
|
(5) |
Operating ratio is defined as operating expenses as a percentage of
revenues. |
|
(6) |
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, revenue ton
miles, freight revenue per RTM, 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. |
|
(7) |
Based on Federal Railroad Administration (FRA) reporting
criteria. |
|
|
|
SUPPLEMENTARY INFORMATION – UNAUDITED
|
|
Three months ended June 30 |
Six months ended June 30 |
|
|
2024 |
|
2023 |
|
% Change Fav (Unfav) |
|
% Change at constant currency (1) Fav (Unfav) |
|
2024 |
|
2023 |
|
% Change Fav (Unfav) |
|
% Change at constant currency (1) Fav (Unfav) |
|
|
Revenues ($ millions) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
850 |
|
748 |
|
14 |
% |
12 |
% |
1,707 |
|
1,576 |
|
8 |
% |
8 |
% |
|
Metals and minerals |
528 |
|
497 |
|
6 |
% |
5 |
% |
1,058 |
|
1,026 |
|
3 |
% |
3 |
% |
|
Forest products |
501 |
|
480 |
|
4 |
% |
3 |
% |
995 |
|
991 |
|
— |
% |
— |
% |
|
Coal |
241 |
|
263 |
|
(8 |
%) |
(9 |
%) |
462 |
|
526 |
|
(12 |
%) |
(12 |
%) |
|
Grain and fertilizers |
738 |
|
688 |
|
7 |
% |
7 |
% |
1,598 |
|
1,549 |
|
3 |
% |
3 |
% |
|
Intermodal |
1,040 |
|
983 |
|
6 |
% |
5 |
% |
1,999 |
|
1,995 |
|
— |
% |
— |
% |
|
Automotive |
255 |
|
235 |
|
9 |
% |
7 |
% |
471 |
|
450 |
|
5 |
% |
4 |
% |
|
Total freight revenues |
4,153 |
|
3,894 |
|
7 |
% |
6 |
% |
8,290 |
|
8,113 |
|
2 |
% |
2 |
% |
|
Other revenues |
176 |
|
163 |
|
8 |
% |
7 |
% |
288 |
|
257 |
|
12 |
% |
11 |
% |
|
Total revenues |
4,329 |
|
4,057 |
|
7 |
% |
6 |
% |
8,578 |
|
8,370 |
|
2 |
% |
2 |
% |
|
Revenue ton miles (RTMs) (millions) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
11,651 |
|
10,426 |
|
12 |
% |
12 |
% |
23,365 |
|
21,445 |
|
9 |
% |
9 |
% |
|
Metals and minerals |
7,558 |
|
6,740 |
|
12 |
% |
12 |
% |
14,908 |
|
13,828 |
|
8 |
% |
8 |
% |
|
Forest products |
5,751 |
|
5,754 |
|
— |
% |
— |
% |
11,520 |
|
11,810 |
|
(2 |
%) |
(2 |
%) |
|
Coal |
5,293 |
|
5,965 |
|
(11 |
%) |
(11 |
%) |
9,931 |
|
11,813 |
|
(16 |
%) |
(16 |
%) |
|
Grain and fertilizers |
14,586 |
|
13,592 |
|
7 |
% |
7 |
% |
31,618 |
|
30,610 |
|
3 |
% |
3 |
% |
|
Intermodal |
14,214 |
|
12,611 |
|
13 |
% |
13 |
% |
26,745 |
|
24,870 |
|
8 |
% |
8 |
% |
|
Automotive |
883 |
|
789 |
|
12 |
% |
12 |
% |
1,598 |
|
1,462 |
|
9 |
% |
9 |
% |
|
Total RTMs |
59,936 |
|
55,877 |
|
7 |
% |
7 |
% |
119,685 |
|
115,838 |
|
3 |
% |
3 |
% |
|
Freight revenue / RTM (cents) (2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
7.30 |
|
7.17 |
|
2 |
% |
1 |
% |
7.31 |
|
7.35 |
|
(1 |
%) |
(1 |
%) |
|
Metals and minerals |
6.99 |
|
7.37 |
|
(5 |
%) |
(7 |
%) |
7.10 |
|
7.42 |
|
(4 |
%) |
(5 |
%) |
|
Forest products |
8.71 |
|
8.34 |
|
4 |
% |
3 |
% |
8.64 |
|
8.39 |
|
3 |
% |
2 |
% |
|
Coal |
4.55 |
|
4.41 |
|
3 |
% |
3 |
% |
4.65 |
|
4.45 |
|
4 |
% |
4 |
% |
|
Grain and fertilizers |
5.06 |
|
5.06 |
|
— |
% |
(1 |
%) |
5.05 |
|
5.06 |
|
— |
% |
— |
% |
|
Intermodal |
7.32 |
|
7.79 |
|
(6 |
%) |
(7 |
%) |
7.47 |
|
8.02 |
|
(7 |
%) |
(7 |
%) |
|
Automotive |
28.88 |
|
29.78 |
|
(3 |
%) |
(5 |
%) |
29.47 |
|
30.78 |
|
(4 |
%) |
(5 |
%) |
|
Total freight revenue / RTM |
6.93 |
|
6.97 |
|
(1 |
%) |
(1 |
%) |
6.93 |
|
7.00 |
|
(1 |
%) |
(1 |
%) |
|
Carloads (thousands) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
162 |
|
151 |
|
7 |
% |
7 |
% |
327 |
|
312 |
|
5 |
% |
5 |
% |
|
Metals and minerals |
247 |
|
248 |
|
— |
% |
— |
% |
487 |
|
485 |
|
— |
% |
— |
% |
|
Forest products |
77 |
|
77 |
|
— |
% |
— |
% |
155 |
|
158 |
|
(2 |
%) |
(2 |
%) |
|
Coal |
115 |
|
132 |
|
(13 |
%) |
(13 |
%) |
227 |
|
262 |
|
(13 |
%) |
(13 |
%) |
|
Grain and fertilizers |
162 |
|
152 |
|
7 |
% |
7 |
% |
333 |
|
330 |
|
1 |
% |
1 |
% |
|
Intermodal |
597 |
|
550 |
|
9 |
% |
9 |
% |
1,124 |
|
1,062 |
|
6 |
% |
6 |
% |
|
Automotive |
59 |
|
59 |
|
— |
% |
— |
% |
109 |
|
113 |
|
(4 |
%) |
(4 |
%) |
|
Total carloads |
1,419 |
|
1,369 |
|
4 |
% |
4 |
% |
2,762 |
|
2,722 |
|
1 |
% |
1 |
% |
|
Freight revenue / carload ($) (2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
5,247 |
|
4,954 |
|
6 |
% |
5 |
% |
5,220 |
|
5,051 |
|
3 |
% |
3 |
% |
|
Metals and minerals |
2,138 |
|
2,004 |
|
7 |
% |
5 |
% |
2,172 |
|
2,115 |
|
3 |
% |
2 |
% |
|
Forest products |
6,506 |
|
6,234 |
|
4 |
% |
3 |
% |
6,419 |
|
6,272 |
|
2 |
% |
2 |
% |
|
Coal |
2,096 |
|
1,992 |
|
5 |
% |
5 |
% |
2,035 |
|
2,008 |
|
1 |
% |
1 |
% |
|
Grain and fertilizers |
4,556 |
|
4,526 |
|
1 |
% |
— |
% |
4,799 |
|
4,694 |
|
2 |
% |
2 |
% |
|
Intermodal |
1,742 |
|
1,787 |
|
(3 |
%) |
(3 |
%) |
1,778 |
|
1,879 |
|
(5 |
%) |
(6 |
%) |
|
Automotive |
4,322 |
|
3,983 |
|
9 |
% |
7 |
% |
4,321 |
|
3,982 |
|
9 |
% |
8 |
% |
|
Total freight revenue / carload |
2,927 |
|
2,844 |
|
3 |
% |
2 |
% |
3,001 |
|
2,981 |
|
1 |
% |
— |
% |
|
(1) |
This non-GAAP measure does not have any standardized meaning
prescribed by GAAP and therefore, may not be comparable to similar
measures presented by other companies. See the supplementary
schedule entitled Non-GAAP Measures – Constant currency 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, free cash flow, constant currency and
adjusted debt-to-adjusted 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
Adjusted net income, adjusted diluted earnings
per share, adjusted operating income, adjusted operating expenses
and adjusted operating ratio are non-GAAP measures that are used to
set performance goals and to measure CN's performance. Management
believes that these adjusted performance measures provide
additional insight to management and investors into the Company's
operations and underlying business trends as well as facilitate
period-to-period comparisons, as they exclude certain significant
items that are not reflective of CN's underlying business
operations and could distort the analysis of trends in business
performance. These items may include:
- operating expense adjustments: workforce reduction program,
depreciation expense on the deployment of replacement system,
advisory fees related to shareholder matters, losses and recoveries
from assets held for sale, business acquisition-related costs;
- non-operating expense adjustments: business acquisition-related
financing fees, merger termination income, gains and losses on
disposal of property; and
- the effect of changes in tax laws including rate enactments,
and changes in tax positions affecting prior
years.
These non-GAAP 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,
2024, the Company's adjusted net income was $1,172 million, or
$1.84 per diluted share, and $2,275 million, or $3.56 per diluted
share, respectively. The adjusted figures for the three and six
months ended June 30, 2024 exclude a loss on assets held for sale
of $78 million, or $58 million after-tax ($0.09 per diluted share)
resulting from an agreement to transfer the ownership and related
risks and obligations of the Quebec Bridge located in Quebec,
Canada, to the Government of Canada. See Note 4 – Assets held for
sale to the Company's unaudited Interim Consolidated Financial
Statements for additional information.
For the three and six months ended June 30,
2023, the Company's net income was $1,167 million, or $1.76 per
diluted share, and $2,387 million, or $3.58 per diluted share,
respectively. There were no adjustments in the second quarter and
the first half of 2023.
Adjusted net income is defined as Net income in
accordance with GAAP adjusted for certain significant items.
Adjusted diluted earnings per share is defined as adjusted net
income divided by the weighted-average diluted shares outstanding.
The following table provides a reconciliation of Net income and
Earnings per share in accordance with GAAP, as reported for the
three and six months ended June 30, 2024 and 2023, to the non-GAAP
adjusted performance measures presented herein:
|
|
Three months ended June 30 |
Six months ended June 30 |
|
In millions, except per share data |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Net income |
$ |
1,114 |
|
$ |
1,167 |
|
$ |
2,217 |
|
$ |
2,387 |
|
|
Adjustments: |
|
|
|
|
|
Loss on assets held for sale |
|
78 |
|
|
— |
|
|
78 |
|
|
— |
|
|
Tax effect of adjustments (1) |
|
(20 |
) |
|
— |
|
|
(20 |
) |
|
— |
|
|
Total adjustments |
|
58 |
|
|
— |
|
|
58 |
|
|
— |
|
|
Adjusted net income |
$ |
1,172 |
|
$ |
1,167 |
|
$ |
2,275 |
|
$ |
2,387 |
|
|
Diluted earnings per share |
$ |
1.75 |
|
$ |
1.76 |
|
$ |
3.47 |
|
$ |
3.58 |
|
|
Impact of adjustments, per share |
|
0.09 |
|
|
— |
|
|
0.09 |
|
|
— |
|
|
Adjusted diluted earnings per share |
$ |
1.84 |
|
$ |
1.76 |
|
$ |
3.56 |
|
$ |
3.58 |
|
|
(1) |
The tax impact of adjustments is based on the nature of the item
for tax purposes and related tax rates in the applicable
jurisdiction. |
|
|
|
Adjusted operating income is defined as
Operating income in accordance with GAAP adjusted for certain
significant operating expense items that are not reflective of CN's
underlying business operations. Adjusted operating expenses is
defined as Operating expenses in accordance with GAAP adjusted for
certain significant operating expense items that are not reflective
of CN's underlying business operations. Adjusted operating ratio is
defined as adjusted operating expenses as a percentage of revenues.
The following table provides a reconciliation of Operating income,
Operating expenses and operating ratio, as reported for the three
and six months ended June 30, 2024 and 2023, to the non-GAAP
adjusted performance measures presented herein:
|
|
Three months ended June 30 |
Six months ended June 30 |
|
In millions, except percentages |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Operating income |
$ |
1,558 |
|
$ |
1,600 |
|
$ |
3,104 |
|
$ |
3,262 |
|
|
Adjustment: |
|
|
|
|
|
Loss on assets held for sale |
|
78 |
|
|
— |
|
|
78 |
|
|
— |
|
|
Total adjustment |
|
78 |
|
|
— |
|
|
78 |
|
|
— |
|
|
Adjusted operating income |
$ |
1,636 |
|
$ |
1,600 |
|
$ |
3,182 |
|
$ |
3,262 |
|
|
|
|
|
|
|
|
Operating expenses |
$ |
2,771 |
|
$ |
2,457 |
|
$ |
5,474 |
|
$ |
5,108 |
|
|
Total adjustment |
|
(78 |
) |
|
— |
|
|
(78 |
) |
|
— |
|
|
Adjusted operating expenses |
$ |
2,693 |
|
$ |
2,457 |
|
$ |
5,396 |
|
$ |
5,108 |
|
|
|
|
|
|
|
|
Operating ratio |
|
64.0 |
% |
|
60.6 |
% |
|
63.8 |
% |
|
61.0 |
% |
|
Impact of adjustment |
(1.8 |
)% |
|
— |
% |
(0.9 |
)% |
|
— |
% |
|
Adjusted operating ratio |
|
62.2 |
% |
|
60.6 |
% |
|
62.9 |
% |
|
61.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
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 (i) business
acquisitions and (ii) merger transaction-related payments, cash
receipts and cash income taxes, which are items that are not
indicative of operating trends. 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 in accordance with GAAP,
as reported for the three and six months ended June 30, 2024 and
2023, to the non-GAAP free cash flow presented herein:
|
|
Three months ended June 30 |
Six months ended June 30 |
|
In millions |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Net cash provided by operating activities |
$ |
1,813 |
|
$ |
1,985 |
|
$ |
2,930 |
|
$ |
3,040 |
|
|
Net cash used in investing activities |
|
(866 |
) |
|
(885 |
) |
|
(1,454 |
) |
|
(1,347 |
) |
|
Free cash flow |
$ |
947 |
|
$ |
1,100 |
|
$ |
1,476 |
|
$ |
1,693 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
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 weighted average foreign exchange rates used to
translate transactions denominated in US dollars of the comparable
period of the prior year.
The average foreign exchange rates were $1.368
and $1.359 per US$1.00 for the three and six months ended June 30,
2024, respectively, and $1.343 and $1.347 per US$1.00 for the three
and six months ended June 30, 2023, respectively. On a constant
currency basis, the Company's net income for the three and six
months ended June 30, 2024 would have been lower by $8 million
($0.01 per diluted share) and lower by $5 million ($0.01 per
diluted share), respectively.
The following table provides a reconciliation of
the impact of constant currency and related percentage change at
constant currency on the financial results, as reported for the
three and six months ended June 30, 2024:
|
|
Three months ended June 30 |
Six months ended June 30 |
|
In millions, except per share data |
2024 |
|
Constant currency impact |
|
2023 |
|
% Change at constant currency Fav (Unfav) |
|
2024 |
|
Constant currency impact |
|
2023 |
|
% Change at constant currency Fav (Unfav) |
|
|
Revenues |
|
|
|
|
|
|
|
|
|
Petroleum and chemicals |
$ |
850 |
|
$ |
(9 |
) |
$ |
748 |
|
12 |
% |
$ |
1,707 |
|
$ |
(7 |
) |
$ |
1,576 |
|
8 |
% |
|
Metals and minerals |
|
528 |
|
|
(8 |
) |
|
497 |
|
5 |
% |
|
1,058 |
|
|
(6 |
) |
|
1,026 |
|
3 |
% |
|
Forest products |
|
501 |
|
|
(6 |
) |
|
480 |
|
3 |
% |
|
995 |
|
|
(5 |
) |
|
991 |
|
— |
% |
|
Coal |
|
241 |
|
|
(1 |
) |
|
263 |
|
(9 |
%) |
|
462 |
|
|
(1 |
) |
|
526 |
|
(12 |
%) |
|
Grain and fertilizers |
|
738 |
|
|
(5 |
) |
|
688 |
|
7 |
% |
|
1,598 |
|
|
(4 |
) |
|
1,549 |
|
3 |
% |
|
Intermodal |
|
1,040 |
|
|
(5 |
) |
|
983 |
|
5 |
% |
|
1,999 |
|
|
(4 |
) |
|
1,995 |
|
— |
% |
|
Automotive |
|
255 |
|
|
(4 |
) |
|
235 |
|
7 |
% |
|
471 |
|
|
(3 |
) |
|
450 |
|
4 |
% |
|
Total freight revenues |
|
4,153 |
|
|
(38 |
) |
|
3,894 |
|
6 |
% |
|
8,290 |
|
|
(30 |
) |
|
8,113 |
|
2 |
% |
|
Other revenues |
|
176 |
|
|
(2 |
) |
|
163 |
|
7 |
% |
|
288 |
|
|
(2 |
) |
|
257 |
|
11 |
% |
|
Total revenues |
|
4,329 |
|
|
(40 |
) |
|
4,057 |
|
6 |
% |
|
8,578 |
|
|
(32 |
) |
|
8,370 |
|
2 |
% |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor and fringe benefits |
|
850 |
|
|
(6 |
) |
|
747 |
|
(13 |
%) |
|
1,744 |
|
|
(4 |
) |
|
1,559 |
|
(12 |
%) |
|
Purchased services and material |
|
578 |
|
|
(5 |
) |
|
571 |
|
— |
% |
|
1,149 |
|
|
(5 |
) |
|
1,164 |
|
2 |
% |
|
Fuel |
|
546 |
|
|
(8 |
) |
|
485 |
|
(11 |
%) |
|
1,060 |
|
|
(7 |
) |
|
1,042 |
|
(1 |
%) |
|
Depreciation and amortization |
|
466 |
|
|
(4 |
) |
|
449 |
|
(3 |
%) |
|
928 |
|
|
(3 |
) |
|
897 |
|
(3 |
%) |
|
Equipment rents |
|
102 |
|
|
(2 |
) |
|
83 |
|
(20 |
%) |
|
201 |
|
|
(2 |
) |
|
173 |
|
(15 |
%) |
|
Other |
|
151 |
|
|
(2 |
) |
|
122 |
|
(22 |
%) |
|
314 |
|
|
(2 |
) |
|
273 |
|
(14 |
%) |
|
Loss on assets held for sale |
|
78 |
|
|
— |
|
|
— |
|
— |
% |
|
78 |
|
|
— |
|
|
— |
|
— |
% |
|
Total operating expenses |
|
2,771 |
|
|
(27 |
) |
|
2,457 |
|
(12 |
%) |
|
5,474 |
|
|
(23 |
) |
|
5,108 |
|
(7 |
%) |
|
Operating income |
|
1,558 |
|
|
(13 |
) |
|
1,600 |
|
(3 |
%) |
|
3,104 |
|
|
(9 |
) |
|
3,262 |
|
(5 |
%) |
|
Interest expense |
|
(220 |
) |
|
2 |
|
|
(173 |
) |
(26 |
%) |
|
(430 |
) |
|
2 |
|
|
(338 |
) |
(27 |
%) |
|
Other components of net periodic benefit income |
|
114 |
|
|
— |
|
|
120 |
|
(5 |
%) |
|
227 |
|
|
— |
|
|
239 |
|
(5 |
%) |
|
Other income |
|
32 |
|
|
— |
|
|
1 |
|
3100 |
% |
|
34 |
|
|
— |
|
|
2 |
|
1600 |
% |
|
Income before income taxes |
|
1,484 |
|
|
(11 |
) |
|
1,548 |
|
(5 |
%) |
|
2,935 |
|
|
(7 |
) |
|
3,165 |
|
(7 |
%) |
|
Income tax expense |
|
(370 |
) |
|
3 |
|
|
(381 |
) |
4 |
% |
|
(718 |
) |
|
2 |
|
|
(778 |
) |
8 |
% |
|
Net income |
$ |
1,114 |
|
$ |
(8 |
) |
$ |
1,167 |
|
(5 |
%) |
$ |
2,217 |
|
$ |
(5 |
) |
$ |
2,387 |
|
(7 |
%) |
|
Diluted earnings per share |
$ |
1.75 |
|
$ |
(0.01 |
) |
$ |
1.76 |
|
(1 |
%) |
$ |
3.47 |
|
$ |
(0.01 |
) |
$ |
3.58 |
|
(3 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the
last twelve months of adjusted EBITDA. Adjusted debt is defined as
the sum of Long-term debt and Current portion of long-term debt as
reported on the Company’s Consolidated Balance Sheets as well as
Operating lease liabilities, including current portion and pension
plans in deficiency recognized on the Company's Consolidated
Balance Sheets due to the debt-like nature of their contractual and
financial obligations. Adjusted EBITDA is calculated as Net income
excluding Interest expense, Income tax expense, Depreciation and
amortization, operating lease cost, Other components of net
periodic benefit income, Other income (loss), and other significant
items that are not reflective of CN's underlying business
operations and which could distort the analysis of trends in
business performance. Adjusted debt and adjusted EBITDA are
non-GAAP measures used to compute the adjusted debt-to-adjusted
EBITDA multiple. 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 in accordance with GAAP, reported as at and for
the twelve months ended June 30, 2024 and 2023, to the adjusted
measures presented herein, which have been used to calculate the
non-GAAP adjusted debt-to-adjusted EBITDA multiple:
|
In millions, unless otherwise indicated |
As at and for the twelve months ended June 30, |
2024 |
|
2023 |
|
|
Debt |
$ |
20,510 |
|
$ |
16,938 |
|
|
Adjustments: |
|
|
|
Operating lease liabilities, including current portion (1) |
|
373 |
|
|
410 |
|
|
Pension plans in deficiency (2) |
|
359 |
|
|
350 |
|
|
Adjusted debt |
$ |
21,242 |
|
$ |
17,698 |
|
|
Net income |
$ |
5,455 |
|
$ |
5,262 |
|
|
Interest expense |
|
814 |
|
|
632 |
|
|
Income tax expense |
|
803 |
|
|
1,699 |
|
|
Depreciation and amortization |
|
1,848 |
|
|
1,783 |
|
|
Operating lease cost (3) |
|
151 |
|
|
147 |
|
|
Other components of net periodic benefit income |
|
(467 |
) |
|
(488 |
) |
|
Other loss (income) |
|
(166 |
) |
|
1 |
|
|
Adjustment: |
|
|
|
Loss on assets held for sale (4) |
|
78 |
|
|
— |
|
|
Adjusted EBITDA |
$ |
8,516 |
|
$ |
9,036 |
|
|
Adjusted debt-to-adjusted EBITDA multiple
(times) |
|
2.49 |
|
|
1.96 |
|
|
(1) |
Represents the present value of operating lease payments. |
|
(2) |
Represents the total funded deficit of all defined benefit pension
plans with a projected benefit obligation in excess of plan
assets. |
|
(3) |
Represents the operating lease costs recorded in Purchased services
and material and Equipment rents within the Consolidated Statements
of Income. |
|
(4) |
Relates to a loss of $78 million on assets held for sale recorded
in the second quarter of 2024, resulting from an agreement to
transfer the ownership and related risks and obligations of the
Quebec Bridge located in Quebec, Canada, to the Government of
Canada. See Note 4 – Assets held for sale to the Company's
unaudited Interim Consolidated Financial Statements for additional
information. |
|
|
|
Canadian National Railway (TSX:CNR)
過去 株価チャート
から 10 2024 まで 11 2024
Canadian National Railway (TSX:CNR)
過去 株価チャート
から 11 2023 まで 11 2024
