CN news release:
CN reports Q3-2016 net income of C$972 million, or C$1.25 per diluted share
Another outstanding quarter with continued focus on advancing safety, service and productivity
MONTREAL, Oct. 25, 2016 /CNW/ - CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the third quarter ended Sept. 30, 2016.
Third-quarter 2016 financial highlights
- Net income was C$972 million, or C$1.25 per diluted share, compared with net income of C$1,007 million, or C$1.26 per diluted share for the third quarter of 2015.
- Operating income declined five per cent to C$1,407 million.
- Revenues decreased by six per cent to C$3,014 million. Carloadings declined four per cent and revenue ton-miles declined three per cent.
- Operating expenses declined seven per cent to C$1,607 million.
- A record 53.3 per cent operating ratio, a 0.5-point improvement over the prior-year quarter's performance.
- Free cash flow (1) for the first nine months of 2016 was C$1,743 million, compared with C$1,741 million for the year-earlier period.
Luc Jobin, CN president and chief executive officer, said: "With solid execution from our industry-leading operating team and a network-wide focus on providing quality service, CN delivered outstanding results in the third quarter while facing a still sluggish North American and global economy.
"Despite shifting traffic demands, including a delayed Canadian grain harvest, we remained flexible and service-focused. We also continued to reinvest in our business and infrastructure, investments that are driving ongoing safety, service and productivity improvements, while we maintained our commitment to providing the long-term value that helps CN and its customers succeed."
CN is raising its financial outlook and now expects 2016 adjusted diluted EPS to be up approximately one per cent versus last year's adjusted diluted EPS (1) of C$4.44 (2) (compared with its July 25, 2016, financial outlook calling for 2016 adjusted EPS to be in line with last year).
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 third quarter of 2016 would have been lower by C$2 million, or unchanged per diluted share.
Third-quarter 2016 revenues, traffic volumes and expenses
Revenues for the third quarter of 2016 were C$3,014 million, a decrease of six per cent, when compared to the same period in 2015. Revenues increased for grain and fertilizers (four per cent), automotive (three per cent), and forest products (two per cent), but were more than offset by revenue declines for coal (32 per cent), metals and minerals (20 per cent), petroleum and chemicals (13 per cent), and intermodal (four per cent).
The revenue decline was mainly attributable to lower volumes of crude oil, coal, and frac sand, and lower applicable fuel surcharge rates.
Carloadings for the quarter declined by four per cent to 1,332 thousand.
Revenue ton-miles (RTMs), measuring the relative weight and distance of rail freight transported by CN, declined by three 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, decreased by three per cent over the year-earlier period, mainly driven by an increase in the average length of haul and lower applicable fuel surcharge rates.
Operating expenses for the third quarter decreased by seven per cent to C$1,607 million, mainly due to lower costs resulting from decreased volumes of traffic and cost-management initiatives, and lower pension expense.
(1) Non-GAAP Measures
CN reports its financial results in accordance with United States generally accepted accounting principles (GAAP). CN also uses non-GAAP measures in this news release that do not have any standardized meaning prescribed by GAAP including adjusted performance measures, constant currency, and free cash flow. 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 EPS guidance (2) excludes the expected impact of certain income and expense items, as well as those items noted in the reconciliation tables provided in the attached supplementary schedule, Non-GAAP Measures. However, management cannot individually quantify on a forward-looking basis the impact of these items on its EPS 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 EPS guidance.