Form 20-F | Form 40-F | X |
Yes | No | X |
Yes | No | X |
Yes | No | X |
Exhibit Number | Description of Exhibit |
Ex 99.1 | |
Ex 99.2 | |
Ex 99.3 | |
Ex 99.4 |
Canadian National Railway Company | |||||
Date: | October 22, 2019 | By: | /s/ Cristina Circelli | ||
Name: | Cristina Circelli | ||||
Title: | Vice President, Deputy Corporate Secretary and General Counsel |
• | Revenues increased by four per cent, or C$142 million, to C$3,830 million. |
• | Diluted earnings per share (EPS) increased by eight per cent (or 11 per cent on an adjusted basis (1)) to C$1.66. |
• | Operating ratio of 57.9 per cent, an improvement of 1.6 points. |
• | Operating income increased by eight per cent, or C$121 million, to C$1,613 million. |
• | Strong balance sheet with adjusted debt-to-adjusted-EBITDA of less than 2.0X (1). |
Contacts: | |
Media | Investment Community |
Jonathan Abecassis | Paul Butcher |
Senior Manager | Vice-President |
Media Relations | Investor Relations |
(514) 399-7956 | (514) 399-0052 |
Three months ended September 30 | Nine months ended September 30 | ||||||||
2019 | 2018 | 2019 | 2018 | ||||||
Financial measures | |||||||||
Key financial performance indicators (1) | |||||||||
Total revenues ($ millions) | 3,830 | 3,688 | 11,333 | 10,513 | |||||
Freight revenues ($ millions) | 3,618 | 3,463 | 10,790 | 9,947 | |||||
Operating income ($ millions) | 1,613 | 1,492 | 4,375 | 4,041 | |||||
Adjusted operating income ($ millions) (2) | 1,613 | 1,492 | 4,459 | 4,041 | |||||
Net income ($ millions) | 1,195 | 1,134 | 3,343 | 3,185 | |||||
Adjusted net income ($ millions) (2) | 1,195 | 1,102 | 3,293 | 2,963 | |||||
Diluted earnings per share ($) | 1.66 | 1.54 | 4.62 | 4.31 | |||||
Adjusted diluted earnings per share ($) (2) | 1.66 | 1.50 | 4.56 | 4.01 | |||||
Free cash flow ($ millions) (2) | 700 | 585 | 1,499 | 1,881 | |||||
Gross property additions ($ millions) | 961 | 1,002 | 3,061 | 2,267 | |||||
Share repurchases ($ millions) | 394 | 521 | 1,271 | 1,537 | |||||
Dividends per share ($) | 0.5375 | 0.4550 | 1.6125 | 1.3650 | |||||
Financial position (1) | |||||||||
Total assets ($ millions) | 44,096 | 40,209 | 44,096 | 40,209 | |||||
Total liabilities ($ millions) | 25,596 | 22,603 | 25,596 | 22,603 | |||||
Shareholders' equity ($ millions) | 18,500 | 17,606 | 18,500 | 17,606 | |||||
Financial ratio | |||||||||
Operating ratio (%) | 57.9 | 59.5 | 61.4 | 61.6 | |||||
Adjusted operating ratio (%) (2) | 57.9 | 59.5 | 60.7 | 61.6 | |||||
Operational measures (3) | |||||||||
Statistical operating data | |||||||||
Gross ton miles (GTMs) (millions) | 124,410 | 123,042 | 367,875 | 359,622 | |||||
Revenue ton miles (RTMs) (millions) | 60,849 | 61,642 | 184,245 | 181,848 | |||||
Carloads (thousands) | 1,531 | 1,525 | 4,487 | 4,439 | |||||
Route miles (includes Canada and the U.S.) | 19,500 | 19,500 | 19,500 | 19,500 | |||||
Employees (end of period) | 27,290 | 26,143 | 27,290 | 26,143 | |||||
Employees (average for the period) | 27,269 | 25,905 | 26,803 | 25,216 | |||||
Key operating measures | |||||||||
Freight revenue per RTM (cents) | 5.95 | 5.62 | 5.86 | 5.47 | |||||
Freight revenue per carload ($) | 2,363 | 2,271 | 2,405 | 2,241 | |||||
GTMs per average number of employees (thousands) | 4,562 | 4,750 | 13,725 | 14,262 | |||||
Operating expenses per GTM (cents) | 1.78 | 1.78 | 1.89 | 1.80 | |||||
Labor and fringe benefits expense per GTM (cents) | 0.56 | 0.57 | 0.59 | 0.58 | |||||
Diesel fuel consumed (US gallons in millions) | 110.1 | 113.4 | 342.5 | 339.9 | |||||
Average fuel price ($/US gallon) | 3.05 | 3.42 | 3.13 | 3.32 | |||||
GTMs per US gallon of fuel consumed | 1,130 | 1,085 | 1,074 | 1,058 | |||||
Car velocity (car miles per day) | 209 | 195 | 198 | 183 | |||||
Through dwell (hours) | 7.7 | 7.8 | 7.9 | 8.6 | |||||
Through network train speed (miles per hour) | 18.7 | 17.9 | 18.2 | 17.8 | |||||
Locomotive utilization (trailing GTMs per total horsepower) | 201 | 207 | 200 | 207 | |||||
Safety indicators (4) | |||||||||
Injury frequency rate (per 200,000 person hours) | 1.90 | 1.60 | 1.95 | 1.78 | |||||
Accident rate (per million train miles) | 1.75 | 1.90 | 2.08 | 2.18 |
(1) | Amounts expressed in Canadian dollars and prepared in accordance with United States generally accepted accounting principles (GAAP), unless otherwise noted. |
(2) | See supplementary schedule entitled Non-GAAP Measures for an explanation of these non-GAAP measures. |
(3) | Statistical operating data, key operating measures and safety indicators are unaudited and based on estimated data available at such time and are subject to change as more complete information becomes available. Definitions of these indicators are provided on CN's website, www.cn.ca/glossary. |
(4) | Based on Federal Railroad Administration (FRA) reporting criteria. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||
2019 | 2018 | % Change Fav (Unfav) | % Change at constant currency Fav (Unfav) (1) | 2019 | 2018 | % Change Fav (Unfav) | % Change at constant currency Fav (Unfav) (1) | ||||||||||
Revenues ($ millions) (2) | |||||||||||||||||
Petroleum and chemicals | 788 | 665 | 18 | % | 18 | % | 2,298 | 1,845 | 25 | % | 22 | % | |||||
Metals and minerals | 425 | 457 | (7 | %) | (8 | %) | 1,286 | 1,292 | — | % | (3 | %) | |||||
Forest products | 450 | 508 | (11 | %) | (12 | %) | 1,393 | 1,420 | (2 | %) | (4 | %) | |||||
Coal | 168 | 169 | (1 | %) | (1 | %) | 508 | 486 | 5 | % | 3 | % | |||||
Grain and fertilizers | 552 | 568 | (3 | %) | (3 | %) | 1,770 | 1,698 | 4 | % | 3 | % | |||||
Intermodal | 1,018 | 897 | 13 | % | 13 | % | 2,860 | 2,574 | 11 | % | 10 | % | |||||
Automotive | 217 | 199 | 9 | % | 9 | % | 675 | 632 | 7 | % | 4 | % | |||||
Total freight revenues | 3,618 | 3,463 | 4 | % | 4 | % | 10,790 | 9,947 | 8 | % | 6 | % | |||||
Other revenues | 212 | 225 | (6 | %) | (6 | %) | 543 | 566 | (4 | %) | (6 | %) | |||||
Total revenues | 3,830 | 3,688 | 4 | % | 3 | % | 11,333 | 10,513 | 8 | % | 6 | % | |||||
Revenue ton miles (RTMs) (millions) (3) | |||||||||||||||||
Petroleum and chemicals | 14,042 | 12,437 | 13 | % | 13 | % | 41,148 | 34,609 | 19 | % | 19 | % | |||||
Metals and minerals | 6,458 | 7,442 | (13 | %) | (13 | %) | 19,860 | 21,924 | (9 | %) | (9 | %) | |||||
Forest products | 6,813 | 7,920 | (14 | %) | (14 | %) | 20,902 | 22,803 | (8 | %) | (8 | %) | |||||
Coal | 4,563 | 4,474 | 2 | % | 2 | % | 13,556 | 12,916 | 5 | % | 5 | % | |||||
Grain and fertilizers | 12,722 | 13,481 | (6 | %) | (6 | %) | 41,634 | 41,671 | — | % | — | % | |||||
Intermodal | 15,294 | 14,982 | 2 | % | 2 | % | 44,176 | 44,883 | (2 | %) | (2 | %) | |||||
Automotive | 957 | 906 | 6 | % | 6 | % | 2,969 | 3,042 | (2 | %) | (2 | %) | |||||
Total RTMs | 60,849 | 61,642 | (1 | %) | (1 | %) | 184,245 | 181,848 | 1 | % | 1 | % | |||||
Freight revenue / RTM (cents) (2) (3) | |||||||||||||||||
Petroleum and chemicals | 5.61 | 5.35 | 5 | % | 4 | % | 5.58 | 5.33 | 5 | % | 2 | % | |||||
Metals and minerals | 6.58 | 6.14 | 7 | % | 6 | % | 6.48 | 5.89 | 10 | % | 7 | % | |||||
Forest products | 6.61 | 6.41 | 3 | % | 2 | % | 6.66 | 6.23 | 7 | % | 4 | % | |||||
Coal | 3.68 | 3.78 | (3 | %) | (3 | %) | 3.75 | 3.76 | — | % | (2 | %) | |||||
Grain and fertilizers | 4.34 | 4.21 | 3 | % | 3 | % | 4.25 | 4.07 | 4 | % | 3 | % | |||||
Intermodal | 6.66 | 5.99 | 11 | % | 11 | % | 6.47 | 5.73 | 13 | % | 12 | % | |||||
Automotive | 22.68 | 21.96 | 3 | % | 3 | % | 22.73 | 20.78 | 9 | % | 7 | % | |||||
Total freight revenue / RTM | 5.95 | 5.62 | 6 | % | 5 | % | 5.86 | 5.47 | 7 | % | 5 | % | |||||
Carloads (thousands) (3) | |||||||||||||||||
Petroleum and chemicals | 177 | 161 | 10 | % | 10 | % | 519 | 469 | 11 | % | 11 | % | |||||
Metals and minerals | 270 | 268 | 1 | % | 1 | % | 774 | 775 | — | % | — | % | |||||
Forest products | 93 | 108 | (14 | %) | (14 | %) | 289 | 317 | (9 | %) | (9 | %) | |||||
Coal | 86 | 86 | — | % | — | % | 256 | 252 | 2 | % | 2 | % | |||||
Grain and fertilizers | 145 | 156 | (7 | %) | (7 | %) | 461 | 463 | — | % | — | % | |||||
Intermodal | 693 | 685 | 1 | % | 1 | % | 1,980 | 1,966 | 1 | % | 1 | % | |||||
Automotive | 67 | 61 | 10 | % | 10 | % | 208 | 197 | 6 | % | 6 | % | |||||
Total carloads | 1,531 | 1,525 | — | % | — | % | 4,487 | 4,439 | 1 | % | 1 | % | |||||
Freight revenue / carload ($) (2) (3) | |||||||||||||||||
Petroleum and chemicals | 4,452 | 4,130 | 8 | % | 7 | % | 4,428 | 3,934 | 13 | % | 10 | % | |||||
Metals and minerals | 1,574 | 1,705 | (8 | %) | (8 | %) | 1,661 | 1,667 | — | % | (3 | %) | |||||
Forest products | 4,839 | 4,704 | 3 | % | 2 | % | 4,820 | 4,479 | 8 | % | 5 | % | |||||
Coal | 1,953 | 1,965 | (1 | %) | (1 | %) | 1,984 | 1,929 | 3 | % | 1 | % | |||||
Grain and fertilizers | 3,807 | 3,641 | 5 | % | 4 | % | 3,839 | 3,667 | 5 | % | 3 | % | |||||
Intermodal | 1,469 | 1,309 | 12 | % | 12 | % | 1,444 | 1,309 | 10 | % | 9 | % | |||||
Automotive | 3,239 | 3,262 | (1 | %) | (1 | %) | 3,245 | 3,208 | 1 | % | (1 | %) | |||||
Total freight revenue / carload | 2,363 | 2,271 | 4 | % | 3 | % | 2,405 | 2,241 | 7 | % | 5 | % |
(1) | See supplementary schedule entitled Non-GAAP Measures for an explanation of this non-GAAP measure. |
(2) | Amounts expressed in Canadian dollars. |
(3) | Statistical operating data and related key operating measures are unaudited and based on estimated data available at such time and are subject to change as more complete information becomes available. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization | — | — | 84 | — | |||||||||||
Other income | — | (36 | ) | — | (259 | ) | |||||||||
Income tax expense (recovery) (1) | — | 4 | (134 | ) | 37 | ||||||||||
Adjusted net income | $ | 1,195 | $ | 1,102 | $ | 3,293 | $ | 2,963 | |||||||
Basic earnings per share | $ | 1.66 | $ | 1.55 | $ | 4.63 | $ | 4.32 | |||||||
Impact of adjustments, per share | — | (0.04 | ) | (0.07 | ) | (0.30 | ) | ||||||||
Adjusted basic earnings per share | $ | 1.66 | $ | 1.51 | $ | 4.56 | $ | 4.02 | |||||||
Diluted earnings per share | $ | 1.66 | $ | 1.54 | $ | 4.62 | $ | 4.31 | |||||||
Impact of adjustments, per share | — | (0.04 | ) | (0.06 | ) | (0.30 | ) | ||||||||
Adjusted diluted earnings per share | $ | 1.66 | $ | 1.50 | $ | 4.56 | $ | 4.01 |
(1) | The tax effect of adjustments reflects tax rates in the applicable jurisdiction and the nature of the item for tax purposes. |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
In millions, except percentage | 2019 | 2018 | 2019 | 2018 | ||||||||||
Operating income | $ | 1,613 | $ | 1,492 | $ | 4,375 | $ | 4,041 | ||||||
Adjustment: Depreciation and amortization | — | — | 84 | — | ||||||||||
Adjusted operating income | $ | 1,613 | $ | 1,492 | $ | 4,459 | $ | 4,041 | ||||||
Operating ratio (1) | 57.9 | % | 59.5 | % | 61.4 | % | 61.6 | % | ||||||
Impact of adjustment | — | — | (0.7)-pts | — | ||||||||||
Adjusted operating ratio | 57.9 | % | 59.5 | % | 60.7 | % | 61.6 | % |
(1) | Operating ratio is defined as operating expenses as a percentage of revenues. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net cash provided by operating activities | $ | 1,692 | $ | 1,564 | $ | 4,405 | $ | 4,001 | |||||||
Net cash used in investing activities | (992 | ) | (979 | ) | (3,073 | ) | (2,120 | ) | |||||||
Net cash provided before financing activities | 700 | 585 | 1,332 | 1,881 | |||||||||||
Adjustment: Acquisition, net of cash acquired (1) | — | — | 167 | — | |||||||||||
Free cash flow | $ | 700 | $ | 585 | $ | 1,499 | $ | 1,881 |
(1) | Relates to the acquisition of the TransX Group of Companies ("TransX"). See Note 3 - Business combination to CN's 2019 unaudited Interim Consolidated Financial Statements for additional information. |
In millions, unless otherwise indicated | As at and for the twelve months ended September 30, | 2019 | 2018 | |||||
Debt | $ | 13,768 | $ | 11,894 | ||||
Adjustments: | ||||||||
Operating lease liabilities, including current portion (1) | 536 | 495 | ||||||
Pension plans in deficiency | 476 | 458 | ||||||
Adjusted debt | $ | 14,780 | $ | 12,847 | ||||
Net income | $ | 4,486 | $ | 5,796 | ||||
Interest expense | 524 | 484 | ||||||
Income tax expense (recovery) | 1,278 | (422 | ) | |||||
Depreciation and amortization | 1,521 | 1,299 | ||||||
EBITDA | 7,809 | 7,157 | ||||||
Adjustments: | ||||||||
Other income | (144 | ) | (287 | ) | ||||
Other components of net periodic benefit income | (317 | ) | (305 | ) | ||||
Operating lease cost (1) | 190 | 200 | ||||||
Adjusted EBITDA | $ | 7,538 | $ | 6,765 | ||||
Adjusted debt-to-adjusted EBITDA multiple (times) | 1.96 | 1.90 |
(1) | The Company adopted Accounting Standards Update (ASU) 2016-02: Leases and related amendments (Topic 842) in the first quarter of 2019. The Company now includes operating lease liabilities, as defined by Topic 842, in adjusted debt and excludes operating lease cost, as defined by Topic 842, in adjusted EBITDA. Comparative balances previously referred to as present value of operating lease commitments and operating lease expense have not been adjusted and are now referred to as operating lease liabilities and operating lease cost, respectively. See Note 2 - Recent accounting pronouncements to CN's 2019 unaudited Interim Consolidated Financial Statements for additional information. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues (Note 4) | $ | 3,830 | $ | 3,688 | $ | 11,333 | $ | 10,513 | |||||||
Operating expenses | |||||||||||||||
Labor and fringe benefits | 694 | 707 | 2,173 | 2,069 | |||||||||||
Purchased services and material | 552 | 485 | 1,681 | 1,444 | |||||||||||
Fuel | 391 | 437 | 1,231 | 1,266 | |||||||||||
Depreciation and amortization (Note 5) | 372 | 330 | 1,175 | 983 | |||||||||||
Equipment rents | 114 | 127 | 332 | 352 | |||||||||||
Casualty and other | 94 | 110 | 366 | 358 | |||||||||||
Total operating expenses | 2,217 | 2,196 | 6,958 | 6,472 | |||||||||||
Operating income | 1,613 | 1,492 | 4,375 | 4,041 | |||||||||||
Interest expense | (135 | ) | (121 | ) | (402 | ) | (367 | ) | |||||||
Other components of net periodic benefit income (Note 6) | 81 | 76 | 244 | 229 | |||||||||||
Other income (Note 7) | 26 | 48 | 51 | 283 | |||||||||||
Income before income taxes | 1,585 | 1,495 | 4,268 | 4,186 | |||||||||||
Income tax expense (Note 8) | (390 | ) | (361 | ) | (925 | ) | (1,001 | ) | |||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Earnings per share (Note 9) | |||||||||||||||
Basic | $ | 1.66 | $ | 1.55 | $ | 4.63 | $ | 4.32 | |||||||
Diluted | $ | 1.66 | $ | 1.54 | $ | 4.62 | $ | 4.31 | |||||||
Weighted-average number of shares (Note 9) | |||||||||||||||
Basic | 718.2 | 732.7 | 721.7 | 736.6 | |||||||||||
Diluted | 720.9 | 736.2 | 724.3 | 739.8 | |||||||||||
Dividends declared per share | $ | 0.5375 | $ | 0.4550 | $ | 1.6125 | $ | 1.3650 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Other comprehensive income (loss) (Note 13) | |||||||||||||||
Net gain (loss) on foreign currency translation | 60 | (87 | ) | (152 | ) | 110 | |||||||||
Net change in pension and other postretirement benefit plans (Note 6) | 40 | 50 | 117 | 151 | |||||||||||
Other comprehensive income (loss) before income taxes | 100 | (37 | ) | (35 | ) | 261 | |||||||||
Income tax expense | — | (30 | ) | (63 | ) | (11 | ) | ||||||||
Other comprehensive income (loss) | 100 | (67 | ) | (98 | ) | 250 | |||||||||
Comprehensive income | $ | 1,295 | $ | 1,067 | $ | 3,245 | $ | 3,435 |
September 30 | December 31 | ||||||
In millions | 2019 | 2018 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 258 | $ | 266 | |||
Restricted cash and cash equivalents (Note 10) | 524 | 493 | |||||
Accounts receivable | 1,242 | 1,169 | |||||
Material and supplies | 608 | 557 | |||||
Other current assets | 428 | 243 | |||||
Total current assets | 3,060 | 2,728 | |||||
Properties | 39,349 | 37,773 | |||||
Operating lease right-of-use assets (Note 11) | 554 | — | |||||
Pension asset | 784 | 446 | |||||
Intangible assets, goodwill and other (Note 3) | 349 | 267 | |||||
Total assets | $ | 44,096 | $ | 41,214 | |||
Liabilities and shareholders' equity | |||||||
Current liabilities | |||||||
Accounts payable and other | $ | 2,127 | $ | 2,316 | |||
Current portion of long-term debt | 2,181 | 1,184 | |||||
Total current liabilities | 4,308 | 3,500 | |||||
Deferred income taxes | 7,941 | 7,480 | |||||
Other liabilities and deferred credits | 657 | 501 | |||||
Pension and other postretirement benefits | 699 | 707 | |||||
Long-term debt | 11,587 | 11,385 | |||||
Operating lease liabilities (Note 11) | 404 | — | |||||
Shareholders' equity | |||||||
Common shares | 3,655 | 3,634 | |||||
Common shares in Share Trusts (Note 10) | (156 | ) | (175 | ) | |||
Additional paid-in capital | 393 | 408 | |||||
Accumulated other comprehensive loss (Note 13) | (2,947 | ) | (2,849 | ) | |||
Retained earnings | 17,555 | 16,623 | |||||
Total shareholders' equity | 18,500 | 17,641 | |||||
Total liabilities and shareholders' equity | $ | 44,096 | $ | 41,214 |
Number of common shares | Common shares | Common shares in Share Trusts | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | ||||||||||||||||||||||
In millions | Outstanding | Share Trusts | ||||||||||||||||||||||||||
Balance at June 30, 2019 | 719.0 | 1.6 | $ | 3,661 | $ | (149 | ) | $ | 390 | $ | (3,047 | ) | $ | 17,127 | $ | 17,982 | ||||||||||||
Net income | 1,195 | 1,195 | ||||||||||||||||||||||||||
Stock options exercised | 0.1 | 10 | (1 | ) | 9 | |||||||||||||||||||||||
Settlement of equity settled awards | — | — | — | (5 | ) | (3 | ) | (8 | ) | |||||||||||||||||||
Stock-based compensation expense and other | 9 | (1 | ) | 8 | ||||||||||||||||||||||||
Repurchase of common shares (Note 10) | (3.2 | ) | (16 | ) | (378 | ) | (394 | ) | ||||||||||||||||||||
Share purchases by Share Trusts | (0.1 | ) | 0.1 | (7 | ) | (7 | ) | |||||||||||||||||||||
Other comprehensive loss (Note 13) | 100 | 100 | ||||||||||||||||||||||||||
Dividends | (385 | ) | (385 | ) | ||||||||||||||||||||||||
Balance at September 30, 2019 | 715.8 | 1.7 | $ | 3,655 | $ | (156 | ) | $ | 393 | $ | (2,947 | ) | $ | 17,555 | $ | 18,500 |
Number of common shares | Common shares | Common shares in Share Trusts | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | ||||||||||||||||||||||
In millions | Outstanding | Share Trusts | ||||||||||||||||||||||||||
Balance at December 31, 2018 | 725.3 | 2.0 | $ | 3,634 | $ | (175 | ) | $ | 408 | $ | (2,849 | ) | $ | 16,623 | $ | 17,641 | ||||||||||||
Net income | 3,343 | 3,343 | ||||||||||||||||||||||||||
Stock options exercised | 0.9 | 75 | (10 | ) | 65 | |||||||||||||||||||||||
Settlement of equity settled awards | 0.5 | (0.5 | ) | 45 | (55 | ) | (60 | ) | (70 | ) | ||||||||||||||||||
Stock-based compensation expense and other | 50 | (2 | ) | 48 | ||||||||||||||||||||||||
Repurchase of common shares (Note 10) | (10.7 | ) | (54 | ) | (1,217 | ) | (1,271 | ) | ||||||||||||||||||||
Share purchases by Share Trusts | (0.2 | ) | 0.2 | (26 | ) | (26 | ) | |||||||||||||||||||||
Other comprehensive loss (Note 13) | (98 | ) | (98 | ) | ||||||||||||||||||||||||
Dividends | (1,161 | ) | (1,161 | ) | ||||||||||||||||||||||||
Cumulative-effect adjustment from the adoption of ASU 2016-02 (1) | 29 | 29 | ||||||||||||||||||||||||||
Balance at September 30, 2019 | 715.8 | 1.7 | $ | 3,655 | $ | (156 | ) | $ | 393 | $ | (2,947 | ) | $ | 17,555 | $ | 18,500 |
(1) | The Company adopted Accounting Standards Update (ASU) 2016-02: Leases and related amendments (Topic 842) in the first quarter of 2019 using a modified retrospective approach with a cumulative-effect adjustment to Retained earnings recognized on January 1, 2019, with no restatement of comparative period financial information. See Note 2 - Recent accounting pronouncements for additional information. |
Number of common shares | Common shares | Common shares in Share Trusts | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | ||||||||||||||||||||||
In millions | Outstanding | Share Trusts | ||||||||||||||||||||||||||
Balance at June 30, 2018 | 733.8 | 1.6 | $ | 3,629 | $ | (137 | ) | $ | 393 | $ | (2,467 | ) | $ | 15,951 | $ | 17,369 | ||||||||||||
Net income | 1,134 | 1,134 | ||||||||||||||||||||||||||
Stock options exercised | 0.3 | 19 | (2 | ) | 17 | |||||||||||||||||||||||
Settlement of equity settled awards (1) | — | — | — | (3 | ) | (3 | ) | (6 | ) | |||||||||||||||||||
Stock-based compensation expense and other | 13 | (1 | ) | 12 | ||||||||||||||||||||||||
Repurchase of common shares (Note 10) | (4.6 | ) | (24 | ) | (497 | ) | (521 | ) | ||||||||||||||||||||
Other comprehensive income (Note 13) | (67 | ) | (67 | ) | ||||||||||||||||||||||||
Dividends | (332 | ) | (332 | ) | ||||||||||||||||||||||||
Balance at September 30, 2018 | 729.5 | 1.6 | $ | 3,624 | $ | (137 | ) | $ | 401 | $ | (2,534 | ) | $ | 16,252 | $ | 17,606 |
Number of common shares | Common shares | Common shares in Share Trusts | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total shareholders' equity | ||||||||||||||||||||||
In millions | Outstanding | Share Trusts | ||||||||||||||||||||||||||
Balance at December 31, 2017 | 742.6 | 2.0 | $ | 3,613 | $ | (168 | ) | $ | 434 | $ | (2,784 | ) | $ | 15,561 | $ | 16,656 | ||||||||||||
Net income | 3,185 | 3,185 | ||||||||||||||||||||||||||
Stock options exercised | 1.4 | 88 | (12 | ) | 76 | |||||||||||||||||||||||
Settlement of equity settled awards (1) | 0.4 | (0.4 | ) | 31 | (65 | ) | (30 | ) | (64 | ) | ||||||||||||||||||
Stock-based compensation expense and other | 44 | (2 | ) | 42 | ||||||||||||||||||||||||
Repurchase of common shares (Note 10) | (14.9 | ) | (77 | ) | (1,460 | ) | (1,537 | ) | ||||||||||||||||||||
Other comprehensive income (Note 13) | 250 | 250 | ||||||||||||||||||||||||||
Dividends | (1,002 | ) | (1,002 | ) | ||||||||||||||||||||||||
Balance at September 30, 2018 | 729.5 | 1.6 | $ | 3,624 | $ | (137 | ) | $ | 401 | $ | (2,534 | ) | $ | 16,252 | $ | 17,606 |
(1) | In the fourth quarter of 2018, the Company changed its presentation with respect to the settlement of equity settled awards when purchasing shares on the open market, on a retrospective basis. Comparative balances have been reclassified to conform to the current presentation. The impact of this reclassification on the balance at September 30, 2018 increased Additional paid-in capital by $287 million, decreased Common shares by $232 million and decreased Retained earnings by $55 million. See Note 14 - Share capital to the Company's 2018 Annual Consolidated Financial Statements for additional information. |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Operating activities | ||||||||||||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 372 | 330 | 1,175 | 983 | ||||||||||||
Pension income and funding (1) | (50 | ) | (36 | ) | (218 | ) | (156 | ) | ||||||||
Deferred income taxes | 284 | 172 | 479 | 401 | ||||||||||||
Gain on disposal of property (Note 7) | — | (36 | ) | — | (259 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 42 | (57 | ) | (27 | ) | (117 | ) | |||||||||
Material and supplies | 39 | (4 | ) | (51 | ) | (133 | ) | |||||||||
Accounts payable and other | (210 | ) | (30 | ) | (664 | ) | (15 | ) | ||||||||
Other current assets | (19 | ) | 58 | (20 | ) | 51 | ||||||||||
Other operating activities, net (1) | 39 | 33 | 388 | 61 | ||||||||||||
Net cash provided by operating activities | 1,692 | 1,564 | 4,405 | 4,001 | ||||||||||||
Investing activities | ||||||||||||||||
Property additions | (961 | ) | (1,002 | ) | (2,847 | ) | (2,267 | ) | ||||||||
Acquisition, net of cash acquired (Note 3) | — | — | (167 | ) | — | |||||||||||
Disposal of property (Note 7) | — | 40 | — | 194 | ||||||||||||
Other investing activities, net | (31 | ) | (17 | ) | (59 | ) | (47 | ) | ||||||||
Net cash used in investing activities | (992 | ) | (979 | ) | (3,073 | ) | (2,120 | ) | ||||||||
Financing activities | ||||||||||||||||
Issuance of debt (Note 10) | 150 | 1,137 | 940 | 2,423 | ||||||||||||
Repayment of debt | (58 | ) | (991 | ) | (98 | ) | (2,022 | ) | ||||||||
Change in commercial paper, net (Note 10) | 202 | 21 | 323 | 447 | ||||||||||||
Settlement of foreign exchange forward contracts on debt | (8 | ) | 31 | 7 | 38 | |||||||||||
Issuance of common shares for stock options exercised | 9 | 17 | 65 | 76 | ||||||||||||
Withholding taxes remitted on the net settlement of equity settled awards (Note 12) | (4 | ) | (3 | ) | (60 | ) | (49 | ) | ||||||||
Repurchase of common shares (Note 10) | (399 | ) | (521 | ) | (1,263 | ) | (1,521 | ) | ||||||||
Purchase of common shares for settlement of equity settled awards | (4 | ) | (3 | ) | (10 | ) | (15 | ) | ||||||||
Purchase of common shares by Share Trusts | (7 | ) | — | (26 | ) | — | ||||||||||
Dividends paid | (385 | ) | (332 | ) | (1,161 | ) | (1,002 | ) | ||||||||
Acquisition, additional cash consideration (Note 3) | (25 | ) | — | (25 | ) | — | ||||||||||
Net cash used in financing activities | (529 | ) | (644 | ) | (1,308 | ) | (1,625 | ) | ||||||||
Effect of foreign exchange fluctuations on cash, cash equivalents, restricted cash and restricted cash equivalents | (1 | ) | (11 | ) | (1 | ) | — | |||||||||
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 170 | (70 | ) | 23 | 256 | |||||||||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period | 612 | 879 | 759 | 553 | ||||||||||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period | $ | 782 | $ | 809 | $ | 782 | $ | 809 | ||||||||
Cash and cash equivalents, end of period | $ | 258 | $ | 317 | $ | 258 | $ | 317 | ||||||||
Restricted cash and cash equivalents, end of period | 524 | 492 | 524 | 492 | ||||||||||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period | $ | 782 | $ | 809 | $ | 782 | $ | 809 | ||||||||
Supplemental cash flow information | ||||||||||||||||
Interest paid | $ | (191 | ) | $ | (164 | ) | $ | (433 | ) | $ | (399 | ) | ||||
Income taxes paid | $ | (153 | ) | $ | (215 | ) | $ | (644 | ) | $ | (669 | ) |
(1) | In the first quarter of 2019, the Company began presenting Pension income and funding as a separate line on the Consolidated Statements of Cash Flows. Previously pension income and funding was included in Other operating activities, net. Comparative figures have been adjusted to conform to the current presentation. |
• | the use-of-hindsight practical expedient to reassess the lease term and the likelihood that a purchase option will be exercised; |
• | the land easement practical expedient to not evaluate land easements that were not previously accounted for as leases under Topic 840; |
• | the short-term lease exemption for all asset classes that permits entities not to recognize right-of-use assets and lease liabilities onto the balance sheet for leases with terms of twelve months or less; and |
• | the practical expedient to not separate lease and non-lease components for the freight car asset category. |
March 20 | ||||
In millions | 2019 | |||
Consideration transferred | ||||
Cash paid at closing | $ | 170 | ||
Additional cash consideration | 25 | |||
Fair value of total consideration transferred | $ | 195 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed (1) | ||||
Current assets | $ | 92 | ||
Non-current assets (2) | 260 | |||
Current liabilities | (131 | ) | ||
Non-current liabilities | (84 | ) | ||
Total identifiable net assets (3) | $ | 137 | ||
Goodwill (4) | $ | 58 |
(1) | The Company's purchase price allocation is preliminary, based on information available to the Company to date, and subject to change over the measurement period, which may be up to one year from the acquisition date. |
(2) | Includes identifiable intangible assets of $34 million. |
(3) | Includes finance and operating lease right-of-use assets and liabilities. |
(4) | The goodwill acquired through the business combination is mainly attributable to the premium of an established business operation. The goodwill is not deductible for tax purposes. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Freight revenues | |||||||||||||||
Petroleum and chemicals | $ | 788 | $ | 665 | $ | 2,298 | $ | 1,845 | |||||||
Metals and minerals | 425 | 457 | 1,286 | 1,292 | |||||||||||
Forest products | 450 | 508 | 1,393 | 1,420 | |||||||||||
Coal | 168 | 169 | 508 | 486 | |||||||||||
Grain and fertilizers | 552 | 568 | 1,770 | 1,698 | |||||||||||
Intermodal | 1,018 | 897 | 2,860 | 2,574 | |||||||||||
Automotive | 217 | 199 | 675 | 632 | |||||||||||
Total freight revenues | $ | 3,618 | $ | 3,463 | $ | 10,790 | $ | 9,947 | |||||||
Other revenues | 212 | 225 | 543 | 566 | |||||||||||
Total revenues (1) | $ | 3,830 | $ | 3,688 | $ | 11,333 | $ | 10,513 | |||||||
Revenues by geographic area | |||||||||||||||
Canada | $ | 2,605 | $ | 2,442 | $ | 7,682 | $ | 7,039 | |||||||
United States (U.S.) | 1,225 | 1,246 | 3,651 | 3,474 | |||||||||||
Total revenues (1) | $ | 3,830 | $ | 3,688 | $ | 11,333 | $ | 10,513 |
(1) | As at September 30, 2019, the Company had remaining performance obligations related to freight in-transit, for which revenues of $79 million are expected to be recognized in the next period. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Beginning balance | $ | 243 | $ | 4 | $ | 3 | $ | 3 | |||||||
Revenue recognized included in the beginning balance | (5 | ) | (2 | ) | (2 | ) | (3 | ) | |||||||
Increase due to consideration received, net of revenue recognized | 4 | 2 | 241 | 4 | |||||||||||
Ending balance | $ | 242 | $ | 4 | $ | 242 | $ | 4 | |||||||
Current portion - End of period | $ | 66 | $ | 4 | $ | 66 | $ | 4 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||||||||||
Pensions | Other postretirement benefits | Pensions | Other postretirement benefits | ||||||||||||||||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
Current service cost | $ | 38 | $ | 46 | $ | 1 | $ | 1 | $ | 114 | $ | 125 | $ | 2 | $ | 2 | |||||||||||||||
Other components of net periodic benefit cost (income) (1) | |||||||||||||||||||||||||||||||
Interest cost | 149 | 142 | 2 | 3 | 447 | 426 | 6 | 7 | |||||||||||||||||||||||
Expected return on plan assets | (272 | ) | (271 | ) | — | — | (814 | ) | (813 | ) | — | — | |||||||||||||||||||
Amortization of prior service cost | 1 | 1 | — | — | 3 | 3 | — | — | |||||||||||||||||||||||
Amortization of net actuarial loss (gain) | 39 | 50 | — | (1 | ) | 116 | 150 | (2 | ) | (2 | ) | ||||||||||||||||||||
Total Other components of net periodic benefit cost (income) (1) | (83 | ) | (78 | ) | 2 | 2 | (248 | ) | (234 | ) | 4 | 5 | |||||||||||||||||||
Net periodic benefit cost (income) | $ | (45 | ) | $ | (32 | ) | $ | 3 | $ | 3 | $ | (134 | ) | $ | (109 | ) | $ | 6 | $ | 7 |
(1) | In the second quarters of 2019 and 2018, the Company revised its estimate of full year net periodic benefit cost (income) for pensions to reflect updated plan demographic information. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Weighted-average basic shares outstanding | 718.2 | 732.7 | 721.7 | 736.6 | |||||||||||
Dilutive effect of stock-based compensation | 2.7 | 3.5 | 2.6 | 3.2 | |||||||||||
Weighted-average diluted shares outstanding | 720.9 | 736.2 | 724.3 | 739.8 | |||||||||||
Basic earnings per share | $ | 1.66 | $ | 1.55 | $ | 4.63 | $ | 4.32 | |||||||
Diluted earnings per share | $ | 1.66 | $ | 1.54 | $ | 4.62 | $ | 4.31 | |||||||
Units excluded from the calculation as their inclusion would not have a dilutive effect | |||||||||||||||
Stock options | — | — | 0.5 | 0.7 | |||||||||||
Performance share units | 0.1 | 0.1 | 0.2 | 0.3 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Commercial paper with maturities less than 90 days | |||||||||||||||
Issuance of commercial paper | $ | 1,582 | $ | 2,175 | $ | 3,625 | $ | 6,071 | |||||||
Repayment of commercial paper | (1,296 | ) | (2,004 | ) | (3,620 | ) | (5,941 | ) | |||||||
Change in commercial paper with maturities less than 90 days, net | 286 | 171 | 5 | 130 | |||||||||||
Commercial paper with maturities of 90 days or greater | |||||||||||||||
Issuance of commercial paper | 437 | 332 | 1,634 | 903 | |||||||||||
Repayment of commercial paper | (521 | ) | (482 | ) | (1,316 | ) | (586 | ) | |||||||
Change in commercial paper with maturities of 90 days or greater, net | (84 | ) | (150 | ) | 318 | 317 | |||||||||
Change in commercial paper, net | $ | 202 | $ | 21 | $ | 323 | $ | 447 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Number of common shares repurchased | 3.2 | 4.6 | 10.7 | 14.9 | |||||||||||
Weighted-average price per share | $ | 122.29 | $ | 114.01 | $ | 118.49 | $ | 103.41 | |||||||
Amount of repurchase (1) | $ | 394 | $ | 521 | $ | 1,271 | $ | 1,537 |
(1) | Includes settlements in subsequent periods. |
Three months ended September 30 | Nine months ended September 30 | ||||||
In millions | 2019 | 2019 | |||||
Finance lease cost | |||||||
Amortization of right-of-use assets | $ | 4 | $ | 8 | |||
Interest on lease liabilities | 2 | 6 | |||||
Total finance lease cost | 6 | 14 | |||||
Operating lease cost | 43 | 129 | |||||
Short-term lease cost | 12 | 34 | |||||
Variable lease cost (1) | 15 | 47 | |||||
Total lease cost (2) | $ | 76 | $ | 224 |
(1) | Mainly relates to leases of trucks for the Company's freight delivery service contracts. |
(2) | Includes lease costs from purchased services and material and equipment rents in the Consolidated Statements of Income. |
September 30 | ||||
In millions | Classification | 2019 | ||
Lease right-of-use assets | ||||
Finance leases | Properties | $ | 622 | |
Operating leases | Operating lease right-of-use assets | 554 | ||
Total lease right-of-use assets | $ | 1,176 | ||
Lease liabilities | ||||
Current | ||||
Finance leases | Current portion of long-term debt | $ | 135 | |
Operating leases | Accounts payable and other | 132 | ||
Noncurrent | ||||
Finance leases | Long-term debt | 83 | ||
Operating leases | Operating lease liabilities | 404 | ||
Total lease liabilities | $ | 754 |
September 30 | ||
2019 | ||
Weighted-average remaining lease term (years) | ||
Finance leases | 1.0 | |
Operating leases | 6.9 | |
Weighted-average discount rate (%) | ||
Finance leases | 2.9 | |
Operating leases | 3.2 |
Three months ended September 30 | Nine months ended September 30 | ||||||
In millions | 2019 | 2019 | |||||
Cash paid for amounts included in the measurement of lease liabilities | |||||||
Operating cash outflows from operating leases | $ | 44 | $ | 131 | |||
Operating cash outflows from finance leases | $ | 1 | $ | 5 | |||
Financing cash outflows from finance leases | $ | 58 | $ | 78 | |||
Right-of-use assets obtained in exchange for new finance lease liabilities | $ | — | $ | — | |||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 30 | $ | 71 |
In millions | Finance leases | Operating leases (1) | Total | |||||||||
2019 | $ | 85 | $ | 41 | $ | 126 | ||||||
2020 | 62 | 136 | 198 | |||||||||
2021 | 73 | 107 | 180 | |||||||||
2022 | 1 | 72 | 73 | |||||||||
2023 | — | 50 | 50 | |||||||||
2024 and thereafter | 3 | 191 | 194 | |||||||||
Total lease payments | $ | 224 | $ | 597 | $ | 821 | ||||||
Less: Imputed interest | 6 | 61 | ||||||||||
Present value of lease payments | $ | 218 | $ | 536 |
(1) | Includes $70 million related to renewal options that are reasonably certain to be exercised. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Share Units Plan (1) | $ | 1 | $ | 9 | $ | 23 | $ | 26 | |||||||
Voluntary Incentive Deferral Plan (VIDP) (2) | — | 3 | 4 | 4 | |||||||||||
Stock option awards | 2 | 3 | 9 | 9 | |||||||||||
Employee share investment plan (ESIP) | 5 | 10 | 9 | 28 | |||||||||||
Total stock-based compensation expense | $ | 8 | $ | 25 | $ | 45 | $ | 67 | |||||||
Income tax impacts of stock-based compensation | |||||||||||||||
Tax benefit recognized in income | $ | 2 | $ | 6 | $ | 10 | $ | 16 | |||||||
Excess tax benefit recognized in income | $ | 1 | $ | 1 | $ | 22 | $ | 12 |
(1) | Performance share unit (PSU) awards are granted under the Share Units Plan. |
(2) | Deferred share unit (DSU) awards are granted under the Voluntary Incentive Deferral Plan. |
Equity settled | ||||||||||||
PSUs-ROIC (1) | PSUs-TSR (2) | |||||||||||
Units | Weighted-average grant date fair value | Units | Weighted-average grant date fair value | |||||||||
In millions | In millions | |||||||||||
Outstanding at December 31, 2018 | 1.1 | $ | 46.10 | 0.4 | $ | 100.93 | ||||||
Granted | 0.4 | $ | 70.52 | 0.1 | $ | 128.02 | ||||||
Settled (3) | (0.4 | ) | $ | 35.11 | (0.2 | ) | $ | 95.31 | ||||
Forfeited | (0.1 | ) | $ | 61.22 | — | $ | 116.50 | |||||
Outstanding at September 30, 2019 | 1.0 | $ | 58.27 | 0.3 | $ | 112.04 |
(1) | The grant date fair value of equity settled PSUs-ROIC granted in 2019 of $26 million is calculated using a lattice-based valuation model. As at September 30, 2019, total unrecognized compensation cost related to all outstanding awards was $22 million and is expected to be recognized over a weighted-average period of 1.6 years. |
(2) | The grant date fair value of equity settled PSUs-TSR granted in 2019 of $15 million is calculated using a Monte Carlo simulation model. As at September 30, 2019, total unrecognized compensation cost related to all outstanding awards was $12 million and is expected to be recognized over a weighted-average period of 1.7 years. |
(3) | Equity settled PSUs-ROIC granted in 2016 met the minimum share price condition for settlement and attained a performance vesting factor of 200%. Equity settled PSUs-TSR granted in 2016 attained a performance vesting factor of 100%. In the first quarter of 2019, these awards were settled, net of the remittance of the participants' withholding tax obligation of $50 million, by way of disbursement from the Share Trusts of 0.5 million common shares. |
Equity settled | Cash settled | |||||||
DSUs (1) | DSUs (2) | |||||||
Units | Weighted-average grant date fair value | Units | ||||||
In millions | In millions | |||||||
Outstanding at December 31, 2018 | 0.8 | $ | 79.23 | 0.2 | ||||
Granted | 0.1 | $ | 113.59 | — | ||||
Settled (3) | (0.2 | ) | $ | 80.51 | (0.1 | ) | ||
Outstanding at September 30, 2019 (4) | 0.7 | $ | 81.95 | 0.1 |
(1) | The grant date fair value of equity settled DSUs granted in 2019 of $4 million is calculated using the Company's stock price on the grant date. As at September 30, 2019, the aggregate intrinsic value of all equity settled DSUs outstanding amounted to $80 million. |
(2) | The fair value of cash settled DSUs as at September 30, 2019 is based on the intrinsic value. As at September 30, 2019, the liability for all cash settled DSUs was $15 million ($19 million as at December 31, 2018). The closing stock price used to determine the liability was $118.96. |
(3) | For the nine months ended September 30, 2019, the Company purchased 0.1 million common shares for the settlement of equity settled DSUs, net of the remittance of the participants' withholding tax obligation of $10 million. |
(4) | The total fair value of equity settled DSU awards vested, the number of units outstanding that were nonvested, unrecognized compensation cost and the remaining recognition period for cash and equity settled DSUs have not been quantified as they relate to a minimal number of units. |
Options outstanding | ||||||
Number of options | Weighted-average exercise price | |||||
In millions | ||||||
Outstanding at December 31, 2018 (1) | 4.2 | $ | 79.73 | |||
Granted (2) | 0.9 | $ | 110.76 | |||
Exercised | (0.9 | ) | $ | 70.05 | ||
Forfeited | (0.2 | ) | $ | 103.04 | ||
Outstanding at September 30, 2019 (1) (2) (3) | 4.0 | $ | 86.79 | |||
Exercisable at September 30, 2019 (1) (3) | 1.9 | $ | 71.60 |
(1) | Stock options with a US dollar exercise price have been translated into Canadian dollars using the foreign exchange rate in effect at the balance sheet date. |
(2) | The grant date fair value of options granted in 2019 of $15 million ($16.29 per option) is calculated using the Black-Scholes option-pricing model. As at September 30, 2019, total unrecognized compensation cost related to all outstanding awards was $13 million and is expected to be recognized over a weighted-average period of 2.2 years. |
(3) | The weighted-average term to expiration of options outstanding was 6.8 years and the weighted-average term to expiration of exercisable stock options was 5.1 years. As at September 30, 2019, the aggregate intrinsic value of in-the-money stock options outstanding amounted to $129 million and the aggregate intrinsic value of stock options exercisable amounted to $89 million. |
ESIP | |||
Shares | |||
In millions | |||
Unvested contributions, December 31, 2018 | — | ||
Company contributions (1) | 0.2 | ||
Unvested contributions, September 30, 2019 | 0.2 |
(1) | The weighted average fair value of the shares contributed was $118.79. |
In millions | Foreign currency translation adjustments | Pension and other postretirement benefit plans | Total before tax | Income tax recovery (expense) (1) | Total net of tax | ||||||||||||||
Balance at June 30, 2019 | $ | (253 | ) | $ | (3,804 | ) | $ | (4,057 | ) | $ | 1,010 | $ | (3,047 | ) | |||||
Other comprehensive income (loss) before reclassifications: | |||||||||||||||||||
Foreign exchange gain on translation of net investment in foreign operations | 143 | 143 | — | 143 | |||||||||||||||
Foreign exchange loss on translation of US dollar-denominated debt designated as a hedge of the net investment in foreign operations (2) | (83 | ) | (83 | ) | 11 | (72 | ) | ||||||||||||
Amounts reclassified from Accumulated other comprehensive loss: | |||||||||||||||||||
Amortization of net actuarial loss | 39 | 39 | (3) | (10 | ) | (4) | 29 | ||||||||||||
Amortization of prior service cost | 1 | 1 | (3) | (1 | ) | — | |||||||||||||
Other comprehensive income | 60 | 40 | 100 | — | 100 | ||||||||||||||
Balance at September 30, 2019 | $ | (193 | ) | $ | (3,764 | ) | $ | (3,957 | ) | $ | 1,010 | $ | (2,947 | ) | |||||
In millions | Foreign currency translation adjustments | Pension and other postretirement benefit plans | Total before tax | Income tax recovery (expense) (1) | Total net of tax | ||||||||||||||
Balance at December 31, 2018 | $ | (41 | ) | $ | (3,881 | ) | $ | (3,922 | ) | $ | 1,073 | $ | (2,849 | ) | |||||
Other comprehensive income (loss) before reclassifications: | |||||||||||||||||||
Foreign exchange loss on translation of net investment in foreign operations | (383 | ) | (383 | ) | — | (383 | ) | ||||||||||||
Foreign exchange gain on translation of US dollar-denominated debt designated as a hedge of the net investment in foreign operations (2) | 231 | 231 | (32 | ) | 199 | ||||||||||||||
Amounts reclassified from Accumulated other comprehensive loss: | |||||||||||||||||||
Amortization of net actuarial loss | 114 | 114 | (3) | (30 | ) | (4) | 84 | ||||||||||||
Amortization of prior service cost | 3 | 3 | (3) | (1 | ) | 2 | |||||||||||||
Other comprehensive income (loss) | (152 | ) | 117 | (35 | ) | (63 | ) | (98 | ) | ||||||||||
Balance at September 30, 2019 | $ | (193 | ) | $ | (3,764 | ) | $ | (3,957 | ) | $ | 1,010 | $ | (2,947 | ) |
In millions | Foreign currency translation adjustments | Pension and other postretirement benefit plans | Total before tax | Income tax recovery (expense) (1) | Total net of tax | ||||||||||||||
Balance at June 30, 2018 | $ | (247 | ) | $ | (3,021 | ) | $ | (3,268 | ) | $ | 801 | $ | (2,467 | ) | |||||
Other comprehensive income (loss) before reclassifications: | |||||||||||||||||||
Foreign exchange loss on translation of net investment in foreign operations | (215 | ) | (215 | ) | — | (215 | ) | ||||||||||||
Foreign exchange gain on translation of US dollar-denominated debt designated as a hedge of the net investment in foreign operations (2) | 128 | 128 | (17 | ) | 111 | ||||||||||||||
Amounts reclassified from Accumulated other comprehensive loss: | |||||||||||||||||||
Amortization of net actuarial loss | 49 | 49 | (3) | (13 | ) | (4) | 36 | ||||||||||||
Amortization of prior service cost | 1 | 1 | (3) | — | 1 | ||||||||||||||
Other comprehensive income (loss) | (87 | ) | 50 | (37 | ) | (30 | ) | (67 | ) | ||||||||||
Balance at September 30, 2018 | $ | (334 | ) | $ | (2,971 | ) | $ | (3,305 | ) | $ | 771 | $ | (2,534 | ) | |||||
In millions | Foreign currency translation adjustments | Pension and other postretirement benefit plans | Total before tax | Income tax recovery (expense) (1) | Total net of tax | ||||||||||||||
Balance at December 31, 2017 | $ | (444 | ) | $ | (3,122 | ) | $ | (3,566 | ) | $ | 782 | $ | (2,784 | ) | |||||
Other comprehensive income (loss) before reclassifications: | |||||||||||||||||||
Foreign exchange gain on translation of net investment in foreign operations | 327 | 327 | — | 327 | |||||||||||||||
Foreign exchange loss on translation of US dollar-denominated debt designated as a hedge of the net investment in foreign operations (2) | (217 | ) | (217 | ) | 29 | (188 | ) | ||||||||||||
Amounts reclassified from Accumulated other comprehensive loss: | |||||||||||||||||||
Amortization of net actuarial loss | 148 | 148 | (3) | (40 | ) | (4) | 108 | ||||||||||||
Amortization of prior service cost | 3 | 3 | (3) | — | 3 | ||||||||||||||
Other comprehensive income (loss) | 110 | 151 | 261 | (11 | ) | 250 | |||||||||||||
Balance at September 30, 2018 | $ | (334 | ) | $ | (2,971 | ) | $ | (3,305 | ) | $ | 771 | $ | (2,534 | ) |
(1) | The Company releases stranded tax effects from Accumulated other comprehensive loss to Net income upon the liquidation or termination of the related item. |
(2) | The Company designates US dollar-denominated debt of the parent company as a foreign currency hedge of its net investment in foreign operations. Accordingly, from the dates of designation, foreign exchange gains and losses on translation of the Company's US dollar-denominated debt are recorded in Accumulated other comprehensive loss, which minimizes the volatility of earnings resulting from the conversion of US dollar-denominated debt into Canadian dollars. |
(3) | Reclassified to Other components of net periodic benefit income in the Consolidated Statements of Income and included in net periodic benefit cost. See Note 6 - Pensions and other postretirement benefits. |
(4) | Included in Income tax expense in the Consolidated Statements of Income. |
• | Level 1: Inputs are quoted prices for identical instruments in active markets |
• | Level 2: Significant inputs (other than quoted prices included in Level 1) are observable |
• | Level 3: Significant inputs are unobservable |
• | CN delivered higher third quarter operating income, net income and earnings per share, notwithstanding the weakening economic environment that contributed to a 1% decline in volumes in terms of revenue ton miles (RTMs). |
• | Net income increased by $61 million, or 5%, to $1,195 million, and diluted earnings per share increased by 8% to $1.66. |
• | Adjusted net income increased by $93 million, or 8%, to $1,195 million, and adjusted diluted earnings per share increased by 11% to $1.66. (1) |
• | Operating income was $1,613 million, an increase of $121 million, or 8%. |
• | Operating ratio was 57.9%, a 1.6-point improvement. |
• | Free cash flow was $700 million, an increase of $115 million. (2) |
• | The Company repurchased 3.2 million common shares, returning $394 million to its shareholders. |
• | CN paid a quarterly dividend of $0.5375 per share, representing an increase of 18%, amounting to $385 million. |
• | CN delivered a 4% improvement in fuel productivity, producing an all time record performance and supporting the Company's sustainability agenda. The Company's sustainability practices once again earned it a place on the Dow Jones Sustainability World and North American Indices, for the 8th and 11th consecutive year, respectively; CN is the only Canadian company and the only North American railroad listed in the Transportation and Transportation Infrastructure sector World Index. |
(1) | See the section of this MD&A entitled Adjusted performance measures for an explanation of these non-GAAP measures. |
(2) | See the section of this MD&A entitled Liquidity and capital resources – Free cash flow for an explanation of this non-GAAP measure. |
Forward-looking statements | Key assumptions |
Statements relating to revenue growth opportunities, including those referring to general economic and business conditions | • North American and global economic growth• Long-term growth opportunities being less affected by current economic conditions |
Statements relating to the Company's ability to meet debt repayments and future obligations in the foreseeable future, including income tax payments, and capital spending | • North American and global economic growth• Adequate credit ratios• Investment-grade credit ratings• Access to capital markets• Adequate cash generated from operations and other sources of financing |
Statements relating to pension contributions | • Adequate cash generated from operations and other sources of financing• Adequate long-term return on investment on pension plan assets• Level of funding as determined by actuarial valuations, particularly influenced by discount rates for funding purposes |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except percentage and per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenues | $ | 3,830 | $ | 3,688 | $ | 11,333 | $ | 10,513 | |||||||
Operating income | $ | 1,613 | $ | 1,492 | $ | 4,375 | $ | 4,041 | |||||||
Adjusted operating income (1) | $ | 1,613 | $ | 1,492 | $ | 4,459 | $ | 4,041 | |||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Adjusted net income (1) | $ | 1,195 | $ | 1,102 | $ | 3,293 | $ | 2,963 | |||||||
Basic earnings per share | $ | 1.66 | $ | 1.55 | $ | 4.63 | $ | 4.32 | |||||||
Adjusted basic earnings per share (1) | $ | 1.66 | $ | 1.51 | $ | 4.56 | $ | 4.02 | |||||||
Diluted earnings per share | $ | 1.66 | $ | 1.54 | $ | 4.62 | $ | 4.31 | |||||||
Adjusted diluted earnings per share (1) | $ | 1.66 | $ | 1.50 | $ | 4.56 | $ | 4.01 | |||||||
Dividends declared per share | $ | 0.5375 | $ | 0.4550 | $ | 1.6125 | $ | 1.3650 | |||||||
Total assets | $ | 44,096 | $ | 40,209 | $ | 44,096 | $ | 40,209 | |||||||
Total long-term liabilities | $ | 21,288 | $ | 18,784 | $ | 21,288 | $ | 18,784 | |||||||
Operating ratio | 57.9 | % | 59.5 | % | 61.4 | % | 61.6 | % | |||||||
Adjusted operating ratio (1) | 57.9 | % | 59.5 | % | 60.7 | % | 61.6 | % | |||||||
Free cash flow (2) | $ | 700 | $ | 585 | $ | 1,499 | $ | 1,881 |
(1) | See the section of this MD&A entitled Adjusted performance measures for an explanation of these non-GAAP measures. |
(2) | See the section of this MD&A entitled Liquidity and capital resources – Free cash flow for an explanation of this non-GAAP measure. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income | $ | 1,195 | $ | 1,134 | $ | 3,343 | $ | 3,185 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization | — | — | 84 | — | |||||||||||
Other income | — | (36 | ) | — | (259 | ) | |||||||||
Income tax expense (recovery) (1) | — | 4 | (134 | ) | 37 | ||||||||||
Adjusted net income | $ | 1,195 | $ | 1,102 | $ | 3,293 | $ | 2,963 | |||||||
Basic earnings per share | $ | 1.66 | $ | 1.55 | $ | 4.63 | $ | 4.32 | |||||||
Impact of adjustments, per share | — | (0.04 | ) | (0.07 | ) | (0.30 | ) | ||||||||
Adjusted basic earnings per share | $ | 1.66 | $ | 1.51 | $ | 4.56 | $ | 4.02 | |||||||
Diluted earnings per share | $ | 1.66 | $ | 1.54 | $ | 4.62 | $ | 4.31 | |||||||
Impact of adjustments, per share | — | (0.04 | ) | (0.06 | ) | (0.30 | ) | ||||||||
Adjusted diluted earnings per share | $ | 1.66 | $ | 1.50 | $ | 4.56 | $ | 4.01 |
(1) | The tax effect of adjustments reflects tax rates in the applicable jurisdiction and the nature of the item for tax purposes. |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
In millions, except percentage | 2019 | 2018 | 2019 | 2018 | ||||||||||
Operating income | $ | 1,613 | $ | 1,492 | $ | 4,375 | $ | 4,041 | ||||||
Adjustment: Depreciation and amortization | — | — | 84 | — | ||||||||||
Adjusted operating income | $ | 1,613 | $ | 1,492 | $ | 4,459 | $ | 4,041 | ||||||
Operating ratio (1) | 57.9 | % | 59.5 | % | 61.4 | % | 61.6 | % | ||||||
Impact of adjustment | — | — | (0.7)-pts | — | ||||||||||
Adjusted operating ratio | 57.9 | % | 59.5 | % | 60.7 | % | 61.6 | % |
(1) | Operating ratio is defined as operating expenses as a percentage of revenues. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
In millions, unless otherwise indicated | 2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | |||||||||||||||
Freight revenues | $ | 3,618 | $ | 3,463 | 4 | % | 4 | % | $ | 10,790 | $ | 9,947 | 8 | % | 6 | % | |||||||
Other revenues | 212 | 225 | (6 | %) | (6 | %) | 543 | 566 | (4 | %) | (6 | %) | |||||||||||
Total revenues | $ | 3,830 | $ | 3,688 | 4 | % | 3 | % | $ | 11,333 | $ | 10,513 | 8 | % | 6 | % | |||||||
Freight revenues | |||||||||||||||||||||||
Petroleum and chemicals | $ | 788 | $ | 665 | 18 | % | 18 | % | $ | 2,298 | $ | 1,845 | 25 | % | 22 | % | |||||||
Metals and minerals | 425 | 457 | (7 | %) | (8 | %) | 1,286 | 1,292 | — | % | (3 | %) | |||||||||||
Forest products | 450 | 508 | (11 | %) | (12 | %) | 1,393 | 1,420 | (2 | %) | (4 | %) | |||||||||||
Coal | 168 | 169 | (1 | %) | (1 | %) | 508 | 486 | 5 | % | 3 | % | |||||||||||
Grain and fertilizers | 552 | 568 | (3 | %) | (3 | %) | 1,770 | 1,698 | 4 | % | 3 | % | |||||||||||
Intermodal | 1,018 | 897 | 13 | % | 13 | % | 2,860 | 2,574 | 11 | % | 10 | % | |||||||||||
Automotive | 217 | 199 | 9 | % | 9 | % | 675 | 632 | 7 | % | 4 | % | |||||||||||
Total freight revenues | $ | 3,618 | $ | 3,463 | 4 | % | 4 | % | $ | 10,790 | $ | 9,947 | 8 | % | 6 | % | |||||||
Revenue ton miles (RTMs) (millions) | 60,849 | 61,642 | (1 | %) | (1 | %) | 184,245 | 181,848 | 1 | % | 1 | % | |||||||||||
Freight revenue/RTM (cents) | 5.95 | 5.62 | 6 | % | 5 | % | 5.86 | 5.47 | 7 | % | 5 | % | |||||||||||
Carloads (thousands) | 1,531 | 1,525 | — | % | — | % | 4,487 | 4,439 | 1 | % | 1 | % | |||||||||||
Freight revenue/carload ($) | 2,363 | 2,271 | 4 | % | 3 | % | 2,405 | 2,241 | 7 | % | 5 | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 788 | $ | 665 | 18 | % | 18 | % | $ | 2,298 | $ | 1,845 | 25 | % | 22 | % | |||||||
RTMs (millions) | 14,042 | 12,437 | 13 | % | 13 | % | 41,148 | 34,609 | 19 | % | 19 | % | |||||||||||
Revenue/RTM (cents) | 5.61 | 5.35 | 5 | % | 4 | % | 5.58 | 5.33 | 5 | % | 2 | % | |||||||||||
Carloads (thousands) | 177 | 161 | 10 | % | 10 | % | 519 | 469 | 11 | % | 11 | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 425 | $ | 457 | (7 | %) | (8 | %) | $ | 1,286 | $ | 1,292 | — | % | (3 | %) | |||||||
RTMs (millions) | 6,458 | 7,442 | (13 | %) | (13 | %) | 19,860 | 21,924 | (9 | %) | (9 | %) | |||||||||||
Revenue/RTM (cents) | 6.58 | 6.14 | 7 | % | 6 | % | 6.48 | 5.89 | 10 | % | 7 | % | |||||||||||
Carloads (thousands) | 270 | 268 | 1 | % | 1 | % | 774 | 775 | — | % | — | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 450 | $ | 508 | (11 | %) | (12 | %) | $ | 1,393 | $ | 1,420 | (2 | %) | (4 | %) | |||||||
RTMs (millions) | 6,813 | 7,920 | (14 | %) | (14 | %) | 20,902 | 22,803 | (8 | %) | (8 | %) | |||||||||||
Revenue/RTM (cents) | 6.61 | 6.41 | 3 | % | 2 | % | 6.66 | 6.23 | 7 | % | 4 | % | |||||||||||
Carloads (thousands) | 93 | 108 | (14 | %) | (14 | %) | 289 | 317 | (9 | %) | (9 | %) |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 168 | $ | 169 | (1 | %) | (1 | %) | $ | 508 | $ | 486 | 5 | % | 3 | % | |||||||
RTMs (millions) | 4,563 | 4,474 | 2 | % | 2 | % | 13,556 | 12,916 | 5 | % | 5 | % | |||||||||||
Revenue/RTM (cents) | 3.68 | 3.78 | (3 | %) | (3 | %) | 3.75 | 3.76 | — | % | (2 | %) | |||||||||||
Carloads (thousands) | 86 | 86 | — | % | — | % | 256 | 252 | 2 | % | 2 | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 552 | $ | 568 | (3 | %) | (3 | %) | $ | 1,770 | $ | 1,698 | 4 | % | 3 | % | |||||||
RTMs (millions) | 12,722 | 13,481 | (6 | %) | (6 | %) | 41,634 | 41,671 | — | % | — | % | |||||||||||
Revenue/RTM (cents) | 4.34 | 4.21 | 3 | % | 3 | % | 4.25 | 4.07 | 4 | % | 3 | % | |||||||||||
Carloads (thousands) | 145 | 156 | (7 | %) | (7 | %) | 461 | 463 | — | % | — | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 1,018 | $ | 897 | 13 | % | 13 | % | $ | 2,860 | $ | 2,574 | 11 | % | 10 | % | |||||||
RTMs (millions) | 15,294 | 14,982 | 2 | % | 2 | % | 44,176 | 44,883 | (2 | %) | (2 | %) | |||||||||||
Revenue/RTM (cents) | 6.66 | 5.99 | 11 | % | 11 | % | 6.47 | 5.73 | 13 | % | 12 | % | |||||||||||
Carloads (thousands) | 693 | 685 | 1 | % | 1 | % | 1,980 | 1,966 | 1 | % | 1 | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 217 | $ | 199 | 9 | % | 9 | % | $ | 675 | $ | 632 | 7 | % | 4 | % | |||||||
RTMs (millions) | 957 | 906 | 6 | % | 6 | % | 2,969 | 3,042 | (2 | %) | (2 | %) | |||||||||||
Revenue/RTM (cents) | 22.68 | 21.96 | 3 | % | 3 | % | 22.73 | 20.78 | 9 | % | 7 | % | |||||||||||
Carloads (thousands) | 67 | 61 | 10 | % | 10 | % | 208 | 197 | 6 | % | 6 | % |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | ||||||||||||||||
Revenues (millions) | $ | 212 | $ | 225 | (6 | %) | (6 | %) | $ | 543 | $ | 566 | (4 | %) | (6 | %) |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
In millions | 2019 | 2018 | % Change | % Change at constant currency | 2019 | 2018 | % Change | % Change at constant currency | |||||||||||||||
Labor and fringe benefits | $ | 694 | $ | 707 | 2 | % | 2 | % | $ | 2,173 | $ | 2,069 | (5 | %) | (4 | %) | |||||||
Purchased services and material | 552 | 485 | (14 | %) | (13 | %) | 1,681 | 1,444 | (16 | %) | (15 | %) | |||||||||||
Fuel | 391 | 437 | 11 | % | 11 | % | 1,231 | 1,266 | 3 | % | 6 | % | |||||||||||
Depreciation and amortization | 372 | 330 | (13 | %) | (12 | %) | 1,175 | 983 | (20 | %) | (18 | %) | |||||||||||
Equipment rents | 114 | 127 | 10 | % | 11 | % | 332 | 352 | 6 | % | 8 | % | |||||||||||
Casualty and other | 94 | 110 | 15 | % | 15 | % | 366 | 358 | (2 | %) | — | % | |||||||||||
Total operating expenses | $ | 2,217 | $ | 2,196 | (1 | %) | — | % | $ | 6,958 | $ | 6,472 | (8 | %) | (6 | %) |
2019 | 2018 | 2017 | |||||||||||||||||||||||||||||
Quarters | Quarters | Quarter | |||||||||||||||||||||||||||||
In millions, except per share data | Third | Second | First | Fourth | Third | Second | First | Fourth | |||||||||||||||||||||||
Revenues | $ | 3,830 | $ | 3,959 | $ | 3,544 | $ | 3,808 | $ | 3,688 | $ | 3,631 | $ | 3,194 | $ | 3,285 | |||||||||||||||
Operating income (1) | $ | 1,613 | $ | 1,682 | $ | 1,080 | $ | 1,452 | $ | 1,492 | $ | 1,519 | $ | 1,030 | $ | 1,225 | |||||||||||||||
Net income (1) | $ | 1,195 | $ | 1,362 | $ | 786 | $ | 1,143 | $ | 1,134 | $ | 1,310 | $ | 741 | $ | 2,611 | |||||||||||||||
Basic earnings per share | $ | 1.66 | $ | 1.89 | $ | 1.08 | $ | 1.57 | $ | 1.55 | $ | 1.78 | $ | 1.00 | $ | 3.50 | |||||||||||||||
Diluted earnings per share | $ | 1.66 | $ | 1.88 | $ | 1.08 | $ | 1.56 | $ | 1.54 | $ | 1.77 | $ | 1.00 | $ | 3.48 | |||||||||||||||
Dividends per share | $ | 0.5375 | $ | 0.5375 | $ | 0.5375 | $ | 0.4550 | $ | 0.4550 | $ | 0.4550 | $ | 0.4550 | $ | 0.4125 |
(1) | Certain quarters include items that management believes do not necessarily arise as part of CN's normal day-to-day operations and can distort the analysis of trends in business performance. See the section entitled Adjusted performance measures of this MD&A as well as the Company's 2018 Annual MD&A for additional information on these items. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
In millions | 2019 | 2018 | Variance | 2019 | 2018 | Variance | |||||||||||||||||
Net cash provided by operating activities | $ | 1,692 | $ | 1,564 | $ | 128 | $ | 4,405 | $ | 4,001 | $ | 404 | |||||||||||
Net cash used in investing activities | (992 | ) | (979 | ) | (13 | ) | (3,073 | ) | (2,120 | ) | (953 | ) | |||||||||||
Net cash used in financing activities | (529 | ) | (644 | ) | 115 | (1,308 | ) | (1,625 | ) | 317 | |||||||||||||
Effect of foreign exchange fluctuations on cash, cash equivalents, restricted cash, and restricted cash equivalents | (1 | ) | (11 | ) | 10 | (1 | ) | — | (1 | ) | |||||||||||||
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 170 | (70 | ) | 240 | 23 | 256 | (233 | ) | |||||||||||||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period | 612 | 879 | (267 | ) | 759 | 553 | 206 | ||||||||||||||||
Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period | $ | 782 | $ | 809 | $ | (27 | ) | $ | 782 | $ | 809 | $ | (27 | ) |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Track and roadway | $ | 705 | $ | 719 | $ | 1,712 | $ | 1,652 | |||||||
Rolling stock | 83 | 106 | 844 | 188 | |||||||||||
Buildings | 19 | 16 | 40 | 37 | |||||||||||
Information technology | 105 | 129 | 280 | 311 | |||||||||||
Other | 49 | 32 | 185 | 79 | |||||||||||
Gross property additions | 961 | 1,002 | 3,061 | 2,267 | |||||||||||
Less: Finance leases (1) | — | — | 214 | — | |||||||||||
Property additions (2) | $ | 961 | $ | 1,002 | $ | 2,847 | $ | 2,267 |
(1) | Includes re-measurement of finance leases. |
(2) | Includes $38 million and $151 million associated with the U.S. federal government legislative PTC implementation in the three and nine months ended September 30, 2019, respectively ($114 million and $346 million in the three and nine months ended September 30, 2018, respectively). |
• | On February 8, 2019, issuance of $350 million 3.00% Notes due 2029 and $450 million 3.60% Notes due 2049 in the Canadian capital markets, which resulted in total net proceeds of $790 million; |
• | Net issuance of commercial paper of $202 million in the third quarter and $323 million in the first nine months; |
• | Proceeds from the accounts receivable securitization program of $150 million in the third quarter and first nine months; and |
• | Repayment of finance leases of $58 million in the third quarter and $78 million in the first nine months. |
• | On August 30, 2018, early redemption of US$550 million 5.55% Notes due 2019 for US$558 million ($720 million), which resulted in a loss of US$8 million ($10 million) that was recorded in Other income; |
• | On July 31, 2018, issuance of $350 million 3.20% Notes due 2028 and $450 million 3.60% Notes due 2048 in the Canadian capital markets, which resulted in total net proceeds of $787 million; |
• | On July 15, 2018, repayment of US$200 million ($264 million) 6.80% Notes due 2018 upon maturity; |
• | On May 15, 2018, repayment of US$325 million ($415 million) 5.55% Notes due 2018 upon maturity; |
• | On February 6, 2018, issuance of US$300 million ($374 million) 2.40% Notes due 2020 and US$600 million ($749 million) 3.65% Notes due 2048 in the U.S. capital markets, which resulted in total net proceeds of $1,106 million; |
• | Net issuance of commercial paper of $21 million in the third quarter and $447 million in the first nine months; |
• | Proceeds from the accounts receivable securitization program of $350 million in the third quarter and $530 million in the first nine months; |
• | Repayment of accounts receivable securitization borrowings of $600 million in the first nine months; and |
• | Repayment of finance leases of $7 million in the third quarter and $23 million in the first nine months. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions, except per share data | 2019 | 2018 | 2019 | 2018 | |||||||||||
Number of common shares repurchased | 3.2 | 4.6 | 10.7 | 14.9 | |||||||||||
Weighted-average price per share | $ | 122.29 | $ | 114.01 | $ | 118.49 | $ | 103.41 | |||||||
Amount of repurchase (1) | $ | 394 | $ | 521 | $ | 1,271 | $ | 1,537 |
(1) | Includes settlements in subsequent periods. |
2024 & thereafter | |||||||||||||||||||||||||||
In millions | Total | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||||
Debt obligations (1) | $ | 13,550 | $ | 1,616 | $ | 420 | $ | 771 | $ | 323 | $ | 191 | $ | 10,229 | |||||||||||||
Interest on debt obligations | 9,687 | 80 | 506 | 497 | 479 | 464 | 7,661 | ||||||||||||||||||||
Finance lease obligations (2) | 224 | 85 | 62 | 73 | 1 | — | 3 | ||||||||||||||||||||
Operating lease obligations (3) | 597 | 41 | 136 | 107 | 72 | 50 | 191 | ||||||||||||||||||||
Purchase obligations (4) | 1,886 | 901 | 533 | 171 | 119 | 83 | 79 | ||||||||||||||||||||
Other long-term liabilities (5) | 784 | 29 | 77 | 54 | 46 | 41 | 537 | ||||||||||||||||||||
Total contractual obligations | $ | 26,728 | $ | 2,752 | $ | 1,734 | $ | 1,673 | $ | 1,040 | $ | 829 | $ | 18,700 |
(1) | Presented net of unamortized discounts and debt issuance costs and excludes finance lease obligations. |
(2) | Includes $6 million of imputed interest. |
(3) | Includes $70 million related to renewal options reasonably certain to be exercised and $61 million of imputed interest. |
(4) | Includes fixed and variable commitments for locomotives, rail, wheels, engineering services, information technology services and licenses, railroad ties, rail cars, as well as other equipment and services. Costs of variable commitments were estimated using forecasted prices and volumes. |
(5) | Includes expected payments for workers' compensation, postretirement benefits other than pensions, net unrecognized tax benefits, environmental liabilities and pension obligations that have been classified as contractual settlement agreements. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net cash provided by operating activities | $ | 1,692 | $ | 1,564 | $ | 4,405 | $ | 4,001 | |||||||
Net cash used in investing activities | (992 | ) | (979 | ) | (3,073 | ) | (2,120 | ) | |||||||
Net cash provided before financing activities | 700 | 585 | 1,332 | 1,881 | |||||||||||
Adjustment: Acquisition, net of cash acquired (1) | — | — | 167 | — | |||||||||||
Free cash flow | $ | 700 | $ | 585 | $ | 1,499 | $ | 1,881 |
(1) | Relates to the acquisition of TransX. See the section of this MD&A entitled Liquidity and capital resources - Investing activities for additional information. |
In millions, unless otherwise indicated | As at and for the twelve months ended September 30, | 2019 | 2018 | |||||
Debt | $ | 13,768 | $ | 11,894 | ||||
Adjustments: | ||||||||
Operating lease liabilities, including current portion (1) | 536 | 495 | ||||||
Pension plans in deficiency | 476 | 458 | ||||||
Adjusted debt | $ | 14,780 | $ | 12,847 | ||||
Net income | $ | 4,486 | $ | 5,796 | ||||
Interest expense | 524 | 484 | ||||||
Income tax expense (recovery) | 1,278 | (422 | ) | |||||
Depreciation and amortization | 1,521 | 1,299 | ||||||
EBITDA | 7,809 | 7,157 | ||||||
Adjustments: | ||||||||
Other income | (144 | ) | (287 | ) | ||||
Other components of net periodic benefit income | (317 | ) | (305 | ) | ||||
Operating lease cost (1) | 190 | 200 | ||||||
Adjusted EBITDA | $ | 7,538 | $ | 6,765 | ||||
Adjusted debt-to-adjusted EBITDA multiple (times) | 1.96 | 1.90 |
(1) | The Company adopted Accounting Standards Update (ASU) 2016-02: Leases and related amendments (Topic 842) in the first quarter of 2019. The Company now includes operating lease liabilities, as defined by Topic 842, in adjusted debt and excludes operating lease cost, as defined by Topic 842, in adjusted EBITDA. Comparative balances previously referred to as present value of operating lease commitments and operating lease expense have not been adjusted and are now referred to as operating lease liabilities and operating lease cost, respectively. See the section of this MD&A entitled Recent accounting pronouncements for additional information. |
• | the use-of-hindsight practical expedient to reassess the lease term and the likelihood that a purchase option will be exercised; |
• | the land easement practical expedient to not evaluate land easements that were not previously accounted for as leases under Topic 840; |
• | the short-term lease exemption for all asset classes that permits entities not to recognize right-of-use assets and lease liabilities onto the balance sheet for leases with terms of twelve months or less; and |
• | the practical expedient to not separate lease and non-lease components for the freight car asset category. |
(1) | I have reviewed this report on Form 6-K of Canadian National Railway Company; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d‑15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
(5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 22, 2019 | |
/s/ Jean-Jacques Ruest | |
Jean-Jacques Ruest | |
President and Chief Executive Officer |
(1) | I have reviewed this report on Form 6-K of Canadian National Railway Company; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d‑15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
(5) | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 22, 2019 | |
/s/ Ghislain Houle | |
Ghislain Houle | |
Executive Vice-President and Chief Financial Officer |