(CN issued the following news release on April 22.)
MONTREAL — CN today reported its financial results for the first quarter ended March 31, 2004.
Quarterly highlights
— Net income of $210 million, or 73 cents per diluted share. Excluding the cumulative effect of change in accounting policy in the year-earlier period, diluted earnings per share for the first three months of 2004 increased by six per cent.
— Operating income of $395 million, up six per cent from the year-earlier quarter.
— Operating ratio of 72.5 per cent, 2.5 points better than the prior year’s quarterly performance.
— Free cash flow of $272 million, compared with $181 million for the same three-month period of 2003.(1)
E. Hunter Harrison, president and chief executive officer of CN, said: “I am very pleased with CN’s performance this quarter. We overcame a series of stiff challenges – an unfortunate strike, the year-over-year appreciation of the Canadian dollar, and persistently high energy prices – to grow freight volumes by five per cent and deliver significant improvements in our operating income and operating ratio.
“The Canadian Auto Workers (CAW) strike negatively affected first-quarter net income by an estimated $24 million, or eight cents per diluted share, while the significant appreciation of the Canadian dollar relative to the United States dollar reduced CN’s revenues, operating income and net income by approximately $120 million, $40 million and $20 million, respectively.”
Revenues for first-quarter 2004 declined four per cent to $1,438 million, owing largely to the higher Canadian dollar and lost intermodal revenue caused by the CAW strike. Partly offsetting these losses were increased Canadian grain, forest products, and metals and mineral volumes.
First-quarter 2004 operating expenses declined seven per cent to $1,043 million. The decrease largely reflected the translation impact of the stronger Canadian dollar on U.S. dollar-denominated expenses, and lower labour and fringe benefits expenses and equipment rents. Partly offsetting these decreases were higher depreciation and amortization expenses and the impact of higher fuel prices on fuel expense.
The month-long CAW strike had a minimal impact on operating expenses, because the benefit of lower labour and fringe benefit expenses was mostly offset by increases in other expense categories.
Harrison said: “CN’s intermodal revenues have recovered since the strike and we anticipate continued strength in Canadian grain and forest products volumes during the balance of the year. On the expense side, we are intent on maintaining a sharp focus on cost reduction and productivity improvement.”
The financial results in this press release are reported in Canadian dollars and were determined on the basis of U.S. generally accepted accounting principles (U.S. GAAP).