·
|
Diluted
earnings per share increased 21 per cent to
C$1.16.
|
·
|
Net
income increased 14 per cent to C$552
million.
|
·
|
Revenues
increased 12 per cent to C$2,257
million.
|
·
|
Operating
income increased 10 per cent to C$844 million, with the Company’s
operating ratio rising by six-tenths of one point to 62.6 per
cent.
|
Media
|
Investment
Community
|
Mark
Hallman
|
Robert
Noorigian
|
Director
|
Vice-President
|
Communications,
Media
|
Investor
Relations
|
(905)
669-3384
|
(514)
399-0052
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT
OF INCOME (U.S.
GAAP)
|
(In
millions, except per share
data)
|
Three
months ended
|
Nine
months ended
|
||||||||||
September
30
|
September
30
|
||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||
(Unaudited)
|
|||||||||||
Revenues
|
$
|
2,257
|
$
|
2,023
|
$
|
6,282
|
$
|
5,956
|
|||
Operating
expenses
|
|||||||||||
Labor
and fringe benefits
|
424
|
446
|
1,277
|
1,361
|
|||||||
Purchased
services and material
|
268
|
247
|
836
|
786
|
|||||||
Fuel
|
390
|
251
|
1,099
|
719
|
|||||||
Depreciation
and amortization
|
177
|
165
|
528
|
504
|
|||||||
Equipment
rents
|
59
|
59
|
183
|
187
|
|||||||
Casualty
and other
|
95
|
87
|
285
|
259
|
|||||||
Total
operating expenses
|
1,413
|
1,255
|
4,208
|
3,816
|
|||||||
Operating
income
|
844
|
768
|
2,074
|
2,140
|
|||||||
Interest
expense
|
(92)
|
(78)
|
(265)
|
(251)
|
|||||||
Other
income
|
4
|
2
|
7
|
7
|
|||||||
Income
before income taxes
|
756
|
692
|
1,816
|
1,896
|
|||||||
Income tax expense (Note
7)
|
(204)
|
(207)
|
(494)
|
(571)
|
|||||||
Net
income
|
$
|
552
|
$
|
485
|
$
|
1,322
|
$
|
1,325
|
|||
Earnings per share (Note
8)
|
|||||||||||
Basic
|
$
|
1.17
|
$
|
0.97
|
$
|
2.77
|
$
|
2.62
|
|||
Diluted
|
$
|
1.16
|
$
|
0.96
|
$
|
2.74
|
$
|
2.59
|
|||
Weighted-average
number of shares
|
|||||||||||
Basic
|
471.7
|
499.7
|
477.0
|
505.0
|
|||||||
Diluted
|
477.1
|
506.4
|
482.6
|
512.1
|
|||||||
See
accompanying notes to unaudited consolidated financial
statements.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED BALANCE
SHEET (U.S.
GAAP)
|
(In
millions)
|
September
30
|
December
31
|
September
30
|
||||||
2008
|
2007
|
2007
|
||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
288
|
$
|
310
|
$
|
214
|
||
Accounts
receivable (Note
3)
|
657
|
370
|
641
|
|||||
Material
and supplies
|
213
|
162
|
206
|
|||||
Deferred
income taxes
|
69
|
68
|
69
|
|||||
Other
|
131
|
138
|
316
|
|||||
1,358
|
1,048
|
1,446
|
||||||
Properties
|
21,472
|
20,413
|
19,883
|
|||||
Intangible
and other assets
|
2,134
|
1,999
|
1,576
|
|||||
Total
assets
|
$
|
24,964
|
$
|
23,460
|
$
|
22,905
|
||
Liabilities
and shareholders' equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued charges
|
$
|
1,252
|
$
|
1,282
|
$
|
1,205
|
||
Current
portion of long-term debt
|
449
|
254
|
293
|
|||||
Other
|
77
|
54
|
56
|
|||||
1,778
|
1,590
|
1,554
|
||||||
Deferred income taxes
(Note
7)
|
5,246
|
4,908
|
4,940
|
|||||
Other
liabilities and deferred credits
|
1,378
|
1,422
|
1,410
|
|||||
Long-term debt (Note
3)
|
6,264
|
5,363
|
5,342
|
|||||
Shareholders'
equity:
|
||||||||
Common
shares
|
4,171
|
4,283
|
4,359
|
|||||
Accumulated
other comprehensive income (loss)
|
54
|
(31)
|
(257)
|
|||||
Retained
earnings
|
6,073
|
5,925
|
5,557
|
|||||
10,298
|
10,177
|
9,659
|
||||||
Total
liabilities and shareholders' equity
|
$
|
24,964
|
$
|
23,460
|
$
|
22,905
|
||
See
accompanying notes to unaudited consolidated financial
statements.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT
OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S.
GAAP)
|
(In
millions)
|
|
|||||||||||
|
Three
months ended
|
Nine
months ended
|
|||||||||
|
September
30
|
September
30
|
|||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||
|
(Unaudited)
|
||||||||||
Common
shares (1)
|
|||||||||||
Balance,
beginning of period
|
$
|
4,208
|
$
|
4,417
|
$
|
4,283
|
$
|
4,459
|
|||
Stock
options exercised and other
|
17
|
16
|
59
|
83
|
|||||||
Share
repurchase programs (Note
3)
|
(54)
|
(74)
|
(171)
|
(183)
|
|||||||
Balance,
end of period
|
$
|
4,171
|
$
|
4,359
|
$
|
4,171
|
$
|
4,359
|
|||
|
|||||||||||
Accumulated
other comprehensive income (loss)
|
|||||||||||
Balance,
beginning of period
|
$
|
(1)
|
$
|
(180)
|
$
|
(31)
|
$
|
(44)
|
|||
Other
comprehensive income (loss):
|
|||||||||||
Unrealized
foreign exchange gain (loss) on:
|
|||||||||||
Translation
of the net investment in foreign operations
|
259
|
(381)
|
399
|
(914)
|
|||||||
Translation
of U.S. dollar-denominated long-term debt
|
|||||||||||
designated
as a hedge of the net investment in U.S. subsidiaries
|
(248)
|
328
|
(389)
|
766
|
|||||||
Pension and other
postretirement benefit plans (Note
5):
|
|||||||||||
Amortization
of net actuarial loss (gain) included in net
|
|||||||||||
periodic
benefit cost
|
-
|
13
|
(2)
|
38
|
|||||||
Amortization
of prior service cost included in net
|
|||||||||||
periodic
benefit cost
|
6
|
5
|
18
|
16
|
|||||||
Other
comprehensive income (loss) before income taxes
|
17
|
(35)
|
26
|
(94)
|
|||||||
Income
tax recovery (expense)
|
38
|
(42)
|
59
|
(119)
|
|||||||
Other
comprehensive income (loss)
|
55
|
(77)
|
85
|
(213)
|
|||||||
Balance,
end of period
|
$
|
54
|
$
|
(257)
|
$
|
54
|
$
|
(257)
|
|||
|
|||||||||||
Retained
earnings
|
|||||||||||
Balance,
beginning of period
|
$
|
5,902
|
$
|
5,554
|
$
|
5,925
|
$
|
5,409
|
|||
Adoption
of new accounting pronouncements (2)
|
-
|
-
|
-
|
95
|
|||||||
|
|||||||||||
Restated
balance, beginning of period
|
5,902
|
5,554
|
5,925
|
5,504
|
|||||||
Net
income
|
552
|
485
|
1,322
|
1,325
|
|||||||
Share
repurchase programs (Note
3)
|
(273)
|
(378)
|
(846)
|
(956)
|
|||||||
Dividends
|
(108)
|
(104)
|
(328)
|
(316)
|
|||||||
Balance,
end of period
|
$
|
6,073
|
$
|
5,557
|
$
|
6,073
|
$
|
5,557
|
|||
See
accompanying notes to unaudited consolidated financial statements.
|
(1)
|
During
the three and nine months ended September 30, 2008, the Company issued 0.7
million and 2.2 million common shares, respectively, as a result of stock
options exercised, and repurchased 6.0 million and 19.3 million common
shares, respectively, under its share repurchase programs. At
September 30, 2008, the Company had 468.1 million common shares
outstanding.
|
(2)
|
On
January 1, 2007, the Company adopted Financial Accounting Standards Board
(FASB) Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income
Taxes,” and early adopted the measurement date provisions of Statement of
Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R).” The application
of FIN No. 48 on January 1, 2007 had the effect of decreasing the net
deferred income tax liability and increasing Retained earnings by $98
million. The application of SFAS No. 158 on January 1, 2007 had
the effect of decreasing Retained earnings by $3
million.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT
OF CASH FLOWS (U.S.
GAAP)
|
(In
millions)
|
Three
months ended
|
Nine
months ended
|
||||||||||
September
30
|
September
30
|
||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||
(Unaudited)
|
|||||||||||
Operating
activities
|
|||||||||||
Net
income
|
$
|
552
|
$
|
485
|
$
|
1,322
|
$
|
1,325
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||||||
provided
from operating activities:
|
|||||||||||
Depreciation
and amortization
|
177
|
165
|
528
|
506
|
|||||||
Deferred
income taxes
|
73
|
75
|
187
|
125
|
|||||||
Other
changes in:
|
|||||||||||
Accounts
receivable
|
209
|
(252)
|
(259)
|
(38)
|
|||||||
Material
and supplies
|
6
|
(6)
|
(48)
|
(26)
|
|||||||
Accounts
payable and accrued charges
|
16
|
(65)
|
(110)
|
(471)
|
|||||||
Other
net current assets and liabilities
|
(33)
|
42
|
46
|
51
|
|||||||
Other
|
(43)
|
2
|
(135)
|
3
|
|||||||
Cash
provided from operating activities
|
957
|
446
|
1,531
|
1,475
|
|||||||
Investing
activities
|
|||||||||||
Property
additions
|
(415)
|
(350)
|
(944)
|
(897)
|
|||||||
Other,
net
|
22
|
14
|
42
|
26
|
|||||||
Cash
used by investing activities
|
(393)
|
(336)
|
(902)
|
(871)
|
|||||||
Financing
activities
|
|||||||||||
Issuance
of long-term debt
|
778
|
1,841
|
3,430
|
3,325
|
|||||||
Reduction
of long-term debt
|
(798)
|
(1,420)
|
(2,796)
|
(2,469)
|
|||||||
Issuance
of common shares due to exercise of stock
|
|||||||||||
options
and related excess tax benefits realized
|
14
|
14
|
48
|
73
|
|||||||
Repurchase
of common shares
|
(327)
|
(452)
|
(1,017)
|
(1,139)
|
|||||||
Dividends
paid
|
(108)
|
(104)
|
(328)
|
(316)
|
|||||||
Cash
used by financing activities
|
(441)
|
(121)
|
(663)
|
(526)
|
|||||||
Effect
of foreign exchange fluctuations on U.S. dollar-
|
|||||||||||
denominated
cash and cash equivalents
|
4
|
(16)
|
12
|
(43)
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
127
|
(27)
|
(22)
|
35
|
|||||||
Cash
and cash equivalents, beginning of period
|
161
|
241
|
310
|
179
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
288
|
$
|
214
|
$
|
288
|
$
|
214
|
|||
Supplemental
cash flow information
|
|||||||||||
Net
cash receipts from customers and other
|
$
|
2,391
|
$
|
1,770
|
$
|
6,025
|
$
|
5,930
|
|||
Net
cash payments for:
|
|||||||||||
Employee
services, suppliers and other expenses
|
(1,195)
|
(1,090)
|
(3,749)
|
(3,344)
|
|||||||
Interest
|
(82)
|
(86)
|
(272)
|
(273)
|
|||||||
Workforce
reductions
|
(5)
|
(8)
|
(17)
|
(24)
|
|||||||
Personal
injury and other claims
|
(18)
|
(12)
|
(62)
|
(58)
|
|||||||
Pensions
|
(24)
|
(27)
|
(77)
|
(50)
|
|||||||
Income
taxes
|
(110)
|
(101)
|
(317)
|
(706)
|
|||||||
Cash
provided from operating activities
|
$
|
957
|
$
|
446
|
$
|
1,531
|
$
|
1,475
|
|||
See
accompanying notes to unaudited consolidated financial
statements.
|
|||||||||||
Certain
of the 2007 figures have been restated to conform to the 2008
presentation.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
In
management’s opinion, the accompanying unaudited Interim Consolidated
Financial Statements and Notes thereto, expressed in Canadian dollars, and
prepared in accordance with U.S. generally accepted accounting principles
(U.S. GAAP) for interim financial statements, contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly
Canadian National Railway Company’s (the Company) financial position as at
September 30, 2008, December 31, 2007, and September 30, 2007, and its
results of operations, changes in shareholders’ equity and cash flows for
the three and nine months ended September 30, 2008 and 2007.
These
unaudited Interim Consolidated Financial Statements and Notes thereto have
been prepared using accounting policies consistent with those used in
preparing the Company’s 2007 Annual Consolidated Financial
Statements. While management believes that the disclosures
presented are adequate to make the information not misleading, these
unaudited Interim Consolidated Financial Statements and Notes thereto
should be read in conjunction with the Company’s Interim Management’s
Discussion and Analysis (MD&A) and Annual Consolidated Financial
Statements and Notes thereto.
|
In
September 2007, the Company and U.S. Steel Corporation (U.S. Steel), the
indirect owner of the EJ&E, announced an agreement under which CN
would acquire the principal lines of the EJ&E for a purchase price of
approximately U.S.$300 million. Under the terms of the
agreement, the Company will acquire substantially all of the railroad
assets and equipment of EJ&E, except those that support the Gary Works
site in northwest Indiana and the steelmaking operations of U.S.
Steel. The acquisition will be financed by debt and cash on
hand.
In accordance with the
terms of the agreement, the Company’s obligation to consummate the
acquisition is subject to the Company having obtained from the Surface
Transportation Board (STB) a final decision that approves the acquisition
and does not impose conditions that would significantly and adversely
affect the anticipated economic benefits of the acquisition to the
Company.
On November 26, 2007,
the STB accepted the Company’s application to consider the acquisition as
a minor transaction. The STB, however, is also requiring an
Environmental Impact Statement (EIS) for the transaction, and it has
indicated that its decision on the transaction, which otherwise would have
been required by governing law by April 25, 2008, will not be issued until
the EIS process is completed. The STB issued a draft EIS on July 25,
2008. CN, along with other parties, filed responsive comments
on the draft EIS on September 30, 2008.
With
the environmental review continuing and the
time for its completion uncertain, the
Company twice requested that the STB establish time limits on its review
and issue a final decision that, if the application were approved, would
enable the transaction to close by December 31, 2008, and thereby avoid a
significant risk that the transaction could be terminated under the
agreement. Upon the STB’s second denial of those requests, the
Company filed a petition on September 18, 2008 with the U.S. Court of
Appeals for the District of Columbia Circuit for an expedited ruling to
direct the STB to issue such a decision. If the transaction is
approved by the STB, the Company will account for the acquisition using
the purchase method of
accounting.
|
Shelf
prospectus and registration statement
In May
2008, the Company issued U.S.$325 million (Cdn$331 million) of 4.95% Notes
due 2014 and U.S.$325 million (Cdn$331 million) of 5.55% Notes due
2018. The debt offering was made under the Company’s current
shelf prospectus and registration statement. Accordingly, the
amount registered for offering under the shelf prospectus and registration
statement has been reduced to U.S.$1.85 billion. The Company
used the net proceeds of U.S.$643 million to repay a portion of its
commercial paper outstanding and to reduce its account receivable
securitization program.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Revolving
credit facility
As at
September 30, 2008, the Company had letters of credit drawn on its U.S.$1
billion revolving credit facility, expiring in October 2011, of $176
million ($57 million as at December 31, 2007). The Company also
had total borrowings under its commercial paper program of $346 million,
of which $99 million was denominated in Canadian dollars and $247 million
was denominated in U.S. dollars (U.S.$232 million). The
weighted-average interest rate on these borrowings was
2.91%. As at December 31, 2007, total borrowings under the
Company’s commercial paper program were $122 million, of which $114
million was denominated in Canadian dollars and $8 million was denominated
in U.S. dollars (U.S.$8 million). The weighted-average interest
rate on these borrowings was 5.01%.
|
Accounts
receivable securitization
The
Company has a five-year agreement, expiring in May 2011, to sell an
undivided co-ownership interest for maximum cash proceeds of $600 million
in a revolving pool of freight receivables to an unrelated
trust. Pursuant to the agreement, the Company sells an interest
in its receivables and receives proceeds net of the retained interest as
stipulated in the agreement.
As at September 30,
2008, the Company had sold receivables that resulted in proceeds of $441
million under this program ($588 million at December 31, 2007), and
recorded retained interest of approximately 10% of this amount in Other
current assets (retained interest of approximately 10% recorded as at
December 31, 2007). As at September 30, 2008, the servicing
asset and liability were not
significant.
|
Share
repurchase programs
On July
21, 2008, the Board of Directors of the Company approved a new share
repurchase program which allows for the repurchase of up to 25.0 million
common shares between July 28, 2008 and July 20, 2009 pursuant to a normal
course issuer bid, at prevailing market prices or such other prices as may
be permitted by the Toronto Stock Exchange.
In the
third quarter of 2008, under this current share repurchase program, the
Company repurchased 6.0 million common shares for $327 million, at a
weighted-average price of $54.48 per share.
In the
second quarter of 2008, the Company ended its 33.0 million share
repurchase program, which began on July 26, 2007, repurchasing a total of
31.0 million common shares for $1,588 million, at a weighted-average price
of $51.22 per share. Of this amount, 13.3 million
common shares were repurchased in 2008 for $690 million, at a
weighted-average price of $51.91 per share.
|
Note
4 - Stock plans
The
Company has various stock-based incentive plans for eligible
employees. A description of the plans is provided in Note 12 –
Stock plans, to the Company’s 2007 Annual Consolidated Financial
Statements. For the three and nine months ended September 30, 2008, the
Company recorded total compensation expense for awards under all plans of
$16 million and $50 million, respectively, and $39 million and $112
million, respectively, for the same periods in 2007. The total
tax benefit recognized in income in relation to stock-based compensation
expense for the three and nine months ended September 30, 2008 was $5
million and $15 million, respectively, and $12 million and $33 million,
respectively, for the same periods in
2007.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Cash
settled awards
Following
approval by the Board of Directors in January 2008, the Company granted
0.7 million restricted share units (RSUs) to designated management
employees entitling them to receive payout in cash based on the Company’s
share price. The RSUs granted by the Company are generally
scheduled for payout in cash after three years (“plan period”) and vest
upon the attainment of targets relating to return on invested capital over
the plan period and the Company’s share price during the last three months
of the plan period. As at September 30, 2008, 0.1 million RSUs
remained authorized for future issuance under this
plan.
|
The
following table provides the activity for all cash settled awards in
2008:
|
||||||||
RSUs
|
Vision
2008 Share Unit Plan (Vision)
|
Voluntary
Incentive Deferral Plan (VIDP)
|
||||||
In
millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||
Outstanding
at December 31, 2007
|
1.6
|
0.9
|
0.8
|
-
|
0.2
|
1.9
|
||
Granted
|
0.7
|
-
|
-
|
-
|
-
|
-
|
||
Forfeited
|
(0.1)
|
-
|
-
|
-
|
-
|
-
|
||
Vested
during period
|
-
|
-
|
-
|
-
|
(0.1)
|
0.1
|
||
Payout
|
-
|
(0.9)
|
-
|
-
|
-
|
(0.2)
|
||
Outstanding
at September 30, 2008
|
2.2
|
-
|
0.8
|
-
|
0.1
|
1.8
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
The
following table provides valuation and expense information for all cash
settled awards:
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
In
millions, unless otherwise indicated
|
RSUs
(1)
|
Vision
(1)
|
VIDP
(2)
|
Total
|
||||||||||||||||||||
|
2003
|
|||||||||||||||||||||||
Year
of grant
|
2008
|
2007
|
2006
|
2005
|
2004
|
2005
|
onwards
|
|||||||||||||||||
|
||||||||||||||||||||||||
Stock-based
compensation expense
|
||||||||||||||||||||||||
recognized
over requisite service period
|
||||||||||||||||||||||||
Nine
months ended September 30, 2008
|
$
|
11
|
$
|
1
|
$
|
14
|
N/A
|
$
|
3
|
$
|
2
|
$
|
8
|
$
|
39
|
|||||||||
Nine
months ended September 30, 2007
|
N/A
|
$
|
17
|
$
|
19
|
$
|
19
|
$
|
5
|
$
|
13
|
$
|
30
|
$
|
103
|
|||||||||
|
||||||||||||||||||||||||
Liability
outstanding
|
||||||||||||||||||||||||
September
30, 2008
|
$
|
11
|
$
|
12
|
$
|
43
|
N/A
|
$
|
3
|
$
|
10
|
$
|
98
|
$
|
177
|
|||||||||
December
31, 2007
|
N/A
|
$
|
11
|
$
|
29
|
$
|
48
|
$
|
4
|
$
|
8
|
$
|
95
|
$
|
195
|
|||||||||
|
||||||||||||||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||
September
30, 2008
|
$
|
32.12
|
$
|
31.63
|
$
|
46.40
|
N/A
|
$
|
50.78
|
$
|
14.66
|
$
|
50.78
|
N/A
|
||||||||||
|
||||||||||||||||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||||||
Nine
months ended September 30, 2008
|
$
|
-
|
$
|
-
|
$
|
-
|
N/A
|
$
|
-
|
$
|
-
|
$
|
2
|
$
|
2
|
|||||||||
Nine
months ended September 30, 2007
|
N/A
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
5
|
$
|
-
|
$
|
3
|
$
|
8
|
|||||||||
|
||||||||||||||||||||||||
Nonvested
awards at September 30, 2008
|
||||||||||||||||||||||||
Unrecognized
compensation cost
|
$
|
9
|
$
|
4
|
$
|
2
|
N/A
|
$
|
1
|
$
|
1
|
$
|
4
|
$
|
21
|
|||||||||
Remaining recognition
period (years)
|
2.25
|
1.25
|
0.25
|
N/A
|
0.25
|
0.25
|
3.25
|
N/A
|
||||||||||||||||
|
||||||||||||||||||||||||
Assumptions (3)
|
||||||||||||||||||||||||
Stock price ($)
|
$
|
50.78
|
$
|
50.78
|
$
|
50.78
|
N/A
|
$
|
50.78
|
$
|
50.78
|
$
|
50.78
|
N/A
|
||||||||||
Expected stock price
volatility (4)
|
22%
|
23%
|
26%
|
N/A
|
N/A
|
28%
|
N/A
|
N/A
|
||||||||||||||||
Expected term (years)
(5)
|
2.25
|
1.25
|
0.25
|
N/A
|
N/A
|
0.25
|
N/A
|
N/A
|
||||||||||||||||
Risk-free interest
rate (6)
|
2.59%
|
2.47%
|
1.65%
|
N/A
|
N/A
|
1.26%
|
N/A
|
N/A
|
||||||||||||||||
Dividend rate ($)
(7)
|
$
|
0.92
|
$
|
0.92
|
$
|
0.92
|
N/A
|
N/A
|
$
|
0.92
|
N/A
|
N/A
|
||||||||||||
|
||||||||||||||||||||||||
(1)
|
Compensation
cost is based on the fair value of the awards at period-end using the
lattice-based valuation model that uses the assumptions as presented
herein, except for time-vested RSUs.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(2)
|
Compensation
cost is based on intrinsic value.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(3)
|
Assumptions
used to determine fair value are at September 30, 2008.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(4)
|
Based
on the historical volatility of the Company's stock over a period
commensurate with the expected term of the award.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(5)
|
Represents
the remaining period of time that awards are expected to be
outstanding.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(6)
|
Based
on the implied yield available on zero-coupon government issues with an
equivalent term commensurate with the expected term of the
awards.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(7)
|
Based
on the annualized dividend rate.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Stock
option awards
Following
approval by the Board of Directors in January 2008, the Company granted
0.9 million conventional stock options to designated senior management
employees. The stock option plan allows eligible employees to acquire
common shares of the Company upon vesting at a price equal to the market
value of the common shares at the date of grant. The options
are exercisable during a period not exceeding 10 years. The
right to exercise options generally accrues over a period of four years of
continuous employment. Options are not generally exercisable
during the first 12 months after the date of grant. At
September 30, 2008, 13.5 million common shares remained authorized for
future issuances under this plan. The total number of options
outstanding at September 30, 2008, including conventional, performance and
performance-accelerated options, was 9.9
million, 0.2 million and 3.3 million,
respectively.
The
following table provides the activity of stock option awards in
2008. The table also provides the aggregate intrinsic value for
in-the-money stock options, which represents the amount that would have
been received by option holders had they exercised their options on
September 30, 2008 at the Company’s closing stock price of
$50.78.
|
Options
outstanding
|
|||||||
Number
|
Weighted-average
|
Weighted-average
|
Aggregate
|
||||
of
options
|
exercise
price
|
years
to expiration
|
intrinsic
value
|
||||
In
millions
|
In
millions
|
||||||
Outstanding at December
31, 2007 (1)
|
14.7
|
$
|
24.55
|
||||
Granted
|
0.9
|
$
|
48.51
|
||||
Exercised
|
(2.2)
|
$
|
18.18
|
||||
Outstanding
at September 30, 2008 (1)
|
13.4
|
$
|
27.74
|
4.5
|
$
|
309
|
|
Exercisable
at September 30, 2008 (1)
|
11.0
|
$
|
23.47
|
3.8
|
$
|
300
|
|
(1)
|
Stock
options with a U.S. dollar exercise price have been translated to Canadian
dollars using the foreign exchange rate in effect at the balance sheet
date.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
The
following table provides valuation and expense information for all stock
option awards:
|
|||||||||||||||||
|
|||||||||||||||||
In
millions, unless otherwise indicated
|
|||||||||||||||||
Year
of grant
|
|
2008
|
2007
|
2006
|
2005
|
Total
|
|||||||||||
|
|||||||||||||||||
Stock-based
compensation expense
|
|||||||||||||||||
recognized over
requisite service period (1)
|
|||||||||||||||||
Nine
months ended September 30, 2008
|
$
|
5
|
$
|
2
|
$
|
2
|
$
|
2
|
$
|
11
|
|||||||
Nine
months ended September 30, 2007
|
N/A
|
$
|
6
|
$
|
1
|
$
|
2
|
$
|
9
|
||||||||
|
|||||||||||||||||
Fair
value per unit
|
|
||||||||||||||||
At grant date ($)
|
$
|
12.44
|
$
|
13.36
|
$
|
13.80
|
$
|
9.19
|
N/A
|
||||||||
|
|||||||||||||||||
Fair
value of awards vested during period
|
|||||||||||||||||
Nine
months ended September 30, 2008
|
$
|
-
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
9
|
|||||||
Nine
months ended September 30, 2007
|
N/A
|
$
|
-
|
$
|
4
|
$
|
3
|
$
|
7
|
||||||||
|
|||||||||||||||||
Nonvested
awards at September 30, 2008
|
|||||||||||||||||
Unrecognized
compensation cost
|
$
|
6
|
$
|
3
|
$
|
2
|
$
|
1
|
$
|
12
|
|||||||
Remaining recognition
period (years)
|
3.3
|
2.3
|
1.3
|
0.3
|
N/A
|
||||||||||||
|
|||||||||||||||||
Assumptions (1)
|
|||||||||||||||||
Grant price ($)
|
$
|
48.51
|
$
|
52.79
|
$
|
51.51
|
$
|
36.33
|
N/A
|
||||||||
Expected stock price
volatility (2)
|
27%
|
24%
|
25%
|
25%
|
N/A
|
||||||||||||
Expected term (years)
(3)
|
5.3
|
5.2
|
5.2
|
5.2
|
N/A
|
||||||||||||
Risk-free interest rate
(4)
|
3.58%
|
4.12%
|
4.04%
|
3.50%
|
N/A
|
||||||||||||
Dividend rate ($)
(5)
|
$
|
0.92
|
$
|
0.84
|
$
|
0.65
|
$
|
0.50
|
N/A
|
||||||||
|
|||||||||||||||||
(1)
|
Compensation
cost is based on the grant date fair value using the Black-Scholes
option-pricing model that uses the assumptions at the grant
date.
|
||||||||||||||||
|
|||||||||||||||||
(2)
|
Based
on the historical volatility of the Company's stock over a period
commensurate with the expected term of the award.
|
||||||||||||||||
|
|||||||||||||||||
(3)
|
Represents
the period of time that awards are expected to be
outstanding. The Company uses historical data to estimate
option exercise and employee termination, and groups of employees that
have similar historical exercise behavior are considered
separately.
|
||||||||||||||||
|
|||||||||||||||||
(4)
|
Based
on the implied yield available on zero-coupon government issues with an
equivalent term commensurate with the expected term of the
awards.
|
||||||||||||||||
|
|||||||||||||||||
(5)
|
Based
on the annualized dividend rate.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Note
5 - Pensions and other postretirement benefits
For the
three and nine months ended September 30, 2008 and 2007, the components of
net periodic benefit cost (income) for pensions and other postretirement
benefits were as follows:
|
(a)
Components of net periodic benefit cost (income) for
pensions
|
||||||||||
Three
months ended
|
Nine
months ended
|
|||||||||
September
30
|
September
30
|
|||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||
Service
cost
|
$
|
34
|
$
|
38
|
$
|
104
|
$
|
114
|
||
Interest
cost
|
200
|
186
|
600
|
557
|
||||||
Expected
return on plan assets
|
(251)
|
(234)
|
(753)
|
(703)
|
||||||
Amortization
of prior service cost
|
5
|
5
|
15
|
15
|
||||||
Recognized
net actuarial loss
|
-
|
13
|
-
|
40
|
||||||
Net
periodic benefit cost (income)
|
$
|
(12)
|
$
|
8
|
$
|
(34)
|
$
|
23
|
||
(b)
Components of net periodic benefit cost for other postretirement
benefits
|
||||||||||
Three
months ended
|
Nine
months ended
|
|||||||||
September
30
|
September
30
|
|||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||
Service
cost
|
$
|
1
|
$
|
1
|
$
|
3
|
$
|
3
|
||
Interest
cost
|
4
|
4
|
12
|
11
|
||||||
Curtailment
gain
|
(4)
|
-
|
(7)
|
(3)
|
||||||
Amortization
of prior service cost
|
1
|
-
|
3
|
1
|
||||||
Recognized
net actuarial gain
|
-
|
-
|
(2)
|
(2)
|
||||||
Net
periodic benefit cost
|
$
|
2
|
$
|
5
|
$
|
9
|
$
|
10
|
In 2008, the Company
expects to make total contributions of approximately $130 million for all
its defined benefit plans, of which $77 million was disbursed as at
September 30, 2008 and includes $22 million relating to the 2007 funding
year.
|
A.
Commitments
As at
September 30, 2008, the Company had commitments to acquire railroad ties,
rail, freight cars, locomotives, and other equipment and services, as well
as outstanding information technology service contracts and licenses, at
an aggregate cost of $829 million ($952 million at December 31,
2007). The Company also has agreements with fuel suppliers to
purchase approximately 95% of the estimated remaining 2008 volume, 70% of
its anticipated 2009 volume, and 31% of its anticipated 2010 volume, at
market prices prevailing on the date of the
purchase.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
B.
Contingencies
In the
normal course of its operations, the Company becomes involved in various
legal actions, including actions brought on behalf of various classes of
claimants, and claims relating to personal injuries, occupational disease
and damage to property.
Canada
Employee
injuries are governed by the workers’ compensation legislation in each
province whereby employees may be awarded either a lump sum or future
stream of payments depending on the nature and severity of the injury.
Accordingly, the Company accounts for costs related to employee
work-related injuries based on actuarially developed estimates of the
ultimate cost associated with such injuries, including compensation,
health care and third-party administration costs. For all other
legal actions, the Company maintains, and regularly updates on a
case-by-case basis, provisions for such items when the expected loss is
both probable and can be reasonably estimated based on currently available
information.
United
States
Employee
work-related injuries, including occupational disease claims, are
compensated according to the provisions of the Federal Employers’
Liability Act (FELA), which requires either the finding of fault through
the U.S. jury system or individual settlements, and represent a major
liability for the railroad industry. The Company follows an
actuarial-based approach and accrues the expected cost for personal injury
and property damage claims and asserted and unasserted occupational
disease claims, based on actuarial estimates of their ultimate
cost. A comprehensive actuarial study is conducted on an annual
basis, in the fourth quarter, by an independent actuarial firm for
occupational disease claims, while an actuarial study is conducted on a
semi-annual basis for non-occupational disease claims. On an
ongoing basis, management reviews and compares the assumptions inherent in
the latest actuarial study with the current claim experience and, if
required, adjustments to the liability are recorded.
As at
September 30, 2008, the Company had aggregate reserves for personal injury
and other claims of $452 million, of which $108 million was recorded as a
current liability ($446 million, of which $102 million was recorded as a
current liability at December 31, 2007). Although the Company
considers such provisions to be adequate for all its outstanding and
pending claims, the final outcome with respect to actions outstanding or
pending at September 30, 2008, or with respect to future claims, cannot be
predicted with certainty, and therefore there can be no assurance that
their resolution will not have a material adverse effect on the Company’s
financial position or results of operations in a particular quarter or
fiscal year.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
C.
Environmental matters
The
Company’s operations are subject to numerous federal, provincial, state,
municipal and local environmental laws and regulations in Canada and the
United States concerning, among other things, emissions into the air;
discharges into waters; the generation, handling, storage, transportation,
treatment and disposal of waste, hazardous substances, and other
materials; decommissioning of underground and aboveground storage tanks;
and soil and groundwater contamination. A risk of environmental
liability is inherent in railroad and related transportation operations;
real estate ownership, operation or control; and other commercial
activities of the Company with respect to both current and past
operations. As a result, the Company incurs significant
compliance and capital costs, on an ongoing basis, associated with
environmental regulatory compliance and clean-up requirements in its
railroad operations and relating to its past and present ownership,
operation or control of real property.
The Company is subject
to environmental clean-up and enforcement actions. In
particular, the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (CERCLA), also known as the Superfund law, as
well as similar state laws generally impose joint and several liability
for clean-up and enforcement costs on current and former owners and
operators of a site without regard to fault or the legality of the
original conduct. The Company has been notified that it is a
potentially responsible party for study and clean-up costs at
approximately 19 sites governed by the Superfund law (and other similar
federal and state laws) for which investigation and remediation payments
are or will be made or are yet to be determined and, in many instances, is
one of several potentially responsible parties.
While the Company
believes that it has identified the costs likely to be incurred in the
next several years, based on known information, for environmental matters,
the Company’s ongoing efforts to identify potential environmental concerns
that may be associated with its properties may lead to future
environmental investigations, which may result in the identification of
additional environmental costs and liabilities. The magnitude of such
additional liabilities and the costs of complying with environmental laws
and containing or remediating contamination cannot be reasonably estimated
due to:
(i)
the lack of specific technical information available with respect
to many sites;
(ii)
the absence of any government authority, third-party orders, or
claims with respect to particular sites;
(iii)
the potential for new or changed laws and regulations and for
development of new remediation
technologies and uncertainty regarding the timing of the work
with respect to particular sites;
(iv)
the ability to recover costs from any third parties with respect to
particular sites; and
therefore,
the likelihood of any such costs being incurred or whether such costs
would be material to the Company cannot be determined at this time. There
can thus be no assurance that material liabilities or costs related to
environmental matters will not be incurred in the future, or will not have
a material adverse effect on the Company’s financial position or results
of operations in a particular quarter or fiscal year, or that the
Company’s liquidity will not be adversely impacted by such environmental
liabilities or costs. Although the effect on operating results and
liquidity cannot be reasonably estimated, management believes, based on
current information, that environmental matters will not have a material
adverse effect on the Company’s financial condition or competitive
position. Costs related to any future remediation will be accrued in the
year in which they become known.
As
at September 30, 2008, the Company had aggregate accruals for
environmental costs of $118 million, of which $28 million was recorded as
a current liability ($111 million, of which $28 million was recorded as a
current liability as at December 31,
2007).
|
D.
Guarantees and indemnifications
In
the normal course of business, the Company, including certain of its
subsidiaries, enters into agreements that may involve providing certain
guarantees or indemnifications to third parties and others, which may
extend beyond the term of the agreement. These include, but are
not limited to, residual value guarantees on operating leases, standby
letters of credit and surety and other bonds, and indemnifications that
are customary for the type of transaction or for the railway
business.
The
Company is required to recognize a liability for the fair value of the
obligation undertaken in issuing certain guarantees on the date the
guarantee is issued or modified. In addition, where the Company
expects to make a payment in respect of a guarantee, a liability will be
recognized to the extent that one has not yet been
recognized.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
(i) Guarantee of residual values of operating
leases
The
Company has guaranteed a portion of the residual values of certain of its
assets under operating leases with expiry dates between 2008 and 2019, for
the benefit of the lessor. If the fair value of the assets, at
the end of their respective lease term, is less than the fair value, as
estimated at the inception of the lease, then the Company must, under
certain conditions, compensate the lessor for the shortfall. At
September 30, 2008, the maximum exposure in respect of these guarantees
was $139 million. There are no recourse provisions to recover
any amounts from third parties.
(ii)
Other guarantees
The
Company, including certain of its subsidiaries, has granted irrevocable
standby letters of credit and surety and other bonds, issued by highly
rated financial institutions, to third parties to indemnify them in the
event the Company does not perform its contractual
obligations. As at September 30, 2008, the maximum potential
liability under these guarantees was $491 million, of which $410 million
was for workers’ compensation and other employee benefits and $81 million
was for equipment under leases and other. During 2008, the Company has
granted guarantees for which no liability has been recorded, as they
relate to the Company’s future performance.
As at September 30,
2008, the Company had not recorded any additional liability with respect
to these guarantees, as the Company does not expect to make any additional
payments associated with these guarantees. The majority of the
guarantee instruments mature at various dates between 2008 and
2011.
(iii)
General indemnifications
In the
normal course of business, the Company has provided indemnifications,
customary for the type of transaction or for the railway business, in
various agreements with third parties, including indemnification
provisions where the Company would be required to indemnify third parties
and others. Indemnifications are found in various types of
contracts with third parties which include, but are not limited
to:
(a) contracts
granting the Company the right to use or enter upon property owned by
third parties such as leases,
easements,
trackage rights and sidetrack agreements;
(b)
contracts
granting rights to others to use the Company’s property, such as leases,
licenses and easements;
(c)
contracts
for the sale of assets and securitization of accounts
receivable;
(d) contracts
for the acquisition of services;
(e)
financing
agreements;
(f) trust
indentures, fiscal agency agreements, underwriting agreements or similar
agreements relating to debt
or
equity securities of the Company and engagement agreements
with financial
advisors;
(g)
transfer
agent and registrar agreements in respect of the Company’s
securities;
(h)
trust
and other agreements relating to pension plans and other plans, including
those establishing trust funds
to secure payment to certain officers and senior employees of
special retirement compensation arrangements;
(i)
pension
transfer agreements;
(j) master
agreements with financial institutions governing derivative transactions;
and
(k) settlement
agreements with insurance companies or other third parties whereby such
insurer or third party has
been
indemnified for any present or future claims relating
to insurance policies, incidents or events covered by
the
settlement agreements.
To
the extent of any actual claims under these agreements, the Company
maintains provisions for such items, which it considers to be
adequate. Due to the nature of the indemnification clauses, the
maximum exposure for future payments may be material. However,
such exposure cannot be determined with certainty.
The Company has entered
into various indemnification contracts with third parties for which the
maximum exposure for future payments cannot be determined with
certainty. As a result, the Company was unable to determine the
fair value of these guarantees and accordingly, no liability was
recorded. There are no recourse provisions to recover any
amounts from third parties.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Three
months ended
|
Nine
months ended
|
||||||||||
September
30
|
September
30
|
||||||||||
In
millions, except per share data
|
2008
|
2007
|
2008
|
2007
|
|||||||
Net
income
|
$
|
552
|
$
|
485
|
$
|
1,322
|
$
|
1,325
|
|||
Weighted-average
shares outstanding
|
471.7
|
499.7
|
477.0
|
505.0
|
|||||||
Effect
of stock options
|
5.4
|
6.7
|
5.6
|
7.1
|
|||||||
Weighted-average
diluted shares outstanding
|
477.1
|
506.4
|
482.6
|
512.1
|
|||||||
Basic
earnings per share
|
$
|
1.17
|
$
|
0.97
|
$
|
2.77
|
$
|
2.62
|
|||
Diluted
earnings per share
|
$
|
1.16
|
$
|
0.96
|
$
|
2.74
|
$
|
2.59
|
The
weighted-average number of stock options that were not included in the
calculation of diluted earnings per share, as their inclusion would have
had an anti-dilutive impact, was 0.1 million for both the three and nine
months ended September 30, 2008, and nil and 0.1 million, respectively,
for the corresponding periods in
2007.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
SELECTED RAILROAD
STATISTICS (1)
(U.S.
GAAP)
|
Three
months ended
|
Nine
months ended
|
||||
September
30
|
September
30
|
||||
2008
|
2007
|
2008
|
2007
|
||
(Unaudited)
|
|||||
Statistical
operating data
|
|||||
Rail
freight revenues ($ millions)
|
2,028
|
1,821
|
5,664
|
5,423
|
|
Gross
ton miles (GTM) (millions)
|
86,369
|
88,498
|
257,983
|
258,583
|
|
Revenue
ton miles (RTM) (millions)
|
45,346
|
46,481
|
135,569
|
136,997
|
|
Carloads
(thousands)
|
1,217
|
1,204
|
3,537
|
3,539
|
|
Route
miles (includes Canada and the U.S.)
|
20,421
|
20,219
|
20,421
|
20,219
|
|
Employees
(end of period)
|
22,569
|
22,834
|
22,569
|
22,834
|
|
Employees
(average for the period)
|
22,730
|
22,789
|
22,773
|
22,254
|
|
Productivity
|
|||||
Operating
ratio (%)
|
62.6
|
62.0
|
67.0
|
64.1
|
|
Rail
freight revenue per RTM (cents)
|
4.47
|
3.92
|
4.18
|
3.96
|
|
Rail
freight revenue per carload ($)
|
1,666
|
1,512
|
1,601
|
1,532
|
|
Operating
expenses per GTM (cents)
|
1.64
|
1.42
|
1.63
|
1.48
|
|
Labor
and fringe benefits expense per GTM (cents)
|
0.49
|
0.50
|
0.49
|
0.53
|
|
GTMs
per average number of employees (thousands)
|
3,800
|
3,883
|
11,328
|
11,620
|
|
Diesel
fuel consumed (U.S. gallons in millions)
|
92
|
96
|
287
|
290
|
|
Average
fuel price ($/U.S. gallon)
|
3.84
|
2.39
|
3.55
|
2.29
|
|
GTMs
per U.S. gallon of fuel consumed
|
939
|
922
|
899
|
892
|
|
Safety
indicators
|
|||||
Injury frequency rate
per 200,000 person hours (2)
|
2.1
|
2.2
|
1.8
|
1.8
|
|
Accident rate per
million train miles (2)
|
2.2
|
3.0
|
2.5
|
2.4
|
|
Financial
ratio
|
|||||
Debt to
total capitalization ratio (% at end of period)
|
39.5
|
36.8
|
39.5
|
36.8
|
|
(1)
Includes data relating to companies acquired as of the date of
acquisition.
|
|||||
(2)
Based on Federal Railroad Administration (FRA) reporting
criteria.
|
Certain
statistical data and related productivity measures are based on estimated
data available at such time and are subject to change as more complete
information becomes available.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
SUPPLEMENTARY
INFORMATION (U.S.
GAAP)
|
Three
months ended September 30
|
Nine
months ended September 30
|
||||||
Variance
|
Variance
|
||||||
2008
|
2007
|
Fav
(Unfav)
|
2008
|
2007
|
Fav
(Unfav)
|
||
(Unaudited)
|
|||||||
Revenues
(millions of dollars)
|
|||||||
Petroleum
and chemicals
|
346
|
317
|
9%
|
987
|
920
|
7%
|
|
Metals
and minerals
|
269
|
208
|
29%
|
713
|
631
|
13%
|
|
Forest
products
|
383
|
392
|
(2%)
|
1,070
|
1,216
|
(12%)
|
|
Coal
|
140
|
99
|
41%
|
346
|
287
|
21%
|
|
Grain
and fertilizers
|
327
|
330
|
(1%)
|
1,001
|
961
|
4%
|
|
Intermodal
|
446
|
361
|
24%
|
1,190
|
1,020
|
17%
|
|
Automotive
|
117
|
114
|
3%
|
357
|
388
|
(8%)
|
|
Total
rail freight revenue
|
2,028
|
1,821
|
11%
|
5,664
|
5,423
|
4%
|
|
Other
revenues
|
229
|
202
|
13%
|
618
|
533
|
16%
|
|
Total
revenues
|
2,257
|
2,023
|
12%
|
6,282
|
5,956
|
5%
|
|
Revenue
ton miles (millions)
|
|||||||
Petroleum
and chemicals
|
8,272
|
8,369
|
(1%)
|
24,668
|
24,288
|
2%
|
|
Metals
and minerals
|
5,140
|
4,301
|
20%
|
13,971
|
12,414
|
13%
|
|
Forest
products
|
8,715
|
10,021
|
(13%)
|
25,999
|
30,652
|
(15%)
|
|
Coal
|
4,159
|
3,500
|
19%
|
11,189
|
10,344
|
8%
|
|
Grain
and fertilizers
|
9,379
|
11,241
|
(17%)
|
31,915
|
32,809
|
(3%)
|
|
Intermodal
|
9,040
|
8,339
|
8%
|
25,795
|
24,114
|
7%
|
|
Automotive
|
641
|
710
|
(10%)
|
2,032
|
2,376
|
(14%)
|
|
45,346
|
46,481
|
(2%)
|
135,569
|
136,997
|
(1%)
|
||
Rail
freight revenue / RTM (cents)
|
|||||||
Total
rail freight revenue per RTM
|
4.47
|
3.92
|
14%
|
4.18
|
3.96
|
6%
|
|
Commodity
groups:
|
|||||||
Petroleum
and chemicals
|
4.18
|
3.79
|
10%
|
4.00
|
3.79
|
6%
|
|
Metals
and minerals
|
5.23
|
4.84
|
8%
|
5.10
|
5.08
|
-
|
|
Forest
products
|
4.39
|
3.91
|
12%
|
4.12
|
3.97
|
4%
|
|
Coal
|
3.37
|
2.83
|
19%
|
3.09
|
2.77
|
12%
|
|
Grain
and fertilizers
|
3.49
|
2.94
|
19%
|
3.14
|
2.93
|
7%
|
|
Intermodal
|
4.93
|
4.33
|
14%
|
4.61
|
4.23
|
9%
|
|
Automotive
|
18.25
|
16.06
|
14%
|
17.57
|
16.33
|
8%
|
|
Carloads
(thousands)
|
|||||||
Petroleum
and chemicals
|
139
|
153
|
(9%)
|
424
|
448
|
(5%)
|
|
Metals
and minerals
|
287
|
257
|
12%
|
797
|
749
|
6%
|
|
Forest
products
|
132
|
147
|
(10%)
|
395
|
450
|
(12%)
|
|
Coal
|
103
|
90
|
14%
|
280
|
275
|
2%
|
|
Grain
and fertilizers
|
137
|
152
|
(10%)
|
436
|
439
|
(1%)
|
|
Intermodal
|
370
|
343
|
8%
|
1,045
|
978
|
7%
|
|
Automotive
|
49
|
62
|
(21%)
|
160
|
200
|
(20%)
|
|
1,217
|
1,204
|
1%
|
3,537
|
3,539
|
-
|
||
Rail
freight revenue / carload (dollars)
|
|||||||
Total
rail freight revenue per carload
|
1,666
|
1,512
|
10%
|
1,601
|
1,532
|
5%
|
|
Commodity
groups:
|
|||||||
Petroleum
and chemicals
|
2,489
|
2,072
|
20%
|
2,328
|
2,054
|
13%
|
|
Metals
and minerals
|
937
|
809
|
16%
|
895
|
842
|
6%
|
|
Forest
products
|
2,902
|
2,667
|
9%
|
2,709
|
2,702
|
-
|
|
Coal
|
1,359
|
1,100
|
24%
|
1,236
|
1,044
|
18%
|
|
Grain
and fertilizers
|
2,387
|
2,171
|
10%
|
2,296
|
2,189
|
5%
|
|
Intermodal
|
1,205
|
1,052
|
15%
|
1,139
|
1,043
|
9%
|
|
Automotive
|
2,388
|
1,839
|
30%
|
2,231
|
1,940
|
15%
|
Such
statistical data and related productivity measures are based on estimated
data available at such time and are subject to change as more complete
information becomes available.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NON-GAAP MEASURE - unaudited
|
Free
cash flow
The
Company generated $258 million and $483 million of free cash flow for the
three and nine months ended September 30, 2008, compared to $142 million
and $193 million of free cash flow for the same periods in
2007. Free cash flow does not have any standardized meaning
prescribed by GAAP and may, therefore, not be comparable to similar
measures presented by other companies. The Company believes
that free cash flow is a useful measure of performance as it demonstrates
the Company’s ability to generate cash after the payment of capital
expenditures and dividends. The Company defines free cash flow
as cash provided from operating activities, excluding changes in the
accounts receivable securitization program and changes in cash and cash
equivalents resulting from foreign exchange fluctuations, less cash used
by investing activities and the payment of dividends, calculated as
follows:
|
Three
months ended
September
30
|
Nine
months ended
September
30
|
||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
|||||||
Cash
provided from operating activities
|
$
|
957
|
$
|
446
|
$
|
1,531
|
$
|
1,475
|
|||
Cash
used by investing activities
|
(393)
|
(336)
|
(902)
|
(871)
|
|||||||
Cash
provided before financing activities
|
564
|
110
|
629
|
604
|
|||||||
Adjustments:
|
|||||||||||
Change
in accounts receivable securitization
|
(202)
|
152
|
170
|
(52)
|
|||||||
Dividends
paid
|
(108)
|
(104)
|
(328)
|
(316)
|
|||||||
Effect
of foreign exchange fluctuations on U.S.
|
|||||||||||
dollar-denominated
cash and cash equivalents
|
4
|
(16)
|
12
|
(43)
|
|||||||
Free
cash flow
|
$
|
258
|
$
|
142
|
$
|
483
|
$
|
193
|
Canadian
National Railway Company
|
|||||
Date: October
21, 2008
|
By:
|
/s/
Cristina Circelli
|
|||
Name:
|
Cristina
Circelli
|
||||
Title:
|
Deputy
Corporate Secretary and
General Counsel
|