|
|
·
|
Net
income declined to C$387 million, or C$0.82 per diluted share, from
year-earlier net income of C$459 million, or C$0.95 per diluted share, as
a result of depressed North American and global economies driving lower
volumes.
|
·
|
Revenues
declined 15 per cent to C$1,781 million, carloads declined 22 per cent to
928,000, and revenue ton-miles declined 14 per cent, with weakness in
almost all market segments.
|
·
|
Operating
expenses declined 14 per cent to C$1,198 million, reflecting a significant
reduction in year-over-year fuel prices and extensive cost-containment
measures in response to lower
traffic.
|
·
|
Operating
income declined 18 per cent to C$583 million, while the operating ratio
increased by one percentage point to 67.3 per
cent.
|
·
|
Six-month
2009 free cash flow increased to C$463 million from C$225 million
generated during the first-half of 2008.
(1)
|
·
|
A
deferred income tax recovery of C$28 million ($0.06 per diluted share), of
which C$12 million (C$0.03 per diluted share) resulted from the enactment
of a lower provincial corporate income tax rate and C$16 million (C$0.03
per diluted share) resulted from the re-capitalization of a foreign
investment.
|
·
|
Costs
of C$2 million after-tax (nil per diluted share) related to the
acquisition of the principal rail lines of the Elgin, Joliet and Eastern
Railway Company (EJ&E).
|
|
|
|
|
Media
|
Investment
Community
|
Mark
Hallman
|
Robert
Noorigian
|
Director,
Communications, Media
|
Vice-President,
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
|
Six
months ended
|
|||||||||||
June
30
|
June
30
|
|||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||
(Unaudited)
|
||||||||||||
Revenues
|
$
|
1,781
|
$
|
2,098
|
$
|
3,640
|
$
|
4,025
|
||||
Operating
expenses
|
||||||||||||
Labor
and fringe benefits
|
413
|
392
|
867
|
853
|
||||||||
Purchased
services and material
|
253
|
283
|
544
|
568
|
||||||||
Fuel
|
174
|
399
|
356
|
709
|
||||||||
Depreciation
and amortization
|
199
|
176
|
402
|
351
|
||||||||
Equipment
rents
|
70
|
60
|
152
|
124
|
||||||||
Casualty
and other
|
89
|
81
|
255
|
190
|
||||||||
Total
operating expenses
|
1,198
|
1,391
|
2,576
|
2,795
|
||||||||
Operating
income
|
583
|
707
|
1,064
|
1,230
|
||||||||
Interest
expense
|
(108)
|
(87)
|
(220)
|
(173)
|
||||||||
Other
income (Note
3)
|
9
|
9
|
170
|
3
|
||||||||
Income
before income taxes
|
484
|
629
|
1,014
|
1,060
|
||||||||
Income
tax expense (Note
7)
|
(97)
|
(170)
|
(203)
|
(290)
|
||||||||
Net
income
|
$
|
387
|
$
|
459
|
$
|
811
|
$
|
770
|
||||
Earnings
per share (Note
10)
|
||||||||||||
Basic
|
$
|
0.83
|
$
|
0.96
|
$
|
1.73
|
$
|
1.61
|
||||
Diluted
|
$
|
0.82
|
$
|
0.95
|
$
|
1.72
|
$
|
1.59
|
||||
Weighted-average
number of shares
|
||||||||||||
Basic
|
468.7
|
476.4
|
468.5
|
479.6
|
||||||||
Diluted
|
473.0
|
482.0
|
472.7
|
485.3
|
||||||||
See
accompanying notes to unaudited consolidated financial
statements.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED
BALANCE SHEET (U.S.
GAAP)
|
(In
millions)
|
June
30
|
December
31
|
June
30
|
||||||
2009
|
2008
|
2008
|
||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
431
|
$
|
413
|
$
|
161
|
||
Accounts
receivable (Note
4)
|
865
|
913
|
843
|
|||||
Material
and supplies
|
258
|
200
|
217
|
|||||
Deferred
income taxes
|
113
|
98
|
67
|
|||||
Other
|
96
|
132
|
88
|
|||||
1,763
|
1,756
|
1,376
|
||||||
Properties
|
23,160
|
23,203
|
20,864
|
|||||
Intangible
and other assets
|
1,814
|
1,761
|
2,113
|
|||||
Total
assets
|
$
|
26,737
|
$
|
26,720
|
$
|
24,353
|
||
Liabilities
and shareholders' equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and other
|
$
|
1,270
|
$
|
1,386
|
$
|
1,289
|
||
Current
portion of long-term debt
|
506
|
506
|
85
|
|||||
1,776
|
1,892
|
1,374
|
||||||
Deferred
income taxes
|
5,443
|
5,511
|
5,100
|
|||||
Other
liabilities and deferred credits
|
1,319
|
1,353
|
1,381
|
|||||
Long-term
debt (Note
4)
|
7,093
|
7,405
|
6,389
|
|||||
Shareholders'
equity:
|
||||||||
Common
shares
|
4,203
|
4,179
|
4,208
|
|||||
Accumulated
other comprehensive loss
|
(207)
|
(155)
|
(1)
|
|||||
Retained
earnings
|
7,110
|
6,535
|
5,902
|
|||||
11,106
|
10,559
|
10,109
|
||||||
Total
liabilities and shareholders' equity
|
$
|
26,737
|
$
|
26,720
|
$
|
24,353
|
||
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
|
Six
months ended
|
|||||||||
|
June
30
|
June
30
|
|||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||
|
(Unaudited)
|
||||||||||
Common shares
(1)
|
|||||||||||
Balance,
beginning of period
|
$
|
4,188
|
$
|
4,241
|
$
|
4,179
|
$
|
4,283
|
|||
Stock
options exercised and other
|
15
|
19
|
24
|
42
|
|||||||
Share
repurchase programs (Note
4)
|
-
|
(52)
|
-
|
(117)
|
|||||||
Balance,
end of period
|
$
|
4,203
|
$
|
4,208
|
$
|
4,203
|
$
|
4,208
|
|||
|
|||||||||||
Accumulated other comprehensive
loss
|
|||||||||||
Balance,
beginning of period
|
$
|
(126)
|
$
|
9
|
$
|
(155)
|
$
|
(31)
|
|||
Other
comprehensive income (loss):
|
|||||||||||
Unrealized
foreign exchange gain (loss) on:
|
|||||||||||
Translation
of the net investment in foreign operations
|
(583)
|
(47)
|
(332)
|
140
|
|||||||
Translation
of U.S. dollar-denominated long-term debt
|
|||||||||||
designated
as a hedge of the net investment in U.S. subsidiaries
|
580
|
41
|
322
|
(141)
|
|||||||
Pension
and other postretirement benefit plans (Note
6):
|
|||||||||||
Amortization
of net actuarial loss (gain) included in net
|
|||||||||||
periodic
benefit cost (income)
|
1
|
(1)
|
1
|
(2)
|
|||||||
Amortization
of prior service cost included in net
|
|||||||||||
periodic
benefit cost (income)
|
-
|
6
|
1
|
12
|
|||||||
Other
comprehensive income (loss) before income taxes
|
(2)
|
(1)
|
(8)
|
9
|
|||||||
Income
tax recovery (expense)
|
(79)
|
(9)
|
(44)
|
21
|
|||||||
Other
comprehensive income (loss)
|
(81)
|
(10)
|
(52)
|
30
|
|||||||
Balance,
end of period
|
$
|
(207)
|
$
|
(1)
|
$
|
(207)
|
$
|
(1)
|
|||
|
|||||||||||
Retained
earnings
|
|||||||||||
Balance,
beginning of period
|
$
|
6,841
|
$
|
5,823
|
$
|
6,535
|
$
|
5,925
|
|||
Net
income
|
387
|
459
|
811
|
770
|
|||||||
Share
repurchase programs (Note
4)
|
-
|
(271)
|
-
|
(573)
|
|||||||
Dividends
|
(118)
|
(109)
|
(236)
|
(220)
|
|||||||
Balance,
end of period
|
$
|
7,110
|
$
|
5,902
|
$
|
7,110
|
$
|
5,902
|
|||
See
accompanying notes to unaudited consolidated financial
statements.
|
(1)
|
During
the three and six months ended June 30, 2009, the Company issued 0.6
million and 0.8 million common shares, respectively, as a result of stock
options exercised. At June 30, 2009, the Company had 469.0 million common
shares outstanding.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED
STATEMENT OF CASH FLOWS (U.S.
GAAP)
|
(In
millions)
|
Three
months ended
|
Six
months ended
|
||||||||||
June
30
|
June
30
|
||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||
(Unaudited)
|
|||||||||||
Operating
activities
|
|||||||||||
Net
income
|
$
|
387
|
$
|
459
|
$
|
811
|
$
|
770
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||||||
provided
from operating activities:
|
|||||||||||
Depreciation
and amortization
|
199
|
176
|
402
|
351
|
|||||||
Deferred
income taxes
|
40
|
89
|
50
|
114
|
|||||||
Gain
on disposal of property
(Note 3)
|
-
|
-
|
(157)
|
-
|
|||||||
Other
changes in:
|
|||||||||||
Accounts
receivable
|
28
|
(233)
|
29
|
(468)
|
|||||||
Material
and supplies
|
4
|
(6)
|
(49)
|
(54)
|
|||||||
Accounts
payable and other
|
(9)
|
(39)
|
(141)
|
(98)
|
|||||||
Other
current assets
|
5
|
22
|
41
|
51
|
|||||||
Other
|
(22)
|
(59)
|
(36)
|
(92)
|
|||||||
Cash
provided from operating activities
|
632
|
409
|
950
|
574
|
|||||||
Investing
activities
|
|||||||||||
Property
additions
|
(309)
|
(352)
|
(496)
|
(529)
|
|||||||
Acquisitions,
net of cash acquired (Note
3)
|
-
|
-
|
(373)
|
-
|
|||||||
Disposal
of property (Note
3)
|
40
|
-
|
150
|
-
|
|||||||
Other,
net
|
33
|
9
|
37
|
20
|
|||||||
Cash
used by investing activities
|
(236)
|
(343)
|
(682)
|
(509)
|
|||||||
Financing
activities
|
|||||||||||
Issuance
of long-term debt
|
-
|
1,597
|
1,440
|
2,652
|
|||||||
Reduction
of long-term debt
|
(187)
|
(1,418)
|
(1,459)
|
(1,998)
|
|||||||
Issuance
of common shares due to exercise of stock
|
|||||||||||
options
and related excess tax benefits realized
|
13
|
16
|
15
|
34
|
|||||||
Repurchase
of common shares
|
-
|
(323)
|
-
|
(690)
|
|||||||
Dividends
paid
|
(118)
|
(109)
|
(236)
|
(220)
|
|||||||
Cash
used by financing activities
|
(292)
|
(237)
|
(240)
|
(222)
|
|||||||
Effect
of foreign exchange fluctuations on U.S.
|
|||||||||||
dollar-denominated
cash and cash equivalents
|
(22)
|
(2)
|
(10)
|
8
|
|||||||
Net
increase (decrease) in cash and cash equivalents
|
82
|
(173)
|
18
|
(149)
|
|||||||
Cash
and cash equivalents, beginning of period
|
349
|
334
|
413
|
310
|
|||||||
Cash
and cash equivalents, end of period
|
$
|
431
|
$
|
161
|
$
|
431
|
$
|
161
|
|||
Supplemental
cash flow information
|
|||||||||||
Net
cash receipts from customers and other
|
$
|
1,834
|
$
|
1,886
|
$
|
3,738
|
$
|
3,634
|
|||
Net
cash payments for:
|
|||||||||||
Employee
services, suppliers and other expenses
|
(970)
|
(1,215)
|
(2,332)
|
(2,554)
|
|||||||
Interest
|
(93)
|
(90)
|
(199)
|
(190)
|
|||||||
Workforce
reductions
|
(4)
|
(6)
|
(8)
|
(12)
|
|||||||
Personal
injury and other claims
|
(35)
|
(18)
|
(65)
|
(44)
|
|||||||
Pensions
|
(28)
|
(31)
|
(28)
|
(53)
|
|||||||
Income
taxes
|
(72)
|
(117)
|
(156)
|
(207)
|
|||||||
Cash
provided from operating activities
|
$
|
632
|
$
|
409
|
$
|
950
|
$
|
574
|
|||
See
accompanying notes to unaudited consolidated financial
statements.
|
|||||||||||
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
At
January 31, 2009
|
||
(In
U.S. millions)
|
||
Consideration
|
||
Cash
|
$
|
300
|
Fair
value of total consideration transferred
|
$
|
300
|
Recognized
amounts of identifiable assets acquired and liabilities
assumed
|
||
Current
assets
|
$
|
6
|
Other
long-term assets
|
4
|
|
Property,
plant and equipment
|
304
|
|
Current
liabilities
|
(4)
|
|
Other
long-term liabilities
|
(10)
|
|
Total
identifiable net assets
|
$
|
300
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
The
following table provides the 2009 activity for all cash settled
awards:
|
||||||||
RSUs
|
Voluntary
Incentive Deferral Plan (VIDP)
|
|||||||
In
millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||||
Outstanding
at December 31, 2008
|
1.3
|
0.9
|
(1)
|
0.1
|
1.8
|
|||
Granted
|
0.9
|
-
|
-
|
0.1
|
(2)
|
|||
Transferred
into plan
|
-
|
-
|
-
|
0.1
|
||||
Payout
|
-
|
(0.9)
|
-
|
(0.1)
|
||||
Outstanding
at June 30, 2009
|
2.2
|
-
|
0.1
|
1.9
|
||||
(1) Includes
0.1 million of 2004 time-vested RSUs.
|
||||||||
(2) Includes
the Company's match and dividends earned on original deferred share
units.
|
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
|
2009
|
2008
|
2007
|
2006
|
2004
|
2005
|
onwards
|
|||||||||||||||||
|
||||||||||||||||||||||||
Stock-based
compensation expense (recovery)
|
||||||||||||||||||||||||
recognized
over requisite service period
|
||||||||||||||||||||||||
Six
months ended June 30, 2009
|
$
|
14
|
$
|
2
|
$
|
3
|
$
|
(2)
|
N/A
|
N/A
|
$
|
14
|
$
|
31
|
||||||||||
Six
months ended June 30, 2008
|
N/A
|
$
|
9
|
$
|
-
|
$
|
7
|
$
|
2
|
$
|
2
|
$
|
6
|
$
|
26
|
|||||||||
|
||||||||||||||||||||||||
Liability
outstanding
|
||||||||||||||||||||||||
June
30, 2009
|
$
|
14
|
$
|
10
|
$
|
12
|
$
|
-
|
$
|
-
|
N/A
|
$
|
98
|
$
|
134
|
|||||||||
December
31, 2008
|
N/A
|
$
|
8
|
$
|
9
|
$
|
53
|
$
|
3
|
$
|
-
|
$
|
88
|
$
|
161
|
|||||||||
|
||||||||||||||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||
June
30, 2009
($)
|
$
|
35.19
|
$
|
28.36
|
$
|
22.93
|
N/A
|
N/A
|
N/A
|
$
|
49.97
|
N/A
|
||||||||||||
|
||||||||||||||||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||||||
Six
months ended June 30, 2009
|
$
|
-
|
$
|
-
|
$
|
-
|
N/A
|
N/A
|
N/A
|
$
|
1
|
$
|
1
|
|||||||||||
Six
months ended June 30, 2008
|
N/A
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2
|
$
|
2
|
|||||||||
|
||||||||||||||||||||||||
Nonvested
awards at June 30, 2009
|
||||||||||||||||||||||||
Unrecognized
compensation cost
|
$
|
13
|
$
|
3
|
$
|
1
|
N/A
|
N/A
|
N/A
|
$
|
2
|
$
|
19
|
|||||||||||
Remaining
recognition period (years)
|
2.50
|
1.50
|
0.50
|
N/A
|
N/A
|
N/A
|
3.50
|
N/A
|
||||||||||||||||
|
||||||||||||||||||||||||
Assumptions (3)
|
||||||||||||||||||||||||
Stock
price ($)
|
$
|
49.97
|
$
|
49.97
|
$
|
49.97
|
N/A
|
N/A
|
N/A
|
$
|
49.97
|
N/A
|
||||||||||||
Expected
stock price volatility (4)
|
29%
|
32%
|
37%
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
||||||||||||||||
Expected
term (years)
(5)
|
2.50
|
1.50
|
0.50
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
||||||||||||||||
Risk-free
interest rate (6)
|
1.52%
|
0.86%
|
0.31%
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
||||||||||||||||
Dividend
rate ($) (7)
|
$
|
1.01
|
$
|
1.01
|
$
|
1.01
|
N/A
|
N/A
|
N/A
|
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.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(2)
|
Compensation
cost is based on intrinsic value.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(3)
|
Assumptions
used to determine fair value are at June 30, 2009.
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||
(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)
|
Options
outstanding
|
|||||||
Weighted-
|
|||||||
Number
|
average
|
Weighted-average
|
Aggregate
|
||||
of
options
|
exercise
price
|
years
to expiration
|
intrinsic
value
|
||||
In
millions
|
In
millions
|
||||||
Outstanding
at December 31, 2008(1)
|
13.2
|
$
|
29.05
|
||||
Granted
|
1.2
|
$
|
42.13
|
||||
Exercised
|
(0.8)
|
$
|
15.33
|
||||
Outstanding at June 30, 2009
(1)
|
13.6
|
$
|
30.47
|
4.5
|
$
|
273
|
|
Exercisable at June 30, 2009
(1)
|
11.0
|
$
|
26.59
|
3.5
|
$
|
261
|
|
(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
|
|
2009
|
2008
|
2007
|
2006
|
2005
|
Total
|
|||||||||||||
|
||||||||||||||||||||
Stock-based compensation
expense
|
||||||||||||||||||||
recognized
over requisite service period (1)
|
||||||||||||||||||||
Six
months ended June 30, 2009
|
$
|
6
|
$
|
1
|
$
|
1
|
$
|
1
|
$
|
-
|
$
|
9
|
||||||||
Six
months ended June 30, 2008
|
N/A
|
$
|
5
|
$
|
1
|
$
|
1
|
$
|
1
|
$
|
8
|
|||||||||
|
||||||||||||||||||||
Fair
value per unit
|
|
|||||||||||||||||||
At
grant date ($)
|
$
|
12.60
|
$
|
12.44
|
$
|
13.36
|
$
|
13.80
|
$
|
9.19
|
N/A
|
|||||||||
|
||||||||||||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||
Six
months ended June 30, 2009
|
$
|
-
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
12
|
||||||||
Six
months ended June 30, 2008
|
N/A
|
$
|
-
|
$
|
3
|
$
|
3
|
$
|
3
|
$
|
9
|
|||||||||
|
||||||||||||||||||||
Nonvested
awards at June 30, 2009
|
||||||||||||||||||||
Unrecognized
compensation cost
|
$
|
8
|
$
|
3
|
$
|
2
|
$
|
1
|
$
|
-
|
$
|
14
|
||||||||
Remaining
recognition period (years)
|
3.5
|
2.5
|
1.5
|
0.5
|
-
|
N/A
|
||||||||||||||
|
||||||||||||||||||||
Assumptions
|
||||||||||||||||||||
Grant
price ($)
|
$
|
42.13
|
$
|
48.51
|
$
|
52.79
|
$
|
51.51
|
$
|
36.33
|
N/A
|
|||||||||
Expected
stock price volatility (2)
|
39%
|
27%
|
24%
|
25%
|
25%
|
N/A
|
||||||||||||||
Expected
term (years)
(3)
|
5.3
|
5.3
|
5.2
|
5.2
|
5.2
|
N/A
|
||||||||||||||
Risk-free
interest rate (4)
|
1.97%
|
3.58%
|
4.12%
|
4.04%
|
3.50%
|
N/A
|
||||||||||||||
Dividend
rate ($) (5)
|
$
|
1.01
|
$
|
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 average of the historical volatility of the Company's stock over a
period commensurate with the expected term of the award and the implied
volatility from traded options on the Company's stock.
|
|||||||||||||||||||
|
||||||||||||||||||||
(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)
|
(a)
Components of net periodic benefit income for pensions
|
|||||||||
Three
months ended
|
Six
months ended
|
||||||||
June
30
|
June
30
|
||||||||
In
millions
|
2009
|
2008
|
2009
|
2008
|
|||||
Service
cost
|
$
|
22
|
$
|
35
|
$
|
44
|
$
|
70
|
|
Interest
cost
|
221
|
200
|
443
|
400
|
|||||
Expected
return on plan assets
|
(252)
|
(251)
|
(504)
|
(502)
|
|||||
Amortization
of prior service cost
|
-
|
5
|
-
|
10
|
|||||
Recognized
net actuarial loss
|
2
|
-
|
3
|
-
|
|||||
Net
periodic benefit (income)
|
$
|
(7)
|
$
|
(11)
|
$
|
(14)
|
$
|
(22)
|
|
(b)
Components of net periodic benefit cost for other postretirement
benefits
|
|||||||||
Three
months ended
|
Six
months ended
|
||||||||
June
30
|
June
30
|
||||||||
In
millions
|
2009
|
2008
|
2009
|
2008
|
|||||
Service
cost
|
$
|
1
|
$
|
1
|
$
|
2
|
$
|
2
|
|
Interest
cost
|
4
|
4
|
8
|
8
|
|||||
Curtailment
gain
|
-
|
(1)
|
(3)
|
(3)
|
|||||
Amortization
of prior service cost
|
-
|
1
|
1
|
2
|
|||||
Recognized
net actuarial gain
|
(1)
|
(1)
|
(2)
|
(2)
|
|||||
Net
periodic benefit cost
|
$
|
4
|
$
|
4
|
$
|
6
|
$
|
7
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
(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
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
(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.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
In
millions
|
June
30, 2009
|
December
31, 2008
|
||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||
amount
|
value
|
amount
|
value
|
|||||||
Financial
assets
|
||||||||||
Investments
|
$
|
23
|
$
|
119
|
$
|
24
|
$
|
127
|
||
Financial
liabilities
|
||||||||||
Long-term
debt (including current portion)
|
$
|
7,599
|
$
|
8,156
|
$
|
7,911
|
$
|
8,301
|
||
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Three
months ended
|
Six
months ended
|
||||||||||
June
30
|
June
30
|
||||||||||
In
millions, except per share data
|
2009
|
2008
|
2009
|
2008
|
|||||||
Net
income
|
$
|
387
|
$
|
459
|
$
|
811
|
$
|
770
|
|||
Weighted-average
shares outstanding
|
468.7
|
476.4
|
468.5
|
479.6
|
|||||||
Effect
of stock options
|
4.3
|
5.6
|
4.2
|
5.7
|
|||||||
Weighted-average
diluted shares outstanding
|
473.0
|
482.0
|
472.7
|
485.3
|
|||||||
Basic
earnings per share
|
$
|
0.83
|
$
|
0.96
|
$
|
1.73
|
$
|
1.61
|
|||
Diluted
earnings per share
|
$
|
0.82
|
$
|
0.95
|
$
|
1.72
|
$
|
1.59
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
SELECTED
RAILROAD STATISTICS (1)
(U.S.
GAAP)
|
Three
months ended
|
Six
months ended
|
||||
June
30
|
June
30
|
||||
2009
|
2008
|
2009
|
2008
|
||
(Unaudited)
|
|||||
Statistical
operating data
|
|||||
Rail
freight revenues ($ millions)
|
1,601
|
1,876
|
3,297
|
3,636
|
|
Gross
ton miles (GTM) (millions)
|
74,556
|
87,287
|
148,113
|
171,614
|
|
Revenue
ton miles (RTM) (millions)
|
38,865
|
45,264
|
77,556
|
90,223
|
|
Carloads
(thousands)
|
928
|
1,188
|
1,882
|
2,320
|
|
Route
miles (includes Canada and the U.S.)
|
21,104
|
20,421
|
21,104
|
20,421
|
|
Employees
(end of period)
|
21,717
|
23,147
|
21,717
|
23,147
|
|
Employees
(average for the period)
|
21,827
|
22,953
|
22,043
|
22,795
|
|
Productivity
|
|||||
Operating
ratio (%)
|
67.3
|
66.3
|
70.8
|
69.4
|
|
Rail
freight revenue per RTM (cents)
|
4.12
|
4.14
|
4.25
|
4.03
|
|
Rail
freight revenue per carload ($)
|
1,725
|
1,579
|
1,752
|
1,567
|
|
Operating
expenses per GTM (cents)
|
1.61
|
1.59
|
1.74
|
1.63
|
|
Labor
and fringe benefits expense per GTM (cents)
|
0.55
|
0.45
|
0.59
|
0.50
|
|
GTMs
per average number of employees (thousands)
|
3,416
|
3,803
|
6,719
|
7,529
|
|
Diesel
fuel consumed (U.S. gallons in millions)
|
80
|
96
|
165
|
195
|
|
Average
fuel price ($/U.S. gallon)
|
2.00
|
3.82
|
1.99
|
3.41
|
|
GTMs
per U.S. gallon of fuel consumed
|
932
|
909
|
898
|
880
|
|
Safety
indicators
|
|||||
Injury
frequency rate per 200,000 person hours (2)
|
1.68
|
1.16
|
1.48
|
1.64
|
|
Accident
rate per million train miles (2)
|
1.71
|
2.68
|
1.92
|
2.67
|
|
Financial
ratio
|
|||||
Debt
to total capitalization ratio (% at end of period)
|
40.6
|
39.0
|
40.6
|
39.0
|
|
(1)
Includes data relating to companies acquired as of the date of
acquisition.
|
|||||
(2)
Based on Federal Railroad Administration (FRA) reporting
criteria.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
SUPPLEMENTARY
INFORMATION (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
||||||
Variance
|
Variance
|
||||||
2009
|
2008
|
Fav
(Unfav)
|
2009
|
2008
|
Fav
(Unfav)
|
||
(Unaudited)
|
|||||||
Revenues
(millions of dollars)
|
|||||||
Petroleum
and chemicals
|
309
|
322
|
(4%)
|
649
|
641
|
1%
|
|
Metals
and minerals
|
158
|
239
|
(34%)
|
356
|
444
|
(20%)
|
|
Forest
products
|
283
|
357
|
(21%)
|
585
|
687
|
(15%)
|
|
Coal
|
111
|
107
|
4%
|
214
|
206
|
4%
|
|
Grain
and fertilizers
|
330
|
334
|
(1%)
|
687
|
674
|
2%
|
|
Intermodal
|
318
|
393
|
(19%)
|
637
|
744
|
(14%)
|
|
Automotive
|
92
|
124
|
(26%)
|
169
|
240
|
(30%)
|
|
Total
rail freight revenue
|
1,601
|
1,876
|
(15%)
|
3,297
|
3,636
|
(9%)
|
|
Other
revenues
|
180
|
222
|
(19%)
|
343
|
389
|
(12%)
|
|
Total
revenues
|
1,781
|
2,098
|
(15%)
|
3,640
|
4,025
|
(10%)
|
|
Revenue
ton miles (millions)
|
|||||||
Petroleum
and chemicals
|
7,114
|
7,970
|
(11%)
|
14,641
|
16,396
|
(11%)
|
|
Metals
and minerals
|
2,813
|
4,740
|
(41%)
|
6,065
|
8,831
|
(31%)
|
|
Forest
products
|
6,782
|
8,826
|
(23%)
|
13,396
|
17,284
|
(22%)
|
|
Coal
|
3,445
|
3,638
|
(5%)
|
6,286
|
7,030
|
(11%)
|
|
Grain
and fertilizers
|
10,049
|
10,707
|
(6%)
|
20,607
|
22,536
|
(9%)
|
|
Intermodal
|
8,108
|
8,666
|
(6%)
|
15,584
|
16,755
|
(7%)
|
|
Automotive
|
554
|
717
|
(23%)
|
977
|
1,391
|
(30%)
|
|
38,865
|
45,264
|
(14%)
|
77,556
|
90,223
|
(14%)
|
||
Rail
freight revenue / RTM (cents)
|
|||||||
Total
rail freight revenue per RTM
|
4.12
|
4.14
|
-
|
4.25
|
4.03
|
5%
|
|
Commodity
groups:
|
|||||||
Petroleum
and chemicals
|
4.34
|
4.04
|
7%
|
4.43
|
3.91
|
13%
|
|
Metals
and minerals
|
5.62
|
5.04
|
12%
|
5.87
|
5.03
|
17%
|
|
Forest
products
|
4.17
|
4.04
|
3%
|
4.37
|
3.97
|
10%
|
|
Coal
|
3.22
|
2.94
|
10%
|
3.40
|
2.93
|
16%
|
|
Grain
and fertilizers
|
3.28
|
3.12
|
5%
|
3.33
|
2.99
|
11%
|
|
Intermodal
|
3.92
|
4.53
|
(13%)
|
4.09
|
4.44
|
(8%)
|
|
Automotive
|
16.61
|
17.29
|
(4%)
|
17.30
|
17.25
|
-
|
|
Carloads
(thousands)
|
|||||||
Petroleum
and chemicals
|
125
|
140
|
(11%)
|
253
|
285
|
(11%)
|
|
Metals
and minerals
|
128
|
272
|
(53%)
|
308
|
510
|
(40%)
|
|
Forest
products
|
100
|
136
|
(26%)
|
200
|
263
|
(24%)
|
|
Coal
|
107
|
90
|
19%
|
197
|
177
|
11%
|
|
Grain
and fertilizers
|
130
|
148
|
(12%)
|
262
|
299
|
(12%)
|
|
Intermodal
|
300
|
348
|
(14%)
|
592
|
675
|
(12%)
|
|
Automotive
|
38
|
54
|
(30%)
|
70
|
111
|
(37%)
|
|
928
|
1,188
|
(22%)
|
1,882
|
2,320
|
(19%)
|
||
Rail
freight revenue / carload (dollars)
|
|||||||
Total
rail freight revenue per carload
|
1,725
|
1,579
|
9%
|
1,752
|
1,567
|
12%
|
|
Commodity
groups:
|
|||||||
Petroleum
and chemicals
|
2,472
|
2,300
|
7%
|
2,565
|
2,249
|
14%
|
|
Metals
and minerals
|
1,234
|
879
|
40%
|
1,156
|
871
|
33%
|
|
Forest
products
|
2,830
|
2,625
|
8%
|
2,925
|
2,612
|
12%
|
|
Coal
|
1,037
|
1,189
|
(13%)
|
1,086
|
1,164
|
(7%)
|
|
Grain
and fertilizers
|
2,538
|
2,257
|
12%
|
2,622
|
2,254
|
16%
|
|
Intermodal
|
1,060
|
1,129
|
(6%)
|
1,076
|
1,102
|
(2%)
|
|
Automotive
|
2,421
|
2,296
|
5%
|
2,414
|
2,162
|
12%
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NON-GAAP
MEASURES - unaudited
|
Three
months ended
|
Six
months ended
|
||||||||||||
June
30, 2009
|
June
30, 2009
|
||||||||||||
In
millions, except per share data
|
Reported
|
Adjustments
|
Adjusted
|
Reported
|
Adjustments
|
Adjusted
|
|||||||
Revenues
|
$
|
1,781
|
$
|
-
|
$
|
1,781
|
$
|
3,640
|
$
|
-
|
$
|
3,640
|
|
Operating
expenses
|
1,198
|
(3)
|
1,195
|
2,576
|
(49)
|
2,527
|
|||||||
Operating
income
|
583
|
3
|
586
|
1,064
|
49
|
1,113
|
|||||||
Interest
expense
|
(108)
|
-
|
(108)
|
(220)
|
-
|
(220)
|
|||||||
Other
income
|
9
|
-
|
9
|
170
|
(157)
|
13
|
|||||||
Income
before income taxes
|
484
|
3
|
487
|
1,014
|
(108)
|
906
|
|||||||
Income
tax expense
|
(97)
|
(29)
|
(126)
|
(203)
|
(40)
|
(243)
|
|||||||
Net
income
|
$
|
387
|
$
|
(26)
|
$
|
361
|
$
|
811
|
$
|
(148)
|
$
|
663
|
|
Operating
Ratio
|
67.3%
|
67.1%
|
70.8%
|
69.4%
|
|||||||||
Basic
earnings per share
|
$
|
0.83
|
$
|
(0.06)
|
$
|
0.77
|
$
|
1.73
|
$
|
(0.32)
|
$
|
1.41
|
|
Diluted
earnings per share
|
$
|
0.82
|
$
|
(0.06)
|
$
|
0.76
|
$
|
1.72
|
$
|
(0.32)
|
$
|
1.40
|
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NON-GAAP
MEASURES - unaudited
|
Three
months ended
|
Six
months ended
|
||||||||||||
June
30, 2008
|
June
30, 2008
|
||||||||||||
In
millions, except per share data
|
Reported
|
Adjustments
|
Adjusted
|
Reported
|
Adjustments
|
Adjusted
|
|||||||
Revenues
|
$
|
2,098
|
$
|
-
|
$
|
2,098
|
$
|
4,025
|
$
|
-
|
$
|
4,025
|
|
Operating
expenses
|
1,391
|
-
|
1,391
|
2,795
|
-
|
2,795
|
|||||||
Operating
income
|
707
|
-
|
707
|
1,230
|
-
|
1,230
|
|||||||
Interest
expense
|
(87)
|
-
|
(87)
|
(173)
|
-
|
(173)
|
|||||||
Other
income
|
9
|
-
|
9
|
3
|
-
|
3
|
|||||||
Income
before income taxes
|
629
|
-
|
629
|
1,060
|
-
|
1,060
|
|||||||
Income
tax expense
|
(170)
|
(23)
|
(193)
|
(290)
|
(34)
|
(324)
|
|||||||
Net
income
|
$
|
459
|
$
|
(23)
|
$
|
436
|
$
|
770
|
$
|
(34)
|
$
|
736
|
|
Operating
Ratio
|
66.3%
|
66.3%
|
69.4%
|
69.4%
|
|||||||||
Basic
earnings per share
|
$
|
0.96
|
$
|
(0.05)
|
$
|
0.91
|
$
|
1.61
|
$
|
(0.07)
|
$
|
1.54
|
|
Diluted
earnings per share
|
$
|
0.95
|
$
|
(0.05)
|
$
|
0.90
|
$
|
1.59
|
$
|
(0.07)
|
$
|
1.52
|
Three
months ended
|
Six
months ended
|
||||||||||
June
30
|
June
30
|
||||||||||
In
millions
|
2009
|
2008
|
2009
|
2008
|
|||||||
Cash
provided from operating activities
|
$
|
632
|
$
|
409
|
$
|
950
|
$
|
574
|
|||
Cash
used by investing activities
|
(236)
|
(343)
|
(682)
|
(509)
|
|||||||
Cash
provided before financing activities
|
396
|
66
|
268
|
65
|
|||||||
Adjustments:
|
|||||||||||
Change
in accounts receivable securitization
|
-
|
209
|
68
|
372
|
|||||||
Dividends
paid
|
(118)
|
(109)
|
(236)
|
(220)
|
|||||||
Acquisition
of EJ&E
|
-
|
-
|
373
|
-
|
|||||||
Effect
of foreign exchange fluctuations on U.S.
dollar-denominated
|
|||||||||||
cash
and cash equivalents
|
(22)
|
(2)
|
(10)
|
8
|
|||||||
Free
cash flow
|
$
|
256
|
$
|
164
|
$
|
463
|
$
|
225
|
Canadian
National Railway Company
|
|||||
Date: July
20, 2009
|
By:
|
/s/
Cristina Circelli
|
|||
Name:
|
Cristina
Circelli
|
||||
Title:
|
Deputy
Corporate Secretary and
General Counsel
|