6-K


FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of January, 2005

Commission File Number: 001-02413

Canadian National Railway Company
(Translation of registrant’s name into English)

935 de la Gauchetiere Street West
Montreal, Quebec
Canada H3B 2M9

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F           Form 40-F    X  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes           No    X  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes           No    X  

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes           No    X  

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A







Canadian National Railway Company

Table of Contents

Item 1  Press Release dated January 25, 2005 titled "CN announces 28 per cent increase in quarterly cash dividend"
   
Item 2

Press Release dated January 25, 2005 titled "CN's record revenues help drive best ever fourth-quarter and full-year results"

 







Item 1

News
North America’s Railroad FOR IMMEDIATE RELEASE
   
   
   
  Stock symbols: TSX: CNR / NYSE: CNI
   
  www.cn.ca

CN announces 28 per cent increase in quarterly cash dividend

MONTREAL, Jan. 25, 2005 – CN announced today that its Board of Directors has approved a first-quarter 2005 dividend on the Company’s common shares outstanding. A quarterly dividend of twenty-five cents (Cdn $0.25) per common share will be paid on March 31, 2005, to shareholders of record at the close of business on March 10, 2005.

The dividend represents a 28 per cent increase over the previous quarterly dividend of nineteen and one-half cents (Cdn $0.195) per common share.

This is the ninth consecutive increase in CN’s cash dividend since the company’s initial public offering of shares in 1995.

Canadian National Railway Company spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.

- 30 -

Media Investment Community
   
Mark Hallman
(905) 669-3384
Robert Noorigian
(514) 399-0052







Item 2


  News
North America’s Railroad   FOR IMMEDIATE RELEASE

Stock symbols: TSX: CNR / NYSE: CNI

www.cn.ca

 

CN’s record revenues help drive best ever fourth- quarter and full-year results

MONTREAL, Jan. 25, 2005 — CN today reported its financial results for the fourth quarter and 12–month period ended Dec. 31, 2004.

Highlights






E. Hunter Harrison, president and chief executive officer of CN, said: “I am delighted to report these record results. Our railroaders delivered the best quarterly and full– year operating ratio in company history, along with record annual operating income, net income and free cash flow.

“CN’s outstanding performance resulted from strong core business growth at low incremental cost, the early benefits of two acquisitions, and the discipline of precision railroading.

“This winning combination allowed CN to generate free cash flow of more than $1 billion, an exceptional achievement that underscores the quality of our earnings. CN’s proven ability to produce strong free cash flow gives management the flexibility to reward investors: it will support a 28 per cent increase in our 2005 dividend– the ninth consecutive increase since CN’s privatization in 1995.”

Business levels benefited from the acquisitions of BC Rail and the railroad and related holdings of Great Lakes Transportation LLC (GLT), which added $145 million to CN’s fourth– quarter 2004 revenues. Central to CN’s performance was strong demand for lumber, chemicals, iron ore, coal, consumer goods from Asia, and Canadian wheat and barley.






Six of CN’s seven commodity groups registered revenue gains during the fourth quarter: metals and minerals (37 per cent); forest products (22 per cent); coal (20 per cent); intermodal (12 per cent); petroleum and chemicals (nine per cent); and grain and fertilizers (five per cent). Automotive revenues declined eight per cent, largely due to the impact of the stronger Canadian dollar on the conversion of U.S.– dollar denominated revenues.

Operating expenses for the fourth quarter of 2004 increased 13 per cent to $1,129 million, largely as a result of the inclusion of $92 million of expenses of GLT and BC Rail, whose operations CN consolidated on May 10, 2004, and July 14, 2004, respectively. This increase was partially offset by the positive impact on expenses of the stronger Canadian dollar. During the latest three– month period, casualty and other expenses grew by 31 per cent, fuel by 29 per cent, and labour and fringe benefits expenses by 13 per cent. Equipment rents declined 25 per cent.

The stronger Canadian dollar affected the conversion of CN’s U.S.– dollar denominated revenues and expenses, and, accordingly, reduced the company’s fourth– quarter revenues, operating income and net income by approximately $60 million, $15 million and $7 million, respectively.

Full-year 2004 financial results

Net income for 2004 was $1,258 million, or $4.34 per diluted share, compared with net income of $1,014 million, or $3.49 per diluted share, for 2003.






Net income for 2003 included a fourth– quarter deferred income tax expense of $79 million, or 27 cents per diluted share, and a cumulative benefit of $48 million after tax (16 cents per diluted share) resulting from a change in the accounting for removal costs for certain track structure assets. Excluding these items, adjusted net income for 2003 was $1,045 million, or $3.60 per diluted share. (1)

Operating income for 2004 increased 22 per cent to $2,168 million. Revenues rose by 11 per cent to $6,548 million, while operating expenses grew by seven per cent to $4,380 million. For 2004, BC Rail and GLT added $351 million to CN’s revenues and $228 million to its operating expenses.

CN’s 2004 operating ratio was 66.9 per cent, a 2.9–percentage point improvement over the year– earlier performance.

The translation impact of the stronger Canadian dollar reduced 2004 revenues, operating income and net income by approximately $255 million, $85 million, and $45 million, respectively.

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).

(1) Please see discussion and reconciliation of these non– GAAP adjusted performance measures in the attached supplementary schedule, Non–GAAP Measures.

This news release contains forward-looking statements. CN cautions that, by their nature, forward-looking statements involve risk and uncertainties and that its results could differ materially from those expressed or implied in such statements. Reference should be made to CN’s most recent Form 40-F filed with the United States Securities and Exchange Commission, and the Annual Information Form filed with the Canadian securities regulators, for a summary of major risks.






Canadian National Railway Company spans Canada and mid– America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key cities of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America.

– 30 –

Contacts:
Media Investment Community
Mark Hallman Robert Noorigian
System Director, Media Relations 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
December 31
  Year ended
December 31
 
 
 

    2004 (1)   2003     2004 (1)   2003  

  (Unaudited)              
                         
Revenues $ 1,736   $ 1,512   $ 6,548   $ 5,884  

Operating expenses 1,129     1,000   4,380     4,107  

Operating income 607     512   2,168     1,777  
Interest expense (75 )   (71 ) (294 )   (315 )
Other income (loss) 25     8   (20 )   21  

Income before income taxes and cumulative effect of change          
   in accounting policy 557     449   1,854     1,483  
Income tax expense (181 )   (225 ) (596 )   (517 )

Income before cumulative effect of change in accounting policy 376     224   1,258     966  
Cumulative effect of change in accounting policy          
   (net of applicable taxes) -     -   -     48  

Net income $ 376   $ 224   $ 1,258   $ 1,014  

Earnings per share (2)          
   Basic earnings per share          
   Income before cumulative effect of change in accounting policy $ 1.32   $ 0.79   $ 4.41   $ 3.38  
   Net income $ 1.32   $ 0.79   $ 4.41   $ 3.54  
   Diluted earnings per share          
   Income before cumulative effect of change in accounting policy $ 1.29   $ 0.78   $ 4.34   $ 3.33  
   Net income $ 1.29   $ 0.78   $ 4.34   $ 3.49  
Weighted-average number of shares          
   Basic 285.1     283.9   285.1     286.8  
   Diluted 290.7     288.1   289.9     290.7  


These unaudited interim consolidated financial statements, expressed in Canadian dollars, and prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP), contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Canadian National Railway Company's (the Company) financial position as at December 31, 2004 and December 31, 2003, its results of operations, changes in shareholders' equity and cash flows for the three months and year ended December 31, 2004 and 2003. These consolidated financial statements have been prepared using accounting policies consistent with those used in preparing the Company's 2004 Annual Consolidated Financial Statements and should be read in conjunction with such statements, notes thereto and Management's Discussion and Analysis (MD&A).

(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.
(2) All share and per share data has been adjusted to reflect the three-for-two common stock split approved by the Board of Directors on January 27, 2004.

1






CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF OPERATING INCOME (U.S. GAAP)

(In millions)


  Three months ended December 31   Year ended December 31
 
 

  2004 (1) 2003 Variance
Fav (Unfav)
    2004 (1) 2003 Variance
Fav (Unfav)

  (Unaudited)          
               
Revenues              
                                 
Petroleum and chemicals $ 283   $ 260   9 % $ 1,123   $ 1,058   6 %
Metals and minerals 192   140   37 %   713     527   35 %
Forest products 387   318   22 %   1,452     1,284   13 %
Coal 72   60   20 %   284     261   9 %
Grain and fertilizers 297   283   5 %   1,053     938   12 %
Intermodal 300   267   12 %   1,117     1,101   1 %
Automotive 125   136   (8 %)   510     525   (3 %)
Other items 80   48   67 %   296     190   56 %


1,736   1,512   15 %   6,548     5,884   11 %
                                 
Operating expenses              
                                 
Labor and fringe benefits 469   415   (13 %)   1,819     1,698   (7 %)
Purchased services and material 185   174   (6 %)   746     703   (6 %)
Depreciation and amortization 153   136   (13 %)   598     554   (8 %)
Fuel 151   117   (29 %)   528     469   (13 %)
Equipment rents 49   65   25 %   244     293   17 %
Casualty and other 122   93   (31 %)   445     390   (14 %)


1,129   1,000   (13 %)   4,380     4,107   (7 %)


                                 
Operating income $ 607   $ 512   19 % $ 2,168   $ 1,777   22 %

                                 
Operating ratio 65.0 % 66.1 % 1.1     66.9 %   69.8 % 2.9  

                                 
(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.

2






 

CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)

(In millions)


  December 31
2004
  December 31
2003

   
Assets  
             
Current assets:  
     Cash and cash equivalents $ 147   $ 130  
     Accounts receivable 793   529  
     Material and supplies 127   120  
     Deferred income taxes 364   125  
     Other 279   223  

1,710   1,127  
             
Properties 19,715   18,305  
Intangible and other assets 940   905  

             
Total assets $ 22,365   $ 20,337  

             
Liabilities and shareholders' equity  
             
Current liabilities:  
     Accounts payable and accrued charges $ 1,605   $ 1,421  
     Current portion of long-term debt 578   483  
     Other 76   73  

2,259   1,977  
             
Deferred income taxes 4,723   4,550  
Other liabilities and deferred credits 1,513   1,203  
Long-term debt 4,586   4,175  
             
Shareholders' equity:  
     Common shares 4,706   4,664  
     Accumulated other comprehensive loss (148 )   (129 )
     Retained earnings 4,726   3,897  

9,284   8,432  

             
Total liabilities and shareholders' equity $ 22,365   $ 20,337  


These unaudited interim consolidated financial statements, expressed in Canadian dollars, and prepared in accordance with U.S. GAAP, contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as at December 31, 2004 and December 31, 2003, its results of operations, changes in shareholders' equity and cash flows for the three months and year ended December 31, 2004 and 2003. These consolidated financial statements have been prepared using accounting policies consistent with those used in preparing the Company's 2004 Annual Consolidated Financial Statements and should be read in conjunction with such statements, notes thereto and MD&A.

3






CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. GAAP)

(In millions)

  Three months ended
December 31
  Year ended
December 31
 
 

  2004 (1)   2003   2004 (1)   2003

  (Unaudited)      
Common shares (2)          
Balance, beginning of period $ 4,742   $ 4,642   $ 4,664   $ 4,785  
   Stock options exercised and other 30     22   108     122  
   Share repurchase program (3) (66 )   -   (66 )   (243 )

Balance, end of period $ 4,706   $ 4,664   $ 4,706   $ 4,664  

           
Accumulated other comprehensive income (loss)          
Balance, beginning of period $ (57 ) $ (116 ) $ (129 ) $ 97  
Other comprehensive income (loss):          
Unrealized foreign exchange gain on translation of          
   U.S. dollar denominated long-term debt designated as a          
   hedge of the net investment in U.S. subsidiaries 217     165   326     754  
Unrealized foreign exchange loss on translation of          
   the net investment in foreign operations (302 )   (203 ) (428 )   (1,101 )
Unrealized holding gain (loss) on fuel derivative instruments (58 )   14   54     8  
Realized gain on settlement of interest rate swaps -     -   12     -  
Minimum pension liability adjustment 8     7   8     7  
Deferred income tax rate enactment -     (2 ) -     (2 )

Other comprehensive loss before income taxes (135 )   (19 ) (28 )   (334 )
Income tax recovery 44     6   9     108  

Other comprehensive loss (91 )   (13 ) (19 )   (226 )

Balance, end of period $ (148 ) $ (129 ) $ (148 ) $ (129 )

           
Retained earnings          
Balance, beginning of period $ 4,612   $ 3,720   $ 3,897   $ 3,487  
   Net income 376     224   1,258     1,014  
   Share repurchase program (3) (207 )   -   (207 )   (413 )
   Dividends (55 )   (47 ) (222 )   (191 )

Balance, end of period $ 4,726   $ 3,897   $ 4,726   $ 3,897  


(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.
(2) For the three months and year ended December 31, 2004, the Company issued 0.7 million and 2.9 million common shares, respectively, as a result of stock options exercised. At December 31, 2004, the Company had 283.1 million common shares outstanding.
(3) As at December 31, 2004, under the Company's current share repurchase program, 4.0 million common shares have been repurchased for $273 million, at an average price of $68.31 per share.

4






CANADIAN NATIONAL RAILWAY COMPANY                  
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)    






(In millions)          
           
    Three months ended
December 31
  Year ended
December 31
 
   
 

    2004 (1) 2003   2004 (1)   2003  

    (Unaudited)              
Operating activities                          
Net income   $ 376   $ 224   $ 1,258   $ 1,014  
Adjustments to reconcile net income to net cash provided from                          
   operating activities:                          
       Depreciation and amortization     154     138     602     560  
       Deferred income taxes     66     189     366     411  
       Equity in earnings of English Welsh and Scottish Railway     (3 )   3     4     (17 )
       Cumulative effect of change in accounting policy     -     -     -     (48 )
       Other changes in:                          
           Accounts receivable     (93 )   34     (233 )   153  
           Material and supplies     18     24     10     (3 )
           Accounts payable and accrued charges     115     9     5     (96 )
           Other net current assets and liabilities     (24 )   (27 )   21     (29 )
       Other     79     (6 )   106     31  

Cash provided from operating activities     688     588     2,139     1,976  

Investing activities                          
Net additions to properties     (365 )   (347 )   (1,072 )   (1,043 )
Acquisition of BC Rail     -     -     (984 )   -  
Acquisition of GLT     -     -     (547 )   -  
Other, net     23     (27 )   192     (32 )

Cash used by investing activities     (342 )   (374 )   (2,411 )   (1,075 )

Dividends paid     (55 )   (47 )   (222 )   (191 )
           
Financing activities                          
Issuance of long-term debt     1,353     1,380     8,277     4,109  
Reduction of long-term debt     (1,381 )   (1,553 )   (7,579 )   (4,141 ) 
Issuance of common shares     25     14     86     83  
Repurchase of common shares     (273 )   -     (273 )   (656 )

Cash provided from (used by) financing activities     (276 )   (159 )   511     (605 )

Net increase in cash and cash equivalents     15     8     17     105  
Cash and cash equivalents, beginning of period     132     122     130     25  

Cash and cash equivalents, end of period   $ 147   $ 130   $ 147   $ 130  

Supplemental cash flow information                          
   Net cash receipts from customers and other   $ 1,740   $ 1,375   $ 6,501   $ 6,022  
   Net cash payments for:                          
       Employee services, suppliers and other expenses     (882 )   (574 )   (3,628 )   (3,262 )
       Interest     (83 )   (82 )   (282 )   (325 )
       Workforce reductions     (12 )   (34 )   (93 )   (155 )
       Personal injury and other claims     (28 )   (35 )   (106 )   (126 )
       Pensions     (34 )   (46 )   (161 )   (92 )
       Income taxes     (13 )   (16 )   (92 )   (86 )

Cash provided from operating activities   $ 688   $ 588   $ 2,139   $ 1,976  

   
(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.                       

5






CANADIAN NATIONAL RAILWAY COMPANY                  
SELECTED RAILROAD STATISTICS    






                 
                 
  Three months ended
December 31
    Year ended
December 31
 
   

  2004 (1)   2003     2004 (1)   2003

    (Unaudited)  
Statistical operating data                        
Freight revenues ($ millions)   1,656     1,464     6,252     5,694  
Gross ton miles (GTM) (millions)   88,636     83,600     332,807     313,593  
Revenue ton miles (RTM) (millions)   46,215     43,840     175,355     162,901  
Carloads (thousands)   1,260     1,064     4,654     4,177  
Route miles (includes Canada and the U.S.)   19,304     17,544     19,304     17,544  
Employees (end of period)   22,679     21,489     22,679     21,489  
Employees (average during period)   23,043     21,918     22,470     22,012  

Productivity                        
Operating ratio (%)   65.0     66.1     66.9     69.8  
Freight revenue per RTM (cents)   3.58     3.34     3.57     3.50  
Freight revenue per carload ($)   1,314     1,376     1,343     1,363  
Operating expenses per GTM (cents)   1.27     1.20     1.32     1.31  
Labor and fringe benefits expense per GTM (cents)   0.53     0.50     0.55     0.54  
GTMs per average number of employees (thousands)   3,847     3,814     14,811     14,246  
Diesel fuel consumed (U.S. gallons in millions)   103     99     391     374  
Average fuel price ($/U.S. gallon)   1.43     1.12     1.30     1.21  
GTMs per U.S. gallon of fuel consumed   861     844     851     838  

Safety indicators                        
Injury frequency rate per 200,000 person hours   2.3     2.4     2.6     2.9  
Accident rate per million train miles   1.7     2.1     1.6     2.0  

Financial ratios                        
Debt to total capitalization ratio (% at end of period)   35.7     35.6     35.7     35.6  

             
(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.                   

Certain of the comparative statistical data and related productivity measures have been restated to reflect changes to estimated statistical data previously reported.

6






CANADIAN NATIONAL RAILWAY COMPANY                  
SUPPLEMENTARY INFORMATION    

                         
  Three months ended December 31   Year ended December 31  
 
 
    2004 (1) 2003     Variance
Fav (Unfav)
  2004 (1) 2003     Variance
Fav (Unfav)
 

    (Unaudited)  
Revenue ton miles (millions)                        
                           
Petroleum and chemicals   8,344   7,968   5%   32,618   30,901   6%  
Metals and minerals   4,089   3,792   8%   16,421   13,876   18%  
Forest products   9,949   8,810   13%   38,414   34,516   11%  
Coal   3,534   3,254   9%   13,614   13,659   -  
Grain and fertilizers   11,272   11,339   (1% )  39,965   35,556   12%  
Intermodal   8,185   7,832   5%   31,002   31,168   (1% )
Automotive   842   845   -   3,321   3,225   3%  

   
 
    46,215   43,840   5%   175,355   162,901   8%  
                         
Freight revenue / RTM (cents)                        
                           
Total freight revenue per RTM   3.58   3.34   7%   3.57   3.50   2%  
Commodity groups:                        
Petroleum and chemicals   3.39   3.26   4%   3.44   3.42   1%  
Metals and minerals   4.70   3.69   27%   4.34   3.80   14%  
Forest products   3.89   3.61   8%   3.78   3.72   2%  
Coal   2.04   1.84   11%   2.09   1.91   9%  
Grain and fertilizers   2.63   2.50   5%   2.63   2.64   -  
Intermodal   3.67   3.41   8%   3.60   3.53   2%  
Automotive   14.85   16.09   (8% )  15.36   16.28   (6% )

   
 
                         
Carloads (thousands)                        
                           
Petroleum and chemicals   161   155   4%   637   604   5%  
Metals and minerals   257   99   160%   809   396   104%  
Forest products   175   148   18%   653   594   10%  
Coal   122   111   10%   486   471   3%  
Grain and fertilizers   156   159   (2% )  572   548   4%  
Intermodal   314   313   -   1,202   1,276   (6% )
Automotive   75   79   (5% )  295   288   2%  

   
 
    1,260   1,064   18%   4,654   4,177   11%  
                         
Freight revenue / carload (dollars)                        
                           
Total freight revenue per carload   1,314   1,376   (5% )  1,343   1,363   (1% )
Commodity groups:                        
Petroleum and chemicals   1,758   1,677   5%   1,763   1,752   1%  
Metals and minerals   747   1,414   (47% )  881   1,331   (34% )
Forest products   2,211   2,149   3%   2,224   2,162   3%  
Coal   590   541   9%   584   554   5%  
Grain and fertilizers   1,904   1,780   7%   1,841   1,712   8%  
Intermodal   955   853   12%   929   863   8%  
Automotive   1,667   1,722   (3% )  1,729   1,823   (5% )

             
(1) Includes GLT and BC Rail from May 10, 2004 and July 14, 2004, respectively.            

Certain of the comparative statistical data and related productivity measures have been restated to reflect changes to estimated statistical data previously reported.

7






CANADIAN NATIONAL RAILWAY COMPANY

SUPPLEMENTARY INFORMATION

PROFORMA CONSOLIDATED STATEMENT OF INCOME (1) (U.S. GAAP)

(In millions, except per share data)

  Three months ended  
 
  Year ended
  March 31
2004
  June 30
2004
  September 30
2004
  December 31
2004
  December 31
2004
 
 

  (Unaudited)   (Unaudited)
         
Revenues        
Petroleum and chemicals $ 279   $ 287   $ 301   $ 283   $ 1,150  
Metals and minerals   172   205   203   192   772  
Forest products   356   401   409   387   1,553  
Coal   71   77   71   72   291  
Grain and fertilizers   257   272   232   297   1,058  
Intermodal   228   287   302   300   1,117  
Automotive   130   143   112   125   510  
Other items   64   89   89   80   322  

  1,557   1,761   1,719   1,736   6,773  
                               
Operating expenses        
Labor and fringe benefits   463   494   469   469   1,895  
Purchased services and material   216   196   191   185   788  
Depreciation and amortization   154   158   153   153   618  
Fuel   134   132   133   151   550  
Equipment rents   60   62   63   49   234  
Casualty and other   116   108   114   122   460  

  1,143   1,150   1,123   1,129   4,545  
                               
Operating income   414   611   596   607   2,228  
                               
Interest expense   (93)     (87)     (82)     (75)   (337)  
Other income (loss)   (12)     (23)     (9)     25   (19)  

Income before income taxes   309   501   505   557   1,872  
Income tax expense   (98)     (163)     (158)     (181)   (600)  

                               
Net income $ 211   $ 338   $ 347   $ 376   $ 1,272  

                               
Operating ratio   73.4%     65.3%     65.3%     65.0%   67.1%  

                               
Diluted earnings per share $ 0.73   $ 1.17   $ 1.19   $ 1.29   $ 4.39  
                               
Diluted weighted-average number of shares   288.8   289.2   290.8   290.7   289.9  


(1) The proforma figures reflect the Company's results of operations as if the Company had acquired GLT and BC Rail on January 1, 2004.

 

8






CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY PROFORMA INFORMATION (1)

  Three months ended    
 
  Year ended
  March 31
2004
June 30
2004
September 30
2004
December 31
2004
  December 31
2004
 
 
  (Unaudited)   (Unaudited)
Revenue ton miles (millions)        
                   
Petroleum and chemicals 8,220   8,093   8,408   8,344   33,065
Metals and minerals 4,403   4,492   4,348   4,089   17,332
Forest products 9,422   10,198   10,595   9,949   40,164
Coal 3,457   3,427   3,256   3,534   13,674
Grain and fertilizers 10,053   10,001   8,796   11,272   40,122
Intermodal 6,990   7,737   8,090   8,185   31,002
Automotive 834   905   740   842   3,321

43,379   44,853   44,233   46,215   178,680
                   
Freight revenue / RTM (cents)        
                   
Total freight revenue per RTM 3.44   3.73   3.69   3.58   3.61
                   
Commodity groups:        
Petroleum and chemicals 3.39   3.55   3.58   3.39   3.48
Metals and minerals 3.91   4.56   4.67   4.70   4.45
Forest products 3.78   3.93   3.86   3.89   3.87
Coal 2.05   2.25   2.18   2.04   2.13
Grain and fertilizers 2.56   2.72   2.64   2.63   2.64
Intermodal 3.26   3.71   3.73   3.67   3.60
Automotive 15.59   15.80   15.14   14.85   15.36

                   
Carloads (thousands)        
                   
Petroleum and chemicals 161   159   163   161   644
Metals and minerals 225   263   257   257   1,002
Forest products 172   177   180   175   704
Coal 128   125   121   122   496
Grain and fertilizers 143   143   132   156   574
Intermodal 260   313   314   314   1,201
Automotive 79   77   64   75   295

1,168   1,257   1,231   1,260   4,916
                   
Freight revenue / carload (dollars)        
                   
Total freight revenue per carload 1,278   1,330   1,324   1,314   1,312
Commodity groups:        
Petroleum and chemicals 1,733   1,805   1,847   1,758   1,786
Metals and minerals 764   779   790   747   770
Forest products 2,070   2,266   2,272   2,211   2,206
Coal 555   616   587   590   587
Grain and fertilizers 1,797   1,902   1,758   1,904   1,843
Intermodal 877   917   962   955   930
Automotive 1,646   1,857   1,750   1,667   1,729

(1) The proforma figures reflect the Company's results of operations as if the Company had acquired GLT and BC Rail on January 1, 2004.

 

9






CANADIAN NATIONAL RAILWAY COMPANY
NON-GAAP MEASURES

Adjusted performance measures
The Company’s results of operations include items affecting the comparability of results. Management believes that non-GAAP measures such as adjusted net income and the resulting adjusted performance measures for such items as operating income, operating ratio and per share data are useful measures of performance that can facilitate period-to-period comparisons as they exclude items that do not arise as part of the normal day-to-day operations or that could potentially distort the analysis of trends in business performance. The exclusion of specified items in the adjusted measures below does not imply that they are necessarily non-recurring. These adjusted measures do not have any standardized meaning prescribed by GAAP and may, therefore, not be comparable to similar measures presented by other companies. The reader is advised to read all information provided in the Company's MD&A, Annual Consolidated Financial Statements and notes thereto.
      The year ended December 31, 2003 included items impacting the comparability of the results of operations. The Company recorded a fourth quarter deferred income tax expense of $79 million resulting from the enactment of higher corporate tax rates in the province of Ontario. Also included in 2003 was a cumulative benefit of $75 million, $48 million after tax, resulting from a change in the accounting for removal costs for certain track structure assets pursuant to the requirements of Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” The following table provides a reconciliation of adjusted net income (and resulting adjusted performance measures) to the Company’s net income (and resulting performance measures) reported in accordance with U.S. GAAP.

Reconciliation of adjusted performance measures
(In millions, except per share data)

Three months ended December 31, 2003 Year ended December 31, 2003  

  Reported     Rate
enactment
    Adjusted   Reported     Change
in policy
    Rate
enactment
    Adjusted  


Revenues $ 1,512   $ -   $ 1,512   $ 5,884   $ -   $ -   $ 5,884  
Operating expenses   1,000   -   1,000     4,107   -     -   4,107  


Operating income   512   -   512     1,777   -     -   1,777  


Interest expense   (71 ) -   (71 )   (315 ) -     -   (315)  
Other income   8   -   8     21   -     -   21  


Income before income taxes                  
   and cumulative effect of                  
   change in accounting policy   449   -   449     1,483   -     -   1,483  
Income tax expense   (225 ) 79   (146 )   (517 ) -     79   (438)  


Income before cumulative effect                  
   of change in accounting policy   224   79   303     966   -     79   1,045  
Cumulative effect of change in                  
   accounting policy, net of                  
   applicable taxes   -   -   -     48   (48 )   -   -  


Net income $ 224   $ 79   $ 303   $ 1,014   $ (48 ) $ 79   $ 1,045  


                                           
Operating ratio   66.1%     66.1%     69.8%         69.8%  
                                           
Basic earnings per share $ 0.79     $ 1.06   $ 3.54         $ 3.65  
Diluted earnings per share $ 0.78     $ 1.05   $ 3.49         $ 3.60  


10






 

CANADIAN NATIONAL RAILWAY COMPANY
NON-GAAP MEASURES

 

Free cash flow
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. 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 defines free cash flow as cash provided from operating activities, excluding changes in the level of accounts receivable sold under the securitization program, less investing activities and dividends paid, and adjusted for significant acquisitions as they are not indicative of normal day-to-day investments in the Company’s asset base, calculated as follows:



  Three months ended
December 31
  Year ended
December 31
 
 
 

In millions   2004     2003     2004     2003  

                         
Cash provided from operating activities $ 688   $ 588   $ 2,139   $ 1,976  
           
Less:          
   Investing activities   (342 ) (374 )   (2,411 ) (1,075 )
   Dividends paid   (55 ) (47 )   (222 ) (191 )

Cash provided (used) before financing activities   291   167     (494 ) 710  

                         
Adjustments:          
   Change in accounts receivable sold   (20 ) (44 )   (12 ) (132 )
   Acquisition of BC Rail   -   -     984   -  
   Acquisition of GLT   -   -     547   -  

Free cash flow $ 271   $ 123   $ 1,025   $ 578  


11






SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


  Canadian National Railway Company
     
Date: January 26, 2005 By: /s/ Sean Finn
   
    Name: Sean Finn
Title:    Senior Vice President Public
            Affairs, Chief Legal Officer and
            Corporate Secretary