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
1.
|
Management’s
Report on Internal Control over Financial Reporting
|
2.
|
Reports
of
Independent Registered Public Accounting Firm
|
3.
|
Financial
Statements and Notes thereto - U.S. GAAP
|
4.
|
Management’s
Discussion and Analysis - U.S. GAAP
|
5.
|
Certificate
of
CEO Regarding Facts and Circumstances Relating to Exchange
Act
Filings
|
6.
|
Certificate
of
CFO Regarding Facts and Circumstances Relating to Exchange
Act
Filings
|
Consolidated
Statement of Income
|
U.S.
GAAP
|
In
millions, except per share data
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Revenues
|
$ |
7,897
|
$ |
7,929
|
$ |
7,446
|
|||||||
Operating
expenses
|
|||||||||||||
Labor
and
fringe benefits
|
1,701
|
1,823
|
1,856
|
||||||||||
Purchased
services and material
|
1,045
|
1,027
|
993
|
||||||||||
Fuel
|
1,026
|
892
|
730
|
||||||||||
Depreciation
and amortization
|
677
|
650
|
627
|
||||||||||
Equipment
rents
|
247
|
198
|
192
|
||||||||||
Casualty
and
other
|
325
|
309
|
424
|
||||||||||
Total
operating expenses
|
5,021
|
4,899
|
4,822
|
||||||||||
Operating
income
|
2,876
|
3,030
|
2,624
|
||||||||||
Interest
expense
|
(336 | ) | (312 | ) | (299 | ) | |||||||
Other
income
(Note 14)
|
166
|
11
|
12
|
||||||||||
Income
before income taxes
|
2,706
|
2,729
|
2,337
|
||||||||||
Income
tax
expense (Note 15)
|
(548 | ) | (642 | ) | (781 | ) | |||||||
Net
income
|
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
|||||||
Earnings
per share (Note 17)
|
|||||||||||||
Basic
|
$ |
4.31
|
$ |
3.97
|
$ |
2.82
|
|||||||
Diluted
|
$ |
4.25
|
$ |
3.91
|
$ |
2.77
|
Consolidated
Statement of
Comprehensive Income
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Net
income
|
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
|||||||
Other
comprehensive income (loss) (Note 20)
:
|
|||||||||||||
Unrealized
foreign exchange gain (loss) on:
|
|||||||||||||
Translation
of
the net investment in foreign operations
|
(1,004 | ) |
32
|
(233 | ) | ||||||||
Translation
of
U.S. dollar-denominated long-term debt designated as a
hedge
|
|||||||||||||
of
the net
investment in U.S. subsidiaries
|
788
|
(33 | ) |
152
|
|||||||||
Pension
and
other postretirement benefit plans (Notes 9, 13)
:
|
|||||||||||||
Net
actuarial
gain arising during the period
|
391
|
-
|
-
|
||||||||||
Prior
service
cost arising during the period
|
(12 | ) |
-
|
-
|
|||||||||
Amortization
of net actuarial loss included in net periodic benefit
cost
|
49
|
-
|
-
|
||||||||||
Amortization
of prior service cost included in net periodic benefit
cost
|
21
|
-
|
-
|
||||||||||
Minimum
pension liability adjustment
|
-
|
1
|
4
|
||||||||||
Derivative
instruments (Note 19)
|
(1 | ) | (57 | ) | (35 | ) | |||||||
Other
comprehensive income (loss) before income taxes
|
232
|
(57 | ) | (112 | ) | ||||||||
Income
tax
recovery (expense) on other comprehensive income (loss)
|
(219 | ) | (179 | ) |
38
|
||||||||
Other
comprehensive income (loss)
|
13
|
(236 | ) | (74 | ) | ||||||||
Comprehensive
income
|
$ |
2,171
|
$ |
1,851
|
$ |
1,482
|
Consolidated
Balance
Sheet
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Assets
|
|||||||||
Current
assets:
|
|||||||||
Cash
and cash
equivalents
|
$ |
310
|
$ |
179
|
|||||
Accounts
receivable (Note 4)
|
370
|
692
|
|||||||
Material
and
supplies
|
162
|
189
|
|||||||
Deferred
income taxes (Note 15)
|
68
|
84
|
|||||||
Other
|
138
|
192
|
|||||||
1,048
|
1,336
|
||||||||
Properties
(Note 5)
|
20,413
|
21,053
|
|||||||
Intangible
and
other assets (Note 6)
|
1,999
|
1,615
|
|||||||
Total
assets
|
$ |
23,460
|
$ |
24,004
|
|||||
Liabilities
and
shareholders’
equity
|
|||||||||
Current
liabilities:
|
|||||||||
Accounts
payable and accrued charges (Note 8)
|
$ |
1,282
|
$ |
1,823
|
|||||
Current
portion of long-term debt (Note 10)
|
254
|
218
|
|||||||
Other
|
54
|
73
|
|||||||
1,590
|
2,114
|
||||||||
Deferred
income taxes (Note 15)
|
4,908
|
5,215
|
|||||||
Other
liabilities and deferred credits (Note 9)
|
1,422
|
1,465
|
|||||||
Long-term
debt
(Note 10)
|
5,363
|
5,386
|
|||||||
Shareholders’
equity:
|
|||||||||
Common
shares
(Note 11)
|
4,283
|
4,459
|
|||||||
Accumulated
other comprehensive loss (Note 20)
|
(31 | ) | (44 | ) | |||||
Retained
earnings
|
5,925
|
5,409
|
|||||||
10,177
|
9,824
|
||||||||
Total
liabilities and shareholders’ equity
|
$ |
23,460
|
$ |
24,004
|
On
behalf of
the Board:
|
|
David
G.A.
McLean
|
E.
Hunter
Harrison
|
Director
|
Director
|
Consolidated
Statement of Changes
in Shareholders’
Equity
|
U.S.
GAAP
|
Issued
and
|
Accumulated
|
|||||||||||||||||||
outstanding
|
other
|
Total
|
||||||||||||||||||
common
|
Common
|
comprehensive
|
Retained
|
shareholders’
|
||||||||||||||||
In
millions
|
shares
|
shares
|
loss
|
earnings
|
equity
|
|||||||||||||||
Balances
at December 31, 2004
|
566.2
|
$ |
4,706
|
$ | (148 | ) | $ |
4,726
|
$ |
9,284
|
||||||||||
Net
income
|
-
|
-
|
-
|
1,556
|
1,556
|
|||||||||||||||
Stock
options
exercised and other (Notes 11, 12)
|
6.6
|
176
|
-
|
-
|
176
|
|||||||||||||||
Share
repurchase programs (Note 11)
|
(36.0 | ) | (302 | ) |
-
|
(1,116 | ) | (1,418 | ) | |||||||||||
Other
comprehensive loss (Note 20)
|
-
|
-
|
(74 | ) |
-
|
(74 | ) | |||||||||||||
Dividends
($0.50 per share)
|
-
|
-
|
-
|
(275 | ) | (275 | ) | |||||||||||||
Balances
at December 31, 2005
|
536.8
|
4,580
|
(222 | ) |
4,891
|
9,249
|
||||||||||||||
Net
income
|
-
|
-
|
-
|
2,087
|
2,087
|
|||||||||||||||
Stock
options
exercised and other (Notes 11, 12)
|
5.1
|
133
|
-
|
-
|
133
|
|||||||||||||||
Share
repurchase programs (Note 11)
|
(29.5 | ) | (254 | ) |
-
|
(1,229 | ) | (1,483 | ) | |||||||||||
Other
comprehensive loss (Note 20)
|
-
|
-
|
(236 | ) |
-
|
(236 | ) | |||||||||||||
Adjustment
to
Accumulated other comprehensive
|
||||||||||||||||||||
loss
(Notes 2, 20)
|
-
|
-
|
414
|
-
|
414
|
|||||||||||||||
Dividends
($0.65 per share)
|
-
|
-
|
-
|
(340 | ) | (340 | ) | |||||||||||||
Balances
at December 31, 2006
|
512.4
|
4,459
|
(44 | ) |
5,409
|
9,824
|
||||||||||||||
Adoption
of
accounting pronouncements (Note 2)
|
-
|
-
|
-
|
95
|
95
|
|||||||||||||||
Restated
balance, beginning of year
|
512.4
|
4,459
|
(44 | ) |
5,504
|
9,919
|
||||||||||||||
Net
income
|
-
|
-
|
-
|
2,158
|
2,158
|
|||||||||||||||
Stock
options
exercised and other (Notes 11, 12)
|
3.0
|
89
|
-
|
-
|
89
|
|||||||||||||||
Share
repurchase programs (Note 11)
|
(30.2 | ) | (265 | ) |
-
|
(1,319 | ) | (1,584 | ) | |||||||||||
Other
comprehensive income (Note 20)
|
-
|
-
|
13
|
-
|
13
|
|||||||||||||||
Dividends
($0.84 per share)
|
-
|
-
|
-
|
(418 | ) | (418 | ) | |||||||||||||
Balances
at December 31, 2007
|
485.2
|
$ |
4,283
|
$ | (31 | ) | $ |
5,925
|
$ |
10,177
|
Consolidated
Statement of Cash
Flows
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Operating
activities
|
|||||||||||||
Net
income
|
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
|||||||
Adjustments
to
reconcile net income to net cash provided
|
|||||||||||||
from
operating
activities:
|
|||||||||||||
Depreciation
and amortization
|
678
|
653
|
630
|
||||||||||
Deferred
income taxes (Note 15)
|
(82 | ) |
3
|
547
|
|||||||||
Gain
on sale
of Central Station Complex (Note 5)
|
(92 | ) |
-
|
-
|
|||||||||
Gain
on sale
of investment in English Welsh and Scottish Railway (Note
6)
|
(61 | ) |
-
|
-
|
|||||||||
Other
changes
in:
|
|||||||||||||
Accounts
receivable (Note 4)
|
229
|
(17 | ) |
142
|
|||||||||
Material
and
supplies
|
18
|
(36 | ) | (25 | ) | ||||||||
Accounts
payable and accrued charges
|
(351 | ) |
197
|
(156 | ) | ||||||||
Other
net
current assets and liabilities
|
39
|
58
|
8
|
||||||||||
Other
|
(119 | ) |
6
|
6
|
|||||||||
Cash
provided from operating activities
|
2,417
|
2,951
|
2,708
|
||||||||||
Investing
activities
|
|||||||||||||
Property
additions
|
(1,387 | ) | (1,298 | ) | (1,180 | ) | |||||||
Acquisitions,
net of cash acquired (Note 3)
|
(25 | ) | (84 | ) |
-
|
||||||||
Sale
of
Central Station Complex (Note 5)
|
351
|
-
|
-
|
||||||||||
Sale
of
investment in English Welsh and Scottish Railway (Note
6)
|
114
|
-
|
-
|
||||||||||
Other,
net
|
52
|
33
|
105
|
||||||||||
Cash
used
by investing activities
|
(895 | ) | (1,349 | ) | (1,075 | ) | |||||||
Financing
activities
|
|||||||||||||
Issuance
of
long-term debt
|
4,171
|
3,308
|
2,728
|
||||||||||
Reduction
of
long-term debt
|
(3,589 | ) | (3,089 | ) | (2,865 | ) | |||||||
Issuance
of
common shares due to exercise of stock options
|
|||||||||||||
and
related
excess tax benefits realized (Note 12)
|
77
|
120
|
115
|
||||||||||
Repurchase
of
common shares (Note 11)
|
(1,584 | ) | (1,483 | ) | (1,418 | ) | |||||||
Dividends
paid
|
(418 | ) | (340 | ) | (275 | ) | |||||||
Cash
used
by financing activities
|
(1,343 | ) | (1,484 | ) | (1,715 | ) | |||||||
Effect
of
foreign exchange fluctuations on U.S. dollar-denominated
|
|||||||||||||
cash
and cash
equivalents
|
(48 | ) | (1 | ) | (3 | ) | |||||||
Net
increase (decrease) in cash and cash equivalents
|
131
|
117
|
(85 | ) | |||||||||
Cash
and cash
equivalents, beginning of year
|
179
|
62
|
147
|
||||||||||
Cash
and
cash equivalents, end of year
|
$ |
310
|
$ |
179
|
$ |
62
|
|||||||
Supplemental
cash flow information
|
|||||||||||||
Net
cash
receipts from customers and other
|
$ |
8,139
|
$ |
7,946
|
$ |
7,581
|
|||||||
Net
cash
payments for:
|
|||||||||||||
Employee
services, suppliers and other expenses
|
(4,323 | ) | (4,130 | ) | (4,075 | ) | |||||||
Interest
|
(340 | ) | (294 | ) | (306 | ) | |||||||
Workforce
reductions (Note 9)
|
(31 | ) | (45 | ) | (87 | ) | |||||||
Personal
injury and other claims (Note 18)
|
(86 | ) | (107 | ) | (92 | ) | |||||||
Pensions
(Note 13)
|
(75 | ) | (112 | ) | (127 | ) | |||||||
Income
taxes
(Note 15)
|
(867 | ) | (307 | ) | (186 | ) | |||||||
Cash
provided from operating activities
|
$ |
2,417
|
$ |
2,951
|
$ |
2,708
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Asset
class
|
Annual
rate
|
|
Track
and
roadway
|
2
|
%
|
Rolling
stock
|
3
|
%
|
Buildings
|
3
|
%
|
Information
technology
|
11
|
%
|
Other
|
8
|
%
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
(i)
|
the
cost of pension benefits provided in exchange for employees’ services
rendered during the year,
|
(ii)
|
the
interest cost of pension
obligations,
|
(iii)
|
the
expected long-term return on pension fund
assets,
|
(iv)
|
the
amortization of prior service costs and amendments over the expected
average remaining service life of the employee group covered by the
plans,
and
|
(v)
|
the
amortization of cumulative net actuarial gains and losses in excess
of 10%
of, the greater of the beginning of year balances of the projected
benefit
obligation or market-related value of plan assets, over the expected
average remaining service life of the employee group covered by the
plans.
|
The
pension
plans are funded through contributions determined in accordance
with the
projected unit credit actuarial cost
method.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Assets
|
Liabilities
|
Shareholders'
equity
|
||||||||||||||||||||||||||||||
In
millions
|
Pension
|
Total
|
Other
postretirement benefits |
Pension
(1)
|
Net
deferred
income tax |
Total
|
Accumulated
other comprehensive loss
|
Total
|
||||||||||||||||||||||||
Balance
at
December 31, 2006 before application of SFAS No. 158
|
$ |
676
|
$ |
23,405
|
$ |
313
|
$ |
175
|
$ |
4,939
|
$ |
13,995
|
$ | (458 | ) | $ |
9,410
|
|||||||||||||||
Adjustments
|
599
|
599
|
(27 | ) |
20
|
192
|
185
|
414
|
414
|
|||||||||||||||||||||||
Balance
at
December 31, 2006 after application of SFAS No. 158
|
$ |
1,275
|
$ |
24,004
|
$ |
286
|
$ |
195
|
$ |
5,131
|
$ |
14,180
|
$ | (44 | ) | $ |
9,824
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
(i)
|
Alberta
short-line railways, composed of the 600-mile Mackenzie Northern
Railway,
the 118-mile Lakeland & Waterways Railway and the 21-mile Central
Western Railway,
|
(ii)
|
Savage
Alberta Railway, Inc., a 345-mile short-line railway,
and
|
(iii)
|
the
remaining 51% of SLX Canada Inc., a company engaged in equipment
leasing
in which the Company previously had a 49% interest that had been
consolidated.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Freight
|
$ |
146
|
$ |
398
|
|||||
Non-freight
|
251
|
313
|
|||||||
397
|
711
|
||||||||
Allowance
for
doubtful accounts
|
(27 | ) | (19 | ) | |||||
$ |
370
|
$ |
692
|
In
millions
|
December
31, 2007
|
December
31, 2006
|
||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Cost
|
depreciation
|
Net
|
Cost
|
depreciation
|
Net
|
|||||||||||||||||||
Track
and
roadway (1)
|
$ |
22,020
|
$ |
6,433
|
$ |
15,587
|
$ |
22,579
|
$ |
6,445
|
$ |
16,134
|
||||||||||||
Rolling
stock
|
4,702
|
1,606
|
3,096
|
4,833
|
1,676
|
3,157
|
||||||||||||||||||
Buildings
|
1,105
|
498
|
607
|
1,251
|
609
|
642
|
||||||||||||||||||
Information
technology
|
667
|
131
|
536
|
622
|
101
|
521
|
||||||||||||||||||
Other
|
829
|
242
|
587
|
1,226
|
627
|
599
|
||||||||||||||||||
$ |
29,323
|
$ |
8,910
|
$ |
20,413
|
$ |
30,511
|
$ |
9,458
|
$ |
21,053
|
|||||||||||||
Capital
leases included in properties
|
||||||||||||||||||||||||
Track
and
roadway (1)
|
$ |
457
|
$ |
38
|
$ |
419
|
$ |
450
|
$ |
25
|
$ |
425
|
||||||||||||
Rolling
stock
|
1,591
|
310
|
1,281
|
1,442
|
275
|
1,167
|
||||||||||||||||||
Buildings
|
119
|
2
|
117
|
38
|
3
|
35
|
||||||||||||||||||
Information
technology
|
14
|
2
|
12
|
20
|
6
|
14
|
||||||||||||||||||
Other
|
211
|
63
|
148
|
188
|
41
|
147
|
||||||||||||||||||
$ |
2,392
|
$ |
415
|
$ |
1,977
|
$ |
2,138
|
$ |
350
|
$ |
1,788
|
(1)
|
Includes
the cost of land of $1,530 million and $1,746 million as at December
31,
2007 and 2006, respectively, of which $108 million was for right-of-way
access and was recorded as a capital lease in both
years.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Pension
asset
(Notes 2,13)
|
$ |
1,768
|
$ |
1,275
|
|||||
Investments
(A)
|
24
|
142
|
|||||||
Other
receivables
|
106
|
95
|
|||||||
Intangible
assets (B)
|
54
|
65
|
|||||||
Other
|
47
|
38
|
|||||||
$ |
1,999
|
$ |
1,615
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Trade
payables
|
$ |
457
|
$ |
529
|
|||||
Payroll-related
accruals
|
234
|
232
|
|||||||
Accrued
charges
|
146
|
184
|
|||||||
Income
and
other taxes
|
123
|
566
|
|||||||
Accrued
interest
|
118
|
124
|
|||||||
Personal
injury and other claims provision
|
102
|
115
|
|||||||
Workforce
reduction provisions
|
19
|
23
|
|||||||
Other
|
83
|
50
|
|||||||
$ |
1,282
|
$ |
1,823
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Personal
injury and other claims provision, net of current portion
|
$ |
344
|
$ |
487
|
|||||
Other
postretirement benefits liability, net of current portion
(A)
|
248
|
269
|
|||||||
Pension
liability (Note 13)
|
187
|
195
|
|||||||
Environmental
reserve, net of current portion
|
83
|
106
|
|||||||
Workforce
reduction provisions, net of current portion (B)
|
53
|
74
|
|||||||
Deferred
credits and other
|
507
|
334
|
|||||||
$ |
1,422
|
$ |
1,465
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
||||||
Change
in benefit obligation
|
|||||||||
Benefit
obligation at beginning of year
|
$ |
286
|
$ |
300
|
|||||
Amendments
|
12
|
2
|
|||||||
Adoption
of
SFAS No. 158 measurement date provision (Note 2)
|
2
|
-
|
|||||||
Actuarial
gain
|
(7 | ) | (19 | ) | |||||
Interest
cost
|
15
|
16
|
|||||||
Service
cost
|
5
|
4
|
|||||||
Curtailment
gain
|
(9 | ) |
-
|
||||||
Foreign
currency changes
|
(21 | ) |
-
|
||||||
Benefits
paid
|
(17 | ) | (17 | ) | |||||
Benefit
obligation at end of year
|
$ |
266
|
$ |
286
|
|||||
Unfunded
status
|
$ |
266
|
$ |
286
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Current
liabilities
|
$ |
18
|
$ |
17
|
|||||
Noncurrent
liabilities
|
248
|
269
|
|||||||
Total
amount recognized
|
$ |
266
|
$ |
286
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Net
actuarial
gain
|
$ |
27
|
$ |
34
|
|||||
Prior
service
cost
|
(8 | ) | (7 | ) |
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Service
cost
|
$ |
5
|
$ |
4
|
$ |
5
|
|||||||
Interest
cost
|
15
|
16
|
19
|
||||||||||
Curtailment
gain
|
(4 | ) |
-
|
-
|
|||||||||
Amortization
of prior service cost
|
2
|
2
|
1
|
||||||||||
Recognized
net
actuarial gain
|
(4 | ) | (5 | ) | (1 | ) | |||||||
Net
periodic benefit cost
|
$ |
14
|
$ |
17
|
$ |
24
|
December
31,
|
2007
|
2006
|
2005
|
|||||||||
To
determine benefit obligation
|
||||||||||||
Discount
rate
|
5.84 | % | 5.44 | % | 5.30 | % | ||||||
Rate
of
compensation increase
|
3.50 | % | 3.50 | % | 3.75 | % | ||||||
To
determine net periodic benefit cost
|
||||||||||||
Discount
rate
|
5.44 | % | 5.30 | % | 5.90 | % | ||||||
Rate
of
compensation increase
|
3.50 | % | 3.75 | % | 3.75 | % |
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
One-percentage-point
|
|||||||
Increase
|
Decrease
|
|||||||
Effect
on
total service and interest costs
|
$ |
2
|
$ | (1 | ) | |||
Effect
on
benefit obligation
|
17
|
(14 | ) |
In
millions
|
||||||
2008
|
$
|
18
|
||||
2009
|
18
|
|||||
2010
|
19
|
|||||
2011
|
19
|
|||||
2012
|
20
|
|||||
Years
2013 to
2017
|
107
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
U.S.
dollar-
|
||||||||||||||||
denominated
|
December
31,
|
|||||||||||||||
In
millions
|
Maturity
|
amount
|
2007
|
2006
|
||||||||||||
Debentures
and notes: (A)
|
||||||||||||||||
Canadian
National series:
|
||||||||||||||||
4.25% 5-year
notes
(B)
|
Aug.
1,
2009
|
$ |
300
|
$ |
297
|
$ |
350
|
|||||||||
6.38%
10-year
notes
(B)
|
Oct.
15,
2011
|
400
|
397
|
466
|
||||||||||||
4.40%
10-year
notes
(B)
|
Mar.
15,
2013
|
400
|
397
|
466
|
||||||||||||
5.80%
10-year
notes
(B)
|
June
1,
2016
|
250
|
248
|
291
|
||||||||||||
5.85%
10-year
notes
(B)
|
Nov.
15,
2017
|
250
|
248
|
-
|
||||||||||||
6.80%
20-year
notes
(B)
|
July
15,
2018
|
200
|
198
|
233
|
||||||||||||
7.63%
30-year
debentures
|
May
15,
2023
|
150
|
149
|
175
|
||||||||||||
6.90%
30-year
notes
(B)
|
July
15,
2028
|
475
|
471
|
554
|
||||||||||||
7.38%
30-year
debentures (B)
|
Oct.
15,
2031
|
200
|
198
|
233
|
||||||||||||
6.25%
30-year
notes
(B)
|
Aug.
1,
2034
|
500
|
496
|
583
|
||||||||||||
6.20%
30-year
notes
(B)
|
June
1,
2036
|
450
|
446
|
524
|
||||||||||||
6.71%
Puttable
Reset
SecuritiesSM (B)(C)
|
July
15,
2036
|
250
|
248
|
291
|
||||||||||||
6.38%
30-year
debentures (B)
|
Nov.
15,
2037
|
300
|
297
|
-
|
||||||||||||
Illinois
Central series:
|
||||||||||||||||
6.98%
12-year
notes
|
July
12,
2007
|
50
|
-
|
58
|
||||||||||||
6.63%
10-year
notes
|
June
9,
2008
|
20
|
20
|
23
|
||||||||||||
5.00%
99-year
income
debentures
|
Dec.
1,
2056
|
7
|
7
|
9
|
||||||||||||
7.70%
100-year
debentures
|
Sept.
15,
2096
|
125
|
124
|
146
|
||||||||||||
Wisconsin
Central series:
|
||||||||||||||||
6.63%
10-year
notes
|
April
15,
2008
|
150
|
149
|
175
|
||||||||||||
4,390
|
4,577
|
|||||||||||||||
BC
Rail
series:
|
||||||||||||||||
Non-interest
bearing 90-year subordinated notes (D)
|
July
14,
2094
|
-
|
842
|
842
|
||||||||||||
Total
debentures and notes
|
5,232
|
5,419
|
||||||||||||||
Other:
|
||||||||||||||||
Commercial
paper (E) (Note 7)
|
122
|
-
|
||||||||||||||
Capital
lease
obligations and other (F)
|
1,114
|
1,038
|
||||||||||||||
Total
other
|
1,236
|
1,038
|
||||||||||||||
6,468
|
6,457
|
|||||||||||||||
Less:
|
||||||||||||||||
Current
portion of long-term debt
|
254
|
218
|
||||||||||||||
Net
unamortized discount
|
851
|
853
|
||||||||||||||
1,105
|
1,071
|
|||||||||||||||
$ |
5,363
|
$ |
5,386
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
||
2008
|
$
|
254
|
2009
|
409
|
|
2010
|
48
|
|
2011
|
628
|
|
2012
|
27
|
|
2013
and
thereafter
|
4,251
|
•
|
Unlimited
number of Common Shares, without par
value
|
•
|
Unlimited
number of Class A Preferred Shares, without par value, issuable in
series
|
•
|
Unlimited
number of Class B Preferred Shares, without par value, issuable in
series
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
RSUs
|
Vision
|
VIDP
|
||||||||||||||||||||||
In
millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||||||||||||||||||
Outstanding
at
December 31, 2006
|
2.0
|
-
|
0.8
|
-
|
0.3
|
1.9
|
||||||||||||||||||
Granted
|
0.7
|
-
|
0.1
|
-
|
-
|
-
|
||||||||||||||||||
Forfeited
|
-
|
-
|
(0.1 | ) |
-
|
-
|
-
|
|||||||||||||||||
Vested
during
period
|
(1.1 | ) |
1.1
|
-
|
-
|
(0.1 | ) |
0.1
|
||||||||||||||||
Payout
|
-
|
(0.1 | ) |
-
|
-
|
-
|
(0.2 | ) | ||||||||||||||||
Conversion
into VIDP
|
-
|
(0.1 | ) |
-
|
-
|
-
|
0.1
|
|||||||||||||||||
Outstanding
at December 31, 2007
|
1.6
|
0.9
|
0.8
|
-
|
0.2
|
1.9
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions, unless otherwise indicated
|
RSUs(1)
|
Vision(1)
|
VIDP(2)
|
Total
|
||||||||||||||||||||||
Year
of grant
|
2007
|
2006
|
2005
|
2004
|
2005
|
2003
onwards |
||||||||||||||||||||
Stock-based
compensation expense
recognized over requisite service period |
||||||||||||||||||||||||||
Year
ended
December 31, 2007
|
$
|
11
|
$
|
8
|
$
|
14
|
$
|
5
|
$
|
2
|
$
|
11
|
$
|
51
|
||||||||||||
Year
ended
December 31, 2006
|
N/A
|
$
|
21
|
$
|
19
|
$
|
6
|
$
|
8
|
$
|
11
|
$
|
65
|
|||||||||||||
Year
ended
December 31, 2005
|
N/A
|
N/A
|
$
|
15
|
$
|
74
|
$
|
-
|
$
|
13
|
$
|
102
|
||||||||||||||
Liability
outstanding
|
||||||||||||||||||||||||||
December
31,
2007
|
$
|
11
|
$
|
29
|
$
|
48
|
$
|
4
|
$
|
8
|
$
|
95
|
$
|
195
|
||||||||||||
December
31,
2006
|
N/A
|
$
|
21
|
$
|
34
|
$
|
8
|
$
|
8
|
$
|
99
|
$
|
170
|
|||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||||
December
31,
2007
|
$
|
28.56
|
$
|
38.88
|
$
|
46.65
|
$
|
46.65
|
$
|
17.54
|
$
|
46.65
|
N/A
|
|||||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||||||||
Year
ended
December 31, 2007
|
$
|
-
|
$
|
1
|
$
|
48
|
$
|
9
|
$
|
-
|
$
|
5
|
$
|
63
|
||||||||||||
Year
ended
December 31, 2006
|
N/A
|
$
|
-
|
$
|
-
|
$
|
4
|
$
|
-
|
$
|
5
|
$
|
9
|
|||||||||||||
Year
ended
December 31, 2005
|
N/A
|
|
N/A
|
$
|
-
|
$
|
105
|
$
|
-
|
$
|
2
|
$
|
107
|
|||||||||||||
Nonvested
awards at December 31, 2007
|
|
|||||||||||||||||||||||||
Unrecognized
compensation cost
|
$
|
7
|
$
|
8
|
$
|
-
|
$
|
4
|
$
|
3
|
$
|
7
|
$
|
29
|
||||||||||||
Remaining
recognition period (years)
|
2.0
|
1.0
|
-
|
1.0
|
1.0
|
3.0
|
N/A
|
|||||||||||||||||||
Assumptions
(3)
|
||||||||||||||||||||||||||
Stock
price
($)
|
$
|
46.65
|
$
|
46.65
|
$
|
46.65
|
$
|
46.65
|
$
|
46.65
|
$
|
46.65
|
N/A
|
|||||||||||||
Expected
stock
price volatility (4)
|
20%
|
20%
|
N/A
|
N/A
|
20%
|
N/A
|
N/A
|
|||||||||||||||||||
Expected
term
(years) (5)
|
2.0
|
1.0
|
N/A
|
N/A
|
1.0
|
N/A
|
N/A
|
|||||||||||||||||||
Risk-free
interest rate (6)
|
3.74%
|
3.90%
|
N/A
|
N/A
|
3.49%
|
N/A
|
N/A
|
|||||||||||||||||||
Dividend
rate
($) (7)
|
$
|
0.84
|
$
|
0.84
|
N/A
|
N/A
|
$
|
0.84
|
N/A
|
N/A
|
(1)
|
Beginning
in 2006, 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. In
2005,
compensation cost was measured using intrinsic
value.
|
(2)
|
Compensation
cost is based on intrinsic value.
|
(3)
|
Assumptions
used to determine fair value are at period-end.
|
(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.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Options
outstanding
|
Nonvested
options
|
|||||||||||||||
Number of
options |
Weighted-
average
exercise
price
|
Number of
options |
Weighted-
average
grant
date
fair
value
|
|||||||||||||
In
millions
|
In
millions
|
|||||||||||||||
Outstanding
at
December 31, 2006 (1)
|
16.9
|
$ |
23.29
|
2.1
|
$ |
11.61
|
||||||||||
Granted
|
0.9
|
$ |
52.73
|
0.9
|
$ |
13.36
|
||||||||||
Forfeited
|
(0.1 | ) | $ |
37.35
|
(0.1 | ) | $ |
12.06
|
||||||||
Exercised
|
(3.0 | ) | $ |
20.19
|
N/A
|
N/A
|
||||||||||
Vested
|
N/A
|
N/A
|
(0.6 | ) | $ |
11.20
|
||||||||||
Outstanding
at December 31, 2007 (1)
|
14.7
|
$ |
24.55
|
2.3
|
$ |
12.34
|
||||||||||
Exercisable
at December 31, 2007 (1)
|
12.4
|
$ |
21.17
|
N/A
|
N/A
|
(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.
|
Options
outstanding
|
Options
exercisable
|
Range
of
exercise price
|
Number
of options |
Weighted-
average years to expiration |
Weighted-
average exercise price |
Aggregate
intrinsic value |
Number
of options |
Weighted-
average exercise price |
Aggregate
intrinsic value |
|||||||||||||||||||||
In
millions
|
In
millions
|
In
millions
|
In
millions
|
|||||||||||||||||||||||||
$8.90–$11.90
|
1.5
|
1.6
|
$ |
11.29
|
$ |
53
|
1.5
|
$ |
11.29
|
$ |
53
|
|||||||||||||||||
$13.54–$19.83
|
2.6
|
2.4
|
$ |
16.19
|
79
|
2.6
|
$ |
16.19
|
79
|
|||||||||||||||||||
$20.27–$27.07
|
7.5
|
4.5
|
$ |
23.12
|
176
|
7.5
|
$ |
23.12
|
176
|
|||||||||||||||||||
$28.93–$40.55
|
1.2
|
7.1
|
$ |
31.69
|
18
|
0.5
|
$ |
31.57
|
9
|
|||||||||||||||||||
$41.40–$46.27
|
1.1
|
8.5
|
$ |
44.42
|
2
|
0.2
|
$ |
44.53
|
-
|
|||||||||||||||||||
$46.73–$57.38
|
0.8
|
8.6
|
$ |
52.00
|
-
|
0.1
|
$ |
51.29
|
-
|
|||||||||||||||||||
Balance
at
December 31, 2007 (1)
|
14.7
|
4.6
|
$ |
24.55
|
$ |
328
|
12.4
|
$ |
21.17
|
$ |
317
|
(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. As at December 31, 2007, the total number of in-the-money stock
options outstanding was 13.9 million with a weighted-average exercise
price of $23.06. The weighted- average years to expiration of exercisable
stock options is 3.9 years.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions, unless otherwise indicated
|
Year
of grant
|
2007
|
2006
|
2005
|
Prior
to 2005
|
Total
|
|||||||||||||||
Stock-based
compensation expense
|
||||||||||||||||||||
recognized
over requisite service period (1)
|
||||||||||||||||||||
Year
ended December 31, 2007
|
$ |
6
|
$ |
2
|
$ |
3
|
$ |
-
|
$ |
11
|
||||||||||
Year
ended December 31, 2006
|
N/A
|
$ |
8
|
$ |
3
|
$ |
3
|
$ |
14
|
|||||||||||
Year
ended December 31, 2005
|
N/A
|
N/A
|
$ |
2
|
$ |
16
|
$ |
18
|
||||||||||||
Fair
value per unit
|
||||||||||||||||||||
At
grant date ($)
|
$ |
13.36
|
$ |
13.80
|
$ |
9.19
|
$ |
8.61
|
N/A
|
|||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||
Year
ended December 31, 2007
|
$ |
-
|
$ |
4
|
$ |
3
|
$ |
-
|
$ |
7
|
||||||||||
Year
ended December 31, 2006
|
N/A
|
$ |
-
|
$ |
3
|
$ |
34
|
$ |
37
|
|||||||||||
Year
ended December 31, 2005
|
N/A
|
N/A
|
$ |
-
|
$ |
34
|
$ |
34
|
||||||||||||
Nonvested
awards at December 31, 2007
|
||||||||||||||||||||
Unrecognized
compensation cost
|
$ |
5
|
$ |
4
|
$ |
3
|
$ |
-
|
$ |
12
|
||||||||||
Remaining
recognition period (years)
|
3.1
|
2.1
|
1.1
|
-
|
N/A
|
|||||||||||||||
Assumptions
|
||||||||||||||||||||
Grant
price
($)
|
$ |
52.79
|
$ |
51.51
|
$ |
36.33
|
$ |
23.59
|
N/A
|
|||||||||||
Expected
stock
price volatility (2)
|
24% | 25% | 25% | 30% |
N/A
|
|||||||||||||||
Expected
term
(years) (3)
|
5.2
|
5.2
|
5.2
|
6.2
|
N/A
|
|||||||||||||||
Risk-free
interest rate (4)
|
4.12% | 4.04% | 3.50% | 5.13% |
N/A
|
|||||||||||||||
Dividend
rate
($) (5)
|
$ |
0.84
|
$ |
0.65
|
$ |
0.50
|
$ |
0.30
|
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.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Total
intrinsic value
|
$ |
105
|
$ |
156
|
$ |
139
|
|||||||
Cash
received upon exercise of options
|
$ |
61
|
$ |
101
|
$ |
115
|
|||||||
Related
tax benefits realized
|
$ |
16
|
$ |
19
|
$ |
21
|
In
millions, except per share data
|
Year
ended
December 31,
|
2005
|
|||
Net
income, as
reported
|
$ |
1,556
|
|||
Add
(deduct)
compensation cost, net of applicable taxes, determined
under:
|
|||||
Fair
value
method for all awards granted after Jan 1, 2003 (SFAS No.
123)
|
86
|
||||
Fair
value
method for all awards (SFAS No. 123)
|
(110 | ) | |||
Pro
forma
net income
|
$ |
1,532
|
|||
Basic
earnings
per share, as reported
|
$ |
2.82
|
|||
Basic
earnings
per share, pro forma
|
$ |
2.78
|
|||
Diluted
earnings per share, as reported
|
$ |
2.77
|
|||
Diluted
earnings per share, pro forma
|
$ |
2.73
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Target |
December
31,
|
|||||||||||
Plan
assets by category
|
allocation
|
2007
|
2006
|
|||||||||
Equity
securities
|
53 | % | 51 | % | 52 | % | ||||||
Debt
securities
|
40 | % | 34 | % | 38 | % | ||||||
Real
estate
|
4 | % | 2 | % | 2 | % | ||||||
Other
|
3 | % | 13 | % | 8 | % | ||||||
100 | % | 100 | % | 100 | % |
December
31,
|
2007
|
2006
|
2005
|
||||||||||
To
determine benefit obligation
|
|||||||||||||
Discount
rate
|
5.53 | % | 5.12 | % | 5.00 | % | |||||||
Rate
of
compensation increase
|
3.50 | % | 3.50 | % | 3.75 | % | |||||||
To
determine net periodic benefit cost
|
|||||||||||||
Discount
rate
|
5.12 | % | 5.00 | % | 5.75 | % | |||||||
Rate
of
compensation increase
|
3.50 | % | 3.75 | % | 3.75 | % | |||||||
Expected
return on plan assets
|
8.00 | % | 8.00 | % | 8.00 | % |
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
||||||
Change
in benefit obligation
|
|||||||||
Benefit
obligation at beginning of year
|
$ |
14,545
|
$ |
14,346
|
|||||
Adoption
of
SFAS No. 158 measurement date provision (Note 2)
|
3
|
-
|
|||||||
Interest
cost
|
742
|
713
|
|||||||
Actuarial
(gain) loss
|
(195 | ) |
237
|
||||||
Service
cost
|
150
|
146
|
|||||||
Plan
participants’ contributions
|
54
|
55
|
|||||||
Foreign
currency changes
|
(33 | ) | (1 | ) | |||||
Benefit
payments and transfers
|
(847 | ) | (951 | ) | |||||
Benefit
obligation at end of year
|
$ |
14,419
|
$ |
14,545
|
|||||
Component
representing future salary increases
|
(618 | ) | (771 | ) | |||||
Accumulated
benefit obligation at end of year
|
$ |
13,801
|
$ |
13,774
|
|||||
Change
in plan assets
|
|||||||||
Fair
value of
plan assets at beginning of year
|
$ |
15,625
|
$ |
14,874
|
|||||
Employer
contributions
|
75
|
112
|
|||||||
Plan
participants’ contributions
|
54
|
55
|
|||||||
Foreign
currency changes
|
(26 | ) |
1
|
||||||
Actual
return
on plan assets
|
1,119
|
1,534
|
|||||||
Benefit
payments and transfers
|
(847 | ) | (951 | ) | |||||
Fair
value
of plan assets at end of year
|
$ |
16,000
|
$ |
15,625
|
|||||
Funded
status (Excess of fair value of plan assets over benefit obligation
at end
of year)
|
$ |
1,581
|
$ |
1,080
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Noncurrent
assets (Note 6)
|
$ |
1,768
|
$ |
1,275
|
|||||
Noncurrent
liability (Note 9)
|
(187 | ) | (195 | ) | |||||
Total
amount recognized
|
$ |
1,581
|
$ |
1,080
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Net
actuarial
gain
|
$ |
1,039
|
$ |
600
|
|||||
Prior
service
cost
|
(19 | ) | (38 | ) |
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Projected
benefit obligation
|
$ |
266
|
$ |
386
|
|||||
Accumulated
benefit obligation
|
229
|
337
|
|||||||
Fair
value of
plan assets
|
79
|
177
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Service
cost
|
$ |
150
|
$ |
146
|
$ |
138
|
|||||||
Interest
cost
|
742
|
713
|
742
|
||||||||||
Expected
return on plan assets
|
(935 | ) | (903 | ) | (884 | ) | |||||||
Amortization
of prior service cost
|
19
|
19
|
18
|
||||||||||
Recognized
net
actuarial loss
|
53
|
91
|
3
|
||||||||||
Net
periodic benefit cost
|
$ |
29
|
$ |
66
|
$ |
17
|
In
millions
|
||||
2008
|
$ |
847
|
||
2009
|
879
|
|||
2010
|
912
|
|||
2011
|
942
|
|||
2012
|
971
|
|||
Years
2013 to
2017
|
5,245
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Gain
on
disposal of Central Station Complex (Note 5)
|
$ |
92
|
$ |
-
|
$ |
-
|
|||||||
Gain
on
disposal of investment in EWS (Note 6)
|
61
|
-
|
-
|
||||||||||
Foreign
exchange
|
24
|
18
|
12
|
||||||||||
Gain
on
disposal of properties
|
14
|
16
|
26
|
||||||||||
Equity
in
earnings of EWS (Note 6)
|
5
|
(6 | ) |
4
|
|||||||||
Net
real
estate costs
|
(6 | ) | (12 | ) | (12 | ) | |||||||
Costs
related
to the Accounts receivable securitization program
|
(24 | ) | (12 | ) | (16 | ) | |||||||
Other
|
-
|
7
|
(2 | ) | |||||||||
$ |
166
|
$ |
11
|
$ |
12
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Federal
tax
rate
|
22.1 | % | 22.1 | % | 22.1 | % | |||||||
Income
tax
expense at the statutory Federal tax rate
|
$ | (598 | ) | $ | (603 | ) | $ | (516 | ) | ||||
Income
tax
(expense) recovery resulting from:
|
|||||||||||||
Provincial
and
other taxes
|
(318 | ) | (354 | ) | (331 | ) | |||||||
Deferred
income tax adjustments due to rate enactments
|
317
|
228
|
(14 | ) | |||||||||
Other
(1)
|
51
|
87
|
80
|
||||||||||
Income
tax
expense
|
$ | (548 | ) | $ | (642 | ) | $ | (781 | ) | ||||
Cash
payments for income taxes
|
$ |
867
|
$ |
307
|
$ |
186
|
(1)
|
Includes
adjustments relating to the resolution of matters pertaining to
prior
years’ income taxes and other
items.
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||||
Income
before income taxes
|
|||||||||||||||
Canada
|
$ |
1,983
|
$ |
2,009
|
$ |
1,769
|
|||||||||
U.S.
|
723
|
720
|
568
|
||||||||||||
$ |
2,706
|
$ |
2,729
|
$ |
2,337
|
||||||||||
Current
income tax expense
|
|||||||||||||||
Canada
|
$ | (418 | ) | $ | (440 | ) | $ | (95 | ) | ||||||
U.S.
|
(212 | ) | (199 | ) | (139 | ) | |||||||||
$ | (630 | ) | $ | (639 | ) | $ | (234 | ) | |||||||
Deferred
income tax recovery (expense)
|
|||||||||||||||
Canada
|
$ |
141
|
$ |
102
|
$ | (488 | ) | ||||||||
U.S.
|
(59 | ) | (105 | ) | (59 | ) | |||||||||
$ |
82
|
$ | (3 | ) | $ | (547 | ) |
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
|||
Deferred
income tax assets
|
||||||
Workforce
reduction provisions
|
$
|
22
|
$
|
32
|
||
Personal
injury claims and other reserves
|
146
|
215
|
||||
Other
postretirement benefits liability
|
85
|
99
|
||||
Losses
and tax
credit carryforwards
|
24
|
14
|
||||
277
|
360
|
|||||
Deferred
income tax liabilities
|
||||||
Net
pension
asset
|
429
|
330
|
||||
Properties
and
other
|
4,688
|
5,161
|
||||
5,117
|
5,491
|
|||||
Total
net
deferred income tax liability
|
$
|
4,840
|
$
|
5,131
|
||
Total
net
deferred income tax liability
|
||||||
Canada
|
$
|
2,191
|
$
|
2,050
|
||
U.S.
|
2,649
|
3,081
|
||||
$
|
4,840
|
$
|
5,131
|
|||
Total
net
deferred income tax liability
|
$
|
4,840
|
$
|
5,131
|
||
Net
current
deferred income tax asset
|
68
|
84
|
||||
Long-term
deferred income tax liability
|
$
|
4,908
|
$
|
5,215
|
The
following table provides reconciliation for unrecognized tax benefits
for
Canada and the United States:
|
In
millions
|
|||
Gross
unrecognized tax benefits as at January 1, 2007
|
$
|
140
|
|
Additions:
|
|||
Tax
positions
related to the current year
|
14
|
||
Tax
positions
related to prior years
|
11
|
||
Interest
accrued on tax positions
|
15
|
||
Deductions:
|
|||
Tax
positions
related to prior years
|
(11
|
)
|
|
Interest
accrued on tax positions
|
(6
|
)
|
|
Settlements
|
(5
|
)
|
|
Gross
unrecognized tax benefits as at December 31, 2007
|
$
|
158
|
|
Adjustments
to
reflect tax treaties and other arrangements
|
(81
|
)
|
|
Net
unrecognized tax benefits as at December 31, 2007
|
$
|
77
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
(i)
|
Each
region’s sole business activity is the transportation of freight over the
Company’s extensive rail network;
|
(ii)
|
The
regions service national accounts that extend over the Company’s various
commodity groups and across its rail
network;
|
(iii)
|
The
services offered by the Company stem predominantly from the transportation
of freight by rail with the goal of optimizing the rail network as
a
whole;
|
(iv)
|
The
Company and its subsidiaries, not its regions, are subject to single
regulatory regimes in both Canada and the
U.S.
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||||
Revenues
|
|||||||||||||||
Canada
|
$ |
5,265
|
$ |
5,293
|
$ |
4,839
|
|||||||||
U.S.
|
2,632
|
2,636
|
2,607
|
||||||||||||
$ |
7,897
|
$ |
7,929
|
$ |
7,446
|
||||||||||
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||||
Net
income
|
|||||||||||||||
Canada
|
$ |
1,706
|
$ |
1,671
|
$ |
1,186
|
|||||||||
U.S.
|
452
|
416
|
370
|
||||||||||||
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||||
Properties
|
|||||||||||
Canada
|
$ |
11,777
|
$ |
11,129
|
|||||||
U.S.
|
8,636
|
9,924
|
|||||||||
$ |
20,413
|
$ |
21,053
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
||||||||||
Basic
earnings
per share
|
$ |
4.31
|
$ |
3.97
|
$ |
2.82
|
|||||||
Diluted
earnings per share
|
$ |
4.25
|
$ |
3.91
|
$ |
2.77
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Net
income
|
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
|||||||
Weighted-average
shares outstanding
|
501.2
|
525.9
|
551.7
|
||||||||||
Effect
of
stock options
|
6.8
|
8.4
|
10.5
|
||||||||||
Weighted-average
diluted shares outstanding
|
508.0
|
534.3
|
562.2
|
In
millions
|
Operating
|
Capital
|
||||||
2008
|
$ |
152
|
$ |
145
|
||||
2009
|
125
|
165
|
||||||
2010
|
106
|
100
|
||||||
2011
|
84
|
164
|
||||||
2012
|
68
|
75
|
||||||
2013
and
thereafter
|
344
|
971
|
||||||
$ |
879
|
1,620
|
||||||
Less
: imputed interest on capital leases at rates ranging from
approximately 3.0% to 7.9%
|
515
|
|||||||
Present
value of minimum lease payments included in debt
|
$ |
1,105
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
195
|
$ |
205
|
$ |
204
|
||||||
Accruals
and other
|
41
|
60
|
46
|
|||||||||
Payments
|
(40 | ) | (70 | ) | (45 | ) | ||||||
Balance
December 31
|
$ |
196
|
$ |
195
|
$ |
205
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
407
|
$ |
452
|
$ |
438
|
||||||
Accruals
and other
|
(111 | ) | (8 | ) |
61
|
|||||||
Payments
|
(46 | ) | (37 | ) | (47 | ) | ||||||
Balance
December 31
|
$ |
250
|
$ |
407
|
$ |
452
|
(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
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
131
|
$ |
124
|
$ |
113
|
||||||
Accruals
and other
|
(1 | ) |
17
|
35
|
||||||||
Payments
|
(19 | ) | (10 | ) | (24 | ) | ||||||
Balance
December 31
|
$ |
111
|
$ |
131
|
$ |
124
|
Notes
to 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.
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
In
millions
|
December
31, 2007
|
December
31, 2006
|
||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
amount
|
value
|
amount
|
value
|
|||||||||||||
Financial
assets
|
||||||||||||||||
Investments
|
$ |
24
|
$ |
95
|
$ |
142
|
$ |
215
|
||||||||
Financial
liabilities
|
||||||||||||||||
Long-term
debt
(including current portion)
|
$ |
5,617
|
$ |
5,850
|
$ |
5,604
|
$ |
5,946
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Unrealized
foreign exchange loss
|
$ | (762 | ) | $ | (455 | ) | |||
Pension
and
other postretirement benefit plans
|
723
|
403
|
|||||||
Derivative
instruments
|
8
|
8
|
|||||||
Accumulated
other comprehensive loss
|
$ | (31 | ) | $ | (44 | ) |
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
2005
|
|||||||||
Accumulated
other comprehensive loss - Balance at January 1
|
$ | (44 | ) | $ | (222 | ) | $ | (148 | ) | ||||
Other
comprehensive income (loss):
|
|||||||||||||
Unrealized
foreign exchange loss (net of income tax (expense) recovery of
|
(307 | ) | (232 | ) | (54 | ) | |||||||
$(91),
$(231),
and $27, for 2007, 2006 and 2005, respectively) (1)
|
|||||||||||||
Pension
and
other postretirement benefit plans
|
|||||||||||||
(net
of income
tax expense of $(129), nil, and $(1),
|
|||||||||||||
for
2007, 2006
and 2005, respectively) (Notes 9, 13)
|
320
|
1
|
3
|
||||||||||
Derivative
instruments (net of income tax recovery of $1, $18, and $12,
|
|||||||||||||
for
2007, 2006
and 2005, respectively) (Note 19)
|
-
|
(39 | ) | (23 | ) | ||||||||
Deferred
income tax rate enactment
|
-
|
34
|
-
|
||||||||||
Other
comprehensive income (loss)
|
13
|
(236 | ) | (74 | ) | ||||||||
Adjustment
to
reflect the funded status of benefit plans (Note 2)
:
|
|||||||||||||
Net
actuarial
gain (net of income tax expense of $(200) for 2006)
|
-
|
434
|
-
|
||||||||||
Prior
service
cost (net of income tax recovery of $14 for 2006)
|
-
|
(31 | ) |
-
|
|||||||||
Reversal
of
minimum pension liability adjustment (net of income
|
|||||||||||||
tax
expense of
$(6) for 2006)
|
-
|
11
|
-
|
||||||||||
Accumulated
other comprehensive loss - Balance at December 31
|
$ | (31 | ) | $ | (44 | ) | $ | (222 | ) |
(1)
|
In
2006,
the Company adjusted its deferred income tax liability for changes
in
income tax rates applied to certain temporary differences and also
for the
income tax effect on the currency translation amount resulting from
the
difference between the accounting and tax basis of its net investment
in
foreign subsidiaries. As a result, the Company recorded a $180 million
net
charge for deferred income taxes in Other comprehensive income
(loss).
|
Notes
to Consolidated Financial
Statements
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
$
in
millions, except per share data, or unless otherwise
indicated
|
2007
|
2006
|
2005
|
|||||||||
Financial
results
|
||||||||||||
Revenues
(a)
|
$ |
7,897
|
$ |
7,929
|
$ |
7,446
|
||||||
Operating
income
|
$ |
2,876
|
$ |
3,030
|
$ |
2,624
|
||||||
Net
income
(b)
(c)
|
$ |
2,158
|
$ |
2,087
|
$ |
1,556
|
||||||
Operating
ratio (a)
|
63.6% | 61.8% | 64.8% | |||||||||
Basic
earnings
per share (b)
(c)
|
$ |
4.31
|
$ |
3.97
|
$ |
2.82
|
||||||
Diluted
earnings per share (b)
(c)
|
$ |
4.25
|
$ |
3.91
|
$ |
2.77
|
||||||
Dividend
declared per share
|
$ |
0.84
|
$ |
0.65
|
$ |
0.50
|
||||||
Financial
position
|
||||||||||||
Total
assets
|
$ |
23,460
|
$ |
24,004
|
$ |
22,188
|
||||||
Total
long-term financial liabilities
|
$ |
11,693
|
$ |
12,066
|
$ |
10,981
|
||||||
Statistical
operating data and productivity measures
|
||||||||||||
Employees
(average for the period )
|
22,389
|
22,092
|
22,637
|
|||||||||
Gross
ton
miles (GTM) per average number of employees (thousands
)
|
15,539
|
15,977
|
15,148
|
|||||||||
GTMs
per U.S.
gallon of fuel consumed
|
887
|
880
|
851
|
(a)
|
The
2006
and 2005 comparative figures have been reclassified in order to
be
consistent with the 2007 presentation (see the Revenue reclassification
section of this MD&A).
|
(b)
|
The
2007
figures included a deferred income tax recovery of $328 million
($0.66 per
basic share or $0.64 per diluted share), resulting mainly from
the
enactment of corporate income tax rate changes in Canada, and the
gains on
sale of the Central Station Complex of $92 million, or $64 million
after-tax ($0.13 per basic or diluted share) and the Company’s investment
in English Welsh and Scottish Railway (EWS) of $61 million, or
$41 million
after-tax ($0.08 per basic or diluted
share).
|
(c)
|
The
2006
figures included a deferred income tax recovery of $277 million
($0.53 per
basic share or $0.51 per diluted share), resulting primarily from
the
enactment of lower corporate income tax rates in Canada and the
resolution
of matters pertaining to prior years’ income
taxes.
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions, unless otherwise indicated
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
|||||||||
Rail
freight
revenues
|
$ |
7,186
|
$ |
7,254
|
(1 | %) | |||||||
Other
revenues
|
711
|
675
|
5 | % | |||||||||
Total
revenues
|
$ |
7,897
|
$ |
7,929
|
-
|
||||||||
Rail
freight revenues:
|
|||||||||||||
Petroleum
and
chemicals
|
$ |
1,226
|
$ |
1,171
|
5 | % | |||||||
Metals
and
minerals
|
826
|
835
|
(1 | %) | |||||||||
Forest
products
|
1,552
|
1,747
|
(11 | %) | |||||||||
Coal
|
385
|
370
|
4 | % | |||||||||
Grain
and
fertilizers
|
1,311
|
1,258
|
4 | % | |||||||||
Intermodal
|
1,382
|
1,394
|
(1 | %) | |||||||||
Automotive
|
504
|
479
|
5 | % | |||||||||
Total
rail
freight revenues
|
$ |
7,186
|
$ |
7,254
|
(1 | %) | |||||||
Revenue
ton
miles (RTM) (millions)
|
184,148
|
185,610
|
(1 | %) | |||||||||
Rail
freight
revenue/RTM (cents)
|
3.90
|
3.91
|
-
|
||||||||||
Carloads
(thousands)
|
4,744
|
4,824
|
(2 | %) | |||||||||
Rail
freight
revenue/carload (dollars)
|
1,515
|
1,504
|
1 | % |
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,226
|
$ |
1,171
|
5 | % | |||||||
RTMs
(millions)
|
32,761
|
31,868
|
3 | % | |||||||||
Revenue/RTM
(cents)
|
3.74
|
3.67
|
2 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Percentage
of revenues
|
||||||||||||||||
Chemicals
|
39 | % | ||||||||||||||
Petroleum
and
plastics
|
61 | % |
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
564
|
596
|
594
|
590
|
599
|
|||||||||||||||
(In
thousands)
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
826
|
$ |
835
|
(1 | %) | |||||||
RTMs
(millions)
|
16,719
|
17,467
|
(4 | %) | |||||||||
Revenue/RTM
(cents)
|
4.94
|
4.78
|
3 | % |
Percentage
of revenues
|
||||||||||||||||
Metals
|
54 | % | ||||||||||||||
Minerals
|
25 | % | ||||||||||||||
Iron
ore
|
21 | % | ||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
396
|
801
|
994
|
981
|
1,010
|
|||||||||||||||
(In
thousands)
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,552
|
$ |
1,747
|
(11 | %) | |||||||
RTMs
(millions)
|
39,808
|
42,488
|
(6 | %) | |||||||||
Revenue/RTM
(cents)
|
3.90
|
4.11
|
(5 | %) |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Percentage
of revenues
|
||||||||||||||||||||
Lumber
and
panels
|
46 | % | ||||||||||||||||||
Pulp
and
paper
|
54 | % | ||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
618
|
678
|
712
|
667
|
584
|
|||||||||||||||
(In
thousands)
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
385
|
$ |
370
|
4 | % | |||||||
RTMs
(millions)
|
13,776
|
13,727
|
-
|
||||||||||
Revenue/RTM
(cents)
|
2.79
|
2.70
|
3 | % |
Percentage
of revenues
|
||||||||||||||||||||
Coal
|
86 | % | ||||||||||||||||||
Petroleum
coke
|
14 | % | ||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
406
|
429
|
448
|
411
|
361
|
|||||||||||||||
(In
thousands)
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,311
|
$ |
1,258
|
4 | % | |||||||
RTMs
(millions)
|
45,359
|
44,096
|
3 | % | |||||||||
Revenue/RTM
(cents)
|
2.89
|
2.85
|
1 | % |
Percentage
of revenues
|
||||||||||||||||||||
Food
grain
|
28 | % | ||||||||||||||||||
Feed
grain
|
26 | % | ||||||||||||||||||
Oilseeds
|
26 | % | ||||||||||||||||||
Fertilizers
|
20 | % | ||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
552
|
577
|
566
|
594
|
601
|
|||||||||||||||
(In
thousands)
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,382
|
$ |
1,394
|
(1 | %) | |||||||
RTMs
(millions)
|
32,607
|
32,922
|
(1 | %) | |||||||||
Revenue/RTM
(cents)
|
4.24
|
4.23
|
-
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Percentage
of revenues
|
||||||||||||||||||||
Domestic
|
48 | % | ||||||||||||||||||
International
|
52 | % | ||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
1,276
|
1,202
|
1,248
|
1,326
|
1,324
|
|||||||||||||||
(In
thousands)
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
504
|
$ |
479
|
5 | % | |||||||
RTMs
(millions)
|
3,118
|
3,042
|
2 | % | |||||||||
Revenue/RTM
(cents)
|
16.16
|
15.75
|
3 | % |
Percentage
of revenues
|
||||||||||||||||||||
Finished
vehicles
|
85 | % | ||||||||||||||||||
Auto
parts
|
15 | % | ||||||||||||||||||
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Carloads*
|
288
|
295
|
279
|
255
|
265
|
|||||||||||||||
(In
thousands)
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Percentage
of
revenues
|
|||||||||||||||||||||
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
%
Change
|
2007
|
2006
|
|||||||||||||||
Labor
and
fringe benefits
|
$ |
1,701
|
$ |
1,823
|
7 | % | 21.5 | % | 23.0 | % | |||||||||||
Purchased
services and material
|
1,045
|
1,027
|
(2 | %) | 13.2 | % | 13.0 | % | |||||||||||||
Fuel
|
1,026
|
892
|
(15 | %) | 13.0 | % | 11.2 | % | |||||||||||||
Depreciation
and amortization
|
677
|
650
|
(4 | %) | 8.6 | % | 8.2 | % | |||||||||||||
Equipment
rents
|
247
|
198
|
(25 | %) | 3.1 | % | 2.5 | % | |||||||||||||
Casualty
and
other
|
325
|
309
|
(5 | %) | 4.2 | % | 3.9 | % | |||||||||||||
Total
|
$ |
5,021
|
$ |
4,899
|
(2 | %) | 63.6 | % | 61.8 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions, unless otherwise indicated
|
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
|||||||||
Rail
freight
revenues
|
$ |
7,254
|
$ |
6,793
|
7 | % | |||||||
Other
revenues
|
675
|
653
|
3 | % | |||||||||
Total
revenues
|
$ |
7,929
|
$ |
7,446
|
6 | % | |||||||
Rail
freight revenues:
|
|||||||||||||
Petroleum
and
chemicals
|
$ |
1,171
|
$ |
1,093
|
7 | % | |||||||
Metals
and
minerals
|
835
|
777
|
7 | % | |||||||||
Forest
products
|
1,747
|
1,742
|
-
|
||||||||||
Coal
|
370
|
324
|
14 | % | |||||||||
Grain
and
fertilizers
|
1,258
|
1,118
|
13 | % | |||||||||
Intermodal
|
1,394
|
1,252
|
11 | % | |||||||||
Automotive
|
479
|
487
|
(2 | %) | |||||||||
Total
rail
freight revenues
|
$ |
7,254
|
$ |
6,793
|
7 | % | |||||||
Revenue
ton
miles (RTM) (millions)
|
185,610
|
179,701
|
3 | % | |||||||||
Rail
freight
revenue/RTM (cents)
|
3.91
|
3.78
|
3 | % | |||||||||
Carloads
(thousands)
|
4,824
|
4,841
|
-
|
||||||||||
Rail
freight
revenue/carload (dollars)
|
1,504
|
1,403
|
7 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,171
|
$ |
1,093
|
7 | % | |||||||
RTMs
(millions)
|
31,868
|
31,235
|
2 | % | |||||||||
Revenue/RTM
(cents)
|
3.67
|
3.50
|
5 | % |
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
835
|
$ |
777
|
7 | % | |||||||
RTMs
(millions)
|
17,467
|
16,848
|
4 | % | |||||||||
Revenue/RTM
(cents)
|
4.78
|
4.61
|
4 | % |
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,747
|
$ |
1,742
|
-
|
||||||||
RTMs
(millions)
|
42,488
|
42,330
|
-
|
||||||||||
Revenue/RTM
(cents)
|
4.11
|
4.12
|
-
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
370
|
$ |
324
|
14 | % | |||||||
RTMs
(millions)
|
13,727
|
13,576
|
1 | % | |||||||||
Revenue/RTM
(cents)
|
2.70
|
2.39
|
13 | % |
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,258
|
$ |
1,118
|
13 | % | |||||||
RTMs
(millions)
|
44,096
|
40,393
|
9 | % | |||||||||
Revenue/RTM
(cents)
|
2.85
|
2.77
|
3 | % |
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
1,394
|
$ |
1,252
|
11 | % | |||||||
RTMs
(millions)
|
32,922
|
32,184
|
2 | % | |||||||||
Revenue/RTM
(cents)
|
4.23
|
3.89
|
9 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
||||||||||
Revenues
(millions)
|
$ |
479
|
$ |
487
|
(2 | %) | |||||||
RTMs
(millions)
|
3,042
|
3,135
|
(3 | %) | |||||||||
Revenue/RTM
(cents)
|
15.75
|
15.53
|
1 | % |
Percentage
of
revenues
|
|||||||||||||||||||||
In
millions
|
Year
ended
December 31,
|
2006
|
2005
|
%
Change
|
2006
|
2005
|
|||||||||||||||
Labor
and
fringe benefits
|
$ |
1,823
|
$ |
1,856
|
2 | % | 23.0 | % | 24.9 | % | |||||||||||
Purchased
services and material
|
1,027
|
993
|
(3 | %) | 13.0 | % | 13.3 | % | |||||||||||||
Fuel
|
892
|
730
|
(22 | %) | 11.2 | % | 9.8 | % | |||||||||||||
Depreciation
and amortization
|
650
|
627
|
(4 | %) | 8.2 | % | 8.5 | % | |||||||||||||
Equipment
rents
|
198
|
192
|
(3 | %) | 2.5 | % | 2.6 | % | |||||||||||||
Casualty
and
other
|
309
|
424
|
27 | % | 3.9 | % | 5.7 | % | |||||||||||||
Total
|
$ |
4,899
|
$ |
4,822
|
(2 | %) | 61.8 | % | 64.8 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions, except per share data
|
||||||||||||||||||||||||||||||||
2007
Quarters
|
2006
Quarters
|
|||||||||||||||||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||||||||||||
Revenues
(a)
|
$ |
1,941
|
$ |
2,023
|
$ |
2,027
|
$ |
1,906
|
$ |
2,000
|
$ |
2,032
|
$ |
2,000
|
$ |
1,897
|
||||||||||||||||
Operating
income
|
$ |
736
|
$ |
768
|
$ |
811
|
$ |
561
|
$ |
756
|
$ |
844
|
$ |
805
|
$ |
625
|
||||||||||||||||
Net
income
|
$ |
833
|
$ |
485
|
$ |
516
|
$ |
324
|
$ |
499
|
$ |
497
|
$ |
729
|
$ |
362
|
||||||||||||||||
Basic
earnings
per share
|
$ |
1.70
|
$ |
0.97
|
$ |
1.02
|
$ |
0.64
|
$ |
0.97
|
$ |
0.95
|
$ |
1.38
|
$ |
0.68
|
||||||||||||||||
Diluted
earnings per share
|
$ |
1.68
|
$ |
0.96
|
$ |
1.01
|
$ |
0.63
|
$ |
0.95
|
$ |
0.94
|
$ |
1.35
|
$ |
0.66
|
||||||||||||||||
Dividend
declared per share
|
$ |
0.2100
|
$ |
0.2100
|
$ |
0.2100
|
$ |
0.2100
|
$ |
0.1625
|
$ |
0.1625
|
$ |
0.1625
|
$ |
0.1625
|
(a)
|
The
2006
comparative figures have been reclassified in order to be consistent
with
the 2007 presentation (see the Revenue reclassification section of
this
MD&A).
|
In
millions, except per share data
|
||||||||||||||||||||||||||||||||
2007
Quarters
|
2006
Quarters
|
|||||||||||||||||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||||||||||||
Deferred
income tax recoveries
|
$ |
284
|
$ |
14
|
$ |
30
|
$ |
-
|
$ |
27
|
$ |
-
|
$ |
250
|
$ |
-
|
||||||||||||||||
Gain
on sale
of Central Station Complex (after-tax)
|
64
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Gain
on sale
of investment in EWS (after-tax)
|
41
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
UTU
strike
(after-tax)
|
-
|
-
|
-
|
(35 | ) |
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Impact
on net
income
|
$ |
389
|
$ |
14
|
$ |
30
|
$ | (35 | ) | $ |
27
|
$ |
-
|
$ |
250
|
$ |
-
|
|||||||||||||||
Basic
earnings
per share
|
$ |
0.79
|
$ |
0.03
|
$ |
0.06
|
$ | (0.07 | ) | $ |
0.05
|
$ |
-
|
$ |
0.48
|
$ |
-
|
|||||||||||||||
Diluted
earnings per share
|
$ |
0.78
|
$ |
0.03
|
$ |
0.06
|
$ | (0.07 | ) | $ |
0.05
|
$ |
-
|
$ |
0.46
|
$ |
-
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
||||||
Track
and
roadway
|
$ |
1,069
|
$ |
1,012
|
|||||
Rolling
stock
|
281
|
349
|
|||||||
Buildings
|
172
|
35
|
|||||||
Information
technology
|
97
|
81
|
|||||||
Other
|
69
|
82
|
|||||||
Gross
property
additions
|
1,688
|
1,559
|
|||||||
Less:
capital leases (a)
|
301
|
261
|
|||||||
Property
additions
|
$ |
1,387
|
$ |
1,298
|
(a)
|
During
2007, the Company recorded $213 million ($264 million in 2006) in
assets
it acquired through equipment leases and $90 million relating to
the
leaseback arrangement from the Central Station Complex transaction,
for
which an equivalent amount was recorded in
debt.
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions
|
Year
ended
December 31,
|
2007
|
2006
|
||||||
Cash
provided
from operating activities
|
$ |
2,417
|
$ |
2,951
|
|||||
Cash
used by
investing activities
|
(895 | ) | (1,349 | ) | |||||
Cash
provided
before financing activities
|
1,522
|
1,602
|
|||||||
Adjustments:
|
|||||||||
Change
in
accounts receivable securitization
|
(228 | ) |
82
|
||||||
Dividends
paid
|
(418 | ) | (340 | ) | |||||
Effect
of
foreign exchange fluctuations on U.S. dollar-denominated cash and
cash
equivalents
|
(48 | ) | (1 | ) | |||||
Free
cash
flow
|
$ |
828
|
$ |
1,343
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
December
31,
|
2007
|
2006
|
|||||||
Debt-to-total
capitalization ratio (a)
|
35.6 | % | 36.3 | % | |||||
Add
:
Present value of operating lease commitments plus securitization
financing
(b)
|
4.8 | % | 4.1 | % | |||||
Adjusted
debt-to-total capitalization ratio
|
40.4 | % | 40.4 | % | |||||
Adjusted
debt-to-adjusted EBITDA
|
|||||||||
$
in
millions, unless otherwise indicated
|
Year
ended
December 31,
|
2007
|
2006
|
||||||
Debt
|
$ |
5,617
|
$ |
5,604
|
|||||
Add
:
Present value of operating lease commitments plus securitization
financing
(b)
|
1,287
|
1,044
|
|||||||
Adjusted
debt
|
6,904
|
6,648
|
|||||||
EBITDA
|
3,553
|
3,680
|
|||||||
Add
:
Deemed interest on operating leases
|
41
|
38
|
|||||||
Adjusted
EBITDA
|
$ |
3,594
|
$ |
3,718
|
|||||
Adjusted
debt-to-adjusted EBITDA
|
1.9
times
|
1.8
times
|
(a)
|
Debt-to-total
capitalization is calculated as total long-term debt plus current
portion
of long-term debt divided by the sum of total debt plus total
shareholders’ equity.
|
(b)
|
The
operating lease commitments have been discounted using the Company’s
implicit interest rate for each of the periods
presented.
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
2013
&
|
||||||||||||||||||||||||||||
In
millions
|
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
thereafter
|
|||||||||||||||||||||
Long-term
debt
obligations (a)
|
$ |
4,512
|
$ |
170
|
$ |
299
|
$ |
-
|
$ |
517
|
$ |
-
|
$ |
3,526
|
||||||||||||||
Interest
on
long-term debt obligations
|
5,428
|
277
|
267
|
254
|
252
|
223
|
4,155
|
|||||||||||||||||||||
Capital
lease
obligations (b)
|
1,620
|
145
|
165
|
100
|
164
|
75
|
971
|
|||||||||||||||||||||
Operating
lease obligations (c)
|
879
|
152
|
125
|
106
|
84
|
68
|
344
|
|||||||||||||||||||||
Purchase
obligations (d)
|
952
|
492
|
156
|
108
|
52
|
36
|
108
|
|||||||||||||||||||||
Other
long-term liabilities reflected on
|
||||||||||||||||||||||||||||
the
balance
sheet (e)
|
950
|
73
|
60
|
51
|
44
|
41
|
681
|
|||||||||||||||||||||
Total
obligations
|
$ |
14,341
|
$ |
1,309
|
$ |
1,072
|
$ |
619
|
$ |
1,113
|
$ |
443
|
$ |
9,785
|
(a)
|
Presented
net of unamortized discounts, of which $836 million relates to
non-interest bearing Notes due in 2094, and excludes capital lease
obligations of $1,105 million which are included in “Capital lease
obligations.”
|
(b)
|
Includes
$1,105 million of minimum lease payments and $515 million of imputed
interest at rates ranging from 3.0% to
7.9%.
|
(c)
|
Includes
minimum rental payments for operating leases having initial non-cancelable
lease terms of one year or more. The Company also has operating
lease
agreements for its automotive fleet with minimum one-year non-cancelable
terms for which its practice is to renew monthly thereafter. The
estimated
annual rental payments for such leases are approximately $30 million
and
generally extend over five
years.
|
(d)
|
Includes
commitments for railroad ties, rail, freight cars, locomotives
and other
equipment and services, and outstanding information technology
service
contracts and
licenses.
|
(e)
|
Includes
expected payments for workers’ compensation, workforce reductions,
postretirement benefits other than pensions and environmental liabilities
that have been classified as contractual settlement
agreements.
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
195
|
$ |
205
|
$ |
204
|
||||||
Accruals
and
other
|
41
|
60
|
46
|
|||||||||
Payments
|
(40 | ) | (70 | ) | (45 | ) | ||||||
Balance
December 31
|
$ |
196
|
$ |
195
|
$ |
205
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
407
|
$ |
452
|
$ |
438
|
||||||
Accruals
and
other
|
(111 | ) | (8 | ) |
61
|
|||||||
Payments
|
(46 | ) | (37 | ) | (47 | ) | ||||||
Balance
December 31
|
$ |
250
|
$ |
407
|
$ |
452
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
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;
|
In
millions
|
2007
|
2006
|
2005
|
|||||||||
Balance
January 1
|
$ |
131
|
$ |
124
|
$ |
113
|
||||||
Accruals
and
other
|
(1 | ) |
17
|
35
|
||||||||
Payments
|
(19 | ) | (10 | ) | (24 | ) | ||||||
Balance
December 31
|
$ |
111
|
$ |
131
|
$ |
124
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
In
millions
|
December
31,
|
2007
|
2006
|
||||||
Pension
benefit obligation
|
$ |
14,419
|
$ |
14,545
|
|||||
Accumulated
postretirement benefit obligation
|
266
|
286
|
|||||||
Other
postretirement benefits liability
|
266
|
286
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Rates
of
return
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||||||
Actual
|
8.0 | % | 10.7 | % | 20.5 | % | 11.7 | % | 9.6 | % | ||||||||||
Market-related
value
|
12.7 | % | 11.4 | % | 8.6 | % | 6.3 | % | 7.0 | % | ||||||||||
Expected
|
8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % |
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
CN
|
BC
Rail Ltd
|
U.S.
and
|
|||||||||||||||
In
millions
|
December
31, 2007
|
Pension
Plan
|
Pension
Plan
|
other
plans
|
Total
|
||||||||||||
Plan
assets by category
|
|||||||||||||||||
Equity
securities
|
$ |
7,730
|
$ |
283
|
$ |
110
|
$ |
8,123
|
|||||||||
Debt
securities
|
5,149
|
229
|
73
|
5,451
|
|||||||||||||
Real
estate
|
247
|
9
|
1
|
257
|
|||||||||||||
Other
|
2,082
|
76
|
11
|
2,169
|
|||||||||||||
Total
|
$ |
15,208
|
$ |
597
|
$ |
195
|
$ |
16,000
|
|||||||||
Benefit
obligation at end of year
|
$ |
13,538
|
$ |
513
|
$ |
368
|
$ |
14,419
|
|||||||||
Company
contributions in 2007
|
$ |
64
|
$ |
2
|
$ |
9
|
$ |
75
|
|||||||||
Employee
contributions in 2007
|
$ |
54
|
$ |
-
|
$ |
-
|
$ |
54
|
|||||||||
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
Canadian
National Railway Company
|
|
Management’s
Discussion and Analysis
|
U.S.
GAAP
|
(1)
|
I
have
reviewed this report on Form 6-K of Canadian National Railway
Company;
|
(2)
|
Based
on my
knowledge, this report does not contain any untrue statement of
a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements
were made,
not misleading with respect to the period covered by this
report;
|
(3)
|
Based
on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
(4)
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such
disclosure controls and procedures, or caused such disclosure controls
and
procedures to be designed under our supervision, to ensure that
material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
|
(b)
|
Designed
such
internal control over financial reporting, or caused such internal
control
over financial reporting to be designed under our supervision,
to provide
reasonable assurance regarding the reliability of financial reporting
and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness
of the
disclosure controls and procedures, as of the end of the period
covered by
this report based on such evaluation;
and
|
(d)
|
Disclosed
in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
|
(5)
|
The
registrant's other certifying officer(s) and I have disclosed,
based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability
to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud,
whether or not material, that involves management or other employees
who
have a significant role in the registrant's internal control over
financial reporting.
|
/s/
E. Hunter
Harrison
|
|
E.
Hunter
Harrison
|
|
President
and
Chief Executive Officer
|
(1)
|
I
have
reviewed this report on Form 6-K of Canadian National Railway
Company;
|
(2)
|
Based
on my
knowledge, this report does not contain any untrue statement
of a material
fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements
were made,
not misleading with respect to the period covered by this
report;
|
(3)
|
Based
on my
knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of
the
registrant as of, and for, the periods presented in this
report;
|
(4)
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act
Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed
such
disclosure controls and procedures, or caused such disclosure
controls and
procedures to be designed under our supervision, to ensure that
material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being
prepared;
|
(b)
|
Designed
such
internal control over financial reporting, or caused such internal
control
over financial reporting to be designed under our supervision,
to provide
reasonable assurance regarding the reliability of financial reporting
and
the preparation of financial statements for external purposes
in
accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness
of the
disclosure controls and procedures, as of the end of the period
covered by
this report based on such evaluation;
and
|
(d)
|
Disclosed
in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter
that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting;
and
|
(5)
|
The
registrant's other certifying officer(s) and I have disclosed,
based on
our most recent evaluation of internal control over financial
reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant
deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably
likely to
adversely affect the registrant's ability to record, process,
summarize
and report financial information;
and
|
(b)
|
Any
fraud,
whether or not material, that involves management or other employees
who
have a significant role in the registrant's internal control
over
financial reporting.
|
/s/
Claude
Mongeau
|
|
Claude
Mongeau
|
|
Executive
Vice-President and Chief
|
|
Financial
Officer
|
Canadian National Railway Company | |||||
Date: February 12, 2008 | By: | /s/ Cristina Circelli | |||
Name: | Cristina Circelli | ||||
Title: | Deputy
Corporate Secretary and General Counsel |