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
Item
1
|
Notice of
Annual Meeting of Shareholders
|
Item
2
|
Management Proxy Circular |
Item
3
|
Proxy Form |
Item
4
|
Annual Report |
Canadian National Railway Company | |||||
Date: March 19, 2008 | By: | /s/ Sean Finn | |||
Name: | Sean Finn | ||||
Title: |
Senior
Vice-President Public Affairs,
Chief Legal
Officer and Corporate Secretary
|
1.
|
receiving the
consolidated financial statements for the year ended December 31, 2007 and
the auditors’ reports thereon;
|
2.
|
electing the
directors;
|
3.
|
appointing the
auditors;
|
4.
|
consideration
of the shareholder proposal set out in Schedule “A” to the Information
Circular; and
|
5.
|
transacting
such other business as may properly be brought before the Meeting or any
adjournment or postponement
thereof.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
1 |
E. Hunter
Harrison
|
David G.A.
McLean
|
President and
Chief Executive Officer
|
Chairman of
the Board
|
1.
|
receiving the
consolidated financial statements for the year ended December 31, 2007 and
the auditors’ reports thereon;
|
2.
|
electing the
directors;
|
3.
|
appointing the
auditors;
|
4.
|
consideration
of the shareholder proposal set out in Schedule “A” to the Information
Circular; and
|
5.
|
transacting
such other business as may properly be brought before the Meeting or any
adjournment or postponement
thereof.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
2 |
4
|
Questions
and Answers – Voting and Proxies
|
7
|
Business
of the Meeting
|
7
|
Financial
Statements
|
7
|
Election of
Directors
|
7
|
Appointment of
Auditors
|
7
|
Shareholder
Proposal
|
8
|
Nominees
for Election to the Board
|
8
|
Description of
Nominees
|
14
|
Board of
Directors Compensation
|
16
|
Share
Ownership
|
17
|
Additional
Disclosure Relating to Directors
|
18
|
Board and
Committee Attendance
|
19
|
Statement
of Corporate Governance Practices
|
19
|
General
|
19
|
Code of
Business Conduct
|
20
|
Independence
of Directors
|
20
|
Independent
Chairman of the Board
|
20
|
Position
Descriptions
|
21
|
No Other
Common Directorships
|
21
|
Election of
Directors
|
21
|
Committees of
the Board
|
22
|
Board and
Committee Meetings
|
23
|
Board
Performance Assessment
|
23
|
Director
Selection
|
24
|
Director
Orientation and Continuing Education
|
25
|
Audit
Committee Disclosure
|
29
|
Statement
of Executive Compensation
|
29
|
Report on
Executive Compensation by the Human Resources and Compensation
Committee
|
38
|
Officers’
Remuneration
|
47
|
Performance
Graph
|
48
|
Other
Information
|
48
|
Indebtedness
of Directors and Executive Officers
|
48
|
Shares Owned
or Controlled by Senior Management
|
48
|
Interest of
Informed Persons and Others in Material Transactions
|
48
|
Directors’ and
Officers’ Insurance
|
48
|
Shareholder
Proposals
|
48
|
Availability
of Documents
|
48
|
Approval
|
49
|
SCHEDULE
“A” – Shareholder Proposal
|
51
|
SCHEDULE
“B” – Mandate of the Board
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
3 |
1.
|
VOTING
BY PROXY
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
4 |
•
|
What
is the deadline for receiving the form of
proxy?
|
The deadline
for receiving duly completed forms of proxy or a vote over the Internet is
5:00 p.m. (Eastern time) on April 21, 2008, or if the Meeting is adjourned
or postponed, by no later than 5:00 p.m. (Eastern time) on the business
day prior to the day fixed for the adjourned or postponed
meeting.
|
•
|
How
will my common shares be voted if I give my
proxy?
|
Your common shares will be voted or withheld
from voting in accordance with your instructions indicated on the proxy.
If no instructions are indicated, your common shares represented by
proxies in favour of the Board chair or the President and Chief Executive
Officer will be voted FOR the election of management’s nominees as
directors, FOR the appointment of KPMG LLP as auditors, AGAINST the
shareholder proposal set out in Schedule “A” and at the discretion of the
proxy holder in respect of amendments to any of the foregoing matters or
on such other business as may properly be brought before the Meeting.
Should any nominee named herein for election as a director become
unable to accept nomination for election, it is intended that the person
acting under proxy in favour of management will vote for the election in
his or her stead for such other person as management of the Company may
recommend. Management has no reason to believe that any of the nominees
for election as directors will be unable to serve if elected to office and
management is not aware of any amendment or other business likely to be
brought before the Meeting.
|
•
|
If
I change my mind, how can I revoke my
proxy?
|
You may revoke
your proxy at any time by an instrument in writing (which includes another
form of proxy with a later date) executed by you, or by your attorney
(duly authorized in writing), and (i) deposited with the Corporate
Secretary of the Company at the registered office of the Company (935 de
La Gauchetière Street West, Montréal, Québec, Canada, H3B 2M9) at any time
up to and including 5:00 p.m. (Eastern time) on the last business day
preceding the day of the Meeting or any adjournment or postponement
thereof, or (ii) filed with the chair of the Meeting on the day of the
Meeting or any adjournment or postponement thereof, or in any other manner
permitted by law or in the case of a vote over the Internet, by way of a
subsequent Internet vote.
|
2.
|
VOTING
IN PERSON
|
1.
|
GIVING
YOUR VOTING INSTRUCTIONS
|
2.
|
VOTING
IN PERSON
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
5 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
6 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
7 |
MICHAEL
R. ARMELLINO, CFA
Age: 68(1)
Fort Lee, New
Jersey, U.S.A.
Director
Since: May 7, 1996
Independent
|
Mr. Armellino,
a chartered financial analyst, is a Retired Partner, The Goldman
Sachs Group, LP. From 1991 to 1994, Mr. Armellino was chair and
Chief Executive Officer of Goldman Sachs Asset Management. Prior to 1991,
he had held various positions at Goldman, Sachs & Co., including
senior transportation analyst and Partner in Charge of
Research.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Strategic
Planning Committee (Chair)
|
100%
|
OR CONTROLLED(3) | |||
Audit
Committee
|
100%
|
|
|||
Finance
Committee
|
100%
|
February 2008 |
102,150
|
February
2008
|
Nil
|
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February 2007 |
97,650
|
February 2007 |
Nil
|
A.
CHARLES BAILLIE, O.C., LL.D.
Age: 68(1)
Toronto,
Ontario, Canada
Director
Since: April 15, 2003 Independent |
Mr. Baillie
retired as chair of The Toronto-Dominion Bank in April 2003, and as Chief
Executive Officer of the bank in December 2002. Mr. Baillie is also a
director of George Weston Limited and Telus
Corporation.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Finance
Committee (Chair)
|
100%
|
OR CONTROLLED(3) | |||
Audit
Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February
2008
|
127,344(5)
|
February
2008
|
N/A
|
Strategic
Planning Committee
|
100%
|
February 2007 |
117,514(6)
|
February 2007 |
N/A
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
8 |
HUGH
J. BOLTON, FCA
Age: 69(1)
Edmonton,
Alberta, Canada
Director
Since: April 15, 2003 Independent |
Mr. Bolton is
the chair of the board of directors of EPCOR Utilities Inc. (energy and
energy-related services provider), and the chairman of the board of
directors of Matrikon Inc. (supplier of industrial IT solutions). Mr. Bolton is
also a director of Teck Cominco Limited, The Toronto-Dominion Bank
and WestJet Airlines Ltd. From 1992 to 1998, Mr. Bolton was
chair and Chief Executive Partner of Coopers & Lybrand Canada (now
PricewaterhouseCoopers).
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Audit
Committee
|
100%
|
OR CONTROLLED(3) | |||
Corporate
Governance and Nominating Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February
2008
|
32,270(5)
|
February
2008
|
N/A
|
Strategic
Planning Committee
|
100%
|
February 2007 |
27,949(6)
|
February 2007 |
N/A
|
J.V.
RAYMOND CYR, O.C., LL.D. Age: 74(1)Montréal,
Québec, Canada
Director
Since: March 29, 1995 Independent |
Mr. Cyr is
chair of PolyValor Inc. (University Research Valorization Fund). Mr. Cyr also
served as chair of Bell Canada from 1985 to 1989 and from 1992 to
1996, and as chair of BCE Inc. from 1989 to 1993. He is also a
director of Transcontinental Inc. and ART Advanced Research Technologies
Inc.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Environment,
Safety and Security Committee (Chair)
|
100%
|
OR CONTROLLED(3) | |||
Corporate
Governance and Nominating Committee
|
100%
|
|
|||
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February
2008
|
69,561(5)
|
February
2008
|
72,000
|
Strategic
Planning Committee
|
100%
|
February 2007 |
64,803(6)
|
February 2007 |
72,000
|
AMBASSADOR
GORDON D. GIFFIN Age: 58(1)Atlanta,
Georgia, U.S.A.
Director
Since: May 1, 2001 Independent |
Mr. Giffin is
Senior Partner, McKenna Long & Aldridge (law firm) and he was United
States Ambassador to Canada from August 1997 to April 2001.
Mr. Giffin is also a director of Canadian Imperial Bank of Commerce,
Canadian Natural Resources Limited, TransAlta Corporation, AbitibiBowater
Incorporated and Ontario Energy Savings
Corp.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Environment,
Safety and Security Committee
|
100%
|
OR CONTROLLED(3) | |||
Finance
Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February
2008
|
32,656(5)
|
February
2008
|
27,000
|
Strategic
Planning Committee
|
100%
|
February 2007 |
28,013(6)
|
February 2007 |
27,000
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
9 |
JAMES
K. GRAY, O.C., A.O.E., LL.D.
Age: 74(1)
Calgary,
Alberta, Canada
Director
Since: July 4, 1996 Independent |
Mr. Gray is
Corporate Director and Former Chairman and Chief Executive
Officer, Canadian Hunter Exploration Ltd. (natural gas company). Mr.
Gray is also a director of Brookfield Asset Management Inc., Phoenix
Technology Income Fund and Atlanta Gold
Inc.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Corporate
Governance and Nominating
Committee
|
100%
|
OR CONTROLLED(3) | |||
Environment,
Safety and Security Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February 2008 |
63,072(5)
|
February
2008
|
39,000
|
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February 2007 |
57,889(6)
|
February 2007 |
72,000
|
Strategic
Planning Committee
|
100%
|
|
E.
HUNTER HARRISON
Age: 63(1)
Wellington,
Florida, U.S.A.
Director
Since: December 7, 1999 Not
Independent |
Mr. Harrison
has been President and Chief Executive Officer of the Company since
January 1, 2003. He has served as Executive Vice-President and
Chief Operating Officer of the Company from March 1998 to
December 2002. Prior to joining CN, Mr. Harrison had been a director and
President and Chief Executive Officer of the Illinois Central
Corporation and the Illinois Central Railroad Company from 1993 to
1998.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Strategic
Planning Committee
|
100%
|
OR CONTROLLED(3) | |||
|
|
|
|||
|
February 2008 |
308,993
|
February
2008
|
3,505,000
|
|
|
|
February 2007 |
283,625
|
February 2007 |
3,360,000
|
EDITH
E. HOLIDAY
Age: 56(1)
Washington,
District of Columbia,
U.S.A.
Director
Since: June 1, 2001
|
Mrs. Holiday
is a Corporate Director and Trustee and a former General Counsel,
United States Treasury Department and Secretary of the Cabinet, The
White House. Mrs. Holiday is a director of H.J. Heinz Company, Hess
Corporation, RTI International Metals, Inc. and White Mountains
Insurance Group, Ltd. She is also a director or trustee in various
investment companies of the Franklin Templeton Group of Mutual
Funds.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Corporate
Governance and Nominating
Committee
|
100%
|
OR CONTROLLED(3) | |||
Environment,
Safety and Security
Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February 2008 |
31,200(5)
|
February
2008
|
27,000
|
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February 2007 |
26,700
|
February 2007 |
27,000
|
Strategic
Planning Committee
|
100%
|
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
10 |
V.
MAUREEN KEMPSTON DARKES,
O.C.,
D. COMM., LL.D.
Miramar,
Florida, U.S.A.
Director
Since: March 29, 1995
Not
Independent
|
Mrs. Kempston
Darkes is Group Vice-President and President Latin America,
Africa and Middle East, General Motors Corporation. From 1994 to
2001, she was President and General Manager of General Motors
of Canada Limited and Vice-President of General Motors
Corporation. Mrs. Kempston Darkes is also a director of The Thomson
Corporation.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Environment,
Safety and Security Committee
|
100%
|
OR CONTROLLED(3) | |||
Finance
Committee
|
100%
|
|
|||
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February
2008
|
59,631(5)
|
February
2008
|
40,000
|
Strategic
Planning Committee
|
100%
|
February 2007 |
35,469(6)
|
February 2007 |
72,000
|
ROBERT
H. LEE, C.M., O.B.C., LL.D.
Vancouver,
British Columbia, Canada
Director
Since: April 21, 2006
Independent
|
Mr. Lee is
Chairman of the Prospero Group of Companies, which includes real
estate investment, financing, sales and property management
businesses. He is a director of Wall Financial Corporation, and he served
for many years as a Trustee of Belmont Trust, which is associated
with Fairmont Shipping Hong Kong Ltd. He served as Chancellor of
the University of British Columbia, Chairman of UBC Foundation and
as a member of its Board of Governors for many years. In
1987, he founded and still serves as Chairman of the UBC Properties
Trust.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Audit
Committee
|
100%
|
OR CONTROLLED(3) | |||
Finance
Committee
|
100%
|
|
|||
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February
2008
|
29,000
|
February
2008
|
N/A
|
Strategic
Planning Committee
|
100%
|
February 2007 |
13,500
|
February 2007 |
N/A
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
11 |
DENIS
LOSIER, LL.D.
Moncton, New
Brunswick, Canada
Director
Since: October 25, 1994 Independent |
Mr. Losier is
President and Chief Executive Officer, Assumption Life (life insurance
company). Between 1989 and 1994, Mr. Losier held various cabinet level
positions with the government of the Province of New Brunswick. He
is also a director of NAV CANADA and Plazacorp Retail Properties
Ltd.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Audit
Committee (Chair)
|
100%
|
OR CONTROLLED(3) | |||
Corporate
Governance and Nominating
Committee
|
100%
|
|
|||
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February
2008
|
81,378(5)
|
February
2008
|
51,000
|
Strategic
Planning Committee
|
100%
|
February 2007 |
66,979(6)
|
February 2007 |
60,000
|
THE
HON. EDWARD C. LUMLEY,
P.C.,
LL.D.
South
Lancaster, Ontario, Canada
Director
Since: July 4, 1996 Independent |
Mr. Lumley is
Vice-Chairman, BMO Capital Markets (investment bank). From 1986 to
1991, he served as chair of Noranda Manufacturing Group Inc. Mr.
Lumley was a Member of Parliament from 1974 to 1984, during
which time he held various cabinet portfolios in the Government of
Canada. Mr. Lumley is also a director of Bell Canada and
Dollar-Thrifty Automotive Group,
Inc.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Investment
Committee of CN’s Pension Trust Funds
(Chair)(2)
|
100%
|
OR CONTROLLED(3) | |||
Environment,
Safety and Security
Committee
|
100%
|
|
|||
Finance
Committee
|
100%
|
February 2008 |
80,985(5)
|
February
2008
|
51,000
|
Human
Resources and Compensation
Committee
|
100%
|
February 2007 |
54,186(6)
|
February
2007
|
72,000
|
Strategic
Planning Committee
|
100%
|
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
12 |
DAVID
G.A. McLEAN, O.B.C., LL.D.
Vancouver,
British Columbia, Canada
Director
Since: August 31, 1994 Independent |
Mr. McLean is
board chair of the Company and chair and Chief Executive
Officer, The McLean Group (real estate investment, film and television
facilities, communications and helicopter
charters).
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
(Chair)
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Corporate
Governance and Nominating Committee
(Chair)
|
100%
|
OR CONTROLLED(3) | |||
Environment,
Safety and Security
Committee
|
100%
|
|
|||
Human
Resources and Compensation Committee
|
100%
|
February 2008 |
164,885(5)
|
February
2008
|
Nil
|
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February 2007 |
150,224(6)
|
February
2007
|
24,000
|
Strategic
Planning Committee
|
100%
|
|
ROBERT
PACE
Age: 53(1)
Halifax, Nova
Scotia, Canada
Director
Since: October 25, 1994
|
Mr. Pace is
President and Chief Executive Officer, The Pace Group (private
holding company). Mr. Pace is also a director of High Liner Foods
Incorporated and Hydro One and board chair of Overland Realty
Limited.
|
MEMBER
OF
|
ATTENDANCE
|
SECURITIES
AND OPTIONS HELD
|
|||
Board
|
100%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Human
Resources and Compensation Committee
(Chair)
|
100%
|
OR CONTROLLED(3) | |||
Audit
Committee
|
100%
|
|
|||
Corporate
Governance and Nominating Committee
|
100%
|
February 2008 |
88,500(5)
|
February
2008
|
51,000
|
Investment
Committee of CN’s Pension Trust Funds(2)
|
100%
|
February 2007 |
68,033(6)
|
February
2007
|
72,000
|
Strategic
Planning Committee
|
100%
|
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
13 |
AMOUNT
|
|
AND
NUMBER
|
|
TYPE
OF FEE
|
OF
SHARES
|
Board Chair
Retainer(1)
|
US$120,000(2)
and 12,000 Shares(2)
|
Director
Retainer(3)
|
US$15,000(2)
and 4,500 Shares(2)
|
Committee
Chair Retainer(4)
|
US$15,000(2)
|
Committee
Member Retainer
|
US$3,500(2)
|
Board Meeting
Attendance Fee
|
US$1,000
|
Committee
Meeting Attendance Fee
|
US$1,000
|
Travel
Attendance Fee
|
US$1,000
|
BOARD
AND
|
PERCENTAGE
OF
|
||||||
DIRECTOR
AND
|
COMMITTEE
|
COMMITTEE
|
VALUE
OF COMMON
|
COMMITTEE
|
TOTAL
ANNUAL
|
TOTAL
FEES
|
|
BOARD
CHAIR CASH
|
CHAIRMAN
|
MEMBER
CASH
|
SHARES
OR
|
ATTENDANCE
AND
|
FEES
AND EQUITY
|
RECEIVED
IN
|
|
RETAINER
|
CASH
RETAINER
|
RETAINER
|
DRSUs
GRANTED(2,3)
|
TRAVEL
FEES(4)
|
GRANT
|
COMMON
SHARES
|
|
DIRECTOR(1)
|
(US$)
|
(US$)
|
(US$)
|
(US$)
|
(US$)
|
(US$)
|
AND/OR
DRSUs(5)
|
Michael
R.
|
|||||||
Armellino
|
15,000
|
15,000
|
14,000
|
202,095
|
34,000
|
280,095
|
77%
|
A. Charles
Baillie(6)
|
15,000
|
10,000
|
14,000
|
202,095
|
36,000
|
277,095
|
81%
|
Hugh J.
Bolton
|
15,000
|
–
|
14,000
|
202,095
|
36,000
|
267,095
|
76%
|
J.V. Raymond
Cyr
|
15,000
|
15,000
|
14,000
|
202,095
|
27,000
|
273,095
|
90%
|
Ambassador
|
|||||||
Gordon D.
Giffin
|
15,000
|
–
|
14,000
|
202,095
|
33,000
|
264,095
|
77%
|
James K.
Gray
|
15,000
|
–
|
17,500
|
202,095
|
39,000
|
273,595
|
86%
|
Edith E.
Holiday
|
15,000
|
–
|
17,500
|
202,095
|
39,000
|
273,595
|
74%
|
V.
Maureen
|
|||||||
Kempston
Darkes
|
15,000
|
–
|
14,000
|
202,095
|
30,000
|
261,095
|
77%
|
Robert H.
Lee
|
15,000
|
–
|
14,000
|
202,095
|
33,000
|
264,095
|
77%
|
Denis
Losier
|
15,000
|
15,000
|
14,000
|
202,095
|
34,000
|
280,095
|
72%
|
The Hon.
Edward
|
|||||||
C.
Lumley
|
15,000
|
15,000
|
17,500
|
202,095
|
37,000
|
286,595
|
87%
|
David G.A.
McLean
|
120,000
|
–
|
–
|
538,920
|
37,000
|
695,920
|
85%
|
Robert
Pace
|
15,000
|
15,000
|
17,500
|
202,095
|
41,000
|
290,595
|
86%
|
TOTAL
|
300,000
|
85,000
|
182,000
|
2,964,060
|
456,000
|
3,987,060
|
81%
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
14 |
OPTIONS
AS AT FEBRUARY 29, 2008
|
|||||||
VALUE
OF
|
|||||||
EXERCISE
|
OPTIONS
GRANTED
|
UNEXERCISED
|
|||||
DATE
OF GRANT
|
EXPIRY
DATE
|
PRICE(1)
|
AND
VESTED
|
EXERCISED(2)
|
UNEXERCISED
|
OPTIONS(3)
|
|
DIRECTOR
|
(MM/DD/YY)
|
(MM/DD/YY)
|
(US$)
|
(#)
|
(#)
|
(#)
|
(US$)
|
Michael
R.
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
Armellino
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
12,000
|
–
|
–
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
12,000
|
–
|
–
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
15,000
|
–
|
–
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
12,000
|
–
|
–
|
|
A. Charles
Baillie(4)
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Hugh J.
Bolton(4)
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
J.V. Raymond
Cyr
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
–
|
21,000
|
780,570
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
–
|
12,000
|
454,080
|
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
Ambassador
|
05/01/2001
|
05/01/2011
|
20.15
|
15,000
|
–
|
15,000
|
490,200
|
Gordon D.
Giffin
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
James K.
Gray
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
12,000
|
–
|
–
|
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
Edith E.
Holiday
|
06/01/2001
|
06/01/2011
|
21.06
|
15,000
|
–
|
15,000
|
476,550
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
V.
Maureen
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
Kempston
Darkes
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
11,000
|
1,000
|
37,840
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
Robert H.
Lee(4)
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Denis
Losier
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
–
|
12,000
|
454,080
|
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
The
Hon.
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
Edward C.
Lumley
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
–
|
12,000
|
454,080
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
|
David G.A.
McLean
|
03/24/1998
|
03/24/2008
|
15.66
|
30,000
|
30,000
|
–
|
–
|
04/26/1999
|
04/26/2009
|
14.99
|
21,000
|
21,000
|
–
|
–
|
|
01/25/2000
|
01/25/2010
|
11.85
|
21,000
|
21,000
|
–
|
–
|
|
01/26/2001
|
01/26/2011
|
16.94
|
24,000
|
24,000
|
–
|
–
|
|
01/25/2002
|
01/25/2012
|
26.00
|
24,000
|
24,000
|
–
|
–
|
|
Robert
Pace
|
03/24/1998
|
03/24/2008
|
15.66
|
21,000
|
21,000
|
–
|
–
|
04/26/1999
|
04/26/2009
|
14.99
|
12,000
|
–
|
12,000
|
454,080
|
|
01/25/2000
|
01/25/2010
|
11.85
|
12,000
|
–
|
12,000
|
491,760
|
|
01/26/2001
|
01/26/2011
|
16.94
|
15,000
|
–
|
15,000
|
538,350
|
|
01/25/2002
|
01/25/2012
|
26.00
|
12,000
|
–
|
12,000
|
321,960
|
(1)
|
The exercise
price, if in Canadian dollars, was converted using the rate of exchange as
at February 29, 2008 (1.0158).
|
(2)
|
During the
12-month period ended February 29, 2008, James K. Gray exercised 33,000
options for an aggregate realized value of US$1,148,406; Maureen Kempston
Darkes exercised 32,000 options
for an aggregate realized value of US$1,171,442; Denis Losier exercised
9,000 options for an aggregate realized value of US$301,674; The Hon.
Edward C. Lumley exercised 21,000 options
for an aggregate realized value of US$770,864; David G.A. McLean exercised
24,000 options for an aggregate realized value of US$699,758; and Robert
Pace exercised 21,000 options
for an aggregate realized value of
US$787,705.
|
(3)
|
The value of
unexercised in-the-money options at February 29, 2008 is the difference
between the average closing price on such date on the New York and Toronto
stock exchanges (US$52.83) and
the exercise price. This value has not been and may never be realized. The
actual gains, if any, on exercise will depend on the value of the common
shares on the date of
exercise.
|
(4)
|
Mr. Baillie,
Mr. Bolton and Mr. Lee were not members of the Board when options were
granted under the Management Long-Term Incentive
Plan.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
15 |
TOTAL
NUMBER
|
|||||||
NUMBER
OF
|
OF
COMMON
|
GUIDELINE MET (3)
|
TOTAL
VALUE
|
||||
COMMON
SHARES
|
SHARES
OWNED,
|
OR
INVESTMENT
|
OF
COMMON
|
||||
OWNED,
|
CONTROLLED
OR
|
REQUIRED
TO MEET
|
SHARES
AND DRSUs
|
VALUE
AT RISK
|
|||
CONTROLLED
|
NUMBER
OF
|
DIRECTED
|
GUIDELINE
|
(VALUE
AT RISK)(2)
|
AS
MULTIPLE OF
|
||
DIRECTOR
|
YEAR(1)
|
OR
DIRECTED
|
DRSUs
HELD
|
AND
DRSUs
|
(US$)
|
(US$)
|
ANNUAL
RETAINER
|
Michael
R.
|
2008
|
102,150
|
–
|
102,150
|
|||
Armellino
|
2007
|
97,650
|
–
|
97,650
|
3
|
5,396,585
|
21
|
Net
change
|
4,500
|
–
|
4,500
|
||||
A. Charles
Baillie
|
2008
|
94,600
|
32,744
|
127,344
|
|||
2007
|
90,200
|
27,314
|
117,514
|
3
|
6,727,584
|
27
|
|
Net
change
|
4,400
|
5,430
|
9,830
|
||||
Hugh J.
Bolton
|
2008
|
2,500
|
29,770
|
32,270
|
|||
2007
|
3,000
|
24,949
|
27,949
|
3
|
1,704,824
|
7
|
|
Net
change
|
(500)
|
4,821
|
4,321
|
||||
J.V. Raymond
Cyr
|
2008
|
42,341
|
27,220
|
69,561
|
|||
2007
|
42,341
|
22,462
|
64,803
|
3
|
3,674,908
|
15
|
|
Net
change
|
–
|
4,758
|
4,758
|
||||
Ambassador
|
2008
|
19,175
|
13,481
|
32,656
|
|||
Gordon D.
Giffin
|
2007
|
15,800
|
12,213
|
28,013
|
3
|
1,725,216
|
7
|
Net
change
|
3,375
|
1,268
|
4,643
|
||||
James K.
Gray
|
2008
|
57,298
|
5,774
|
63,072
|
|||
2007
|
52,176
|
5,713
|
57,889
|
3
|
3,332,094
|
13
|
|
Net
change
|
5,122
|
61
|
5,183
|
||||
E. Hunter
Harrison
|
2008
|
308,993
|
–
|
308,993
|
|||
2007
|
283,625
|
–
|
283,625
|
3
|
16,324,100
|
–
|
|
Net
change
|
25,368
|
–
|
25,368
|
||||
Edith E.
Holiday
|
2008
|
28,950
|
2,250
|
31,200
|
|||
2007
|
26,700
|
–
|
26,700
|
3
|
1,648,296
|
7
|
|
Net
change
|
2,250
|
2,250
|
4,500
|
||||
V.
Maureen
|
2008
|
36,500
|
23,131
|
59,631
|
|||
Kempston
Darkes
|
2007
|
12,600
|
22,869
|
35,469
|
3
|
3,150,306
|
12
|
Net
change
|
23,900
|
262
|
24,162
|
||||
Robert H.
Lee
|
2008
|
29,000
|
–
|
29,000
|
|||
2007
|
13,500
|
–
|
13,500
|
3
|
1,532,070
|
6
|
|
Net
change
|
15,500
|
–
|
15,500
|
||||
Denis
Losier
|
2008
|
52,860
|
28,518
|
81,378
|
|||
2007
|
43,267
|
23,712
|
66,979
|
3
|
4,299,200
|
17
|
|
Net
change
|
9,593
|
4,806
|
14,399
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
16 |
TOTAL
NUMBER
|
|||||||
NUMBER
OF
|
OF
COMMON
|
GUIDELINE MET (3)
|
TOTAL
VALUE OF
|
||||
COMMON
SHARES
|
SHARES
OWNED,
|
OR
INVESTMENT
|
COMMON
SHARES
|
||||
OWNED,
|
CONTROLLED
OR
|
REQUIRED
TO
|
AND
DRSUs
|
VALUE
AT RISK
|
|||
CONTROLLED
|
NUMBER
OF
|
DIRECTED
|
MEET
GUIDELINE
|
(VALUE
AT RISK)(2)
|
AS
MULTIPLE OF
|
||
DIRECTOR
|
YEAR(1)
|
OR
DIRECTED
|
DRSUs
HELD
|
AND
DRSUs
|
(US$)
|
(US$)
|
ANNUAL
RETAINER
|
The
Hon.
|
2008
|
52,800
|
28,185
|
80,985
|
|||
Edward C.
Lumley
|
2007
|
31,800
|
22,386
|
54,186
|
3
|
4,278,438
|
17
|
Net
change
|
21,000
|
5,799
|
26,799
|
||||
David G.A.
McLean
|
2008
|
107,910
|
56,975
|
164,885
|
|||
2007
|
107,910
|
42,314
|
150,224
|
3
|
8,710,875
|
12
|
|
Net
change
|
–
|
14,661
|
14,661
|
||||
Robert
Pace
|
2008
|
58,874
|
29,626
|
88,500
|
|||
2007
|
44,100
|
23,933
|
68,033
|
3
|
4,675,455
|
18
|
|
Net
change
|
14,774
|
5,693
|
20,467
|
(i)
|
Mr. Baillie, a
director of the Company, was a director of Dana Corporation which filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on
March 3, 2006. Dana’s European, South American, Asian-Pacific, Canadian
and Mexican subsidiaries are not included in the Chapter 11 filing. Dana
Corporation successfully emerged from Chapter 11 reorganization in
February 2008. Mr. Baillie is no longer a director of Dana
Corporation;
|
(ii)
|
Mr. Cyr, a
director of the Company, was a director of Air Canada when it voluntarily
filed for protection under the Companies’ Creditors Arrangement Act
(Canada) (“CCAA”) in April 2003 and was a director of Cable
Satisfaction International Inc. when it voluntarily filed for protection
under the CCAA in July 2003. Air Canada successfully emerged from the CCAA
proceedings and was restructured pursuant to a plan of arrangement in
September 2004 and Cable Satisfaction International Inc.’s second amended
and restated plan of arrangement and reorganization was approved by its
creditors and sanctioned by the Québec Superior Court in March 2004. Mr.
Cyr is no longer a director of Air Canada nor of Cable Satisfaction
International Inc.; and
|
(iii)
|
Mr. Lumley, a
director of the Company, was a director of Air Canada when it voluntarily
filed for protection under the CCAA in April 2003. Air Canada successfully
emerged from the CCAA proceedings and was restructured pursuant to a plan
of arrangement in September 2004. Mr. Lumley is no longer a director of
Air Canada.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
17 |
NUMBER
AND % OF MEETINGS ATTENDED
|
||||||||||
CORPORATE
|
ENVI-
|
HUMAN
|
INVESTMENT
|
|||||||
GOVERNANCE
|
RONMENT,
|
RESOURCES
|
COMMITTEE
|
|||||||
AND
|
SAFETY
AND
|
AND
COM-
|
OF
CN’S
|
STRATEGIC
|
||||||
AUDIT
|
NOMINATING
|
SECURITY
|
FINANCE
|
PENSATION
|
PENSION
|
PLANNING
|
COMMITTEES
|
OVERALL
|
||
DIRECTOR(1)
|
BOARD
|
COMMITTEE
|
COMMITTEE
|
COMMITTEE
|
COMMITTEE
|
COMMITTEE
|
TRUST
FUNDS
|
COMMITTEE
|
(TOTAL) |
ATTENDANCE
|
Michael R.
Armellino
|
10/10
|
17/17
|
27/27
|
|||||||
(100%)
|
6/6
|
–
|
–
|
4/4
|
–
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
A. Charles
Baillie
|
10/10
|
19/19
|
29/29
|
|||||||
(100%)
|
6/6
|
2/2
|
–
|
3/3
|
5/5
|
–
|
3/3
|
(100%)
|
(100%)
|
|
Hugh J.
Bolton
|
10/10
|
19/19
|
29/29
|
|||||||
(100%)
|
6/6
|
5/5
|
–
|
–
|
5/5
|
–
|
3/3
|
(100%)
|
(100%)
|
|
J.V. Raymond
Cyr
|
10/10
|
15/15
|
25/25
|
|||||||
(100%)
|
–
|
3/3
|
4/4
|
1/1
|
–
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
Ambassador
|
10/10
|
16/16
|
26/26
|
|||||||
Gordon D.
Giffin
|
(100%)
|
–
|
–
|
4/4
|
4/4
|
5/5
|
–
|
3/3
|
(100%)
|
(100%)
|
James K.
Gray
|
10/10
|
21/21
|
31/31
|
|||||||
(100%)
|
–
|
5/5
|
4/4
|
–
|
5/5
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
E. Hunter
Harrison
|
10/10
|
3/3
|
13/13
|
|||||||
(100%)
|
–
|
–
|
–
|
–
|
–
|
–
|
3/3
|
(100%)
|
(100%)
|
|
Edith E.
Holiday
|
10/10
|
21/21
|
31/31
|
|||||||
(100%)
|
–
|
5/5
|
4/4
|
–
|
5/5
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
V.
Maureen
|
10/10
|
15/15
|
25/25
|
|||||||
Kempston
Darkes
|
(100%)
|
–
|
–
|
4/4
|
4/4
|
–
|
4/4
|
3/3
|
(100%)
|
(100%)
|
Robert H.
Lee
|
10/10
|
17/17
|
27/27
|
|||||||
(100%)
|
6/6
|
–
|
–
|
4/4
|
–
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
Denis
Losier
|
10/10
|
17/17
|
27/27
|
|||||||
(100%)
|
6/6
|
3/3
|
–
|
1/1
|
–
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
The
Hon.
|
10/10
|
20/20
|
30/30
|
|||||||
Edward C.
Lumley
|
(100%)
|
–
|
–
|
4/4
|
4/4
|
5/5
|
4/4
|
3/3
|
(100%)
|
(100%)
|
David G.A.
McLean
|
10/10
|
21/21
|
31/31
|
|||||||
(100%)
|
–
|
5/5
|
4/4
|
–
|
5/5
|
4/4
|
3/3
|
(100%)
|
(100%)
|
|
Robert
Pace
|
10/10
|
23/23
|
33/33
|
|||||||
(100%)
|
6/6
|
5/5
|
–
|
–
|
5/5
|
4/4
|
3/3
|
(100%)
|
(100%)
|
BOARD
AND BOARD COMMITTEE MEETINGS
|
NUMBER
OF MEETINGS HELD
|
Board
|
10
|
Audit
Committee
|
6
|
Corporate
Governance and Nominating Committee
|
5
|
Environment,
Safety and Security Committee
|
4
|
Finance
Committee
|
4
|
Human
Resources and Compensation Committee
|
5
|
Investment
Committee of CN’s Pension Trust Funds
|
4
|
Strategic
Planning Committee
|
3
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
18 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
19 |
INDEPENDENCE
STATUS
|
|||
REASON
|
|||
FOR
NON-
|
|||
INDEPENDENCE
|
|||
NAME
|
INDEPENDENT
|
NOT
INDEPENDENT
|
STATUS
|
Michael R.
Armellino
|
3
|
||
A. Charles
Baillie
|
3
|
||
Hugh J.
Bolton
|
3
|
||
J.V. Raymond
Cyr
|
3
|
||
Ambassador
|
3
|
||
Gordon D.
Giffin
|
|
||
James K.
Gray
|
3
|
||
E. Hunter
Harrison
|
President
and
|
||
3
|
Chief
Executive
|
||
Officer
of
|
|||
the
Company
|
|||
Edith E.
Holiday
|
3
|
||
V.
Maureen
|
Senior
executive
|
||
Kempston
Darkes
|
of a
major
|
||
3
|
customer
of
|
||
the
Company
|
|||
Robert H.
Lee
|
3
|
||
Denis
Losier
|
3
|
||
The
Hon.
|
3
|
||
Edward C.
Lumley
|
|||
David G.A.
McLean
|
3
|
||
Robert
Pace
|
3
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
20 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
21 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
22 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
23 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
24 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
25 |
A.
|
OVERSEEING
FINANCIAL REPORTING
|
-
|
Reviewed and
approved the annual and quarterly results and financial information
contained in all reports requiring Board
approval
|
-
|
Reviewed the
compliance of management certification of financial reports with
applicable legislation
|
-
|
Reviewed the
external auditors’ quarterly report on the consolidated financial
statements of the Company
|
-
|
Reviewed, with
the external auditors and management, the quality, appropriateness and
disclosure of the Company’s accounting principles and policies, underlying
assumptions and reporting practices, and any proposed changes
thereto
|
-
|
Reviewed
judgments made in connection with the preparation of the financial
statements, including analyses of the effect of alternative generally
accepted accounting principles
methods
|
B.
|
MONITORING
RISK MANAGEMENT AND INTERNAL
CONTROLS
|
-
|
Reviewed the
Company’s risk assessment and risk management policies, including the
Company’s insurance coverage and delegation of financial
authority
|
-
|
Assisted the
Board with the oversight of the Company’s compliance with applicable legal
and regulatory requirements
|
-
|
Received
management’s report assessing the adequacy and effectiveness of the
Company’s disclosure controls and procedures and systems of internal
control
|
C.
|
MONITORING
INTERNAL AUDITORS
|
-
|
Reviewed the
internal audit plan
|
-
|
Monitored the
internal audit function’s performance, its responsibilities, staffing,
budget and the compensation of its
members
|
D.
|
MONITORING
EXTERNAL AUDITORS
|
-
|
Reviewed the
results of the external audit
|
-
|
Recommended to
the Board the appointment and terms of engagement of the Company’s
external auditors
|
-
|
Evaluated,
remunerated and monitored the qualifications, performance and independence
of the external auditors
|
-
|
Approved the
disclosure of all audit, review and attest services provided by the
external auditors
|
-
|
Determined
which non-audit services the external auditors are prohibited from
providing, and pre-approved permitted non-audit services by the external
auditors to the Company
|
-
|
Reviewed the
formal statement from the external auditors confirming their independence
and reviewed hiring policies for employees or former employees of the
Company’s firm of external auditors
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
26 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
27 |
2007(1)
|
2006(1)
|
|
FEES
|
(CAD$)
|
(CAD$)
|
Audit
|
3,170,000
|
3,009,000
|
Audit-Related
|
1,371,000
|
930,000
|
Tax
|
603,000
|
479,000
|
Other
|
–
|
–
|
TOTAL
FEES
|
5,144,000
|
4,418,000
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
28 |
A. |
CEO
PERFORMANCE
|
|
- |
Approved CEO
objectives
|
|
- |
Assessed CEO
performance
|
|
- |
Reviewed and
recommended approval of CEO
compensation
|
B. |
EXECUTIVE
PERFORMANCE
|
|
- |
Reviewed and
approved performance assessments
|
|
- |
Reviewed
succession plan and individual development plans
|
|
- |
Reviewed
progress on CN’s leadership development programs
|
|
- |
Recommended
appointment and approved compensation of new
executives
|
C. |
COMPENSATION
|
|
- |
Reviewed pay
position relative to market
|
|
- |
Reviewed and
recommended approval of annual executive compensation
adjustments
|
|
- |
Reviewed and
recommended for approval no bonus payout for 2007 and approved current
year goals
|
|
- |
Reviewed and
recommended for approval long-term incentive grants to
executives
|
|
- |
Reviewed
executive stock ownership
|
|
- |
Reviewed and
recommended for approval pension plans design, valuation, amendments and
material risks
|
D. |
OTHERS
|
|
- |
Monitored
labour negotiations
|
|
- |
Reviewed the
Committee’s corporate governance and compensation disclosure
practices
|
|
- |
Approved the
Committee’s report for inclusion in the management information
circular
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
29 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
30 |
2007
|
2007
|
2006
|
|
RESULTS(1)
|
OBJECTIVES(2)
|
RESULTS(3)
|
|
IN MILLIONS
EXCEPT PER SHARE DATA
|
(CAD$)
|
(CAD$)
|
(CAD$)
|
Revenues
|
7,897
|
8,047
|
7,929
|
Operating
Income
|
2,876
|
3,124
|
3,030
|
Diluted
Earnings per Share (4)
|
3.40
|
3.64
|
3.40
|
Free Cash Flow
(4)
|
363
|
800
|
1,343
|
Return on
Invested Capital
|
14.0%
|
15.0%
|
14.7%
|
Corporate
|
|||||||
Annual
Salary
|
x
|
Target
Payout
|
x
|
70%
|
x
|
Performance
|
|
Factor
|
+
|
Individual
|
|||||||
Annual
Salary
|
x
|
Target
Payout
|
x
|
30%
|
x
|
Performance
|
|
Factor
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
31 |
RETURN
ON INVESTED CAPITAL
|
PERFORMANCE
|
(3-YEAR
AVERAGE)
|
VESTING
FACTOR
|
< 13.5%
|
0%
|
13.5%
|
50%
|
14.5%
|
100%
|
16.5% and
above
|
150%
|
GUIDELINES
|
|
President and
CEO
|
4 times
salary
|
Executive and
Senior Vice-Presidents
|
3 times
salary
|
Vice-Presidents
|
1.5 to 2 times
salary
|
Senior
Management
|
One times
salary
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
32 |
COMPONENTS
|
DESCRIPTION
|
|
Base
Salary
|
•
|
Salaries are
benchmarked annually to the median (50th percentile) of the comparator
group
|
•
|
Individual
salary recommendations are based on competitive assessment and individual
performance
|
|
Annual
Incentive
|
•
|
Target Payout
is established to position the Company’s total cash compensation (salary +
Target Payout) between 50th and 75th
percentile of the comparator group
|
•
|
Payout linked
to the achievement of corporate objectives (70%) and personal objectives
(30%)
|
|
•
|
Corporate
performance linked to the achievement of a balanced set of goals that
contribute to the organization’s growth and
profitability
|
|
•
|
Target Payouts
range from 50% to 70% of salary for executives (140% for the
CEO)
|
|
•
|
The maximum
payout is equal to twice the Target Payout
|
|
Vision 2008
Share Units Plan
|
•
|
Reward
superior stock price performance and provide retention of key
talent
|
•
|
Award of
performance-based share units granted in January 2005
|
|
•
|
Payout
effective December 31, 2008 (four-year term)
|
|
•
|
Strenuous
stock price vesting criteria corresponding to a compounded annual growth
rate of 9% (minimum payout level) to 19% (full
payout) over the four-year period
|
|
•
|
Also subject
to a minimum average return on invested capital over the four-year period
of 10% and a minimum 20-day average share
price on December 31, 2008
|
|
Long-Term
Incentive
|
•
|
Awards are
established to position total direct compensation (salary + annual
incentive target payout + long-term incentive award) at
approximately 75th percentile of comparator group, when aggressively set
goals are achieved
|
•
|
Align
management interest with shareholders’ value growth and provide retention
of key talent
|
|
•
|
Significant
recognition of individual contribution and potential
|
|
•
|
Combination of
RSUs and stock options of approximately equal value, except for the CEO
Stock
Options (Management Long-Term Incentive Plan)
|
|
•
|
10-year term;
25% per year vesting over the first four years
|
|
•
|
Granted in the
currency of the recipient’s salary Share Units
(Restricted Share Unit Plan)
|
|
•
|
Award of
performance-based share units
|
|
•
|
Payout in cash
after three years
|
|
•
|
Performance
vesting subject to attainment of targets related to return on invested
capital over the Plan Period and to the share price
during the last three months of the
period
|
LONG-TERM
INCENTIVE
|
||||||||||
LEVEL
|
BASE
SALARY
|
ANNUAL
INCENTIVE
|
AND
VISION 2008
|
TOTAL
|
TOTAL
AT RISK
|
|||||
President and
CEO
|
13
|
%
|
18
|
%
|
69
|
%
|
100
|
%
|
87
|
%
|
Executive
Vice-Presidents
|
25
|
%
|
17
|
%
|
58
|
%
|
100
|
%
|
75
|
%
|
Senior
Vice-Presidents
|
33
|
%
|
22
|
%
|
45
|
%
|
100
|
%
|
67
|
%
|
Vice-Presidents
|
45
|
%
|
24
|
%
|
31
|
%
|
100
|
%
|
55
|
%
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
33 |
2007
|
2006
|
2005
|
||||
Total
aggregate compensation
|
||||||
value awarded
to NEO
|
||||||
(US$
million)
|
18.6
|
26.4
|
24.7
|
|||
Net income
(CAD$ million)
|
1,725
|
(1)
|
1,810
|
(2)
|
1,556
|
(3)
|
As percentage
of Net Income (4)
|
1.2
|
1.7
|
1.9
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
34 |
E.
HUNTER HARRISON, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Under the
strong leadership of Mr. Harrison, the Company remains at the forefront of
the rail industry through the disciplined execution of its business model,
which is anchored on five principles: providing quality service,
controlling costs, focusing on asset utilization, committing to safety,
and developing people.
|
|||
2007
|
2006
|
2005
|
|
(US$)
|
(US$)
|
(US$)
|
|
Base
salary
|
1,600,000
|
1,500,000
|
1,375,000
|
Bonus
|
Nil
|
4,200,000
|
3,850,000
|
Other annual
compensation(1)
|
882,113
|
680,275
|
536,456
|
Value of
restricted share units under the annual grant(2)
|
3,725,000
|
4,367,000
|
2,313,000
|
Value of stock
options under the annual grant(3)
|
1,619,000
|
1,963,000
|
1,763,000
|
Value of
Vision 2008 grant allocated to 2005, 2006 and 2007(4)
|
201,000
|
201,000
|
201,000
|
Value of
81,000 restricted share units pursuant to the 2004 CEO
|
|||
Employment
Agreement in each of 2005, 2006 and 2007(5)
|
1,409,000
|
1,409,000
|
1,409,000
|
Value of
defined contribution pension plans accrued(1)
|
1,052,209
|
891,570
|
875,168
|
Value of
defined benefit pension plans accrued(6)
|
1,338,000
|
1,134,000
|
1,057,000
|
Value of
benefits accrued on amounts deferred
|
–
|
–
|
–
|
TOTAL
COMPENSATION
|
11,826,322
|
16,345,845
|
13,379,624
|
AGGREGATE
EQUITY HOLDINGS IN COMPANY PLANS(7)
|
|||||||||
DSUs
|
VISION
2008
|
RSUs
|
OPTIONS
|
TOTAL
VALUE
|
|||||
#
|
US$
|
#
|
US$
|
#
|
US$
|
#
|
US$
|
US$
|
|
VESTED
/ EXERCISABLE
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
2,947,500
|
71,932,304
|
71,932,304
|
UNVESTED
/
|
|||||||||
UNEXERCISABLE
|
Nil
|
Nil
|
184,000
|
1,402,706
|
382,000
|
17,954,000
|
412,500
|
2,860,413
|
22,217,119
|
TOTAL
|
Nil
|
Nil
|
184,000
|
1,402,706
|
382,000
|
17,954,000
|
3,360,000
|
74,792,717
|
94,149,423
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
35 |
CLAUDE
MONGEAU, EXECUTIVE VICE-PRESIDENT AND CHIEF FINANCIAL
OFFICER
|
|||
|
2007
|
2006
|
2005
|
|
(US$)
|
(US$)
|
(US$)
|
Base salary
|
519,000
|
504,000
|
489,000
|
Bonus
|
Nil
|
679,100
|
658,900
|
Other annual compensation(1)
|
–
|
–
|
–
|
Value of restricted share units
under the annual grant(2)
|
616,000
|
809,000
|
578,000
|
Value of stock options under
the annual grant(3)
|
514,000
|
620,000
|
564,000
|
Value of Vision 2008 grant
allocated to 2005, 2006 and 2007(4)
|
50,000
|
50,000
|
50,000
|
Value of defined contribution
pension plans accrued
|
–
|
–
|
–
|
Value of defined benefit
pension plans accrued(5)
|
175,000
|
182,000
|
146,000
|
Value of benefits accrued on
amounts deferred(6)
|
140,992
|
101,936
|
903,788
|
TOTAL
COMPENSATION
|
2,014,992
|
2,946,036
|
3,389,688
|
AGGREGATE
EQUITY HOLDINGS IN COMPANY PLANS(7)
|
|||||||||
DSUs
|
VISION
2008
|
RSUs
|
OPTIONS
|
TOTAL
VALUE
|
|||||
#
|
US$
|
#
|
US$
|
#
|
US$
|
#
|
US$
|
US$
|
|
VESTED
/ EXERCISABLE
|
168,472
|
7,918,184
|
Nil
|
Nil
|
Nil
|
Nil
|
564,000
|
12,246,340
|
20,164,524
|
UNVESTED
/
|
|||||||||
UNEXERCISABLE
|
13,783
|
647,801
|
46,000
|
350,676
|
53,000
|
2,491,000
|
131,000
|
913,155
|
4,402,632
|
TOTAL
|
182,255
|
8,565,985
|
46,000
|
350,676
|
53,000
|
2,491,000
|
695,000
|
13,159,495
|
24,567,156
|
JAMES
M. FOOTE, EXECUTIVE VICE-PRESIDENT, SALES AND MARKETING
|
|||||
2007
|
2006
|
2005
|
|||
(US$)
|
(US$)
|
(US$)
|
|||
Base
salary
|
519,000
|
504,000
|
489,000
|
||
Bonus
|
Nil
|
679,100
|
658,900
|
||
Other annual
compensation(1)
|
22,177
|
14,656
|
16,432
|
||
Value of
restricted share units under the annual grant(2)
|
616,000
|
809,000
|
578,000
|
||
Value of stock
options under the annual grant(3)
|
514,000
|
620,000
|
564,000
|
||
Value of
Vision 2008 grant allocated to 2005, 2006 and 2007(4)
|
50,000
|
50,000
|
50,000
|
||
Value of
defined contribution pension plans accrued(1)
|
6,750
|
6,600
|
6,300
|
||
Value of
defined benefit pension plans accrued(5)
|
173,000
|
173,000
|
146,000
|
||
Value of
benefits accrued on amounts deferred(6)
|
209,803
|
151,686
|
1,466,177
|
||
TOTAL
COMPENSATION
|
2,110,730
|
3,008,042
|
3,974,809
|
AGGREGATE
EQUITY HOLDINGS IN COMPANY PLANS(7)
|
|||||||||
DSUs
|
VISION
2008
|
RSUs
|
OPTIONS
|
TOTAL
VALUE
|
|||||
#
|
US$
|
#
|
US$
|
#
|
US$
|
#
|
US$
|
US$
|
|
VESTED
/ EXERCISABLE
|
249,964
|
11,748,308
|
Nil
|
Nil
|
Nil
|
Nil
|
449,000
|
9,037,985
|
20,786,293
|
UNVESTED
/
|
|||||||||
UNEXERCISABLE
|
21,240
|
998,280
|
46,000
|
350,676
|
53,000
|
2,491,000
|
131,000
|
913,155
|
4,753,111
|
TOTAL
|
271,204
|
12,746,588
|
46,000
|
350,676
|
53,000
|
2,491,000
|
580,000
|
9,951,140
|
25,539,404
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
36 |
KEITH
E. CREEL , EXECUTIVE VICE-PRESIDENT, OPERATIONS
|
|||||
2007
|
2006
|
2005
|
|||
(US$)
|
(US$)
|
(US$)
|
|||
Base
salary
|
376,548
|
313,000
|
298,423
|
||
Bonus
|
Nil
|
379,400
|
362,500
|
||
Other annual
compensation(1)
|
64,897
|
5,107
|
64,455
|
||
Value of
restricted share units under the annual grant(2)
|
534,000
|
539,000
|
260,000
|
||
Value of stock
options under the annual grant(3)
|
446,000
|
413,000
|
254,000
|
||
Value of
Vision 2008 grants allocated to 2005, 2006 and 2007(4)
|
121,000
|
23,000
|
23,000
|
||
Value of
defined contribution pension plans accrued(1)
|
60,070
|
35,177
|
4,476
|
||
Value of
defined benefit pension plans accrued(5)
|
–
|
–
|
48,000
|
||
Value of
benefits accrued on amounts deferred(6)
|
63,435
|
45,864
|
554,812
|
||
TOTAL
COMPENSATION
|
1,665,950
|
1,753,548
|
1,869,666
|
AGGREGATE
EQUITY HOLDINGS IN COMPANY PLANS(7)
|
|||||||||
DSUs
|
VISION
2008
|
RSUs
|
OPTIONS
|
TOTAL
VALUE
|
|||||
#
|
US$
|
#
|
US$
|
#
|
US$
|
#
|
US$
|
US$
|
|
VESTED
/ EXERCISABLE
|
74,497
|
3,501,359
|
Nil
|
Nil
|
Nil
|
Nil
|
41,000
|
633,924
|
4,135,283
|
UNVESTED
/
|
|||||||||
UNEXERCISABLE
|
7,504
|
352,688
|
31,000
|
236,325
|
39,000
|
1,833,000
|
86,000
|
448,160
|
2,870,173
|
TOTAL
|
82,001
|
3,854,047
|
31,000
|
236,325
|
39,000
|
1,833,000
|
127,000
|
1,082,084
|
7,005,456
|
SEAN
FINN, SENIOR VICE-PRESIDENT PUBLIC AFFAIRS, CHIEF LEGAL OFFICER AND
CORPORATE SECRETARY
|
|||||
2007
|
2006
|
2005
|
|||
(US$)
|
(US$)
|
(US$)
|
|||
Base
salary
|
415,000
|
381,500
|
343,000
|
||
Bonus
|
Nil
|
475,000
|
409,100
|
||
Other annual
compensation(1)
|
–
|
–
|
–
|
||
Value of
restricted share units under the annual grant(2)
|
225,000
|
323,000
|
231,000
|
||
Value of stock
options under the annual grant(3)
|
188,000
|
248,000
|
226,000
|
||
Value of
Vision 2008 grant allocated to 2005, 2006 and 2007(4)
|
20,000
|
20,000
|
20,000
|
||
Value of
defined contribution pension plans accrued
|
–
|
–
|
–
|
||
Value of
defined benefit pension plans accrued(5)
|
137,000
|
128,000
|
99,000
|
||
Value of
benefits accrued on amounts deferred
|
–
|
–
|
–
|
||
TOTAL
COMPENSATION
|
985,000
|
1,575,500
|
1,328,100
|
AGGREGATE
EQUITY HOLDINGS IN COMPANY PLANS(7)
|
|||||||||
DSUs
|
VISION
2008
|
RSUs
|
OPTIONS
|
TOTAL
VALUE
|
|||||
#
|
US$
|
#
|
US$
|
#
|
US$
|
#
|
US$
|
US$
|
|
VESTED
/ EXERCISABLE
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
121,000
|
2,635,602
|
2,635,602
|
UNVESTED
/
|
|||||||||
UNEXERCISABLE
|
Nil
|
Nil
|
18,000
|
137,221
|
20,400
|
958,800
|
50,800
|
361,534
|
1,457,555
|
TOTAL
|
Nil
|
Nil
|
18,000
|
137,221
|
20,400
|
958,800
|
171,800
|
2,997,136
|
4,093,157
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
37 |
Robert Pace
(Chair)
|
Edith E.
Holiday
|
A. Charles
Baillie
|
Edward C.
Lumley
|
Hugh J.
Bolton
|
David G.A.
McLean
|
Gordon D.
Giffin
|
|
James K.
Gray
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
38 |
LONG-TERM
COMPENSATION
|
|||||||||||
ANNUAL
COMPENSATION
|
AWARDS
|
PAYOUTS
|
|||||||||
SECURITIES
|
SHARES
OR
|
LONG-TERM
|
|||||||||
UNDER
|
UNITS
SUBJECT
|
INCENTIVE
|
ALL
OTHER
|
||||||||
OTHER
ANNUAL
|
OPTIONS
|
TO
RESALE
|
PLAN
|
COMPEN-
|
|||||||
SALARY
|
BONUS(3) |
COMPENSATION(4)
|
GRANTED
|
RESTRICTIONS(7)
|
PAYOUTS
|
(3,8) |
SATION
|
||||
NAME
AND PRINCIPAL POSITION
|
YEAR
|
(US$)
|
(US$)
|
(US$)
|
(#)
|
(US$)
|
(US$)
|
(US$)
|
|||
E. Hunter
Harrison
|
2007
|
1,600,000
|
Nil
|
882,113
|
(5)
|
145,000
|
Nil
|
8,860,800
|
(9)
|
1,052,209
|
(11)
|
President and
Chief Executive Officer
|
2006
|
1,500,000
|
4,200,000
|
680,275
|
(5)
|
190,000
|
Nil
|
Nil
|
891,570
|
(11)
|
|
2005
|
1,375,000
|
3,850,000
|
536,456
|
(5)
|
250,000
|
Nil
|
17,275,680
|
(10)
|
875,168
|
(11)
|
|
Claude
Mongeau
|
2007
|
519,000
|
Nil
|
Nil
|
46,000
|
Nil
|
2,215,200
|
(9)
|
140,992
|
(12)
|
|
Executive
Vice-President and
|
2006
|
504,000
|
679,100
|
Nil
|
60,000
|
Nil
|
Nil
|
101,936
|
(12)
|
||
Chief
Financial Officer
|
2005
|
489,000
|
658,900
|
Nil
|
80,000
|
Nil
|
5,038,740
|
(10)
|
903,788
|
(12)
|
|
James M.
Foote
|
2007
|
519,000
|
Nil
|
22,177
|
46,000
|
Nil
|
2,215,200
|
(9)
|
216,553
|
(11,12)
|
|
Executive
Vice-President,
|
2006
|
504,000
|
679,100
|
14,656
|
60,000
|
Nil
|
Nil
|
158,286
|
(11,12)
|
||
Sales and
Marketing
|
2005
|
489,000
|
658,900
|
16,432
|
80,000
|
Nil
|
5,038,740
|
(10)
|
1,472,477
|
(11,12)
|
|
Keith E. Creel
(2)
|
2007
|
376,548
|
Nil
|
64,897
|
(6)
|
38,000
|
Nil
|
996,840
|
(9)
|
123,505
|
(11,12)
|
Executive
Vice-President, Operations
|
2006
|
313,000
|
379,400
|
5,107
|
40,000
|
Nil
|
Nil
|
81,041
|
(11,12)
|
||
2005
|
298,423
|
362,500
|
64,455
|
(6)
|
36,000
|
Nil
|
2,015,496
|
(10)
|
559,288
|
(11,12)
|
|
Sean
Finn
|
2007
|
415,000
|
Nil
|
Nil
|
16,800
|
Nil
|
886,080
|
(9)
|
Nil
|
||
Senior
Vice-President Public Affairs, Chief
|
2006
|
381,500
|
475,000
|
Nil
|
24,000
|
Nil
|
Nil
|
Nil
|
|||
Legal Officer
and Corporate Secretary
|
2005
|
343,000
|
409,100
|
Nil
|
32,000
|
Nil
|
1,727,568
|
(10)
|
Nil
|
AMOUNTS
DEFERRED
|
||||
UNIT
PRICE
|
||||
(US$)
|
CLAUDE
MONGEAU
|
JAMES
M. FOOTE
|
KEITH
E. CREEL
|
|
US$3,023,244
|
US$5,038,740
|
US$2,015,496
|
||
2005 Long-Term
Incentive
|
39.99
|
(75,600
units)
|
(126,000
units)
|
(50,400
units)
|
COMPANY
MATCH ON AMOUNTS DEFERRED
|
|||
CLAUDE
MONGEAU
|
JAMES
M. FOOTE
|
KEITH
E. CREEL
|
|
(US$)
|
(US$)
|
(US$)
|
|
2005
|
869,999
|
1,422,810
|
547,999
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
39 |
ESTIMATED
FUTURE PAYOUTS UNDER
|
||||||
NON-SECURITIES
PRICE-BASED PLANS
|
||||||
PERFORMANCE
OR
|
||||||
SECURITIES,
UNITS
|
OTHER
PERIOD
|
|||||
OR
OTHER RIGHTS
|
UNTIL
MATURATION
|
THRESHOLD
|
TARGET
|
MAXIMUM
|
||
NAME
|
(#)
|
OR
PAYOUT
|
(#)
|
(#)
|
(#)
|
|
E. Hunter
Harrison
|
139,000
|
(1)
|
December 31,
2009
|
69,500
|
139,000
|
208,500
|
Claude
Mongeau
|
23,000
|
(1)
|
December 31,
2009
|
11,500
|
23,000
|
34,500
|
James M.
Foote
|
23,000
|
(1)
|
December 31,
2009
|
11,500
|
23,000
|
34,500
|
Keith E.
Creel
|
14,000
|
(1)
|
December 31,
2009
|
7,000
|
14,000
|
21,000
|
5,000
|
(2)
|
December 31,
2009
|
2,500
|
5,000
|
7,500
|
|
10,000
|
(3)
|
December 31,
2008
|
0
|
N/A
|
10,000
|
|
Sean
Finn
|
8,400
|
(1)
|
December 31,
2009
|
4,200
|
8,400
|
12,600
|
MARKET
VALUE
|
|||||
OF
SECURITIES
|
|||||
%
OF TOTAL
|
UNDERLYING
|
||||
#
OF SECURITIES
|
OPTIONS
GRANTED
|
OPTIONS
ON DATE
|
|||
GRANTED
UNDER
|
TO
EMPLOYEES IN
|
EXERCISE
PRICE
|
OF
GRANT
|
||
NAME
|
OPTIONS(1)
|
FINANCIAL
YEAR
|
(US$/SECURITY)
|
(US$/SECURITY)
|
EXPIRY
DATE
|
E. Hunter
Harrison
|
145,000
|
16.8%
|
44.67
|
44.67
|
January 25,
2017
|
Claude
Mongeau
|
46,000
|
5.3%
|
44.67
|
44.67
|
January 25,
2017
|
James M.
Foote
|
46,000
|
5.3%
|
44.67
|
44.67
|
January 25,
2017
|
Keith E.
Creel
|
28,000
|
44.67
|
44.67
|
January 25,
2017
|
|
10,000
|
4.4%
|
53.01
|
53.01
|
June 11,
2017
|
|
Sean
Finn
|
16,800
|
2.0%
|
44.67
|
44.67
|
January 25,
2017
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
40 |
SECURITIES
|
UNEXERCISED
OPTIONS AT
|
VALUE
OF UNEXERCISED IN-THE-MONEY
|
||||
ACQUIRED
ON
|
AGGREGATE
|
FY-END
|
OPTIONS
AT FY-END (1)
|
|||
EXERCISE
|
VALUE
REALIZED
|
(#)
|
(US$)
|
|||
NAME
|
(#)
|
(US$)
|
EXERCISABLE
|
UNEXERCISABLE
|
EXERCISABLE
|
UNEXERCISABLE
|
E. Hunter
Harrison
|
Nil
|
Nil
|
2,947,500
|
412,500
|
71,932,304
|
2,860,413
|
Claude
Mongeau
|
150,000
|
4,868,932
|
564,000
|
131,000
|
12,246,340
|
913,155
|
James M.
Foote
|
Nil
|
Nil
|
449,000
|
131,000
|
9,037,985
|
913,155
|
Keith E.
Creel
|
77,550
|
2,410,936
|
41,000
|
86,000
|
633,924
|
448,160
|
Sean
Finn
|
100,000
|
2,763,035
|
121,000
|
50,800
|
2,635,602
|
361,534
|
#
COMMON
|
%
OF OUTSTANDING
|
|
SHARES
|
COMMON
SHARES
|
|
Options
already granted and
outstanding
|
14,649,493
|
3.0
|
Options
issuable under the Plan
|
13,532,784
|
2.8
|
Shares issued
following the exercise of options
|
31,817,723
|
6.6
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
41 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
42 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
43 |
ESTIMATED
ANNUAL BENEFIT PAYABLE UPON RETIREMENT
|
|||||
HIGHEST
AVERAGE
|
PENSIONABLE
SERVICE (YEARS)
|
||||
EARNINGS
|
(US$)
|
||||
(US$)
|
10
|
20
|
25
|
30
|
35
|
200,000
|
38,843
|
77,686
|
97,107
|
116,528
|
135,950
|
450,000
|
88,843
|
177,686
|
222,107
|
266,528
|
310,950
|
700,000
|
138,843
|
277,686
|
347,107
|
416,528
|
485,950
|
950,000
|
188,843
|
377,686
|
472,107
|
566,528
|
660,950
|
1,200,000
|
238,843
|
477,686
|
597,107
|
716,528
|
835,950
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
44 |
HIGHEST
|
DEFINED
BENEFIT PLAN TABLE ESTIMATED ANNUAL BENEFIT
|
||||||
AVERAGE
|
AT
NORMAL RETIREMENT AGE FOR YEARS OF CREDITED SERVICE
|
||||||
EARNINGS
|
AFTER
DECEMBER 31, 2000
|
||||||
(US$)
|
(US$)
|
||||||
5
|
10
|
15
|
20
|
25
|
30
|
35
|
|
400,000
|
6,403
|
12,806
|
19,209
|
25,612
|
32,015
|
38,418
|
44,821
|
750,000
|
6,403
|
12,806
|
19,209
|
25,612
|
32,015
|
38,418
|
44,821
|
1,100,000
|
6,403
|
12,806
|
19,209
|
25,612
|
32,015
|
38,418
|
44,821
|
1,450,000
|
6,403
|
12,806
|
19,209
|
25,612
|
32,015
|
38,418
|
44,821
|
1,800,000
|
6,403
|
12,806
|
19,209
|
25,612
|
32,015
|
38,418
|
44,821
|
FINAL
|
SUPPLEMENTAL
RETIREMENT PLAN (NEW SERP)
|
||||||
AVERAGE
|
TABLE
ESTIMATED ANNUAL BENEFIT AT NORMAL RETIREMENT AGE FOR
YEARS
|
||||||
COMPENSATION
|
OF
CREDITED SERVICE AFTER DECEMBER 31, 2000
|
||||||
(US$)
|
(US$)
|
||||||
5
|
10
|
15
|
20
|
25
|
30
|
35
|
|
200,000
|
20,000
|
40,000
|
60,000
|
80,000
|
100,000
|
120,000
|
140,000
|
450,000
|
45,000
|
90,000
|
135,000
|
180,000
|
225,000
|
270,000
|
315,000
|
700,000
|
70,000
|
140,000
|
210,000
|
280,000
|
350,000
|
420,000
|
490,000
|
950,000
|
95,000
|
190,000
|
285,000
|
380,000
|
475,000
|
570,000
|
665,000
|
1,200,000
|
120,000
|
240,000
|
360,000
|
480,000
|
600,000
|
720,000
|
840,000
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
45 |
POINTS
(SUM OF AGE AND SERVICE)
|
||
Up to
39
|
5% of
eligible compensation
|
|
40–49
|
6%
|
|
50–59
|
7%
|
|
Above
60
|
8%
|
|
Mr. Creel has
9.75 years of service in the new SERP and 2 years of participation
in the CN Retirement Contribution Option and DC
SERP.
|
NAME
|
2007
SERVICE
COST(1)
|
BENEFIT
OBLIGATION
AT
DECEMBER
31,
2006(2)
(US$)
|
CHANGE
IN
BENEFIT
OBLIGATION
RELATING
TO
COMPENSATION
FROM
JANUARY
1,
2007
TO
DECEMBER
31,
2007(3)
(US$)
|
CHANGE
IN
BENEFIT
OBLIGATION
RELATING
TO
ASSUMPTIONS
FROM
JANUARY
1,
2007
TO
DECEMBER
31,
2007(3)
(US$)
|
BENEFIT
OBLIGATION
AT
DECEMBER
31,
2007(2)
(US$)
|
ACCRUED
ANNUAL
PENSION
AT
DECEMBER
31,
2007
(US$)
|
PROJECTED
ANNUAL
PENSION
AT
FIRST
UNREDUCED
DATE(4)
(US$)
|
AGE AT
FIRST
UNREDUCED
DATE(4)
|
E.Hunter
Harrison(5)
|
1,338,000
|
12,733,000
|
2,148,000
|
(1,440,000)
|
13,441,000
|
1,209,000
|
1,311,000
|
64
|
Claude
Mongeau
|
175,000
|
2,308,000
|
272,000
|
(300,000)
|
2,280,000
|
204,000
|
436,000
|
59
|
James M.
Foote
|
173,000
|
4,011,000
|
340,000
|
(359,000)
|
3,992,000
|
321,000
|
440,000
|
60
|
Sean
Finn
|
137,000
|
1,710,000
|
380,000
|
(248,000)
|
1,842,000
|
140,000
|
344,000
|
60
|
Keith E.
Creel(6)
|
0
|
787,000
|
238,000
|
(137,000)
|
888,000
|
68,000
|
100,000
|
57
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
46 |
COMPANY
CONTRIBUTIONS
|
INTEREST
CREDITS
|
AGGREGATE
|
AGGREGATE
BALANCE AS
|
||
IN
2007
|
IN
2007
|
WITHDRAWALS/
|
AT
DECEMBER 31, 2007
|
||
NAME
|
PLAN
NAME (1)
|
(US$)
|
(US$)
|
DISTRIBUTIONS
|
(US$)
|
E.
Hunter
|
Executive
Account
|
||||
Harrison
|
Balance
Plan
|
563,750
|
306,074
|
Not
Allowed
|
4,187,059
|
Excess Benefit
Plan
|
68,750
|
97,419
|
Not
Allowed
|
1,126,358
|
|
Supplemental
Defined
|
|||||
Contribution
Plan
|
4,600
|
4,866
|
Not
Allowed
|
52,760
|
|
Keith E.
Creel
|
DC
SERP
|
43,399
|
2,894
|
Not
Allowed
|
70,685
|
DEC-02
|
DEC-03
|
DEC-04
|
DEC-05
|
DEC-06
|
DEC-07
|
||
CNR
|
$100
|
$126
|
$170
|
$218
|
$238
|
$225
|
|
S&P/TSX
|
$100
|
$127
|
$145
|
$180
|
$211
|
$232
|
|
S&P
500
|
$100
|
$126
|
$140
|
$146
|
$169
|
$178
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
47 |
NUMBER
OF SECURITIES
|
|||
REMAINING
AVAILABLE FOR
|
|||
NUMBER
OF SECURITIES TO BE
|
WEIGHTED-AVERAGE
EXERCISE
|
FUTURE
ISSUANCE UNDER
|
|
ISSUED
UPON EXERCISE
|
PRICE
OF OUTSTANDING OPTIONS,
|
EQUITY
COMPENSATION PLANS
|
|
OF
OUTSTANDING OPTIONS,
|
WARRANTS
AND RIGHTS
|
(EXCLUDING
SECURITIES
|
|
PLAN
CATEGORY
|
WARRANTS
AND RIGHTS
|
(CAD$)
|
REFLECTED
IN THE FIRST COLUMN)
|
Equity
compensation plans approved
|
|||
by
securityholders
|
14,163,768
|
25.02
|
14,405,394
|
Equity
compensation plans not approved
|
|||
by
securityholders
|
Nil
|
Nil
|
Nil
|
Total
|
14,163,768
|
25.02
|
14,405,394
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
48 |
• |
diesel
fuel spills
|
• |
petroleum
greasers seeping into adjacent waterways
|
• |
slag
from the Sudbury Basin that contains high levels of heavy metals, some
carcinogens
|
• |
creosote-impregnated
timbers abandoned in flowing waters
|
• |
deteriorating
metal and concrete culverts, some outflows perched, preventing upstream
fish migration
|
• |
abandoned
buildings, such as the abandoned staff-house at Brent
town-site.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
49 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
50 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
51 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
52 |
|
Mixed
Sources
Product
group from well-managed
forests and
other controlled sources
Cert no.
SW-COC-1383
www.fsc.org
©
1996 Forest Stewardship
Council
|
|
|
9th Floor, 100 University
Avenue
Toronto, Ontario M5J
2Y1
www.computershare.com
|
|
Security
Class
|
|
Holder Account
Number
|
Form of Proxy - Annual Meeting to be held on Tuesday, April 22, 2008 |
• Go to the following web
site:
ww.investorvote.com
|
• You can enroll to receive
future security
communications electronically, by visiting
www.computershare.com - click "Enroll for e-delivery"
under the Shareholder Services
menu.
|
CONTROL
NUMBER
|
HOLDER
ACCOUNT NUMBER
|
ACCESS
NUMBER
|
+ |
+
|
This Form of Proxy is solicited by and on behalf of Management. |
Appointment
of Proxyholder
I/We being holder(s) of Common
Shares of Canadian National Railway Company hereby appoint:
David
G.A. McLean, or failing him, E. Hunter
Harrison
|
OR
|
Print the name of the person
you are appointing if this person is
someone other than
the Chairman of the Board or the President and Chief
Executive Officer of the Company.
|
For |
Withhold
|
For
|
Withhold
|
For
|
Withhold
|
|||||||
01. Michael R.
Armellino
|
|
|
|
06. James K.
Gray
|
|
|
|
11. Denis
Losier
|
|
|
--- | |
Fold
|
||||||||||||
02. A. Charles
Baillie
|
|
|
|
07. E. Hunter
Harrison
|
|
|
|
12. The Hon.
Edward C. Lumley
|
|
|
||
03. Hugh J.
Bolton
|
|
|
|
08. Edith E. Holiday |
|
|
|
13. David G.A.
McLean
|
|
|
||
04. J.V.
Raymond Cyr
|
|
|
|
09. V. Maureen
Kempston Darkes
|
|
|
|
14. Robert
Pace
|
|
|
||
05.
Ambassador Gordon D.
Giffin
|
|
|
|
10. Robert H.
Lee
|
|
|
|
|
|
|||
For | Withhold | |||||||||||
2.
Appointment of Auditors
|
||||||||||||
Appointment of
KPMG LLP as Auditors
|
||||||||||||
For
|
Against
|
|||||||||||
3. Shareholder Proposal | ||||||||||||
|
|
|
||||||||||
The Board of
Directors and management recommend that shareholders VOTE
AGAINST the Shareholder Proposal set out in Schedule “A” to the
accompanying Management Information Circular.
|
|
|
|
Signature(s) | Date | |
Authorized
Signature(s) - This section must be
completed
for your instructions to be executed.
I/We authorize
you to act in accordance with my/our instructions set out above. I/We
hereby revoke any proxy previously given with respect to the Meeting.
If
no voting instructions are indicated above, this Proxy
will be voted as recommended by the Board of Directors and
Management.
|
Quarterly
reports
To reduce
costs and help protect the environment, we will not send CN's quarterly
financial reports and related management’s discussion and analysis
(MD&A), unless you tell us that you want to receive them by checking
the box below. You will be required to complete this request on an annual
basis.
|
Annual
report
By law, we
must send you our annual financial statements and related management's
discussion and analysis (MD&A), unless you tell us that you do not
want to receive them by checking the box
below.
|
Please
send me CN's quarterly reports
If you do not
check the box or do not return this form, we will assume that you do not
want to receive CN's quarterly reports and MD&A.
|
Please
do not send me CN's annual financial statements and MD&A
If you do not
check the box or do not return this form, we will assume that you want to
receive CN's annual
financial statements and MD&A.
|
AR2
|
CNRQ
|
+
|
In
|
2007, weather and economic challenges kept coming, fast and
furious. We maintained our operating discipline and We delivered an
operating ratio that was 13 points minimized the economic impact on
revenues. better than the average of our peers. And we
continued to invest in long-term, profitable growth. CN is moving fast as
always, rolling forward to pursue opportunities ahead.
Certain
information included in this Annual Report may be
forward-looking statements within the meaning of United States and
Canadian securities laws. The Company cautions that, by their nature,
forward-looking statements involve risk, uncertainties and assumptions.
The Company assumes that, although there is an increasing risk of
recession in the U.S. economy, growth in North America and globally will
continue to slow down in 2008, but that a recession will not take place.
The Company’s long-term business prospectus assume continued growth in the
global economy. The Company cautions that these, as well as its other
assumptions, may not materialize, and that its actual results or the
developments anticipated by the Company could differ materially from those
expressed or implied in such forward-looking statements. Such
forward-looking statements are not guarantees of future performance and
involve known and unknown risks, uncertainties and other factors which may
cause the actual results or performance of the Company or the rail
industry to be materially different from the outlook or any future results
or performance implied by such statements. Such factors include the
specific risks set forth in Management’s Discussion and Analysis obtained
in this Annual Report as well as other risks detailed from tie to time in
reports filed by the Company with securities regulators in Canada and the
United States
|
forward.
Contents
2 Port
of Price
Rupert
29 Financial Section (U.S. GAAP)
4 Northern
Alberta oil
sands
87 Non-GAAP Measures–unaudited
7 Booming
commodities,
88 Corporate Governance
a
boon for
CN 89 2007
President’s Awards for Excellence
8 Building
a better
network 90 Board
of Directors
10 Partnering
for
next-level
92 Chairman of the Board and
improvement
logistics chain
13 Toward
a more
seamless Select
Senior Officers of the Company
14 Fast
forward
16 A
message from E. Hunter Harrison 93 Shareholder
and investor information
18 Financial
and operational highlights
22 CN
at a glance
24 A
message from the Chairman
25 Matching
championship golf
with a commitment to community 28 Glossary
of terms
Except
where otherwise indicated, all financial information reflected in this
document is expressed in Canadian dollars and determined on the basis of
United States generally accepted accounting principles (U.S.
GAAP).
|
Canadian
National Railway Company
|
1
|
The
port of Prince Rupert intermodal powerful opportunity for CN to
benefit
With
the first China Ocean Shipping Company (COSCO) ship docking at the
brand-new Prince Rupert intermodal terminal on October 31, 2007, a new,
strategically advantaged gateway between Asia and North America
for container traffic opened, right on schedule. The closest North
American port to Asia by more than two days and with no congestion, Prince
Rupert represents enormous possibility for CN, the port’s exclusive rail
connection to key markets. The new terminal completes the 500,000 TEU
first phase in a longer-term development plan that has the potential to
drive significant volume growth – including backhaul – for CN.
Beyond containers, CN has over the past several years been hauling to
Prince Rupert steadily growing volumes of commodities currently in high
demand in Asia, including coal and
grain.
|
Canadian
National Railway Company
|
2
|
Canadian
National Railway Company
|
3
|
Canadian
National Railway Company
|
4
|
Canadian
National Railway Company
|
5
|
With
major potash mines,
corn distribution
centres and ethanol plants,
key Canadian coal
mines, the Illinois coal
basin and the oil sands
of northern Alberta
all located on CN
lines, we expect global
commodity demand
to support CN’s revenue
growth for years
to come.
|
Canadian
National Railway Company
|
6 |
Strong global demand for coal, grain and potash is benefiting CN’s bulk business
Demand
for ethanol is driving increased production of corn and fertilizer inputs.
Oil sands development projects in Alberta are producing sulfur in large
quantities. Demand for Canadian wheat is strong in export markets,
primarily Asia. Strong demand for metallurgical and thermal coal continues
from steel mills, power plants and other buyers worldwide. Iron ore
production is up again as the North American steel industry rights itself.
These and other market forces are putting a spotlight on CN’s powerful
franchise and efficient transportation network connecting major ports on
three coasts.
|
||
Booming
commodities,
a
boom for CN.
|
Canadian
National Railway Company
|
7 |
Investing
to improve velocity and consistency
During
its entire history as a public company, CN has demonstrated a commitment
to continuously improving the efficiency of its network. With the
acquisitions of the IC, the WC, the GLT rail and related holdings and BC
Rail – as well as the Mackenzie Northern Railway (MKNR), Savage Alberta
Railway (SAR) and Athabasca Northern Railway (ANY)–over the past 10 years,
CN has aggressively but methodically pursued every opportunity to extend
its reach, improve traffic flows and deliver ever-improving service
quality for customers. The latest such transaction is CN’s proposed
acquisition of a major portion of the Elgin, Joliet & Eastern Railway
Company’s (EJ&E) rail network, which runs along the periphery of the
Chicago metropolitan area. This is a move that, if approved by regulatory
authorities, would have a significant positive – and immediate – impact on
CN’s rail network fluidity.
|
Building
a
better network.
|
Canadian
National Railway Company
|
8 |
In addition to acquisitions, CN has invested continuously in improving its infrastructure, from building ware house facilities and extending sidings to renovating yards. The latest: the construction of a newly configured, $100 million switching facility in Memphis at Johnston Yard, planned for completion in
2008.
|
Canadian
National Railway Company
|
9 |
Working
with other railroads to benefit shippers It’s a clear, shared
priority among North America’s Class I
railways: to improve the overall efficiency and effectiveness of rail for
shippers. CN has led a number of partnering initiatives within the
industry to achieve that goal, including pioneering routing protocols with
other major rail carriers based on the shortest routes and best gateways.
Today, CN has routing protocol agreements with every Class I and other
railroads, including new agreements completed in 2007 with Canadian
Pacific and Kansas City Southern. In
addition, CN has a number of co-production agreements with other railroads
designed to increase the efficiency of existing track and other assets.
Partnering strategies are a win-win for rail transportation and customers
– these
agreements enable increased
asset utilization for each railroad while improving service for
shippers.
|
|
Partnering for
next-level
improvement
|
Canadian
National Railway Company
|
10 |
Canadian
National Railway Company
|
11 |
CN WorldWide North America (CNWW NA), provides integrated end-to-end transportation and logistics services, including warehousing and distribution, trucking, customs brokerage and transportation management. In its first year of operation, CNWW NA’s dedicated sales force has found receptive audiences both among existing CN customers and new ones. |
Canadian
National Railway Company
|
12 |
Toward a
more
seamless
logistics
chain.
|
Going the extra mile with CN precision
As
CN pursues growth opportunities and continuous improvement on its rail
network, it has continued to methodically extend its services beyond rail
to increase the value it can bring to customers. The concept is to apply
CN’s culture of
innovation, operational discipline
and precision transportation model to expand the company’s service
offerings. That concept has taken the form of CN WorldWide (CNWW).
CNWW’s international
division is a unique freight forwarding provider that has gotten a
positive response among global
shippers looking for the end-to-end excellence CN can provide. And in
North America, CNWW’s integrated
transportation offering includes an array of non-rail services that is
already contributing to expanded relationships with CN rail
customers.
|
Canadian
National Railway Company
|
14 |
Canadian
National Railway Company
|
15 |
Canadian
National Railway Company
|
16 |
Canadian
National Railway Company
|
17 |
$ in
millions, except per share data, or unless otherwise
indicated
|
2007
|
(1)
|
2006
|
(1)(2) |
2005
|
(2) | ||||||
Financial
results
|
||||||||||||
Revenues
|
$ | 7,897 | $ | 7,929 | $ | 7,446 | ||||||
Operating
income
|
2,876 | 3,030 | 2,624 | |||||||||
Net
income
|
2,158 | 2,087 | 1,556 | |||||||||
Diluted
earnings per share
|
4.25 | 3.91 | 2.77 | |||||||||
Dividend per
share
|
0.84 | 0.65 | 0.50 | |||||||||
Net capital
expenditures
|
1,387 | 1,298 | 1,180 | |||||||||
Financial
position
|
||||||||||||
Total
assets
|
23,460 | 24,004 | 22,188 | |||||||||
Long-term
debt, including current portion
|
5,617 | 5,604 | 5,085 | |||||||||
Shareholders’
equity
|
10,177 | 9,824 | 9,249 | |||||||||
Financial
ratios (%)
|
||||||||||||
Operating
ratio
|
63.6 | 61.8 | 64.8 | |||||||||
Debt-to-total
capitalization
|
35.6 | 36.3 | 35.5 |
(1) |
The
Company’s financial results for 2007 and 2006 include items affecting the
comparability of the results of operations as discussed on page 33 of this
report.
|
(2) |
The
2006 and 2005 comparative figures have been reclassified in order to be
consistent with the 2007 presentation as discussed on page 42 of this
report.
|
(3) |
Statistical
data are based on estimated data available at such time and subject to
change as more complete information becomes available.
|
(4) |
2007
and 2006 adjusted to exclude items affecting the comparability of the
results of operations. See discussion and reconciliation of this non-GAAP
adjusted performance measure on page 87 of this
report.
|
Canadian
National Railway Company
|
18 |
Canadian
National Railway Company
|
19 |
Canadian
National Railway Company
|
20 |
Canadian
National Railway Company
|
21 |
Petroleum
and chemicals
|
Metals
and minerals
|
Forest
products
|
Coal
|
|||||
We
believe the balance of our commodity mix positions us well to face
economic fluctuations and enhances our potential to grow
revenues.
|
||||||||
Petroleum
and chemicals comprises a wide range of commodities including chemicals,
sulfur, plastics, petroleum and liquefied petroleum gas products. Most of
CN’s petroleum and chemicals shipments originate in the Louisiana
petrochemical corridor between New Orleans and Baton Rouge, in northern
Alberta, and in eastern Canada, destined for customers in Canada, the
United States and overseas.
|
CN’s
metals and minerals commodity group consists primarily of nonferrous base
metals, concentrates, iron ore, steel, construction
materials, machinery and dimensional (large) loads. The
Company’s unique rail access to major mines, ports and smelters throughout
North America, coupled with strategically located transload facilities,
has made CN a leader in the transportation of copper, lead, zinc
concentrates, iron ore, refined metals and aluminum.
|
CN
is one of the largest carriers of forest products in North America,
including various types of lumber, panels, wood pulp and other fibers such
as logs, recycled paper and wood chips. In Canada, CN enjoys superior
access to the major fiber-producing regions; in the United States, CN is
strategically located to serve both the Midwestern and southern U.S.
corridors with interline capabilities to other Class I
railroads.
|
The
coal commodity group moves primarily thermal-grade bituminous coal. CN
delivers Canadian thermal coal to power utilities mostly in eastern
Canada; U.S. thermal coal is transported from mines served in southern
Illinois, or from western U.S. mines via interchange with other railroads,
to major utilities in the Midwest and southeast United States. CN also
transports Canadian metallurgical coal, largely for export via terminals
on the west coast of Canada.
|
|||||
Canadian
National Railway Company
|
22 |
Grain and fertilizers | Intermodal |
Automotive
|
CN
WorldWide International
|
CN
WorldWide North America
|
||||
CN’s grain and fertilizers business consists primarily of commodities from western Canada and the U.S. Midwest. The majority of Canadian grain moved by CN is exported via the ports of Vancouver, Prince Rupert and Thunder Bay. In the United States, CN transports grain grown in Illinois and Iowa for export, domestic processing facilities and feed markets. CN also serves producers of potash, ammonium nitrate, urea and other fertilizers. | The intermodal commodity group comprises two segments: domestic and international. The domestic segment transports consumer products and manufactured goods, operating through retail and wholesale channels within domestic Canada, domestic United States, Mexico and transborder markets. The international segment handles import and export container traffic, directly serving the major ports of Vancouver, Prince Rupert, Montreal, Halifax and New Orleans. |
The
automotive commodity group moves finished vehicles and parts throughout
North America, serving all vehicle assembly plants in Canada, eight in
Michigan and one in Mississippi, in addition to vehicle distribution and
parts production facilities in Canada and the United States. CN also moves
import vehicles via the ports of Halifax and Vancouver, and through
interchange with other railroads.
|
CN
WorldWide International is CN’s global freight forwarding business
headquartered in Rotterdam, The Netherlands. With offices in a growing
number of locations globally, CN WorldWide International brings the
benefits of CN’s rail expertise, knowledge of North American routes and
precision-scheduled operating model to global shippers.
|
CN WorldWide North America offers a complete portfolio of transportation services, including intermodal, ground transportation, warehousing and distribution, transportation management, customs brokerage and bulk handling, on a single-source or stand-alone/bundled basis to customers in the United States and Canada. | ||||
Canadian
National Railway Company
|
23 |
Canadian
National Railway Company
|
24 |
Canadian
National Railway Company
|
25 |
Canadian
National Railway Company
|
26 |
Josh
Hui (left),
Stollery Children’s Hospital “miracle kid,” and his sister
Kaitlyn
(right) get a hug
from LPGA star golfer Morgan Pressel.
Wayne
Gretzky visiting Edmonton’s Stollery Children’s Hospital in support of the
CN Miracle Match
program.
|
|
Canadian
National Railway Company
|
27 |
U.S. GAAP |
Canadian
National Railway Company
|
28 |
30
|
Selected
Railroad Statistics
|
31
|
Management’s
Discussion and Analysis
|
58
|
Management’s
Report on Internal Control over Financial Reporting
|
58
|
Report of
Independent Registered Public Accounting Firm
|
59
|
Report of
Independent Registered Public Accounting Firm
|
60
|
Consolidated
Statement of Income
|
61
|
Consolidated
Statement of Comprehensive Income
|
62
|
Consolidated
Balance Sheet
|
63
|
Consolidated
Statement of Changes in Shareholders’ Equity
|
64
|
Consolidated
Statement of Cash Flows
|
65
|
1
|
Summary of
significant accounting policies
|
67
|
2
|
Accounting
changes
|
68
|
3
|
Acquisitions
|
69
|
4
|
Accounts
receivable
|
69
|
5
|
Properties
|
70
|
6
|
Intangible and
other assets
|
70
|
7
|
Credit
facility
|
70
|
8
|
Accounts
payable and accrued charges
|
70
|
9
|
Other
liabilities and deferred credits
|
72
|
10
|
Long-term
debt
|
73
|
11
|
Capital
stock
|
73
|
12
|
Stock
plans
|
78
|
13
|
Pensions
|
79
|
14
|
Other
income
|
80
|
15
|
Income
taxes
|
80
|
16
|
Segmented
information
|
81
|
17
|
Earnings per
share
|
81
|
18
|
Major
commitments and contingencies
|
84
|
19
|
Financial
instruments
|
86
|
20
|
Accumulated
other comprehensive loss
|
86
|
21
|
Comparative
figures
|
U.S. GAAP |
Canadian
National Railway Company
|
29 |
Year ended December
31,
|
2007
|
2006
|
2005
|
|||||||||
Statistical
operating data
|
||||||||||||
Rail freight revenues ($
millions)
|
7,186 | 7,254 | 6,793 | |||||||||
Gross ton miles (GTM) (millions)
|
347,898 | 352,972 | 342,894 | |||||||||
Revenue ton miles (RTM)
(millions)
|
184,148 | 185,610 | 179,701 | |||||||||
Carloads
(thousands)
|
4,744 | 4,824 | 4,841 | |||||||||
Route miles
(includes
Canada and the
U.S.)
|
20,421 | 20,264 | 19,221 | |||||||||
Employees
(end of
year)
|
22,696 | 22,250 | 21,961 | |||||||||
Employees
(average for
the year)
|
22,389 | 22,092 | 22,637 | |||||||||
Productivity
|
||||||||||||
Operating ratio (%)
|
63.6 | 61.8 | 64.8 | |||||||||
Rail freight revenue per RTM
(cents)
|
3.90 | 3.91 | 3.78 | |||||||||
Rail freight revenue per carload
($)
|
1,515 | 1,504 | 1,403 | |||||||||
Operating expenses per GTM
(cents)
|
1.44 | 1.39 | 1.41 | |||||||||
Labor and fringe benefits expense
per GTM (cents)
|
0.49 | 0.52 | 0.54 | |||||||||
GTMs per average number of
employees (thousands)
|
15,539 | 15,977 | 15,148 | |||||||||
Diesel fuel
consumed (U.S. gallons in
millions)
|
392 | 401 | 403 | |||||||||
Average fuel price ($/U.S.
gallon) (2)
|
2.40 | 2.13 | 1.72 | |||||||||
GTMs per U.S. gallon of fuel consumed
|
887 | 880 | 851 | |||||||||
Safety
indicators
|
||||||||||||
Injury frequency
rate per 200,000 person hours (3)
|
1.9 | 2.1 | 2.4 | |||||||||
Accident rate per million train
miles (3)
|
2.7 | 2.4 | 1.8 |
U.S. GAAP |
Canadian
National Railway Company
|
30 |
U.S. GAAP |
Canadian
National Railway Company
|
31 |
U.S. GAAP |
Canadian
National Railway Company
|
32 |
$ 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
year)
|
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.
|
U.S. GAAP |
Canadian
National Railway Company
|
33 |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
34 |
|
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 | % |
|
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 | %) |
U.S. GAAP |
Canadian
National Railway Company
|
35 |
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 | % |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
36 |
|
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 | – |
|
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
37 |
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 operating
expenses
|
$ | 5,021 | $ | 4,899 | (2 | %) | 63.6 | % | 61.8 | % |
U.S. GAAP |
Canadian
National Railway Company
|
38 |
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 | % |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
39 |
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 | – |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
40 |
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 operating
expenses
|
$ | 4,899 | $ | 4,822 | (2 | %) | 61.8 | % | 64.8 | % |
U.S. GAAP |
Canadian
National Railway Company
|
41 |
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 |
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 | $ | – |
U.S. GAAP |
Canadian
National Railway Company
|
42 |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
43 |
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.
|
U.S. GAAP |
Canadian
National Railway Company
|
44 |
In millions
|
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013 & 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.
|
U.S. GAAP |
Canadian
National Railway Company
|
45 |
U.S. GAAP |
Canadian
National Railway Company
|
46 |
U.S. GAAP |
Canadian
National Railway Company
|
47 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
48 |
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;
|
U.S. GAAP |
Canadian
National Railway Company
|
49 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
50 |
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 |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
51 |
In millions
|
December 31,
2007
|
CN
Pension
Plan
|
BC Rail Ltd
Pension
Plan
|
U.S. and
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 |
U.S. GAAP |
Canadian
National Railway Company
|
52 |
U.S. GAAP |
Canadian
National Railway Company
|
53 |
U.S. GAAP |
Canadian
National Railway Company
|
54 |
U.S. GAAP |
Canadian
National Railway Company
|
55 |
U.S. GAAP |
Canadian
National Railway Company
|
56 |
U.S. GAAP |
Canadian
National Railway Company
|
57 |
U.S. GAAP |
Canadian
National Railway Company
|
58 |
U.S. GAAP |
Canadian
National Railway Company
|
59 |
In millions, except per share
data
|
Year ended December
31,
|
2007
|
2006
|
2005
|
|||||||||
Revenues (1)
|
$ | 7,897 | $ | 7,929 | $ | 7,446 | |||||||
Operating expenses (1)
|
|||||||||||||
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 |
(1)
|
Certain
of the 2006 and
2005 comparative figures have been reclassified in order to be consistent
with the 2007 presentation (see Note
21).
|
U.S. GAAP |
Canadian
National Railway Company
|
60 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
61 |
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
|
U.S. GAAP |
Canadian
National Railway Company
|
62 |
Issued and
|
Accumulated
|
|||||||||||||||||||
outstanding
|
other
|
Total
|
||||||||||||||||||
common
|
Common
|
comprehensive
|
Retained
|
shareholders’
|
||||||||||||||||
In millions
|
shares
|
shares
|
loss
|
earnings
|
equity
|
|||||||||||||||
Balances 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 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 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
December 31, 2007
|
485.2 | $ | 4,283 | $ | (31 | ) | $ | 5,925 | $ | 10,177 |
U.S. GAAP |
Canadian
National Railway Company
|
63 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
64 |
U.S. GAAP |
Canadian
National Railway Company
|
65 |
Asset class
|
Annual
rate
|
|||
Track and
roadway
|
2 | % | ||
Rolling
stock
|
3 | % | ||
Buildings
|
3 | % | ||
Information
technology
|
11 | % | ||
Other
|
8 | % |
(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.
|
U.S. GAAP |
Canadian
National Railway Company
|
66 |
U.S. GAAP |
Canadian
National Railway Company
|
67 |
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 |
(1)
|
On December 31, 2006, just prior
to the adoption of SFAS No. 158, the Company had a minimum pension
liability recorded of
$17 million, with the offsetting amount recorded in Accumulated other
comprehensive loss ($11 million
after-tax).
|
(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.
|
U.S. GAAP |
Canadian
National Railway Company
|
68 |
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
|
||||||||||||||||||||||
Cost
|
Accumulated
depreciation
|
Net
|
Cost
|
Accumulated
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.
|
U.S. GAAP |
Canadian
National Railway Company
|
69 |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
70 |
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 |
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% |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
71 |
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 Securities
PURSSM
(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 |
U.S. GAAP |
Canadian
National Railway Company
|
72 |
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
|
U.S. GAAP |
Canadian
National Railway Company
|
73 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
74 |
In millions, unless otherwise
indicated
|
RSUs (1)
|
Vision
(1)
|
VIDP
(2)
|
Total
|
||||||||||||||||||||||||
2003
|
||||||||||||||||||||||||||||
Year of grant
|
2007
|
2006
|
2005
|
2004
|
2005
|
onwards
|
||||||||||||||||||||||
Stock-based
compensation expense recognized
over vesting 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 |
U.S. GAAP |
Canadian
National Railway Company
|
75 |
Options outstanding
|
Nonvested options
|
|||||||||||||||
Weighted-
|
Weighted-
|
|||||||||||||||
Number of
|
average
|
Number of |
average grant
|
|||||||||||||
options
|
exercise price
|
options
|
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 |
Options outstanding
|
Options exercisable
|
||||||||||||||||||||||||||||
Weighted-
|
Weighted-
|
Aggregate
|
Weighted-
|
Aggregate
|
|||||||||||||||||||||||||
Number of |
average years
|
average
|
intrinsic
|
Number of
|
average
|
intrinsic
|
|||||||||||||||||||||||
Range of exercise prices
|
options
|
to expiration
|
exercise price
|
value
|
options
|
exercise price
|
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 |
U.S. GAAP |
Canadian
National Railway Company
|
76 |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
77 |
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 | % |
U.S. GAAP |
Canadian
National Railway Company
|
78 |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
79 |
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 | ) |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
80 |
(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 | ||||||||
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 |
U.S. GAAP |
Canadian
National Railway Company
|
81 |
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 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
82 |
(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
|
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 |
U.S. GAAP |
Canadian
National Railway Company
|
83 |
(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.
|
U.S. GAAP |
Canadian
National Railway Company
|
84 |
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 |
U.S. GAAP |
Canadian
National Railway Company
|
85 |
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 $(91), $(231), and $27, for
2007, 2006 and 2005, respectively)(1)
|
(307 | ) | (232 | ) | (54 | ) | |||||||
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 | ) |
U.S. GAAP |
Canadian
National Railway Company
|
86 |
Year
ended December 31,
|
2007
|
2006
|
||||||||||||||||||||||
Reported
|
Adjustments(1)
|
Adjusted |
Reported
|
Adjustments(2)
|
Adjusted
|
|||||||||||||||||||
Revenues
|
$ | 7,897 | $ | – | $ | 7,897 | $ | 7,929 | $ | – | $ | 7,929 | ||||||||||||
Operating
expenses
|
5,021 | – | 5,021 | 4,899 | – | 4,899 | ||||||||||||||||||
Operating
income
|
2,876 | – | 2,876 | 3,030 | – | 3,030 | ||||||||||||||||||
Interest
expense
|
(336 | ) | – | (336 | ) | (312 | ) | – | (312 | ) | ||||||||||||||
Other
income
|
166 | (153 | ) | 13 | 11 | – | 11 | |||||||||||||||||
Income
before income taxes
|
2,706 | (153 | ) | 2,553 | 2,729 | – | 2,729 | |||||||||||||||||
Income
tax expense
|
(548 | ) | (280 | ) | (828 | ) | (642 | ) | (277 | ) | (919 | ) | ||||||||||||
Net
income
|
$ | 2,158 | $ | (433 | ) | $ | 1,725 | $ | 2,087 | $ | (277 | ) | $ | 1,810 | ||||||||||
Operating
ratio
|
63.6% | 63.6% | 61.8% | 61.8% | ||||||||||||||||||||
Diluted
earnings per share
|
$ | 4.25 | $ | (0.85 | ) | $ | 3.40 | $ | 3.91 | $ | (0.51 | ) | $ | 3.40 |
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
|
86 |
Canadian
National Railway Company
|
88 |
Employees from across the company were recognized for outstanding achievement in 2007, with the President’s Awards for Excellence. Their accomplishments in the five categories of Service, Cost Control, Asset Utilization, Safety and People made a real difference to CN. |
Canadian
National Railway Company
|
89 |
J.V.
Raymond Cyr, O.C., LL.D.
|
David
G.A. McLean, O.B.C., LL.D.
|
The
Honourable
|
E.
Hunter
Harrison,LL.D.
|
Chairman
of the Board
|
Chairman
of the Board
|
Edward
C. Lumley, P.C., LL.D.
|
President
and
|
PolyValor
Inc.
|
Canadian
National Railway Company
|
Vice-Chairman
|
Chief
Executive Officer
|
Committees:
3, 5*, 7, 8
|
Chairman
of the Board and
|
BMO
Capital Markets
|
Canadian
National Railway Company
|
Chief
Executive Officer
|
Committees:
2, 5, 6, 7, 8*
|
Committees:
4*, 7
|
|
The
McLean Group
|
|||
Committees:
3*, 4, 5, 6, 7, 8
|
James
K. Gray, O.C., A.O.E., LL.D.
|
Edith
E. Holiday
|
Hugh
J. Bolton, FCA
|
Corporate
Director
|
Corporate
Director and Trustee
|
Chairman
of the Board
|
Former
Chairman and
|
Former
General Counsel
|
EPCOR
Utilities Inc.
|
Chief
Executive Officer
|
United
States Treasury Department
|
Committees:
1, 3, 6, 7
|
Canadian
Hunter
Exploration Ltd.
|
Secretary
of the Cabinet
|
|
Committees:
3, 5, 6, 7, 8
|
The
White House
|
|
Committees:
3, 5, 6, 7, 8
|
Canadian
National Railway Company
|
90 |
Ambassador
Gordon D. Giffin
|
Michael
R. Armellino, CFA
|
V.
Maureen Kempston Darkes,
|
Robert
Pace
|
Senior
Partner
|
Retired
Partner
|
O.C.,
D.Comm., LL.D.
|
President
and
|
McKenna
Long & Aldridge
|
The
Goldman
Sachs Group, LP
|
Group
Vice-President
|
Chief
Executive Officer
|
Committees:
2, 5, 6, 7
|
Committees:
1, 2, 7*, 8
|
General
Motors Corporation
|
The
Pace Group
|
President
|
Committees:
1, 3, 6*, 7, 8
|
||
GM
Latin America,
Africa
|
|||
and
Middle East
|
|||
Committees:
2, 5, 7, 8
|
Robert
H. Lee, C.M.,O.B.C., LL.D.
|
A.
Charles Baillie, O.C., LL.D.
|
Denis
Losier, LL.D.
|
Committees:
|
Chairman
|
Former
Chairman and
|
President
and
|
1
Audit
|
Prospero
Group of Companies
|
Chief
Executive Officer
|
Chief
Executive Officer
|
2
Finance
|
Committees:
1, 2, 7, 8
|
The
Toronto-Dominion Bank
|
Assumption
Life
|
3
Corporate governance and
|
Committees:
1, 2*, 6, 7
|
Committees:
1*, 3, 7, 8
|
nominating
|
|
4
Donations
|
|||
5
Environment, safety and security
|
|||
Directors
Emeritus
|
6
Human
resources and compensation
|
||
Purdy
Crawford
|
7
Strategic planning
|
||
Cedric
Ritchie
|
8
Investment
|
||
*denotes
chairman of the committee
|
Canadian
National Railway Company
|
91 |
David
G.A.
McLean
|
Tullio Cedraschi*
|
Sean
Finn
|
Claude
Mongeau
|
Chairman
of the Board
|
President
and
|
Senior
Vice-President
|
Executive
Vice-President and
|
Chief
Executive Officer
|
Public
Affairs,
|
Chief
Financial Officer
|
|
CN
Investment Division
|
Chief
Legal Officer and
|
||
E.
Hunter
Harrison
|
Corporate
Secretary
|
||
President
and
|
Robert
E. Noorigian
|
||
Chief
Executive Officer
|
Mike
Cory
|
Vice-President
|
|
Vice-President
|
James
M. Foote
|
Investor
Relations
|
|
Operations
|
Executive
Vice-President
|
||
Eastern
Region
|
Sales
and Marketing
|
||
Jean-Jacques
Ruest
|
|||
Senior
Vice-President
|
|||
Keith
E. Creel
|
Fred
R. Grigsby
|
Marketing
|
|
Executive
Vice-President
|
Senior
Vice-President and
|
||
Operations
|
Chief
Information Officer
|
||
Gordon
T. Trafton
|
|||
Senior
Vice-President
|
|||
Les
Dakens
|
Stan
Jablonski
|
Southern
Region
|
|
Senior
Vice-President
|
Senior
Vice-President
|
||
People
|
Sales
|
||
Jim
Vena
|
|||
Senior
Vice-President
|
|||
Sameh
Fahmy
|
Western
Region
|
||
Senior
Vice-President
|
|||
Engineering,
Mechanical and
|
|||
Supply
Management
|
|||
*Mr.
Cedraschi retired
|
|||
in
January 2008.
|
|||
His
successor is
|
|||
Russell
Hiscock.
|
Canadian National Railway Company | 92 |
Annual
meeting
|
||
The
annual meeting of shareholders will be held
|
Stock
exchanges
|
|
at
10:00 am (central time) on April 22, 2008 at
|
CN
common shares are listed on the Toronto and
|
|
The
Peninsula Chicago
|
New
York stock
exchanges.
|
|
4th
floor
|
||
Grand Ballroom | Ticker symbols: | |
108
East Superior Street
|
CNR
(Toronto Stock
Exchange)
|
|
Chicago,
Illinois,
U.S.A.
|
CNI
(New
York Stock
Exchange)
|
|
Annual
information form
|
Investor
relations
|
|
The
annual information form may be obtained by writing
to:
|
Robert
Noorigian
|
|
Vice-President, Investor Relations | ||
The
Corporate Secretary
|
Telephone:
(514) 399-0052 or 1-800-319-9929
|
|
Canadian
National Railway Company
|
||
935
de La Gauchetière
Street West
|
||
Montreal,
Quebec H3B
2M9
|
Shareholder
services
|
|
Shareholders
having inquiries concerning their shares
|
||
or wishing to obtain information about CN should contact: | ||
Transfer
agent and registrar
|
||
Computershare
Trust Company of Canada
|
Computershare Trust Company of Canada | |
Shareholder Services | ||
Offices
in:
|
100
University Avenue,
9th Floor
|
|
Montreal,
QC;
Toronto,
ON;
Calgary,
AB;
Vancouver,
BC
|
Toronto,
Ontario M5J
2Y1
|
|
Telephone:
1-800-564-6253
|
||
Computershare
Trust Company, N.A.
|
||
Offices in:
|
||
Golden,
CO
|
Head
office
|
|
|
Canadian
National Railway Company
|
|
Telephone:
1-800-564-6253
|
935
de La Gauchetière
Street West
|
|
www.computershare.com
|
Montreal,
Quebec H3B
2M9
|
|
P.O.
Box 8100
|
||
Dividend
payment options
|
Montreal,
Quebec H3C
3N4
|
|
Shareholders
wishing to receive dividends by Direct Deposit or
in
|
||
U.S.
dollars may obtain detailed information by communicating
with:
|
||
|
||
Computershare
Trust Company of Canada
|
||
Telephone:
1-800-564-6253
|
|
|
|
|
|
Additional
copies of this report are
|
La
version française
du présent
rapport
|
|
available
from:
|
est disponible à l’adresse suivante : | |
CN
Public Affairs
|
Affaires
publiques CN
|
|
935
de La Gauchetière
Street West
|
935,
rue de La Gauchetière
Ouest
|
|
Montreal,
Quebec H3B
2M9
|
Montréal
(Québec)
H3B 2M9
|
|
Telephone:
1-888-888-5909
|
Téléphone
: 1 888 888-5909
|
|
Email:
contact@cn.ca
|
Courriel
: contact@cn.ca
|
|
935 de La Gauchetière Street West, Montreal, Quebec H3B 2M9 |
www.cn.ca
|