Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F | Form 40-F X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes | No X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes | No X |
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes | No X |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
1. | News Release dated July 21, 2008 entitled, "CN reports Q2-2008 net income of C$459 million, or C$0.95 per diluted share, including deferred income tax recovery of C$0.05". |
2. |
Interim Consolidated Financial
Statements and Notes thereto (U.S. GAAP)
|
3. |
Management’s
Discussion and Analysis (U.S. GAAP)
|
4. |
Certificate of
CEO
|
5. | Certificate of CFO |
•
|
Diluted
earnings per share declined six per cent to
C$0.95.
|
•
|
Net
income declined 11 per cent to C$459
million.
|
•
|
Revenues
increased four per cent to C$2,098
million.
|
•
|
Operating
income declined 13 per cent to C$707 million, with the Company’s operating
ratio rising by 6.3 points to 66.3 per
cent.
|
•
|
The
stronger Canadian dollar relative to the U.S. dollar, which affects the
conversion of CN’s U.S. dollar-denominated revenues and expenses, reduced
second-quarter 2008 net income by approximately C$25 million, or C$0.05
per diluted share.
|
Contacts:
|
|
Media
|
Investment
Community
|
Mark
Hallman
|
Robert
Noorigian
|
Director,
Communications, Media
|
Vice-President,
Investor Relations
|
(905)
669-3384
|
(514)
399-0052
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT OF
INCOME (U.S.
GAAP)
|
(In
millions, except per share data)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenues
|
$ | 2,098 | $ | 2,027 | $ | 4,025 | $ | 3,933 | ||||||||
Operating
expenses
|
||||||||||||||||
Labor and
fringe benefits
|
392 | 430 | 853 | 915 | ||||||||||||
Purchased
services and material
|
283 | 263 | 568 | 539 | ||||||||||||
Fuel
|
399 | 249 | 709 | 468 | ||||||||||||
Depreciation
and amortization
|
176 | 168 | 351 | 339 | ||||||||||||
Equipment
rents
|
60 | 62 | 124 | 128 | ||||||||||||
Casualty and
other
|
81 | 44 | 190 | 172 | ||||||||||||
Total
operating expenses
|
1,391 | 1,216 | 2,795 | 2,561 | ||||||||||||
Operating
income
|
707 | 811 | 1,230 | 1,372 | ||||||||||||
Interest
expense
|
(87 | ) | (85 | ) | (173 | ) | (173 | ) | ||||||||
Other
income
|
9 | 1 | 3 | 5 | ||||||||||||
Income before
income taxes
|
629 | 727 | 1,060 | 1,204 | ||||||||||||
Income tax
expense (Note
7)
|
(170 | ) | (211 | ) | (290 | ) | (364 | ) | ||||||||
Net
income
|
$ | 459 | $ | 516 | $ | 770 | $ | 840 | ||||||||
Earnings
per share (Note
8)
|
||||||||||||||||
Basic
|
$ | 0.96 | $ | 1.02 | $ | 1.61 | $ | 1.65 | ||||||||
Diluted
|
$ | 0.95 | $ | 1.01 | $ | 1.59 | $ | 1.63 | ||||||||
Weighted-average
number of shares
|
||||||||||||||||
Basic
|
476.4 | 505.2 | 479.6 | 507.7 | ||||||||||||
Diluted
|
482.0 | 512.3 | 485.3 | 515.1 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED
BALANCE SHEET (U.S.
GAAP)
|
(In
millions)
|
June
30
|
December
31
|
June
30
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
Assets
|
||||||||||||
Current
assets:
|
||||||||||||
Cash and cash
equivalents
|
$ | 161 | $ | 310 | $ | 241 | ||||||
Accounts
receivable (Note
3)
|
843 | 370 | 425 | |||||||||
Material and
supplies
|
217 | 162 | 204 | |||||||||
Deferred
income taxes
|
67 | 68 | 73 | |||||||||
Other
|
88 | 138 | 159 | |||||||||
1,376 | 1,048 | 1,102 | ||||||||||
Properties
|
20,864 | 20,413 | 20,401 | |||||||||
Intangible and
other assets
|
2,113 | 1,999 | 1,664 | |||||||||
Total
assets
|
$ | 24,353 | $ | 23,460 | $ | 23,167 | ||||||
Liabilities
and shareholders' equity
|
||||||||||||
Current
liabilities:
|
||||||||||||
Accounts
payable and accrued charges
|
$ | 1,198 | $ | 1,282 | $ | 1,427 | ||||||
Current
portion of long-term debt
|
85 | 254 | 366 | |||||||||
Other
|
91 | 54 | 62 | |||||||||
1,374 | 1,590 | 1,855 | ||||||||||
Deferred
income taxes (Note
7)
|
5,100 | 4,908 | 4,885 | |||||||||
Other
liabilities and deferred credits
|
1,381 | 1,422 | 1,443 | |||||||||
Long-term debt
(Note
3)
|
6,389 | 5,363 | 5,193 | |||||||||
Shareholders'
equity:
|
||||||||||||
Common
shares
|
4,208 | 4,283 | 4,417 | |||||||||
Accumulated
other comprehensive loss
|
(1 | ) | (31 | ) | (180 | ) | ||||||
Retained
earnings
|
5,902 | 5,925 | 5,554 | |||||||||
10,109 | 10,177 | 9,791 | ||||||||||
Total
liabilities and shareholders' equity
|
$ | 24,353 | $ | 23,460 | $ | 23,167 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S.
GAAP)
|
(In
millions)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Common shares (1)
|
||||||||||||||||
Balance,
beginning of period
|
$ | 4,241 | $ | 4,426 | $ | 4,283 | $ | 4,459 | ||||||||
Stock options
exercised and other
|
19 | 44 | 42 | 67 | ||||||||||||
Share
repurchase programs (Note
3)
|
(52 | ) | (53 | ) | (117 | ) | (109 | ) | ||||||||
Balance, end
of period
|
$ | 4,208 | $ | 4,417 | $ | 4,208 | $ | 4,417 | ||||||||
Accumulated
other comprehensive loss
|
||||||||||||||||
Balance,
beginning of period
|
$ | 9 | $ | (50 | ) | $ | (31 | ) | $ | (44 | ) | |||||
Other
comprehensive income (loss):
|
||||||||||||||||
Unrealized
foreign exchange gain (loss) on:
|
||||||||||||||||
Translation of
the net investment in foreign operations
|
(47 | ) | (477 | ) | 140 | (533 | ) | |||||||||
Translation of
U.S. dollar-denominated long-term debt designated as a hedge of the net
investment in U.S. subsidiaries
|
41 | 391 | (141 | ) | 438 | |||||||||||
Pension and
other postretirement benefit plans (Note
5):
|
||||||||||||||||
Amortization
of net actuarial loss (gain) included in net periodic benefit
cost
|
(1 | ) | 13 | (2 | ) | 25 | ||||||||||
Amortization
of prior service cost included in net periodic benefit
cost
|
6 | 6 | 12 | 11 | ||||||||||||
Other
comprehensive income (loss) before income taxes
|
(1 | ) | (67 | ) | 9 | (59 | ) | |||||||||
Income tax
recovery (expense)
|
(9 | ) | (63 | ) | 21 | (77 | ) | |||||||||
Other
comprehensive income (loss)
|
(10 | ) | (130 | ) | 30 | (136 | ) | |||||||||
Balance, end
of period
|
$ | (1 | ) | $ | (180 | ) | $ | (1 | ) | $ | (180 | ) | ||||
Retained
earnings
|
||||||||||||||||
Balance,
beginning of period
|
$ | 5,823 | $ | 5,434 | $ | 5,925 | $ | 5,409 | ||||||||
Adoption of
new accounting pronouncements (2)
|
- | - | - | 95 | ||||||||||||
Restated
balance, beginning of period
|
5,823 | 5,434 | 5,925 | 5,504 | ||||||||||||
Net
income
|
459 | 516 | 770 | 840 | ||||||||||||
Share
repurchase programs (Note
3)
|
(271 | ) | (291 | ) | (573 | ) | (578 | ) | ||||||||
Dividends
|
(109 | ) | (105 | ) | (220 | ) | (212 | ) | ||||||||
Balance, end
of period
|
$ | 5,902 | $ | 5,554 | $ | 5,902 | $ | 5,554 |
(1)
|
During
the three and six months ended June 30, 2008, the Company issued 0.7
million and 1.5 million common shares, respectively, as a result of stock
options exercised, and repurchased 6.0 million and 13.3 million common
shares, respectively, under its 33.0 million share repurchase program. At
June 30, 2008, the Company had 473.4 million common shares
outstanding.
|
(2)
|
On
January 1, 2007, the Company adopted Financial Accounting Standards Board
(FASB) Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income
Taxes,” and early adopted the measurement date provisions of Statement of
Financial Accounting Standards (SFAS) No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R).” The application of FIN No.
48 on January 1, 2007 had the effect of decreasing the net deferred income
tax liability and increasing Retained earnings by $98 million. The
application of SFAS No. 158 on January 1, 2007 had the effect of
decreasing Retained earnings by $3
million.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
CONSOLIDATED
STATEMENT OF CASH FLOWS (U.S.
GAAP)
|
(In
millions)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Operating
activities
|
||||||||||||||||
Net
income
|
$ | 459 | $ | 516 | $ | 770 | $ | 840 | ||||||||
Adjustments to
reconcile net income to net cash provided from operating
activities:
|
||||||||||||||||
Depreciation
and amortization
|
176 | 169 | 351 | 341 | ||||||||||||
Deferred
income taxes
|
89 | 43 | 114 | 50 | ||||||||||||
Other changes
in:
|
||||||||||||||||
Accounts
receivable
|
(233 | ) | 38 | (468 | ) | 214 | ||||||||||
Material and
supplies
|
(6 | ) | (1 | ) | (54 | ) | (20 | ) | ||||||||
Accounts
payable and accrued charges
|
(58 | ) | (4 | ) | (126 | ) | (406 | ) | ||||||||
Other net
current assets and liabilities
|
41 | 27 | 79 | 9 | ||||||||||||
Other
|
(59 | ) | (22 | ) | (92 | ) | 1 | |||||||||
Cash provided
from operating activities
|
409 | 766 | 574 | 1,029 | ||||||||||||
Investing
activities
|
||||||||||||||||
Property
additions
|
(352 | ) | (344 | ) | (529 | ) | (547 | ) | ||||||||
Other,
net
|
9 | 2 | 20 | 12 | ||||||||||||
Cash used by
investing activities
|
(343 | ) | (342 | ) | (509 | ) | (535 | ) | ||||||||
Financing
activities
|
||||||||||||||||
Issuance of
long-term debt
|
1,597 | 1,050 | 2,652 | 1,484 | ||||||||||||
Reduction of
long-term debt
|
(1,418 | ) | (904 | ) | (1,998 | ) | (1,049 | ) | ||||||||
Issuance of
common shares due to exercise of stock
|
||||||||||||||||
options and
related excess tax benefits realized
|
16 | 41 | 34 | 59 | ||||||||||||
Repurchase of
common shares
|
(323 | ) | (344 | ) | (690 | ) | (687 | ) | ||||||||
Dividends
paid
|
(109 | ) | (105 | ) | (220 | ) | (212 | ) | ||||||||
Cash used by
financing activities
|
(237 | ) | (262 | ) | (222 | ) | (405 | ) | ||||||||
Effect of
foreign exchange fluctuations on U.S. dollar-
|
||||||||||||||||
denominated
cash and cash equivalents
|
(2 | ) | (27 | ) | 8 | (27 | ) | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
(173 | ) | 135 | (149 | ) | 62 | ||||||||||
Cash and cash
equivalents, beginning of period
|
334 | 106 | 310 | 179 | ||||||||||||
Cash
and cash equivalents, end of period
|
$ | 161 | $ | 241 | $ | 161 | $ | 241 | ||||||||
Supplemental
cash flow information
|
||||||||||||||||
Net cash
receipts from customers and other
|
$ | 1,886 | $ | 2,086 | $ | 3,634 | $ | 4,160 | ||||||||
Net cash
payments for:
|
||||||||||||||||
Employee
services, suppliers and other expenses
|
(1,215 | ) | (1,017 | ) | (2,554 | ) | (2,254 | ) | ||||||||
Interest
|
(90 | ) | (73 | ) | (190 | ) | (187 | ) | ||||||||
Workforce
reductions
|
(6 | ) | (7 | ) | (12 | ) | (16 | ) | ||||||||
Personal
injury and other claims
|
(18 | ) | (26 | ) | (44 | ) | (46 | ) | ||||||||
Pensions
|
(31 | ) | (22 | ) | (53 | ) | (23 | ) | ||||||||
Income
taxes
|
(117 | ) | (175 | ) | (207 | ) | (605 | ) | ||||||||
Cash provided
from operating activities
|
$ | 409 | $ | 766 | $ | 574 | $ | 1,029 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
RSUs
|
Vision
2008 Share Unit
Plan
(Vision)
|
Voluntary
Incentive
Deferral
Plan (VIDP)
|
||||||||||||||||||||||
In
millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||||||||||||||||||
Outstanding at
December 31, 2007
|
1.6 | 0.9 | 0.8 | - | 0.2 | 1.9 | ||||||||||||||||||
Granted
|
0.7 | - | - | - | - | - | ||||||||||||||||||
Forfeited
|
(0.1 | ) | - | - | - | - | - | |||||||||||||||||
Vested during
period
|
- | - | - | - | (0.1 | ) | 0.1 | |||||||||||||||||
Payout
|
- | (0.9 | ) | - | - | - | (0.2 | ) | ||||||||||||||||
Conversion
into VIDP
|
- | - | - | - | - | - | ||||||||||||||||||
Outstanding
at June 30, 2008
|
2.2 | - | 0.8 | - | 0.1 | 1.8 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
In
millions, unless otherwise indicated
|
RSUs (1)
|
Vision (1)
|
VIDP (2)
|
Total
|
||||||||||||||||||||||||||||
2003
|
||||||||||||||||||||||||||||||||
Year
of grant
|
2008
|
2007
|
2006
|
2005
|
2004
|
2005
|
onwards
|
|||||||||||||||||||||||||
Stock-based
compensation expense recognized over requisite service
period
|
||||||||||||||||||||||||||||||||
Six months
ended June 30, 2008
|
$ | 9 | $ | - | $ | 7 | N/A | $ | 2 | $ | 2 | $ | 6 | $ | 26 | |||||||||||||||||
Six months
ended June 30, 2007
|
N/A | $ | 13 | $ | 12 | $ | 12 | $ | 3 | $ | 7 | $ | 19 | $ | 66 | |||||||||||||||||
Liability
outstanding
|
||||||||||||||||||||||||||||||||
June 30,
2008
|
$ | 9 | $ | 11 | $ | 36 | N/A | $ | 2 | $ | 10 | $ | 94 | $ | 162 | |||||||||||||||||
December 31,
2007
|
N/A | $ | 11 | $ | 29 | $ | 48 | $ | 4 | $ | 8 | $ | 95 | $ | 195 | |||||||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||||||||||
June 30,
2008
|
$ | 29.63 | $ | 31.25 | $ | 41.63 | N/A | $ | 48.98 | $ | 15.90 | $ | 48.98 | N/A | ||||||||||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||||||||||||||
Six months
ended June 30, 2008
|
$ | - | $ | - | $ | - | N/A | $ | - | $ | - | $ | 2 | $ | 2 | |||||||||||||||||
Six months
ended June 30, 2007
|
N/A | $ | - | $ | - | $ | - | $ | 5 | $ | - | $ | 3 | $ | 8 | |||||||||||||||||
Nonvested
awards at June 30, 2008
|
||||||||||||||||||||||||||||||||
Unrecognized
compensation cost
|
$ | 10 | $ | 4 | $ | 4 | N/A | $ | 2 | $ | 2 | $ | 4 | $ | 26 | |||||||||||||||||
Remaining
recognition period (years)
|
2.50 | 1.50 | 0.50 | N/A | 0.50 | 0.50 | 3.50 | N/A | ||||||||||||||||||||||||
Assumptions
(3)
|
||||||||||||||||||||||||||||||||
Stock price
($)
|
$ | 48.98 | $ | 48.98 | $ | 48.98 | N/A | $ | 48.98 | $ | 48.98 | $ | 48.98 | N/A | ||||||||||||||||||
Expected stock
price volatility (4)
|
22% | 23% | 26% | N/A | N/A | 28% | N/A | N/A | ||||||||||||||||||||||||
Expected term
(years) (5)
|
2.50 | 1.50 | 0.50 | N/A | N/A | 0.50 | N/A | N/A | ||||||||||||||||||||||||
Risk-free
interest rate (6)
|
3.31% | 3.20% | 2.96% | N/A | N/A | 2.59% | N/A | N/A | ||||||||||||||||||||||||
Dividend rate
($) (7)
|
$ | 0.92 | $ | 0.92 | $ | 0.92 | N/A | N/A | $ | 0.92 | N/A | N/A |
(1)
|
Compensation
cost is based on the fair value of the awards at period-end using the
lattice-based valuation model that uses the assumptions as presented
herein, except for time-vested
RSUs.
|
(2)
|
Compensation
cost is based on intrinsic value.
|
(3)
|
Assumptions
used to determine fair value are at June 30,
2008.
|
(4)
|
Based
on the historical volatility of the Company's stock over a period
commensurate with the expected term of the
award.
|
(5)
|
Represents
the remaining period of time that awards are expected to be
outstanding.
|
(6)
|
Based
on the implied yield available on zero-coupon government issues with an
equivalent term commensurate with the expected term of the
awards.
|
(7)
|
Based
on the annualized dividend rate.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Options
outstanding
|
||||||||||||||||
Number of
options
|
Weighted-average
exercise price
|
Weighted-average
years to expiration
|
Aggregate
intrinsic value
|
|||||||||||||
In
millions
|
In
millions
|
|||||||||||||||
Outstanding at
December 31, 2007 (1)
|
14.7 | $ | 24.55 | |||||||||||||
Granted
|
0.9 | $ | 48.51 | |||||||||||||
Forfeited
|
- | $ | - | |||||||||||||
Exercised
|
(1.5 | ) | $ | 17.44 | ||||||||||||
Outstanding at June 30, 2008
(1)
|
14.1 | $ | 27.01 | 4.7 | $ | 311 | ||||||||||
Exercisable at June 30, 2008
(1)
|
11.7 | $ | 23.09 | 3.9 | $ | 303 |
(1)
|
Stock
options with a U.S. dollar exercise price have been translated to Canadian
dollars using the foreign exchange rate in effect at the balance sheet
date.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
In
millions, unless otherwise indicated
|
||||||||||||||||||||
Year
of grant
|
2008
|
2007
|
2006
|
2005
|
Total
|
|||||||||||||||
Stock-based
compensation expense
|
||||||||||||||||||||
recognized
over requisite service period (1)
|
||||||||||||||||||||
Six months
ended June 30, 2008
|
$ | 5 | $ | 1 | $ | 1 | $ | 1 | $ | 8 | ||||||||||
Six months
ended June 30, 2007
|
N/A | $ | 5 | $ | 1 | $ | 1 | $ | 7 | |||||||||||
Fair
value per unit
|
||||||||||||||||||||
At grant date
($)
|
$ | 12.44 | $ | 13.36 | $ | 13.80 | $ | 9.19 | N/A | |||||||||||
Fair
value of awards vested during period
|
||||||||||||||||||||
Six months
ended June 30, 2008
|
$ | - | $ | 3 | $ | 3 | $ | 3 | $ | 9 | ||||||||||
Six months
ended June 30, 2007
|
N/A | $ | - | $ | 4 | $ | 3 | $ | 7 | |||||||||||
Nonvested
awards at June 30, 2008
|
||||||||||||||||||||
Unrecognized
compensation cost
|
$ | 6 | $ | 3 | $ | 2 | $ | 2 | $ | 13 | ||||||||||
Remaining
recognition period (years)
|
3.6 | 2.6 | 1.6 | 0.6 | N/A | |||||||||||||||
Assumptions (1)
|
||||||||||||||||||||
Grant price
($)
|
$ | 48.51 | $ | 52.79 | $ | 51.51 | $ | 36.33 | N/A | |||||||||||
Expected stock
price volatility (2)
|
27% | 24% | 25% | 25% | N/A | |||||||||||||||
Expected term
(years) (3)
|
5.3 | 5.2 | 5.2 | 5.2 | N/A | |||||||||||||||
Risk-free
interest rate (4)
|
3.58% | 4.12% | 4.04% | 3.50% | N/A | |||||||||||||||
Dividend rate
($) (5)
|
$ | 0.92 | $ | 0.84 | $ | 0.65 | $ | 0.50 | N/A |
(1)
|
Compensation
cost is based on the grant date fair value using the Black-Scholes
option-pricing model that uses the assumptions at the grant
date.
|
(2)
|
Based
on the historical volatility of the Company's stock over a period
commensurate with the expected term of the
award.
|
(3)
|
Represents
the period of time that awards are expected to be outstanding. The Company
uses historical data to estimate option exercise and employee termination,
and groups of employees that have similar historical exercise behavior are
considered separately.
|
(4)
|
Based
on the implied yield available on zero-coupon government issues with an
equivalent term commensurate with the expected term of the
awards.
|
(5)
|
Based
on the annualized dividend rate.
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Service
cost
|
$ | 35 | $ | 38 | $ | 70 | $ | 76 | ||||||||
Interest
cost
|
200 | 185 | 400 | 371 | ||||||||||||
Expected
return on plan assets
|
(251 | ) | (235 | ) | (502 | ) | (469 | ) | ||||||||
Amortization
of prior service cost
|
5 | 5 | 10 | 10 | ||||||||||||
Recognized net
actuarial loss
|
- | 14 | - | 27 | ||||||||||||
Net
periodic benefit cost (income)
|
$ | (11 | ) | $ | 7 | $ | (22 | ) | $ | 15 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Service
cost
|
$ | 1 | $ | 1 | $ | 2 | $ | 2 | ||||||||
Interest
cost
|
4 | 3 | 8 | 7 | ||||||||||||
Curtailment
gain
|
(1 | ) | - | (3 | ) | (3 | ) | |||||||||
Amortization
of prior service cost
|
1 | 1 | 2 | 1 | ||||||||||||
Recognized net
actuarial gain
|
(1 | ) | (1 | ) | (2 | ) | (2 | ) | ||||||||
Net
periodic benefit cost
|
$ | 4 | $ | 4 | $ | 7 | $ | 5 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
(i)
|
the lack of
specific technical information available with respect to many
sites;
|
(ii)
|
the absence of
any government authority, third-party orders, or claims with respect to
particular sites;
|
(iii)
|
the potential
for new or changed laws and regulations and for development of new
remediation technologies and uncertainty regarding the timing of the work
with respect to particular sites;
|
(iv)
|
the ability to
recover costs from any third parties with respect to particular sites;
and
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
(a)
|
contracts
granting the Company the right to use or enter upon property owned by
third parties such as leases, easements, trackage rights and sidetrack
agreements;
|
(b)
|
contracts
granting rights to others to use the Company’s property, such as leases,
licenses and easements;
|
(c)
|
contracts for
the sale of assets and securitization of accounts
receivable;
|
(d)
|
contracts for
the acquisition of services;
|
(e)
|
financing
agreements;
|
(f)
|
trust
indentures, fiscal agency agreements, underwriting agreements or similar
agreements relating to debt or equity securities of the Company and
engagement agreements with financial
advisors;
|
(g)
|
transfer agent
and registrar agreements in respect of the Company’s
securities;
|
(h)
|
trust and
other agreements relating to pension plans and other plans, including
those establishing trust funds to secure payment to certain officers and
senior employees of special retirement compensation
arrangements;
|
(i)
|
pension
transfer agreements;
|
(j)
|
master
agreements with financial institutions governing derivative transactions;
and
|
(k)
|
settlement
agreements with insurance companies or other third parties whereby such
insurer or third party has been indemnified for any present or future
claims relating to insurance policies, incidents or events covered by the
settlement agreements.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S.
GAAP)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
In
millions, except per share data
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Net
income
|
$ | 459 | $ | 516 | $ | 770 | $ | 840 | ||||||||
Weighted-average
shares outstanding
|
476.4 | 505.2 | 479.6 | 507.7 | ||||||||||||
Effect of
stock options
|
5.6 | 7.1 | 5.7 | 7.4 | ||||||||||||
Weighted-average
diluted shares outstanding
|
482.0 | 512.3 | 485.3 | 515.1 | ||||||||||||
Basic earnings
per share
|
$ | 0.96 | $ | 1.02 | $ | 1.61 | $ | 1.65 | ||||||||
Diluted
earnings per share
|
$ | 0.95 | $ | 1.01 | $ | 1.59 | $ | 1.63 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
SELECTED RAILROAD
STATISTICS (1)
(U.S.
GAAP)
|
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Statistical
operating data
|
||||||||||||||||
Rail freight
revenues ($ millions)
|
1,876 | 1,848 | 3,636 | 3,602 | ||||||||||||
Gross ton
miles (GTM) (millions)
|
87,287 | 88,344 | 171,614 | 170,085 | ||||||||||||
Revenue ton
miles (RTM) (millions)
|
45,264 | 46,423 | 90,223 | 90,516 | ||||||||||||
Carloads
(thousands)
|
1,188 | 1,204 | 2,320 | 2,335 | ||||||||||||
Route miles
(includes Canada and the U.S.)
|
20,421 | 20,219 | 20,421 | 20,219 | ||||||||||||
Employees (end
of period)
|
23,147 | 22,757 | 23,147 | 22,757 | ||||||||||||
Employees
(average for the period)
|
22,953 | 22,494 | 22,795 | 21,986 | ||||||||||||
Productivity
|
||||||||||||||||
Operating
ratio (%)
|
66.3 | 60.0 | 69.4 | 65.1 | ||||||||||||
Rail freight
revenue per RTM (cents)
|
4.14 | 3.98 | 4.03 | 3.98 | ||||||||||||
Rail freight
revenue per carload ($)
|
1,579 | 1,535 | 1,567 | 1,543 | ||||||||||||
Operating
expenses per GTM (cents)
|
1.59 | 1.38 | 1.63 | 1.51 | ||||||||||||
Labor and
fringe benefits expense per GTM (cents)
|
0.45 | 0.49 | 0.50 | 0.54 | ||||||||||||
GTMs per
average number of employees (thousands)
|
3,803 | 3,927 | 7,529 | 7,736 | ||||||||||||
Diesel fuel
consumed (U.S. gallons in millions)
|
96 | 98 | 195 | 194 | ||||||||||||
Average fuel
price ($/U.S. gallon)
|
3.82 | 2.30 | 3.41 | 2.24 | ||||||||||||
GTMs per U.S.
gallon of fuel consumed
|
909 | 901 | 880 | 877 | ||||||||||||
Safety
indicators
|
||||||||||||||||
Injury
frequency rate per 200,000 person hours (2)
|
1.2 | 1.6 | 1.6 | 1.6 | ||||||||||||
Accident rate
per million train miles (2)
|
2.7 | 1.7 | 2.7 | 2.2 | ||||||||||||
Financial
ratio
|
||||||||||||||||
Debt to total
capitalization ratio (% at end of period)
|
39.0 | 36.2 | 39.0 | 36.2 |
(1)
|
Includes
data relating to companies acquired as of the date of
acquisition.
|
(2)
|
Based
on Federal Railroad Administration (FRA) reporting
criteria.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
SUPPLEMENTARY INFORMATION
(U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
Variance
|
Variance
|
|||||||||||||||||||||||
2008
|
2007
|
Fav
(Unfav)
|
2008
|
2007
|
Fav
(Unfav)
|
|||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||
Revenues
(millions of dollars)
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
322 | 300 | 7 | % | 641 | 603 | 6 | % | ||||||||||||||||
Metals and
minerals
|
239 | 225 | 6 | % | 444 | 423 | 5 | % | ||||||||||||||||
Forest
products
|
357 | 414 | (14 | %) | 687 | 824 | (17 | %) | ||||||||||||||||
Coal
|
107 | 99 | 8 | % | 206 | 188 | 10 | % | ||||||||||||||||
Grain and
fertilizers
|
334 | 322 | 4 | % | 674 | 631 | 7 | % | ||||||||||||||||
Intermodal
|
393 | 346 | 14 | % | 744 | 659 | 13 | % | ||||||||||||||||
Automotive
|
124 | 142 | (13 | %) | 240 | 274 | (12 | %) | ||||||||||||||||
Other
revenues
|
222 | 179 | 24 | % | 389 | 331 | 18 | % | ||||||||||||||||
2,098 | 2,027 | 4 | % | 4,025 | 3,933 | 2 | % | |||||||||||||||||
Revenue
ton miles (millions)
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
7,970 | 8,049 | (1 | %) | 16,396 | 15,919 | 3 | % | ||||||||||||||||
Metals and
minerals
|
4,740 | 4,263 | 11 | % | 8,831 | 8,113 | 9 | % | ||||||||||||||||
Forest
products
|
8,826 | 10,526 | (16 | %) | 17,284 | 20,631 | (16 | %) | ||||||||||||||||
Coal
|
3,638 | 3,744 | (3 | %) | 7,030 | 6,844 | 3 | % | ||||||||||||||||
Grain and
fertilizers
|
10,707 | 10,780 | (1 | %) | 22,536 | 21,568 | 4 | % | ||||||||||||||||
Intermodal
|
8,666 | 8,184 | 6 | % | 16,755 | 15,775 | 6 | % | ||||||||||||||||
Automotive
|
717 | 877 | (18 | %) | 1,391 | 1,666 | (17 | %) | ||||||||||||||||
45,264 | 46,423 | (2 | %) | 90,223 | 90,516 | - | ||||||||||||||||||
Rail
freight revenue / RTM (cents)
|
||||||||||||||||||||||||
Total
rail freight revenue per RTM
|
4.14 | 3.98 | 4 | % | 4.03 | 3.98 | 1 | % | ||||||||||||||||
Commodity
groups:
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
4.04 | 3.73 | 8 | % | 3.91 | 3.79 | 3 | % | ||||||||||||||||
Metals and
minerals
|
5.04 | 5.28 | (5 | %) | 5.03 | 5.21 | (3 | %) | ||||||||||||||||
Forest
products
|
4.04 | 3.93 | 3 | % | 3.97 | 3.99 | (1 | %) | ||||||||||||||||
Coal
|
2.94 | 2.64 | 11 | % | 2.93 | 2.75 | 7 | % | ||||||||||||||||
Grain and
fertilizers
|
3.12 | 2.99 | 4 | % | 2.99 | 2.93 | 2 | % | ||||||||||||||||
Intermodal
|
4.53 | 4.23 | 7 | % | 4.44 | 4.18 | 6 | % | ||||||||||||||||
Automotive
|
17.29 | 16.19 | 7 | % | 17.25 | 16.45 | 5 | % | ||||||||||||||||
Carloads
(thousands)
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
140 | 149 | (6 | %) | 285 | 295 | (3 | %) | ||||||||||||||||
Metals and
minerals
|
272 | 261 | 4 | % | 510 | 492 | 4 | % | ||||||||||||||||
Forest
products
|
136 | 151 | (10 | %) | 263 | 303 | (13 | %) | ||||||||||||||||
Coal
|
90 | 95 | (5 | %) | 177 | 185 | (4 | %) | ||||||||||||||||
Grain and
fertilizers
|
148 | 146 | 1 | % | 299 | 287 | 4 | % | ||||||||||||||||
Intermodal
|
348 | 330 | 5 | % | 675 | 635 | 6 | % | ||||||||||||||||
Automotive
|
54 | 72 | (25 | %) | 111 | 138 | (20 | %) | ||||||||||||||||
1,188 | 1,204 | (1 | %) | 2,320 | 2,335 | (1 | %) | |||||||||||||||||
Rail
freight revenue / carload (dollars)
|
||||||||||||||||||||||||
Total
rail freight revenue per carload
|
1,579 | 1,535 | 3 | % | 1,567 | 1,543 | 2 | % | ||||||||||||||||
Commodity
groups:
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
2,300 | 2,013 | 14 | % | 2,249 | 2,044 | 10 | % | ||||||||||||||||
Metals and
minerals
|
879 | 862 | 2 | % | 871 | 860 | 1 | % | ||||||||||||||||
Forest
products
|
2,625 | 2,742 | (4 | %) | 2,612 | 2,719 | (4 | %) | ||||||||||||||||
Coal
|
1,189 | 1,042 | 14 | % | 1,164 | 1,016 | 15 | % | ||||||||||||||||
Grain and
fertilizers
|
2,257 | 2,205 | 2 | % | 2,254 | 2,199 | 3 | % | ||||||||||||||||
Intermodal
|
1,129 | 1,048 | 8 | % | 1,102 | 1,038 | 6 | % | ||||||||||||||||
Automotive
|
2,296 | 1,972 | 16 | % | 2,162 | 1,986 | 9 | % |
CANADIAN
NATIONAL RAILWAY COMPANY
|
NON-GAAP
MEASURE - unaudited
|
Three
months ended
June
30
|
Six
months ended
June
30
|
|||||||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Cash provided
from operating activities
|
$ | 409 | $ | 766 | $ | 574 | $ | 1,029 | ||||||||
Cash used by
investing activities
|
(343 | ) | (342 | ) | (509 | ) | (535 | ) | ||||||||
Cash provided
before financing activities
|
66 | 424 | 65 | 494 | ||||||||||||
Adjustments:
|
||||||||||||||||
Change in
accounts receivable securitization
|
209 | (65 | ) | 372 | (204 | ) | ||||||||||
Dividends
paid
|
(109 | ) | (105 | ) | (220 | ) | (212 | ) | ||||||||
Effect of
foreign exchange fluctuations on U.S. dollar-denominated cash and cash
equivalents
|
(2 | ) | (27 | ) | 8 | (27 | ) | |||||||||
Free
cash flow
|
$ | 164 | $ | 227 | $ | 225 | $ | 51 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||
$
in millions, except per share data, or unless otherwise
indicated
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
(Unaudited)
|
||||||||||||||||
Financial
results
|
||||||||||||||||
Revenues
|
$ | 2,098 | $ | 2,027 | $ | 4,025 | $ | 3,933 | ||||||||
Operating
income
|
$ | 707 | $ | 811 | $ | 1,230 | $ | 1,372 | ||||||||
Net income
(a)
|
$ | 459 | $ | 516 | $ | 770 | $ | 840 | ||||||||
Operating
ratio
|
66.3% | 60.0% | 69.4% | 65.1% | ||||||||||||
Basic earnings
per share (a)
|
$ | 0.96 | $ | 1.02 | $ | 1.61 | $ | 1.65 | ||||||||
Diluted
earnings per share (a)
|
$ | 0.95 | $ | 1.01 | $ | 1.59 | $ | 1.63 | ||||||||
Dividend
declared per share
|
$ | 0.23 | $ | 0.21 | $ | 0.46 | $ | 0.42 | ||||||||
Financial
position
|
||||||||||||||||
Total
assets
|
$ | 24,353 | $ | 23,167 | $ | 24,353 | $ | 23,167 | ||||||||
Total
long-term financial liabilities
|
$ | 12,870 | $ | 11,521 | $ | 12,870 | $ | 11,521 | ||||||||
Statistical
operating data and productivity measures (b)
|
||||||||||||||||
Employees
(average for the
period)
|
22,953 | 22,494 | 22,795 | 21,986 | ||||||||||||
Gross ton
miles (GTM) per average number of employees (thousands)
|
3,803 | 3,927 | 7,529 | 7,736 | ||||||||||||
GTMs per U.S.
gallon of fuel consumed
|
909 | 901 | 880 | 877 |
(a)
|
The
three and six months ended June 30, 2008 figures include a deferred income
tax recovery of $23 million ($0.05 per basic or diluted share) and $34
million ($0.07 per basic or diluted share), respectively. The three and
six months ended June 30, 2007 figures include a deferred income tax
recovery of $30 million ($0.06 per basic or diluted share). The deferred
income tax recoveries result mainly from the enactment of lower corporate
income tax rates in Canada as further discussed
herein.
|
(b)
|
Based
on estimated data available at such time and subject to change as more
complete information becomes
available.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
In
millions, unless otherwise indicated
|
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||
Rail freight
revenues
|
$ | 1,876 | $ | 1,848 | 2 | % | $ | 3,636 | $ | 3,602 | 1 | % | ||||||||||||
Other
revenues
|
222 | 179 | 24 | % | 389 | 331 | 18 | % | ||||||||||||||||
Total
revenues
|
$ | 2,098 | $ | 2,027 | 4 | % | $ | 4,025 | $ | 3,933 | 2 | % | ||||||||||||
Rail
freight revenues:
|
||||||||||||||||||||||||
Petroleum and
chemicals
|
$ | 322 | $ | 300 | 7 | % | $ | 641 | $ | 603 | 6 | % | ||||||||||||
Metals and
minerals
|
239 | 225 | 6 | % | 444 | 423 | 5 | % | ||||||||||||||||
Forest
products
|
357 | 414 | (14 | %) | 687 | 824 | (17 | %) | ||||||||||||||||
Coal
|
107 | 99 | 8 | % | 206 | 188 | 10 | % | ||||||||||||||||
Grain and
fertilizers
|
334 | 322 | 4 | % | 674 | 631 | 7 | % | ||||||||||||||||
Intermodal
|
393 | 346 | 14 | % | 744 | 659 | 13 | % | ||||||||||||||||
Automotive
|
124 | 142 | (13 | %) | 240 | 274 | (12 | %) | ||||||||||||||||
Total
rail freight revenues
|
$ | 1,876 | $ | 1,848 | 2 | % | $ | 3,636 | $ | 3,602 | 1 | % | ||||||||||||
Revenue ton
miles (RTM) (millions)
|
45,264 | 46,423 | (2 | %) | 90,223 | 90,516 | - | |||||||||||||||||
Rail freight
revenue/RTM (cents)
|
4.14 | 3.98 | 4 | % | 4.03 | 3.98 | 1 | % |
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 322 | $ | 300 | 7 | % | $ | 641 | $ | 603 | 6 | % | ||||||||||||
RTMs (millions)
|
7,970 | 8,049 | (1 | %) | 16,396 | 15,919 | 3 | % | ||||||||||||||||
Revenue/RTM
(cents)
|
4.04 | 3.73 | 8 | % | 3.91 | 3.79 | 3 | % |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 239 | $ | 225 | 6 | % | $ | 444 | $ | 423 | 5 | % | ||||||||||||
RTMs (millions)
|
4,740 | 4,263 | 11 | % | 8,831 | 8,113 | 9 | % | ||||||||||||||||
Revenue/RTM
(cents)
|
5.04 | 5.28 | (5 | %) | 5.03 | 5.21 | (3 | %) |
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 357 | $ | 414 | (14 | %) | $ | 687 | $ | 824 | (17 | %) | ||||||||||||
RTMs (millions)
|
8,826 | 10,526 | (16 | %) | 17,284 | 20,631 | (16 | %) | ||||||||||||||||
Revenue/RTM
(cents)
|
4.04 | 3.93 | 3 | % | 3.97 | 3.99 | (1 | %) |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 107 | $ | 99 | 8 | % | $ | 206 | $ | 188 | 10 | % | ||||||||||||
RTMs (millions)
|
3,638 | 3,744 | (3 | %) | 7,030 | 6,844 | 3 | % | ||||||||||||||||
Revenue/RTM
(cents)
|
2.94 | 2.64 | 11 | % | 2.93 | 2.75 | 7 | % |
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 334 | $ | 322 | 4 | % | $ | 674 | $ | 631 | 7 | % | ||||||||||||
RTMs (millions)
|
10,707 | 10,780 | (1 | %) | 22,536 | 21,568 | 4 | % | ||||||||||||||||
Revenue/RTM
(cents)
|
3.12 | 2.99 | 4 | % | 2.99 | 2.93 | 2 | % |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 393 | $ | 346 | 14 | % | $ | 744 | $ | 659 | 13 | % | ||||||||||||
RTMs (millions)
|
8,666 | 8,184 | 6 | % | 16,755 | 15,775 | 6 | % | ||||||||||||||||
Revenue/RTM
(cents)
|
4.53 | 4.23 | 7 | % | 4.44 | 4.18 | 6 | % |
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||
2008
|
2007
|
%
Change
|
2008
|
2007
|
%
Change
|
|||||||||||||||||||
Revenues (millions)
|
$ | 124 | $ | 142 | (13 | %) | $ | 240 | $ | 274 | (12 | %) | ||||||||||||
RTMs (millions)
|
717 | 877 | (18 | %) | 1,391 | 1,666 | (17 | %) | ||||||||||||||||
Revenue/RTM
(cents)
|
17.29 | 16.19 | 7 | % | 17.25 | 16.45 | 5 | % |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended June 30
|
Six
months ended June 30
|
|||||||||||||||||||||||||||||||||||||||
Percentage
of
|
Percentage
of
|
|||||||||||||||||||||||||||||||||||||||
%
|
revenues
|
%
|
revenues
|
|||||||||||||||||||||||||||||||||||||
In
millions
|
2008
|
2007
|
Change
|
2008
|
2007
|
2008
|
2007
|
Change
|
2008
|
2007
|
||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||
Labor and
fringe benefits
|
$ | 392 | $ | 430 | 9 | % | 18.7 | % | 21.2 | % | $ | 853 | $ | 915 | 7 | % | 21.2 | % | 23.3 | % | ||||||||||||||||||||
Purchased
services and material
|
283 | 263 | (8 | %) | 13.5 | % | 13.0 | % | 568 | 539 | (5 | %) | 14.1 | % | 13.7 | % | ||||||||||||||||||||||||
Fuel
|
399 | 249 | (60 | %) | 19.0 | % | 12.3 | % | 709 | 468 | (51 | %) | 17.6 | % | 11.9 | % | ||||||||||||||||||||||||
Depreciation
and amortization
|
176 | 168 | (5 | %) | 8.4 | % | 8.3 | % | 351 | 339 | (4 | %) | 8.7 | % | 8.6 | % | ||||||||||||||||||||||||
Equipment
rents
|
60 | 62 | 3 | % | 2.8 | % | 3.1 | % | 124 | 128 | 3 | % | 3.1 | % | 3.2 | % | ||||||||||||||||||||||||
Casualty and
other
|
81 | 44 | (84 | %) | 3.9 | % | 2.1 | % | 190 | 172 | (10 | %) | 4.7 | % | 4.4 | % | ||||||||||||||||||||||||
Total
operating expenses
|
$ | 1,391 | $ | 1,216 | (14 | %) | 66.3 | % | 60.0 | % | $ | 2,795 | $ | 2,561 | (9 | %) | 69.4 | % | 65.1 | % |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||
Quarters
|
Quarters
|
Quarters
|
||||||||||||||||||||||||||||||
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
|||||||||||||||||||||||||
Revenues
|
$ | 2,098 | $ | 1,927 | $ | 1,941 | $ | 2,023 | $ | 2,027 | $ | 1,906 | $ | 2,000 | $ | 2,032 | ||||||||||||||||
Operating
income
|
$ | 707 | $ | 523 | $ | 736 | $ | 768 | $ | 811 | $ | 561 | $ | 756 | $ | 844 | ||||||||||||||||
Net
income
|
$ | 459 | $ | 311 | $ | 833 | $ | 485 | $ | 516 | $ | 324 | $ | 499 | $ | 497 | ||||||||||||||||
Basic earnings
per share
|
$ | 0.96 | $ | 0.64 | $ | 1.70 | $ | 0.97 | $ | 1.02 | $ | 0.64 | $ | 0.97 | $ | 0.95 | ||||||||||||||||
Diluted
earnings per share
|
$ | 0.95 | $ | 0.64 | $ | 1.68 | $ | 0.96 | $ | 1.01 | $ | 0.63 | $ | 0.95 | $ | 0.94 | ||||||||||||||||
Dividend
declared per share
|
$ | 0.2300 | $ | 0.2300 | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.2100 | $ | 0.1625 | $ | 0.1625 |
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||
Quarters
|
Quarters
|
Quarters
|
||||||||||||||||||||||||||||||
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
|||||||||||||||||||||||||
Deferred
income tax recoveries (a)
|
$ | 23 | $ | 11 | $ | 284 | $ | 14 | $ | 30 | $ | - | $ | 27 | $ | - | ||||||||||||||||
Gain on sale
of Central Station
|
||||||||||||||||||||||||||||||||
Complex
(after-tax) (b)
|
- | - | 64 | - | - | - | - | - | ||||||||||||||||||||||||
Gain on sale
of investment in
|
||||||||||||||||||||||||||||||||
EWS
(after-tax) (c)
|
- | - | 41 | - | - | - | - | - | ||||||||||||||||||||||||
UTU strike
(after-tax) (d)
|
- | - | - | - | - | (35 | ) | - | - | |||||||||||||||||||||||
Impact
on net income
|
$ | 23 | $ | 11 | $ | 389 | $ | 14 | $ | 30 | $ | (35 | ) | $ | 27 | $ | - | |||||||||||||||
Basic earnings
per share
|
$ | 0.05 | $ | 0.02 | $ | 0.79 | $ | 0.03 | $ | 0.06 | $ | (0.07 | ) | $ | 0.05 | $ | - | |||||||||||||||
Diluted
earnings per share
|
$ | 0.05 | $ | 0.02 | $ | 0.78 | $ | 0.03 | $ | 0.06 | $ | (0.07 | ) | $ | 0.05 | $ | - |
(a)
|
Deferred
income tax recoveries resulted mainly from the enactment of corporate
income tax rate changes in
Canada.
|
(b)
|
The
Company sold its Central Station Complex in Montreal for proceeds of $355
million before transaction costs. A gain of $92 million ($64 million
after-tax) was recognized immediately in Other income
(loss).
|
(c)
|
The
Company sold its 32% ownership interest in EWS for cash proceeds of $114
million, resulting in a gain on disposition of the investment of $61
million ($41 million after-tax), which was recorded in Other income
(loss).
|
(d)
|
A
strike by 2,800 members of the UTU impacted first-quarter 2007 operating
income and net income by approximately $50 million and $35 million,
respectively.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three months ended June 30
|
Six
months ended June 30
|
|||||||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Track and
roadway
|
$ | 297 | $ | 274 | $ | 431 | $ | 421 | ||||||||
Rolling
stock
|
15 | 28 | 68 | 58 | ||||||||||||
Buildings
|
13 | 15 | 17 | 21 | ||||||||||||
Information
technology
|
18 | 18 | 35 | 35 | ||||||||||||
Other
|
9 | 11 | 22 | 20 | ||||||||||||
Gross property
additions
|
352 | 346 | 573 | 555 | ||||||||||||
Less:
capital leases (a)
|
- | 2 | 44 | 8 | ||||||||||||
Property
additions
|
$ | 352 | $ | 344 | $ | 529 | $ | 547 |
(a)
|
During
the three and six months ended June 30, 2008, the Company recorded nil and
$44 million, respectively, in assets it acquired through equipment leases
($2 million and $8 million in the three and six months ended June 30,
2007, respectively), for which an equivalent amount was recorded in
debt.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Three
months ended
June
30
|
Six
months ended
June
30
|
|||||||||||||||
In
millions
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Cash provided
from operating activities
|
$ | 409 | $ | 766 | $ | 574 | $ | 1,029 | ||||||||
Cash used by
investing activities
|
(343 | ) | (342 | ) | (509 | ) | (535 | ) | ||||||||
Cash provided
before financing activities
|
66 | 424 | 65 | 494 | ||||||||||||
Adjustments:
|
||||||||||||||||
Change in
accounts receivable securitization
|
209 | (65 | ) | 372 | (204 | ) | ||||||||||
Dividends
paid
|
(109 | ) | (105 | ) | (220 | ) | (212 | ) | ||||||||
Effect of
foreign exchange fluctuations on U.S.
|
||||||||||||||||
dollar-denominated
cash and cash equivalents
|
(2 | ) | (27 | ) | 8 | (27 | ) | |||||||||
Free
cash flow
|
$ | 164 | $ | 227 | $ | 225 | $ | 51 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
Adjusted
debt-to-total capitalization ratio
|
|||||||||
June
30,
|
2008
|
2007
|
|||||||
Debt-to-total
capitalization ratio (a)
|
39.0% | 36.2% | |||||||
Add:
Present value of operating lease commitments plus securitization financing
(b)
|
3.2% | 4.2% | |||||||
Adjusted
debt-to-total capitalization ratio
|
42.2% | 40.4% | |||||||
Adjusted
debt-to-adjusted EBITDA
|
|||||||||
$
in millions, unless otherwise indicated
|
Twelve
months ended June 30,
|
2008
|
2007
|
||||||
Debt
|
$ | 6,474 | $ | 5,559 | |||||
Add:
Present value of operating lease commitments plus securitization financing
(b)
|
907 | 1,089 | |||||||
Adjusted
debt
|
7,381 | 6,648 | |||||||
Operating
income
|
2,734 | 2,972 | |||||||
Add:
Depreciation and amortization
|
689 | 663 | |||||||
EBITDA
|
3,423 | 3,635 | |||||||
Add:
Deemed interest on operating leases
|
40 | 30 | |||||||
Adjusted
EBITDA
|
$ | 3,463 | $ | 3,665 | |||||
Adjusted
debt-to-adjusted EBITDA
|
2.1
times
|
1.8
times
|
(a)
|
Debt-to-total
capitalization is calculated as total long-term debt plus current portion
of long-term debt divided by the sum of total debt plus total
shareholders’ equity.
|
(b)
|
The
operating lease commitments have been discounted using the Company’s
implicit interest rate for each of the periods
presented.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
2013 &
|
||||||||||||||||||||||||||||
In
millions
|
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
thereafter
|
|||||||||||||||||||||
Long-term debt
obligations (a)
|
$ | 5,347 | $ | 1 | $ | 306 | $ | - | $ | 752 | $ | - | $ | 4,288 | ||||||||||||||
Interest on
long-term debt obligations
|
5,725 | 152 | 313 | 300 | 297 | 264 | 4,399 | |||||||||||||||||||||
Capital lease
obligations (b)
|
1,616 | 65 | 167 | 105 | 170 | 80 | 1,029 | |||||||||||||||||||||
Operating
lease obligations (c)
|
839 | 79 | 135 | 114 | 90 | 72 | 349 | |||||||||||||||||||||
Purchase
obligations (d)
|
863 | 379 | 171 | 112 | 54 | 37 | 110 | |||||||||||||||||||||
Other
long-term liabilities reflected on
|
||||||||||||||||||||||||||||
the balance
sheet (e)
|
946 | 37 | 63 | 57 | 47 | 45 | 697 | |||||||||||||||||||||
Total
obligations
|
$ | 15,336 | $ | 713 | $ | 1,155 | $ | 688 | $ | 1,410 | $ | 498 | $ | 10,872 |
(a)
|
Presented
net of unamortized discounts, of which $835 million relates to
non-interest bearing Notes due in 2094, and excludes capital lease
obligations of $1,127 million which are included in "Capital
lease obligations."
|
(b)
|
Includes
$1,127 million of minimum lease payments and $489 million of imputed
interest at rates ranging from 3.0% to
7.9%.
|
(c)
|
Includes
minimum rental payments for operating leases having initial non-cancelable
lease terms of one year or more. The Company also has operating lease
agreements for its automotive fleet with minimum one-year non-cancelable
terms for which its practice is to renew monthly thereafter. The estimated
annual rental payments for such leases are approximately $30 million and
generally extend over five
years.
|
(d)
|
Includes
commitments for railroad ties, rail, freight cars, locomotives and other
equipment and services, and outstanding information technology service
contracts and
licenses.
|
(e)
|
Includes
expected payments for workers' compensation, workforce reductions,
postretirement benefits other than pensions and environmental liabilities
that have been classified as contractual settlement
agreements.
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
June
30
|
December
31
|
June
30
|
||||||||||
In
millions
|
2008
|
2007
|
2007
|
|||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
Pension
asset
|
$ | 1,858 | $ | 1,768 | $ | 1,329 | ||||||
Pension
liability
|
193 | 187 | 202 | |||||||||
Other
postretirement benefits liability
|
268 | 266 | 276 | |||||||||
Provision for
personal injury and other claims
|
450 | 446 | 520 | |||||||||
Provision for
environmental costs
|
108 | 111 | 117 | |||||||||
Net deferred
income tax provision
|
5,033 | 4,840 | 4,812 | |||||||||
Properties
|
20,864 | 20,413 | 20,401 |
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
CANADIAN
NATIONAL RAILWAY COMPANY
|
MANAGEMENT'S DISCUSSION AND
ANALYSIS (U.S.
GAAP)
|
(1)
|
I have reviewed this report on
Form 6-K of Canadian National Railway
Company;
|
(2)
|
Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
|
(3)
|
Based on my knowledge, the
financial statements, and other financial information included in this
report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this report;
|
(4)
|
The registrant’s other certifying officer and I
are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
|
|
(a)
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by
others within those entities, particularly during the period in which this
report is being prepared;
|
(b)
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated the effectiveness of the
registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation;
and
|
(d)
|
Disclosed in this report any
change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial
reporting; and
|
(5)
|
The registrant's other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's
auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent
functions):
|
(a)
|
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize
and report financial information;
and
|
(b)
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in
the registrant's internal control over financial
reporting.
|
/s/ E.
Hunter Harrison
|
|
E. Hunter
Harrison
|
|
President and
Chief Executive Officer
|
(1)
|
I
have reviewed this report on Form 6-K of Canadian National Railway
Company;
|
(2)
|
Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by
this report;
|
(3)
|
Based on my knowledge, the
financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this
report;
|
(4)
|
The registrant’s other certifying officer and I
are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is
being prepared;
|
(b)
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated the effectiveness of the
registrant’s disclosure controls and
procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
|
(d)
|
Disclosed in this report any
change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial
reporting; and
|
(5)
|
The registrant's other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or persons
performing the equivalent
functions):
|
(a)
|
All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information;
and
|
(b)
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting.
|
/s/ Claude Mongeau | |
Claude
Mongeau
|
|
Executive Vice-President and Chief
Financial
Officer
|
Canadian National Railway Company | |||||
Date: July 25, 2008 | By: | /s/ Cristina Circelli | |||
Name: | Cristina Circelli | ||||
Title: | Deputy
Corporate Secretary and General Counsel |