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 23, 2009 | By: | /s/ Sean Finn | |||
Name: |
Sean
Finn
|
||||
Title: |
Executive
Vice-President
Corporate
Services and Chief Legal Officer
|
1.
|
receiving
the consolidated financial statements for the year ended December 31, 2008
and the auditors’ reports
thereon;
|
2.
|
electing
the directors;
|
3.
|
appointing
the auditors; and
|
4.
|
transacting
such other business as may properly be brought before the Meeting or any
adjournment or postponement
thereof.
|
(Signed) E.
Hunter Harrison
|
(Signed)
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, 2008
and the auditors’ reports
thereon;
|
2.
|
electing
the directors;
|
3.
|
appointing
the auditors; and
|
4.
|
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
|
8
|
Nominees
for Election
to
the Board
|
8
|
Description
of Nominees
|
12
|
Board
of Directors Compensation
|
16
|
Board and
Committee Attendance
|
17
|
Additional
Disclosure Relating to Directors
|
18
|
Statement
of Corporate Governance Practices
|
18
|
General
|
18
|
Code
of Business Conduct
|
19
|
Independence of
Directors
|
19
|
Independent
Chairman of the Board
|
19
|
Position
Descriptions
|
20
|
Election
of Directors
|
20
|
Committees
of the Board
|
21
|
Board
and Committee Meetings
|
22
|
Board
Performance Assessment
|
22
|
Director
Selection
|
24
|
Director
Orientation and Continuing Education
|
24
|
Audit
Committee Disclosure
|
29
|
Statement
of Executive Compensation
|
29
|
Human
Resources and Compensation Committee
|
31
|
Compensation
Discussion and Analysis
|
40
|
Summary
Compensation Table
|
41
|
Incentive
Plan Awards
|
45
|
Employment
Contracts/ Arrangements
|
46
|
Pension
Plan Benefits
|
50
|
Termination
and Change of Control Benefits
|
52
|
Currency
Exchange Information
|
53
|
Other
Information
|
53
|
Securities
Authorized for Issuance Under Equity Compensation
Plans
|
53
|
Indebtedness
of Directors and Executive Officers
|
53
|
Interest
of Informed Persons and Others in Material
Transactions
|
53
|
Directors’ and
Officers’ Insurance
|
53
|
Shareholder
Proposals
|
53
|
Availability
of Documents
|
53
|
Approval
|
54
|
SCHEDULE
"A" – Mandate
of the Board
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
3 |
1.
|
VOTING BY PROXY | |
You are a registered shareholder if your name appears on your share certificate. If this is the case, you may appoint someone else to vote for you as your proxy holder by using the enclosed form of proxy. The persons currently named as proxies in such form of proxy are the Board chair and the President and Chief Executive Officer of the Company. | ||
However, you have the right to appoint any other person or company (who need not be a shareholder) to attend and act on your behalf at the Meeting. That right may be exercised by writing the name of such person or company in the blank space provided in the form of proxy or by completing another proper form of proxy. Make sure that the person you appoint is aware that he or she is appointed and attends the Meeting. | ||
•
|
How can I send
my form of proxy?
|
|
You can either return a duly
completed and executed form of proxy to the transfer agent and registrar
for the Company’s
common shares, Computershare Trust Company of Canada, in the envelope provided, or you
can vote over the Internet by following the instructions on the form of
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 20, 2009, 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 and FOR the appointment of KPMG LLP as auditors 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 | |
If you wish to vote in person, you may present yourself to a representative of Computershare Trust Company of Canada at the registration table. Your vote will be taken and counted at the Meeting. If you wish to vote in person at the Meeting, do not complete or return the form of proxy. |
1.
|
GIVING
YOUR VOTING INSTRUCTIONS
|
Applicable securities laws require your nominee
to seek voting instructions from you in advance of the Meeting.
Accordingly, you will receive or have already received from your nominee a
request for voting instructions for the number of common shares you hold.
Every nominee has its own mailing procedures
and provides its own signature and return instructions, which should be
carefully followed by non-registered shareholders to ensure that their
common shares are voted at the Meeting.
|
|
2.
|
VOTING
IN PERSON
|
However, if you wish to vote in person at the
Meeting, insert your own name in the space provided on the request for
voting instructions provided by your nominee to appoint yourself as proxy
holder and follow the signature and return instructions of your nominee.
Non-registered shareholders who appoint
themselves as proxy holders should present themselves at the Meeting to a representative of
Computershare Trust Company of Canada. Do not otherwise complete the
request for voting instructions sent to you as you will be voting at the
Meeting.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
5 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
6 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
7 |
MICHAEL R.
ARMELLINO, CFA
Age:
69(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
|
80%
|
COMMON
SHARES OWNED
|
OPTIONS
HELD(4)
|
||
Strategic
Planning Committee (Chair)
|
100%
|
OR
CONTROLLED(3)
|
|
||
Audit
Committee
|
100%
|
|
|||
Finance
Committee
|
100%
|
February
2009
|
106,650
|
February
2009
|
Nil
|
Investment Committee of
CN’s Pension Trust
Funds(2)
|
100%
|
February
2008
|
102,150
|
February
2008
|
Nil
|
|
A. CHARLES BAILLIE, O.C.,
LL.D.
Age:
69(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 chair of the board
of directors of Alberta Investment Management Corporation (AIMCo) and
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
|
83%
|
||||
Human Resources and Compensation
Committee
|
100%
|
February
2009
|
133,776(5)
|
February
2009
|
N/A
|
Strategic Planning
Committee
|
100%
|
February
2008
|
127,344(6)
|
February
2008
|
N/A
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
8 |
|
HUGH J. BOLTON,
FCA
Age:
70(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
2009
|
37,346(5)
|
February
2009
|
N/A
|
Strategic Planning
Committee
|
100%
|
February
2008
|
32,270(6)
|
February
2008
|
N/A
|
|
AMBASSADOR GORDON D.
GIFFIN
Age:
59(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 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
2009
|
37,412(5)
|
February
2009
|
27,000
|
Strategic Planning
Committee
|
100%
|
February
2008
|
32,656(6)
|
February
2008
|
27,000
|
|
E. HUNTER HARRISON
Age:
64(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
2009
|
313,329
|
February
2009
|
3,595,000
|
|
|
February
2008
|
308,993
|
February
2008
|
3,505,000
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
9 |
|
EDITH E.
HOLIDAY
Age:
57(1)
Washington,
District
of Columbia,
U.S.A.
Director Since: June 1,
2001
Independent
|
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
2009
|
35,717(5)
|
February
2009
|
27,000
|
Investment
Committee of CN’s Pension Trust
Funds(2)
|
100%
|
February
2008
|
31,200(6)
|
February
2008
|
27,000
|
Strategic Planning
Committee
|
100%
|
|
|
|
V. MAUREEN KEMPSTON
DARKES,
O.C., D. COMM.,
LL.D.
Age:
60(1)
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 Brookfield Asset Management
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)
|
|||
Finance
Committee
|
100%
|
||||
Investment
Committee of CN’s Pension Trust
Funds(2)
|
100%
|
February
2009
|
64,577(5)
|
February
2009
|
40,000
|
Strategic Planning
Committee
|
100%
|
February
2008
|
59,631(6)
|
February
2008
|
40,000
|
|
THE HON. DENIS LOSIER, P.C.,
LL.D.
Age:
56(1)
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. and has recently been named as
a member of the Security Intelligence Review
Committee (Canadian Government) and as such, became a member of the
Privy
Council.
|
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
2009
|
87,441(5)
|
February
2009
|
39,000
|
Strategic Planning
Committee
|
100%
|
February
2008
|
81,378(6)
|
February
2008
|
51,000
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
10 |
|
THE HON. EDWARD C.
LUMLEY,
P.C., LL.D.
Age:
69(1)
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
BCE, 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
2009
|
87,431(5)
|
February
2009
|
Nil
|
Human Resources and Compensation
Committee
|
100%
|
February
2008
|
80,985(6)
|
February
2008
|
51,000
|
Strategic Planning
Committee
|
100%
|
|
|
|
|
DAVID G.A. McLEAN, O.B.C.,
LL.D.
Age:
70(1)
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 aircraft 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
2009
|
177,989(5)
|
February
2009
|
Nil
|
Investment
Committee of CN’s Pension Trust
Funds(2)
|
100%
|
February
2008
|
164,885(6)
|
February
2008
|
Nil
|
Strategic Planning
Committee
|
100%
|
|
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
11 |
|
ROBERT PACE
Age:
54(1)
Halifax, Nova Scotia, Canada
Director Since: October 25,
1994
Independent
|
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
(Chair)
|
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
2009
|
94,975(5)
|
February
2009
|
51,000
|
Investment
Committee of CN’s Pension Trust
Funds(2)
|
100%
|
February
2008
|
88,500(6)
|
February
2008
|
51,000
|
Strategic Planning
Committee
|
100%
|
|
|
(1)
|
The
age of the directors is provided as at the date of the Meeting (i.e., on
April 21, 2009).
|
(2)
|
The
Investment Committee of CN’s
Pension Trust Funds is a mixed committee composed of both members of the
Board of Directors as well as officers of the
Company.
|
(3)
|
The
information regarding common shares beneficially owned, controlled or
directed has been furnished by the respective nominees
individually and includes Directors Restricted Share Units granted as
compensation to directors, but does not include common shares under
options.
|
(4)
|
The
information regarding options comprises the options granted under the
Management Long-Term Incentive
Plan. Mr. Baillie and Mr. Bolton were not members of the Board when
options were granted. No options were granted to non-executive directors
since 2002. On March 8, 2005, the Management Long-Term Incentive Plan was
amended to provide that option grants under
such plan could no longer be made to non-executive
directors.
|
(5)
|
Includes
Directors Restricted Share Units in the following amounts: A. Charles
Baillie: 39,176; Hugh J. Bolton: 34,846; Ambassador Gordon D. Giffin:
14,637; Edith E. Holiday: 4,517; V. Maureen
Kempston Darkes: 23,577; The Hon. Denis Losier: 33,569; The Hon. Edward C.
Lumley: 34,631; David G.A. McLean: 70,079; and Robert Pace: 36,101.
Pursuant to the terms of the Directors Restricted Share Units, directors
or their estates can only access their
Directors Restricted Share Units upon retirement, resignation or
death.
|
(6)
|
Includes
Directors Restricted Share Units in the following amounts: A. Charles
Baillie: 32,744; Hugh J. Bolton: 29,770; Ambassador Gordon D. Giffin:
13,481; Edith E. Holiday: 2,250;
Maureen
Kempston Darkes: 23,131; The Hon. Denis Losier: 28,518; The Hon. Edward C.
Lumley: 28,185; David G.A. McLean: 56,975; and Robert Pace: 29,626.
Pursuant to the terms of the Directors Restricted Share Units, directors
or their estates can only access
their Directors Restricted Share Units upon retirement, resignation or
death.
|
TYPE
OF FEE
|
AMOUNT
AND NUMBER
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$1,500
|
Committee
Meeting Attendance Fee
|
US$1,500
|
Travel
Attendance Fee
|
US$1,500
|
(1)
|
The Board chair receives no
additional Director Retainer nor Committee Chair or Committee Member
Retainer.
|
(2)
|
The directors may choose to
receive all or part of their cash retainer in common shares or DRSUs and
their common share retainer can also be received in DRSUs. The common
shares are purchased on the open
market.
|
(3)
|
Mr. Harrison does not receive any compensation to
serve as director because he is an officer of the
Company.
|
(4)
|
The committee chairs (other than
the Board chair) also receive, as members of a committee, a retainer of
US$3,500.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
12 |
FEES
EARNED (IN CASH)(1)
|
||||||||
NAME
OF DIRECTOR |
DIRECTOR
AND BOARD
CHAIR |
COMMITTEE CHAIR
CASH |
COMMITTEE MEMBER
CASH |
BOARD
AND COMMITTEEFEES(2)
(CAD$)
|
SHARE-BASED
AWARDS
(1,3,4)
(CAD$)
|
ALL
OTHER COMPENSATION
|
TOTAL (CAD$) |
PERCENTAGE
OF TOTAL
FEES |
Michael
R.Armellino
|
15,990
|
15,990
|
14,924
|
51,168
|
217,890
|
3,198(5)
|
319,160
|
68%
|
A.
Charles Baillie
|
-
|
-
|
14,924
|
54,366
|
248,073
|
-
|
317,363
|
78%
|
Hugh
J. Bolton
|
15,990
|
-
|
14,924
|
57,564
|
217,890
|
1,599(5)
|
307,967
|
71%
|
J.V.
Raymond Cyr
|
15,990
|
15,990
|
14,924
|
46,371
|
217,890
|
4,797(5)
|
315,962
|
69%
|
Ambassador
Gordon D. Giffin
|
15,990
|
-
|
14,924
|
54,366
|
217,890
|
4,797(5)
|
307,967
|
71%
|
James
K. Gray
|
-
|
-
|
-
|
60,762
|
250,588
|
3,198(5)
|
314,548
|
80%
|
Edith
E. Holiday
|
15,990
|
-
|
18,655
|
62,361
|
217,890
|
3,198(5)
|
318,094
|
68%
|
V.
Maureen Kempston Darkes
|
15,990
|
-
|
14,924
|
49,569
|
217,890
|
4,797(5)
|
303,170
|
72%
|
Robert
H. Lee
|
15,990
|
-
|
14,924
|
54,366
|
217,890
|
1,599(5)
|
304,769
|
71%
|
The
Hon. Denis Losier
|
15,990
|
15,990
|
14,924
|
57,564
|
217,890
|
1,599(5)
|
323,957
|
67%
|
The
Hon. Edward C. Lumley
|
-
|
-
|
-
|
62,361
|
265,680
|
3,198(5)
|
331,239
|
80%
|
David
G.A. McLean
|
63,960
|
-
|
-
|
63,960
|
641,406
|
12,731(5,6)
|
782,057
|
82%
|
Robert
Pace
|
-
|
-
|
-
|
67,158
|
265,680
|
-
|
332,838
|
80%
|
TOTAL
|
191,880
|
47,970
|
138,047
|
741,936
|
3,414,547
|
44,711
|
4,579,091
|
75%
|
(1)
|
All
directors earned compensation in U.S. currency.
Compensation received in cash was converted to Canadian dollars using the
average rate of exchange of the Bank of Canada for 2008 (1.066), and
compensation received in common shares or DRSUs was converted to Canadian
dollars using the closing rate
of exchange of the Bank of Canada (1.0061) on the first day opened for
trading following the date on which the Board of Directors approved
Directors’ Compensation
(January 24, 2008).
|
(2)
|
Includes
travel fees which amounted to a total of CAD$140,712, in aggregate,
for all directors.
|
(3)
|
Includes
4,500 common shares or DRSUs received by each non-executive director as
part of the Director Retainer (and 12,000 common shares or DRSUs
received
by the Board Chair as part of the Board Chair Retainer). The value of such
grant was calculated as at January 24, 2008 using the average closing
price on such date on the New York and Toronto stock exchanges
(CAD$48.42).
|
(4)
|
In
addition to the common shares
or DRSUs received by the directors and the Board chair as described in
note (3) above, the directors and the Board chair may choose to receive
all or part of their cash retainers in common shares or DRSUs. The
following directors made such election: A.
Charles Baillie, James K. Gray, The Hon. Edward C. Lumley, David G.A.
McLean and Robert Pace. The value of such election is reflected in this
column and was calculated as at January 24, 2008 using the average closing
price on such date on the New York and
Toronto stock exchanges
(CAD$48.42).
|
(5)
|
Such
values represent committee attendance fees received in cash for attendance
to meetings of board committees of which they were not members. In
addition, Mr. McLean received US$6,000 for his participation in
meetings
of the Company’s
Donations Committee. Such values were converted to Canadian dollars using
the average rate of exchange of the Bank of Canada for 2008
(1.066).
|
(6)
|
Includes
the value for 2008 of insurance premiums for life, accidental death and
dismemberment
insurance as well as 2008 medical and dental coverage for Mr. McLean in
Canada and
the U.S. The
total cost to the Company for such benefits is equal to
CAD$3,136.
|
(7)
|
This
percentage is calculated by dividing
the value provided under the share-based awards column by the value
provided under the total
column.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
13 |
OPTION-BASED
AWARDS(1)
|
SHARE-BASED
AWARDS(3)
|
||||||
NAME
OF DIRECTOR
|
DATE
OF GRANT AND
NUMBER
OF SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS
(#)
|
OPTION EXERCISE
PRICE |
OPTION EXPIRATION |
VALUE
OF UNEXERCISED |
NUMBER
OF SHARES OR
UNITS OF |
MARKET
OR PAYOUT VALUE
OFHAVE NOT VESTED(4)
(CAD$)
|
|
Michael
R. Armellino
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
A.
Charles Baillie
|
-
|
-
|
-
|
-
|
-
|
33,196
|
1,486,517
|
Hugh
J. Bolton
|
-
|
-
|
-
|
-
|
-
|
30,181
|
1,351,505
|
J.V.
Raymond Cyr
|
04/26/1999
|
12,000
|
14.76
|
04/26/2009
|
360,300
|
27,595
|
1,235,704
|
01/25/2000
|
12,000
|
11.67
|
01/25/2010
|
397,320
|
|||
01/26/2001
|
15,000
|
16.67
|
01/26/2011
|
421,600
|
|||
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
|||
Ambassador
|
05/01/2001
|
15,000
|
19.83
|
05/01/2011
|
374,200
|
13,663
|
611,829
|
Gordon
D. Giffin
|
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
||
James
K. Gray
|
-
|
-
|
-
|
-
|
-
|
5,850
|
261,963
|
Edith
E. Holiday
|
06/01/2001
|
15,000
|
20.73
|
06/01/2011
|
360,700
|
2,267
|
101,516
|
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
|||
V.
Maureen
|
04/26/1999
|
1,000
|
14.76
|
04/26/2009
|
30,025
|
23,449
|
1,050,046
|
Kempston
Darkes
|
01/25/2000
|
12,000
|
11.67
|
01/25/2010
|
397,320
|
||
01/26/2001
|
15,000
|
16.67
|
01/26/2011
|
421,600
|
|||
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
|||
Robert
H. Lee
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
The
Hon.
|
01/25/2000
|
12,000
|
11.67
|
01/25/2010
|
397,320
|
28,911
|
1,294,635
|
Denis
Losier
|
01/26/2001
|
15,000
|
16.67
|
01/26/2011
|
421,600
|
||
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
|||
The
Hon.
|
|||||||
Edward
C. Lumley
|
-
|
-
|
-
|
-
|
-
|
28,573
|
1,279,499
|
David
G.A. McLean
|
-
|
-
|
-
|
-
|
-
|
57,761
|
2,586,538
|
Robert
Pace
|
04/26/1999
|
12,000
|
14.76
|
04/26/2009
|
360,300
|
30,034
|
1,344,923
|
01/25/2000
|
12,000
|
11.67
|
01/25/2010
|
397,320
|
|||
01/26/2001
|
15,000
|
16.67
|
01/26/2011
|
421,600
|
|||
01/25/2002
|
12,000
|
25.59
|
01/25/2012
|
230,280
|
(1)
|
Shows information regarding
options held by non-executive directors under the Management Long-Term
Incentive Plan as of December 31, 2008. As of the date hereof, all these
options are exercisable. On March 8, 2005, the Management Long-Term
Incentive Plan was amended to provide that option
grants under the Plan could no longer be made to non-executive directors.
While they remain participants in the Plan for previous grants, the last
time non-executive directors received options was in 2002. Mr. Baillie,
Mr. Bolton and Mr. Lee were not
members of the Board when options were granted under the Management
Long-Term Incentive Plan.
|
(2)
|
The value of unexercised
in-the-money options at financial year-end is the difference between the
average closing price of the common shares on December 31, 2008 on the New
York and Toronto stock exchanges (CAD$44.78) and the exercise price, using
the December 31, 2008 closing exchange
rate (1.2180).
|
(3)
|
Shows information regarding
Directors Restricted Share Units held by non-executive directors as of
December 31, 2008. The directors may choose to receive all or part of
their cash retainer in common shares or DRSUs and their common share
retainer can also be received in DRSUs. Pursuant to the terms of the
Directors Restricted Share Units, directors or their estates can only
access their DRSUs upon retirement, resignation or
death.
|
(4)
|
The value of outstanding DRSUs is based on the average
closing price of the common shares on December 31, 2008 on the New York
and Toronto stock exchanges (CAD$44.78), using the December 31, 2008
closing exchange rate
(1.2180).
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
14 |
DIRECTOR
|
YEAR(1)
|
NUMBER
OF
COMMON
SHARES
OWNED,
CONTROLLED
OR
DIRECTED
|
NUMBER
OF
DRSUs
HELD
|
TOTAL
NUMBER
OF
COMMON
SHARES
OWNED,
CONTROLLED
OR
DIRECTED
AND
DRSUs
|
GUIDELINE
MET (✓)
OR
INVESTMENT REQUIRED
TO MEET GUIDELINE
(CAD$)
|
TOTAL
VALUE
OF
COMMON
SHARES
AND DRSUs
(VALUE
AT RISK)(2)
(CAD$)
|
VALUE
AT RISK
AS
MULTIPLE OF
ANNUAL
RETAINER
|
Michael R. Armellino
|
2009
|
106,650
|
-
|
106,650
|
|||
|
2008
|
102,150
|
-
|
102,150
|
✓
|
4,372,980
|
21
|
Net change
|
4,500
|
-
|
4,500
|
||||
A. Charles
Baillie
|
2009
|
94,600
|
39,176
|
133,776
|
|||
2008
|
94,600
|
32,744
|
127,344
|
✓
|
5,485,230
|
27
|
|
Net change
|
-
|
6,432
|
6,432
|
||||
Hugh J.
Bolton
|
2009
|
2,500
|
34,846
|
37,346
|
|||
2008
|
2,500
|
29,770
|
32,270
|
✓
|
1,531,301
|
8
|
|
Net change
|
-
|
5,076
|
5,076
|
||||
Ambassador
|
2009
|
22,775
|
14,637
|
37,412
|
|||
Gordon D.
Giffin
|
2008
|
19,175
|
13,481
|
32,656
|
✓
|
1,534,008
|
8
|
Net change
|
3,600
|
1,156
|
4,756
|
||||
James K.
Gray
|
2009
|
61,798
|
5,881
|
67,679
|
|||
2008
|
57,298
|
5,774
|
63,072
|
✓
|
2,775,048
|
14
|
|
Net change
|
4,500
|
107
|
4,607
|
||||
E. Hunter
Harrison
|
2009
|
313,329
|
-
|
313,329
|
|||
2008
|
308,993
|
-
|
308,993
|
✓
|
12,847,449
|
N/A
|
|
Net change
|
4,336
|
-
|
4,336
|
||||
Edith E.
Holiday
|
2009
|
31,200
|
4,517
|
35,717
|
|||
2008
|
28,950
|
2,250
|
31,200
|
✓
|
1,464,507
|
7
|
|
Net change
|
2,250
|
2,267
|
4,517
|
||||
V. Maureen
|
2009
|
41,000
|
23,577
|
64,577
|
|||
Kempston
Darkes
|
2008
|
36,500
|
23,131
|
59,631
|
✓
|
2,647,857
|
13
|
Net change
|
4,500
|
446
|
4,946
|
||||
Robert H.
Lee
|
2009
|
33,500
|
-
|
33,500
|
|||
2008
|
29,000
|
-
|
29,000
|
✓
|
1,373,604
|
7
|
|
Net change
|
4,500
|
-
|
4,500
|
||||
The Hon. Denis
Losier
|
2009
|
53,872
|
33,569
|
87,441
|
|||
|
2008
|
52,860
|
28,518
|
81,378
|
✓
|
3,585,351
|
18
|
Net change
|
1,012
|
5,051
|
6,063
|
||||
The Hon.
|
2009
|
52,800
|
34,631
|
87,431
|
|||
Edward C.
Lumley
|
2008
|
52,800
|
28,185
|
80,985
|
✓
|
3,584,941
|
18
|
Net change
|
-
|
6,446
|
6,446
|
||||
David G.A.
McLean
|
2009
|
107,910
|
70,079
|
177,989
|
|||
2008
|
107,910
|
56,975
|
164,885
|
✓
|
7,298,099
|
11
|
|
Net change
|
-
|
13,104
|
13,104
|
||||
Robert Pace
|
2009
|
58,874
|
36,101
|
94,975
|
|
||
2008
|
58,874
|
29,626
|
88,500
|
✓
|
3,894,269
|
19
|
|
Net change
|
-
|
6,475
|
6,475
|
(1)
|
The
number of common shares and DRSUs held by each director for 2009 is as at
February 27, 2009 and for 2008 is as at February 29,
2008.
|
(2)
|
The
total value is based on the February 27, 2009 average closing price of the
common shares on the Toronto and New York stock exchanges
(CAD$41.00).
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
15 |
NUMBER
AND % OF MEETINGS ATTENDED
|
||||||||||
DIRECTOR(1)
|
BOARD
|
AUDIT
COMMITTEE
|
CORPORATE
GOVERNANCE
AND
NOMINATING
COMMITTEE
|
ENVI-
RONMENT,
SAFETY
AND
SECURITY
COMMITTEE
|
FINANCE
COMMITTEE
|
HUMAN
RESOURCES
AND
COM-
PENSATION
COMMITTEE
|
INVESTMENT
COMMITTEE
OF
CN’S
PENSION
TRUST
FUNDS
|
STRATEGIC
PLANNING
COMMITTEE
|
COMMITTEES
(TOTAL)
|
OVERALL
ATTENDANCE
|
Michael R.
Armellino
|
8/10
|
6/6
|
-
|
-
|
4/4
|
-
|
5/5
|
3/3
|
18/18
|
26/28
|
(80%)
|
(Chair)
|
(100%)
|
(93%)
|
|||||||
A. Charles
Baillie
|
10/10
|
5/6
|
-
|
-
|
4/4
|
5/5
|
-
|
3/3
|
17/18
|
27/28
|
(100%)
|
(Chair)
|
(94%)
|
(96%)
|
|||||||
Hugh J.
Bolton
|
10/10
|
6/6
|
5/5
|
-
|
-
|
5/5
|
-
|
3/3
|
19/19
|
29/29
|
(100%)
|
(100%)
|
(100%)
|
||||||||
J.V. Raymond Cyr(2)
|
10/10
|
-
|
5/5
|
4/4
|
-
|
-
|
5/5
|
3/3
|
17/17
|
27/27
|
(100%)
|
(Chair)
|
(100%)
|
(100%)
|
|||||||
Ambassador
|
10/10
|
-
|
-
|
4/4
|
4/4
|
5/5
|
-
|
3/3
|
16/16
|
26/26
|
Gordon D.
Giffin
|
(100%)
|
(100%)
|
(100%)
|
|||||||
James K. Gray(3)
|
10/10
|
-
|
4/5
|
3/4
|
-
|
5/5
|
5/5
|
3/3
|
20/22
|
30/32
|
(100%)
|
(91%)
|
(94%)
|
||||||||
E. Hunter
Harrison
|
10/10
|
-
|
-
|
-
|
-
|
-
|
-
|
3/3
|
3/3
|
13/13
|
(100%)
|
(100%)
|
(100%)
|
||||||||
Edith E.
Holiday
|
10/10
|
-
|
5/5
|
4/4
|
-
|
5/5
|
5/5
|
3/3
|
22/22
|
32/32
|
(100%)
|
(100%)
|
(100%)
|
||||||||
V. Maureen
|
10/10
|
-
|
-
|
4/4
|
4/4
|
-
|
5/5
|
3/3
|
16/16
|
26/26
|
Kempston
Darkes
|
(100%)
|
(100%)
|
(100%)
|
|||||||
Robert H. Lee(3)
|
10/10
|
5/6
|
-
|
-
|
4/4
|
-
|
5/5
|
3/3
|
17/18
|
27/28
|
(100%)
|
(94%)
|
(96%)
|
||||||||
The Hon. Denis
Losier
|
10/10
|
6/6
|
5/5
|
-
|
-
|
-
|
5/5
|
3/3
|
19/19
|
29/29
|
(100%)
|
(Chair)
|
(100%)
|
(100%)
|
|||||||
The Hon.
|
10/10
|
-
|
-
|
4/4
|
4/4
|
5/5
|
5/5
|
3/3
|
21/21
|
31/31
|
Edward C.
Lumley
|
(100%)
|
(Chair)
|
(100%)
|
(100%)
|
||||||
David G.A.
McLean
|
10/10
|
-
|
5/5
|
4/4
|
-
|
5/5
|
5/5
|
3/3
|
22/22
|
32/32
|
(100%)
|
(Chair)
|
(100%)
|
(100%)
|
|||||||
(Chair)
|
||||||||||
Robert Pace
|
10/10
|
6/6
|
5/5
|
-
|
-
|
5/5
|
5/5
|
3/3
|
24/24
|
34/34
|
(100%)
|
(Chair)
|
(100%)
|
(100%)
|
(1)
|
All
Board members, other than the members of such following committees,
attended on a non-voting basis the Human Resources and Compensation
Committee meeting held in January 2008 and the Audit Committee meetings
held in April 2008 and July 2008. In addition,
Hugh J. Bolton and Ambassador Gordon D. Giffin attended on a non-voting
basis the Investment Committee meeting held in September 2008 and Michael
R. Armellino attended on a non-voting basis the Human Resources and
Compensation Committee meeting held in December
2008.
|
(2)
|
J.V.
Raymond Cyr retired from the Board on January 4, 2009. Upon his
retirement, V. Maureen Kempston Darkes was appointed Chair of the
Environment, Safety and Security
Committee.
|
(3)
|
James K. Gray and Robert H. Lee
will retire from the Board on the date of the
Meeting.
|
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
|
5
|
Strategic Planning
Committee
|
3
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
16 |
(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;
and
|
(ii)
|
Mr. Lumley, a
director of the Company, was a director of Air Canada when it voluntarily
filed for protection under the Companies’
Creditors Arrangement Act (“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 |
THE CODE OF BUSINESS CONDUCT WAS
REVIEWED AND UPDATED IN
2008.
|
(1)
|
Form
58-101F1 of the Disclosure Instrument (“Form
58-101F1”),
section 2; Governance Policy, section
3.4.
|
(2)
|
Form
58-101F1, section
5; Governance Policy, sections 3.8 and
3.9.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
18 |
9 OF THE 11 NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS ARE
INDEPENDENT.
|
INDEPENDENCE STATUS
|
|||
NAME
|
INDEPENDENT
|
NOT
INDEPENDENT
|
REASON
FOR
NON-
INDEPENDENCE
STATUS
|
Michael R.
Armellino
|
✓
|
A. Charles
Baillie
|
✓
|
||
Hugh J.
Bolton
|
✓
|
||
Ambassador
|
✓
|
||
Gordon D.
Giffin
|
|||
James K.
Gray
|
✓
|
||
E.
Hunter Harrison
|
✓
|
President and
Chief
Executive
Officer of
the
Company
|
|
Edith E.
Holiday
|
✓
|
||
V. Maureen
Kempston
Darkes
|
|
✓
|
Senior
executive
of a major
customer of
the
Company
|
Robert H.
Lee
|
✓
|
||
The Hon. Denis
Losier
|
✓
|
||
The Hon.
Edward C.
Lumley
|
✓
|
||
David G.A.
McLean
|
✓
|
||
Robert Pace
|
✓
|
(1)
|
Form
58-101F1, sections 1(a), (b) and (c); Governance Policy, section
3.1.
|
(2)
|
Form
58-101F1, section 1(f); Governance Policy, section
3.2.
|
(3)
|
Form
58-101F1, sections 3(a) and (b); Governance Policy, section
3.5.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
19 |
THE BOARD OF DIRECTORS HAS ADOPTED
A MAJORITY VOTING POLICY.
|
(1)
|
Form
58-101F1, section
8.
|
(2)
|
Governance
Policy, section
3.13.
|
(3)
|
Form
58-101F1, section 6(c); Governance Policy, section
3.11.
|
(4)
|
Form
58-101F1, section 6(b); Governance Policy, section 3.10. The NYSE
Standards state that a board should appoint a nominating committee
composed entirely of independent directors and that
such committee should have a written charter. The Board has adopted a
written mandate for the Corporate Governance and Nominating Committee
pursuant to which such committee must
be composed solely of independent
directors.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
20 |
IN CAMERA
SESSIONS ARE HELD
BY NON-MANAGEMENT BOARD MEMBERS AT
EVERY IN-PERSON MEETING OF THE BOARD OF
DIRECTORS.
|
(1)
|
Form 58-101F1, section 7(a) and
Governance Policy, section 3.17(b) (regarding
directors).
|
(2)
|
Form 58-101F1, sections 7(a), (b)
and (c) and Governance Policy, sections 3.15, 3.16 and 3.17 (regarding
officers). The NYSE Standards state that the CEO’s compensation should be
determined by the corporation’s compensation committee or by all
independent directors of the corporation. Our Corporate Governance Manual
provides that the CEO’s compensation is determined by
the Company’s independent directors
only. The NYSE Standards state that
a board should appoint a compensation committee composed entirely of
independent directors and that such committee should have a written
charter. The Board has adopted a written mandate for the Human Resources
and Compensation Committee pursuant to which
such committee must be composed solely of independent
directors.
|
(3)
|
Form 58-101F1, section
7(d).
|
(4)
|
Form 58-101F1, section
1(g).
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
21 |
●
|
The
following questionnaires are prepared by the Office of the Corporate
Secretary
and approved by the Corporate Governance and Nominating
Committee and the Board chair, taking into account current issues, the
findings of previous years and input from the Board of
Directors:
|
●
|
Board
and committee performance evaluation questionnaires,
including a self-assessment by individual
directors;
|
●
|
a
Board chair evaluation questionnaire;
and
|
●
|
committee
chair evaluation
questionnaires.
|
●
|
Each
questionnaire is then sent to
every director and a complete set of the responses is forwarded to the
Board chair, except for the responses to the Board chair and Corporate
Governance and Nominating Committee chair evaluation questionnaires, which
are forwarded directly to each of the chairs
of the Audit Committee and the Human Resources and Compensation
Committee.
|
●
|
Following
receipt of the completed questionnaires, the Board chair contacts every
director to discuss the answers received from and in respect of such
director and any comments
to the questionnaires
which the director may have and to review the self-evaluation of each
director. One of the Audit Committee or Human Resources and Compensation
Committee chairs also discusses individually with each director his or her
responses
and comments on the Board chair and Corporate Governance and Nominating
Committee chair evaluation
questionnaires.
|
●
|
Reports
are then made by the Board chair and the Audit Committee and Human
Resources and Compensation Committee chairs to the Board of Directors,
with suggestions to improve the effectiveness of the Board of Directors,
Board committees, Board and committee chairs
and separately to individual directors in respect of their personal
performance.
|
●
|
The
Board chair and committee chairs take into consideration the overall
results and suggestions derived from the annual Board performance
assessment in order to improve
the functioning and activities of the Board and Board
committees.
|
THE BOARD ASSESSMENT PROCESS IS
CONDUCTED ANNUALLY AND IS COMPRISED OF VARIOUS ASSESSMENT
TOOLS.
|
(1)
|
Form 58-101F1, section 1(e);
Governance Policy, section
3.3.
|
(2)
|
Form 58-101F1, section 9;
Governance Policy, section
3.18.
|
(3)
|
Form
58-101F1, section 6(a); Governance Policy, sections 3.12, 3.13 and
3.14.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
22 |
Number
of current directors
|
|
who
meet the criteria
|
|
Sale/Marketing
|
11
|
Finance
|
12
|
Accounting
|
6
|
Legal
|
5
|
Strategy
|
13
|
Human
Resources
|
9
|
Engineering/Environment
|
2
|
Knowledge
of transport industry
|
13
|
Public
policy
|
13
|
●
|
for
candidates that are chief executive officers or other senior executives of
public corporations,
the Board will prefer individuals who hold no more than two (2) public
corporation directorships (excluding CN’s
Board) in addition to membership on the board of the corporation at which
an individual is
employed;
|
●
|
for
candidates that have a full-time employment with non-public corporations
or other entities and for full-time employees of public corporations
(other than chief executive officers or senior executives of such public
corporations), the Board will prefer individuals
who hold no more than four (4) public corporation directorships (excluding
CN’s
Board) in addition to membership on the board of the corporation at which
an individual is employed;
and
|
●
|
for
other candidates, the Board will prefer individuals who
hold no more than five (5) public corporation directorships (excluding
CN’s
Board).
|
THE
BOARD HAS ADOPTED A POLICY LIMITING THE NUMBER OF DIRECTORS SERVING
ON THE SAME OUTSIDE
BOARD.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
23 |
EDUCATIONAL READING MATERIALS AND PRESENTATIONS WERE
PROVIDED TO BOARD MEMBERS ON A VARIETY OF MATTERS AND
TOPICS.
|
●
|
corporate
governance;
|
●
|
executive
compensation;
|
●
|
executive
succession planning;
|
●
|
financial
strategy, risk assessment and
disclosure;
|
●
|
key
accounting considerations;
and
|
●
|
current
Sarbanes-Oxley Act
requirements.
|
(1)
|
Form
58-101F1, sections 4(a) and (b); Governance Policy, sections 3.6 and
3.7.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
24 |
THE AUDIT COMMITTEE IS COMPOSED OF
SIX INDEPENDENT
DIRECTORS.
|
●
|
overseeing financial
reporting;
|
●
|
monitoring risk management and
internal controls;
|
●
|
monitoring internal
auditors;
|
●
|
monitoring external
auditors.
|
(1)
|
NI
52-110, section 2.3, subsection
1.
|
(2)
|
NI
52-110, section 3.1, subsections (1), (2) and (3). The NYSE Standards and
the applicable rules of the SEC require that in order to be considered
independent, a member of the Audit Committee should not, other than in his
or her capacity as a director or member
of a board committee and in other limited circumstances, accept directly
or indirectly any consulting, advisory or other compensatory fee from the
Company or any subsidiary of the Company nor be an affiliated person of
the Company or any subsidiary of
the Company. All members of the Audit Committee are independent pursuant
to such definition.
|
(3)
|
NI
52-110, section 2.3, subsections 5 and
6.
|
(4)
|
NI
52-110, section 2.3, subsection
7.
|
(5)
|
NI
52-110, section 2.3, subsection
2.
|
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 |
ALL MEMBERS OF
THE AUDIT COMMITTEE ARE CONSIDERED TO BE “FINANCIALLY LITERATE”.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
27 |
2008(1)
|
2007(1)
|
|
FEES
|
(CAD$)
|
(CAD$)
|
Audit
|
2,794,000
|
3,170,000
|
Audit-Related
|
1,170,000
|
1,371,000
|
Tax
|
797,000
|
603,000
|
Other
|
–
|
–
|
TOTAL
FEES
|
4,761,000
|
5,144,000
|
THE AUDIT
COMMITTEE AND THE BOARD HAVE PROHIBITED THE COMPANY FROM ENGAGING THE
EXTERNAL AUDITORS TO PROVIDE CERTAIN NON-AUDIT
SERVICES.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
28 |
•
|
ensuring that appropriate
mechanisms are in place regarding succession planning for the position of
President and Chief Executive Officer (“CEO”);
|
•
|
reviewing executive
management’s
performance
assessment and succession
planning;
|
•
|
recommending to the Board of
Directors executive management’s
compensation;
|
•
|
reviewing human resources
practices by ensuring, amongst other things, that appropriate human
resources systems are in place so that the Company can
attract, motivate and retain the quality of personnel required to meet its
business objectives.
|
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 bonus payout for 2008 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.
|
OTHER
|
-
|
Monitored labour
negotiations
|
-
|
Reviewed the
Committee’s corporate
governance and compensation disclosure
practices
|
-
|
Reviewed and approved new
corporate governance policies on change of control, non-compete and
executive compensation
clawback
|
-
|
Approved the
Committee’s report
for inclusion in the management information
circular
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
29 |
TYPE
OF FEE
|
BILLED
IN
2007
($)
|
BILLED
IN
2008
($)
|
PERCENTAGE
OF
TOTAL
FEES
BILLED
IN
2008 (%)
|
Human
Resources and
Compensation |
68,000
|
92,000
|
100
|
Management
Work
|
0
|
0
|
0
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
30 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
31 |
COMPONENTS
|
DESCRIPTION
|
BENCHMARKING
|
OBJECTIVE &
RATIONALE
|
Base Salary
|
• Fixed rate of
pay, with annual review
|
• Salaries are benchmarked
annually to the
|
• Provide competitive level of
fixed
|
• Generally paid
in U.S. dollars
|
median (50th percentile) of the
comparator
|
compensation
|
|
groups
|
• Recognize sustained
individual performance
|
||
• Individual salary
recommendations are
|
|||
based on competitive assessment,
individual
|
|||
performance and retention
considerations
|
|||
Annual
Incentive
|
• Annual bonus payout to
approximately
|
• Target payout is established
to position total
|
• Reward the achievement
of a balanced set
|
Bonus Plan
|
4,000 eligible management
employees
|
cash compensation (base salary +
target
|
of annual corporate financial
objectives
|
based upon performance against
pre-
|
annual incentive payout) between
50th and
|
• Reward the achievement
of personal
|
|
determined financial and other
targets for
|
75th percentile of the comparator
groups
|
objectives linked to financial and
operating
|
|
the year
|
results, safety, customer service
and
|
||
• Payout linked to the
achievement of
|
leadership
|
||
corporate (70%) and personal
(30%)
|
• Drive superior
corporate and individual
|
||
objectives
|
performance
|
||
• Target payout is 70% of base
salary for
|
|||
Executive Vice-Presidents and 140%
for the
|
|||
President and
CEO
|
|||
• Maximum payout is equal
to twice the
|
|||
Target
Payout
|
|||
Long-Term
Incentive
|
• Combination of restricted
share units and
|
• Awards are established
to position total
|
• Align management
interest with
|
stock options of approximately
equal value,
|
direct compensation (base salary +
annual
|
shareholders’ value growth and
provide
|
|
except for the
CEO
|
incentive target payout +
long-term
|
retention of key
talent
|
|
incentive award value) at
approximately the
|
• Recognize individual
contribution and
|
||
Restricted Share
Units
|
75th percentile of the comparator
group,
|
potential
|
|
• Performance-based share
units, payable in
|
when aggressively set goals are
achieved
|
||
cash after three
years
|
|||
• Performance vesting
subject to attainment
|
|||
of targets related to average
return on
|
|||
invested capital over three
years
|
|||
• Payout conditional upon
minimum share
|
|||
price during the last three months
of the
|
|||
plan period
|
|||
Stock
Options
|
|||
• 10-year term; 25% per year
vesting over
|
|||
the first four
years
|
|||
• Granted in the currency
of the
|
|||
recipient’s salary
|
1.
|
Corporate financial performance: 70% of
the bonus was linked to the achievement of a balanced set of goals that
contribute to the Company’s long-term financial growth and
profitability. The corporate performance factor can range from 0% to 200% for NEOs.
Corporate performance is measured against objectives set by the Board of
Directors. In 2008, the Board of Directors assessed the
Company’s performance
against established targets for revenues, operating income, diluted
earnings per share, free cash flow
and return on invested capital (ROIC), with each measure carrying an equal
weight. The targets were approved by the Board of Directors in January
2008 based on the Company’s economic outlook at that
time.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
32 |
CORPORATE
OBJECTIVES(1)
|
2008
|
|
||
IN MILLIONS
EXCEPT
|
BASE
|
STRETCH
|
RESULTS(2)
|
PERFORMANCE
|
PER SHARE
DATA
|
(CAD$)
|
(CAD$)
|
(CAD$)
|
ASSESSMENT
|
Revenues
|
8,035
|
8,190
|
8,482
|
Exceeds
|
Operating
Income
|
2,739
|
2,859
|
2,894
|
Exceeds
|
Diluted
Earnings
|
||||
Per
Share
|
$3.38
|
$3.55
|
$3.95
|
Exceeds
|
Free
Cash Flow(3)
|
600
|
700
|
794
|
Exceeds
|
ROIC
|
13.1%
|
13.6%
|
13.7%
|
Exceeds
|
(1)
|
Objectives set assuming a foreign
exchange rate of US$1 =
CAD$0.95.
|
(2)
|
Foreign exchange rate experienced
was US$1 = CAD$1.06.
|
(3)
|
See page 89 of the 2008 Annual
report for a discussion and reconciliation of this non-GAAP
measure.
|
CORPORATE
OBJECTIVES
|
2008
|
|
||
IN MILLIONS
EXCEPT
|
BASE
|
STRETCH
|
RESULTS(2)
|
PERFORMANCE
|
PER SHARE
DATA
|
(CAD$)
|
(CAD$)
|
(CAD$)
|
ASSESSMENT
|
Does
not
|
||||
Revenues(1)
|
8,538
|
8,702
|
8,482
|
meet
|
Operating
|
Does
not
|
|||
Income(1)
|
2,915
|
3,042
|
2,894
|
meet
|
Diluted
Earnings
|
||||
Per
Share(1)
|
$3.59
|
$3.77
|
$3.95
|
Exceeds
|
Free
Cash
|
Partially
|
|||
Flow(1)(3)
|
700
|
800
|
794
|
Exceeds
|
ROIC
|
13.1%
|
13.6%
|
13.7%
|
Exceeds
|
(1)
|
Objectives adjusted to reflect the
experienced foreign exchange rate of US$1 = CAD$1.06 vs. CAD$0.95 assumed
when set in January 2008.
|
(2)
|
Foreign exchange rate experienced
was US$1 = CAD$1.06.
|
(3)
|
See page 89 of the 2008 Annual
Report for a discussion and reconciliation of this
non-GAAP measure.
|
2.
|
Individual performance: 30% of the bonus was based on the
achievement of personal business-oriented goals linked to financial and
operating results, safety, customer service and leadership. The individual
performance factor can range from 0% to 200% for executives, based on
individual assessments approved by the
Board of Directors. Any payout under the individual component is
conditional upon a payout being declared under the corporate
component.
|
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
|
33 |
PERFORMANCE
|
||
OBJECTIVE
|
VESTING
FACTOR
|
|
Below
13%
|
0%
|
|
Performance
Objective:
|
13%
|
50%
|
Average
ROIC during the
|
14%
|
100%
|
three-year
period ending on
|
15%
|
125%
|
December
31, 2010
|
16%
and above
|
150%
|
Payout
Condition:
|
CAD$48.60
on the TSX
|
|
Minimum
average closing share price
|
or
|
|
for
the last three months of 2010
|
US$48.44
on the NYSE
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
34 |
|
PERFORMANCE
|
||
VESTING
|
|||
OBJECTIVE
|
FACTOR
|
RESULTS
|
|
Below
12%
|
0%
|
||
Performance
Objective:
|
12%
|
50%
|
|
Average
ROIC for the
|
13%
|
100%
|
15.7%
|
three-year
period ending
|
14%
|
125%
|
|
on
December 31, 2008
|
15%
and above
|
150%
|
|
Payout
Condition:
|
|||
Minimum
average
|
CAD$46.43
on the TSX
|
||
closing
share price
|
or
|
CAD$46.11
|
|
for
the last three
|
US$39.99
on the NYSE
|
US$38.23
|
|
months
of 2008
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
35 |
OBJECTIVE
|
PERFORMANCE
|
OBJECTIVE
|
||
SHARE PRICE ON
TSX
|
VESTING
FACTOR
|
SHARE PRICE ON
NYSE
|
RESULTS
|
|
Performance
Objective:
|
||||
Highest
20-day average closing share
|
CAD$50.00
and below
|
0%
|
US$41.00
and below
|
|
price
between July 1, 2008 and
|
CAD$61.25
|
25%
|
US$50.25
|
|
December
31, 2008
|
CAD$72.50
and above
|
50%
|
US$59.50
and above
|
|
Highest
20-day average
|
CAD$54.77
|
US$52.57
|
42%
|
|
Payout
Condition:
|
||||
a)
Minimum average ROIC between
|
10%
|
15%
|
||
January
1, 2005 and December 31, 2008
|
||||
b)
Minimum average closing share price for
|
CAD$50.00
on the TSX or
|
CAD$42.95
|
||
the
last 20 days of 2008
|
US$41.00
on the NYSE
|
US$34.87
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
36 |
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
|
37 |
a)
|
in the event the ownership
restrictions in the CN Commercialization Act are repealed, a formal bid
for a majority of the
Company’s outstanding
common shares;
|
b)
|
approval by the
Company’s
shareholders of an amalgamation, merger or consolidation of the Company
with or into another corporation, unless the definitive agreement of such
transaction provides that at least 51% of the directors of the
surviving or resulting corporation immediately after the transaction are
the individuals who at the time of such transaction constitute the Board
and that, in fact, these individuals continue to constitute at least 51%
of the board of directors of the
surviving or resulting corporation during a period of two consecutive
years; or
|
c)
|
approval by the
Company’s
shareholders of a plan of liquidation or dissolution of the
Company.
|
a)
|
the use of confidential
information of CN for any purpose other than performing his or her duties
with CN;
|
b)
|
engaging in any business that competes with
CN;
|
c)
|
soliciting, accepting the business
of a customer, client, supplier or distributor of CN or hiring or engaging
employees of CN;
|
d)
|
taking advantage or profit from
any business opportunity of which they became aware in the course of employment
with CN; and
|
e)
|
taking any action as a result of
which relations between CN and its consultants, customers, clients,
suppliers, distributors, employees or others may be impaired or which
might otherwise be detrimental to the business interests or
reputation of CN.
|
a)
|
the amount of incentive
compensation received
by the executive or former executive officer was calculated based upon, or
contingent on, the achievement of certain financial results that were
subsequently the subject of or affected by a restatement of all or a
portion of the Company’s financial
statements,
|
b)
|
the executive officer engaged in
gross negligence, intentional misconduct or fraud that caused or partially
caused the need for the restatement, and
|
c)
|
the incentive compensation payment
received would have been lower had the financial results been properly
reported.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
38 |
DEC-03
|
DEC-04
|
DEC-05
|
DEC-06
|
DEC-07
|
DEC-08
|
|
CNR
|
$100
|
$133
|
$172
|
$187
|
$177
|
$174
|
S&P/TSX
|
$100
|
$114
|
$142
|
$167
|
$183
|
$123
|
S&P 500
|
$100
|
$111
|
$116
|
$134
|
$141
|
$89
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
39 |
NAME AND PRINCIPAL
POSITION
|
YEAR
|
SALARY
($)
|
SHARE-BASED
AWARDS(2,3)
($)
|
OPTION- BASED
AWARDS(2,4)
($)
|
NON-EQUITY
INCENTIVE
PLAN
COMPENSATION
– ANNUAL
INCENTIVE
PLANS(5)
($)
|
PENSION
VALUE(6)
($)
|
ALL
OTHER
COMPENSATION(7)
($)
|
TOTAL
COMPENSATION
($)
|
E. Hunter
Harrison
|
||||||||
President and Chief Executive
Officer
|
2008
|
1,790,880
|
3,450,745
|
1,799,124
|
3,575,195
|
1,620,129
|
1,113,975
|
13,350,048
|
Claude
Mongeau
|
||||||||
Executive Vice-President
and
|
||||||||
Chief Financial
Officer
|
2008
|
570,310
|
821,606
|
744,465
|
569,293
|
76,000
|
2,029
|
2,783,703
|
James M.
Foote
|
||||||||
Executive
Vice-President,
|
||||||||
Sales and
Marketing
|
2008
|
570,310
|
821,606
|
744,465
|
569,293
|
(28,160)
|
14,861
|
2,692,375
|
Keith E.
Creel
|
||||||||
Executive Vice-President,
Operations
|
2008
|
487,695
|
821,606
|
744,465
|
510,707
|
194,803
|
131,835
|
2,891,111
|
Sean Finn
|
||||||||
Executive Vice-President,
Corporate
|
||||||||
Services and Chief Legal
Officer(1)
|
2008
|
492,137
|
575,124
|
521,125
|
462,962
|
207,000
|
2,482
|
2,260,830
|
(1)
|
Mr.
Finn was appointed Executive Vice-President, Corporate Services and Chief
Legal Officer, effective December 1, 2008.
|
|
(2)
|
Represents
the grant
date fair value of awards calculated in accordance with Statement of
Financial Accounting Standards (SFAS) No.123(R), “Share-Based
Payment” under
U.S. Generally
Accepted Accounting Principles (U.S. GAAP).
The grant date fair values stated in the Summary Compensation
Table are
aligned with the fair market values presented to the Committee for the
approval of the restricted share unit and stock option
awards.
|
|
(3)
|
Represents
the award of performance-based restricted share units under the Restricted
Share Units
Plan. The grant date fair value is determined using the lattice-based
valuation model and considers the following
assumptions:
|
|
i.
|
Closing
share price on grant date: CAD$48.46
|
|
ii.
|
Risk-free
interest rate over the term of the award: 3.43%
|
|
iii.
|
Expected
stock price volatility over the term of the award:
22%
|
|
iv.
|
Expected
dividend yield: CAD$0.92
|
|
The methodology used in determining the assumptions is disclosed in Note 11 – Stock plans on page 75 of the 2008 Annual report. | ||
(4)
|
Represents
the award of
stock options pursuant to the Management Long-Term Incentive Plan. The
grant date fair value is determined using the Black-Scholes option pricing
model and considers the following
assumptions:
|
|
i.
|
Closing
share price on grant date: CAD$48.46
|
|
ii.
|
Risk-free
interest rate over the expected life of the options:
3.58%
|
|
iii.
|
Expected
stock price volatility over the expected life of the options:
27%
|
|
iv.
|
Expected
dividend yield: CAD$0.92
|
|
|
v
|
Expected
term: 5.3 years
|
The
methodology used in determining the
assumptions is disclosed in Note 11 – Stock
plans on page 75 of the 2008 Annual
report.
|
||
(5)
|
Represents
the incentive earned under the Annual Incentive Bonus Plan for year 2008.
Refer to page 32 for the details of the AIBP.
|
|
(6)
|
Includes
the compensatory
value of pension benefits as reported in the “Defined
Benefit Plans” and
“Defined
Contribution Plans” tables
in the “Pension
Plan Benefits” section.
|
|
(7)
|
Includes
the value of perquisites, other personal benefits and other compensation
(as applicable), for
example post-retirement benefits, tax gross-up or tax protection such that
net income after taxes is not less than it would have been in the U.S.
Perquisites and other personal benefits that in aggregate amount to less
than CAD$50,000 or 10% of the total
salary for any of the Named Executive Officers, are not reported in this
column. Details are provided in the table on the following
page.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
40 |
NAME
|
PERQUISITES
AND OTHER PERSONAL
BENEFITS(2)($)
|
OTHER COMPENSATION |
ALL
OTHER COMPENSATION |
E. Hunter Harrison(3)
|
Personal Use
of
|
Tax Gross-up:
157,756
|
1,113,975
|
Company Aircraft(4): 937,000
|
|||
Other Perquisites:
19,219
|
|||
Claude
Mongeau
|
Nil
|
Post-retirement
benefits(5): 2,029
|
2,029
|
James M.
Foote
|
Nil
|
Tax Gross-up:
14,861
|
14,861
|
Keith E.
Creel
|
Nil
|
Tax Gross-up:
37,691
|
131,835
|
Tax Protection:
94,144
|
|||
Sean Finn
|
Nil
|
Post-retirement
benefits(5): 2,482
|
2,482
|
(1)
|
Amounts
are calculated
based on the incremental cost to the
Company.
|
(2) |
Perquisites
and other personal benefits include the use of company-leased vehicle,
club membership, financial counselling, and certain healthcare and life
insurance benefits exceeding coverage offered
to salaried employees. See section “Executive
Perquisites” on
page 36 for details. Perquisites and other personal benefits that in
aggregate amount to less than CAD$50,000 or 10% of the total salary for
any of the Named Executive Officers, are reported
as “Nil” in
this column.
|
(3) |
Mr.
Harrison’s
basic life insurance coverage before retirement is equal to 3 times his
salary without limitation. The first US$1 million is covered under the
regular management plan. The coverage in excess of US$1 million
is
self-insured by the Company for which no additional premiums are paid. In
addition to the post-retirement benefits offered to all salaried
employees, Mr. Harrison has a post-retirement life insurance benefit of
US$1 milllion, for which there are no current
service costs since it has been fully expensed by the
Company.
|
(4) |
This
amount reflects the value of Mr. Harrison’s
personal travel on Company owned or leased aircraft. This value is based
on aggregate incremental operating costs to the Company, such
as
fuel costs, trip-related maintenance, landing fees and other miscellaneous
variable costs. It is the Company’s
policy, for efficiency and security reasons, to require that the CEO use
Company aircraft for personal as well as business use. It is also a
condition
of Mr. Harrison’s
employment arrangements with CN. Following Mr. Harrison’s
retirement, the Company’s
policy will require that the use of corporate aircraft be solely for
business purposes for all executive officers of
CN.
|
(5) |
Represents
the service
cost for post-retirement life and medical
insurance.
|
NAME
|
GRANT
DATE
|
AWARD
TYPE
|
SECURITIES,
UNITS
OR
OTHER RIGHTS
(#)
|
END
OF PLAN PERIOD OR
EXPIRY DATE |
SHARE
PRICE
ON
DATE OF GRANT
($)
|
AWARD’S
GRANT
DATE
FAIR VALUE(1)
($)
|
E. Hunter
Harrison
|
January 24,
2008
|
RSUs(2)
|
126,000
|
December 31,
2010
|
48.46
|
3,450,745
|
Options(3)
|
145,000
|
January 24,
2018
|
48.46
|
1,799,124
|
||
Claude
Mongeau
|
January 24,
2008
|
RSUs(2)
|
30,000
|
December 31,
2010
|
48.46
|
821,606
|
Options(3)
|
60,000
|
January 24,
2018
|
48.46
|
744,465
|
||
James M.
Foote
|
January 24,
2008
|
RSUs(2)
|
30,000
|
December 31,
2010
|
48.46
|
821,606
|
Options(3)
|
60,000
|
January 24,
2018
|
48.46
|
744,465
|
||
Keith E.
Creel
|
January 24,
2008
|
RSUs(2)
|
30,000
|
December 31, 2010
|
48.46
|
821,606
|
Options(3)
|
60,000
|
January 24,
2018
|
48.46
|
744,465
|
||
Sean Finn
|
January 24,
2008
|
RSUs(2)
|
21,000
|
December 31,
2010
|
48.46
|
575,124
|
Options(3)
|
42,000
|
January 24,
2018
|
48.46
|
521,125
|
(1)
|
The
grant date fair values reported are calculated using
the same assumptions as described in footnotes 3 and 4 of the Summary
Compensation Table.
|
(2)
|
The
restricted share units granted in 2008 were made under the Restricted
Share Units Plan. Under this plan, the number of restricted share
units’ payout will
be 50%, 100% and 150% of the grant if return on invested capital reaches,
respectively, threshold, target and maximum performance over the plan
period and is also conditional upon meeting a minimum share price
condition, as described under “Restricted
Share Units: 2008 Awards” on
page 34.
|
(3)
|
The
options granted in 2008 were made under the Management Long-Term Incentive
Plan and vest over a period of four years, with 25% of the options vesting
at each anniversary date of the award. Unexercised options
shall expire on the tenth anniversary date of the award. See section
“Management
Long-Term Incentive Plan” on
page 43 for a description of the
plan.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
41 |
OPTION-BASED AWARDS (1) |
SHARE-BASED
AWARDS
|
|||||
NUMBER
OF SECURITIES UNDERLYING UNEXERCISED
OPTIONS
|
OPTION
EXERCISE PRICE
|
OPTION
EXPIRATION
|
VALUE
OF UNEXERCISED IN-THE-MONEY OPTIONS(2)
|
NUMBER
OF SHARES OR UNITS OF SHARES THAT HAVE NOT
VESTED
|
MARKET
OR PAYOUT VALUE OF SHARE-BASED AWARDS THAT HAVE NOT
VESTED
|
|
NAME
|
(#)
|
($)
|
DATE
|
($)
|
(#)
|
($)
|
E. Hunter
Harrison
|
145,000
|
48.08 US
|
2018/01/24
|
68,362,094
|
265,000(3)
|
11,866,700(4)
|
145,000
|
44.67 US
|
2017/01/25
|
||||
190,000
|
44.93 US
|
2016/01/27
|
||||
250,000
|
29.19 US
|
2015/01/28
|
||||
1,080,000
|
20.42 CAD
|
2013/01/24
|
||||
675,000
|
25.59 CAD
|
2012/01/25
|
||||
600,000
|
16.67 CAD
|
2011/01/26
|
||||
300,000
|
11.67 CAD
|
2010/01/25
|
||||
Claude
Mongeau
|
60,000
|
48.08 US
|
2018/01/24
|
10,260,829
|
53,000(3)
|
2,373,340(4)
|
46,000
|
44.67 US
|
2017/01/25
|
5,723(5)
|
256,259(6)
|
||
60,000
|
44.93 US
|
2016/01/27
|
||||
80,000
|
29.19 US
|
2015/01/28
|
||||
324,000
|
20.42 CAD
|
2013/01/24
|
||||
85,000
|
25.59 CAD
|
2012/01/25
|
||||
James M.
Foote
|
60,000
|
48.08 US
|
2018/01/24
|
8,939,639
|
53,000(3)
|
2,373,340(4)
|
46,000
|
44.67 US
|
2017/01/25
|
9,300(5)
|
416,462(6)
|
||
60,000
|
44.93 US
|
2016/01/27
|
||||
80,000
|
29.19 US
|
2015/01/28
|
||||
124,000
|
20.42 CAD
|
2013/01/24
|
||||
270,000
|
25.59 CAD
|
2012/01/25
|
||||
Keith E.
Creel
|
60,000
|
48.08 US
|
2018/01/24
|
623,002
|
49,000(3)
|
2,194,220(4)
|
10,000
|
53.01 US
|
2017/06/11
|
3,536(5)
|
158,320(6)
|
||
28,000
|
44.67 US
|
2017/01/25
|
||||
40,000
|
44.93 US
|
2016/01/27
|
||||
36,000
|
29.19 US
|
2015/01/28
|
||||
13,000
|
22.41 CAD
|
2013/06/16
|
||||
Sean Finn
|
42,000
|
48.08 US
|
2018/01/24
|
587,524
|
29,400(3)
|
1,316,532(4)
|
16,800
|
44.67 US
|
2017/01/25
|
||||
24,000
|
44.93 US
|
2016/01/27
|
||||
32,000
|
29.19 US
|
2015/01/28
|
||||
12,000
|
20.42 CAD
|
2013/01/24
|
(1)
|
Includes
all stock options granted under the Management Long-Term Incentive Plan
outstanding on December 31, 2008.
|
(2)
|
The
value of unexercised in-the-money options at financial year-end is the
difference
between the closing price of the common shares on December 31, 2008, on
the New York Stock Exchange (US$36.76)
for U.S. dollar denominated options, on the TSX (CAD$44.78) for Canadian
dollar denominated options, and the exercise price. The value
has been converted using the December 31,
2008 (1.2180) exchange rate for U.S. dollar denominated options. This
value has not been, and may never be realized. The actual gains, if any,
will depend on the value of the common shares
on the date of exercise.
|
(3)
|
Includes all restricted share
units outstanding on December 31, 2008 that have not vested on such date
under the Restricted Share Units Plan. Payouts for these units are
conditional upon meeting
performance criteria and a minimum
share price condition that may or may not be
achieved.
|
(4)
|
The value of outstanding share
units awarded under the Restricted Share Units Plan is based on the
closing price of the common shares on December 31, 2008 on the TSX
(CAD$44.78) assuming
that targeted performance criteria and minimum share price condition will
be met. In accordance with the plan, the actual payout may represent
between 0% and 150% of the share units
awarded.
|
(5)
|
Includes
the unvested “company-matched” deferred
share
units, under the Voluntary Incentive Deferral Plan that were awarded to
the NEOs following the deferral of compensation in previous years.
These awards vest annually over a period of four years. (See page 44,
section “Deferred
Compensation
Plans”
for a description of the
plan.)
|
(6)
|
The
value of unvested “company-matched” deferred
share units is based on the closing price of the common shares on December
31, 2008 on the TSX
(CAD$44.78).
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
42 |
NON-EQUITY
|
|||
OPTION-BASED
|
SHARE-BASED
|
INCENTIVE
PLAN
|
|
AWARDS
– VALUE
|
AWARDS
– VALUE
|
COMPENSATION
– VALUE
|
|
VESTED
DURING
|
VESTED
DURING
|
EARNED
DURING
|
|
THE
YEAR(1)
|
THE
YEAR(2)
|
THE
YEAR(3)
|
|
NAME
|
($)
|
($)
|
($)
|
E. Hunter
Harrison
|
1,552,129
|
14,508,720(4)
|
3,575,195
|
Claude
Mongeau
|
495,603
|
2,392,997(5)
|
569,293
|
James M.
Foote
|
495,603
|
2,571,337(5)
|
569,293
|
Keith E.
Creel
|
241,300
|
1,525,405(5)
|
510,707
|
Sean Finn
|
196,735
|
806,040
|
462,962
|
(1)
|
The
value of the potential gains from options granted under
the Management Long-Term Incentive Plan in 2005, 2006 and 2007 that have
vested during the financial year. These grants all vest over four years,
with 25% per year on each anniversary date (see section “Management
Long-term Incentive Plan” for
a description
of the plan). The potential gains are calculated as the difference between
the closing price of the common shares on each of the option grant vesting
dates in 2008 and the exercise price, converted when applicable using the
exchange rate on such vesting
date (see “Currency
Exchange Information” on
page 52). This value has not been, and may never be realized. The actual
gains, if any, will depend on the value of the common shares on the date
of exercise.
|
(2) |
Includes
restricted share units granted in 2006
that have vested on December 31, 2008 under the Restricted Share Units
Plan (see page 34, section “Restricted
Share Units: 2006 Award Payouts” for
a description of the plan). The value shown in the table has been
calculated by multiplying the number of share
units granted multiplied by the performance vesting factor of 150% and by
the closing price of the common shares on December 31, 2008 on the TSX
(CAD$44.78). As provided under the plan, the actual payout to the eligible
executives have been made in February
2009, based on the 20-day average closing share price ending on January
31, 2009 (CAD$43.58/US$35.84).
|
(3)
|
Represents
the amount of bonus earned under the Annual Incentive Bonus Plan for the
financial year ending on December 31, 2008 and payable in
January 2009.
|
(4)
|
Also
includes the vesting of 81,000 restricted share units on December 31,
2008. These units are the last vesting tranche of a special one-time grant
of 405,000 restricted share units granted in April 2004. The value is
calculated based
on the number of share units vested multiplied by the closing price of the
common shares on December 31, 2008 on the TSX (CAD$44.78). The actual
payout was based on the 20-day average closing share price ending on
December 31, 2008 of US$34.87 as per the
terms of the award agreement.
|
(5)
|
Also
includes the “company-matched” deferred
share units allocated to an executive following the deferral of
compensation in previous years that have vested during the year (see page
44, section “Deferred
Compensation Plans” for
a description of the Voluntary Incentive Deferral Plan). The value is
calculated based on the number of deferred share units vested multiplied
by the closing price of the common shares on each day of the respective
vesting dates in
2008.
|
#
COMMON
|
%
OF OUTSTANDING
|
|
SHARES
|
COMMON
SHARES
|
|
Options already
granted
|
||
and
outstanding
|
14,140,334
|
3.02
|
Options issuable under the
Plan
|
12,348,434
|
2.64
|
Shares issued following the
exercise
|
||
of options
|
33,511,232
|
7.16
|
Exercise price
|
At least equal to the closing
share price of the common shares on the TSX or the NYSE on
the grant date, granted in the same currency as
the recipient’s
salary.
|
Option
period
|
10 years
|
Vesting
criteria
|
• Options may become
exercisable upon
anniversary date (“conventional options”) and/or upon meeting performance targets (“performance options”) as established for each
grant.
|
• Since 2005, grants
have been of conventional options, which vest over four years, 25% at
each anniversary.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
43 |
|
i.
|
any amendment to
the maximum number of
common shares issuable under the Plan, except for adjustments in the event
that such shares are subdivided, consolidated, converted or reclassified
by the Company or that any other action of a similar nature affecting such
shares is taken by
the
Company (a “Share
Adjustment”);
|
|
ii.
|
any amendment
which would allow non-employee directors to be eligible for new awards
under the Plan;
|
|
iii.
|
any amendment
which would permit any Option granted under the Plan to be transferable or
assignable other than by will or
pursuant to succession laws (estate
settlements);
|
|
iv.
|
the addition of a
cashless exercise feature, payable in cash or common shares, which does
not provide for a full deduction of the number of underlying shares from
the Plan reserve;
|
|
v.
|
the
addition in the Plan
of deferred or restricted share unit provisions or any other provisions
which results in participants receiving common shares while no cash
consideration is received by the
Company;
|
|
vi.
|
any reduction in
the exercise price of an Option after the Option has
been granted to a participant or any cancellation of an Option and the
substitution of that Option by a new Option with a reduced exercise price
granted to the same participant, except in the case of a Share
Adjustment;
|
|
vii.
|
any extension
to
the term of an outstanding Option beyond the original expiry date, except
in case of an extension due to a blackout
period;
|
|
viii.
|
any increase to
the maximum number of common shares that may be
issued:
|
|
a.
|
under the Plan to
any one participant during any calendar year;
or
|
|
b.
|
under the Plan
and under any other plan to any one participant;
and
|
|
ix.
|
the addition in
the Plan of any form of financial assistance and any amendment to a
financial assistance provision which is more favourable to
participants.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
44 |
Base Salary
|
Minimum increase of 5% per
year
|
Annual
Incentive
|
Target bonus at 140% of base
salary and maximum
|
Bonus Plan
|
payout of
280%
|
Special one-time award of
restricted share units on April 22, 2004
|
405,000 restricted share units,
20% vesting per year with payout starting on December 31,
2004
|
Taxes
|
Tax equalization provisions to
compensate for higher tax liability in Canada, if any, and tax gross-up in
specified situations
|
Pension
|
·
Upon retirement on
January 1, 2009, annual pension benefit of US$1,300,000
(CAD$1,583,400)
·
Upon retirement on
January 1, 2010, annual pension benefit of US$1,500,000
(CAD$1,827,000)
|
Spousal Survivor Benefits
|
70% of annual pension
benefit
|
Post-retirement benefits
|
·
Medical
benefits
·
Life insurance of
US$1,000,000 (CAD$1,218,000)
|
Stock
Options
|
·
Entitled to exercise
stock options for five years after
retirement
·
Continued vesting for
five years after
retirement
|
Non-compete and
non-solicitation
|
Eligible for an annual payment of
US$350,000
(CAD$426,300) per year for two years providing compliance with the
restrictions
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
45 |
-
|
2.0% of highest average earnings
for each year of pensionable service before
1966
|
-
|
1.7% of highest average earnings
up to the average year's maximum
pensionable earnings
(YMPE) as defined under the Canada Pension Plan for
each year of pensionable service after
1965
|
-
|
2.0% of highest average earnings
in excess of the YMPE for each year of pensionable service after
1965.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
46 |
CN
MANAGEMENT INFORMATION CIRCULAR
|
47 |
POINTS
(SUM OF AGE AND SERVICE)
|
|
Up to 39
|
5% of eligible
compensation
|
40-49
|
6%
|
50-59
|
7%
|
Above 60
|
8%
|
Mr. Creel has 9.75 years of
service in the new SERP and 3 years of participation in the CN Retirement Contribution
Option and DC SERP.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
48 |
ANNUAL
BENEFITS PAYABLE
|
COMPENSATORY
CHANGE(1)
($)
|
|||||||
NAME
|
NUMBER
OF YEARS CREDITED SERVICE
(#)
|
AT
YEAR END
($)
|
AT
AGE 65(2)
($)
|
ACCRUED
OBLIGATION AT START OF YEAR(3)
($)
|
SERVICE
COST
|
IMPACT
OF SALARY/BONUS ON ACCRUED OBLIGATION
|
NON-COMPENSATORY
CHANGE(4)
($)
|
ACCRUED
OBLIGATION AT YEAR END(3)
($)
|
E. Hunter Harrison(5)
|
N/A
|
1,596,000
|
1,842,000
|
13,324,000
|
1,378,000
|
0
|
3,530,000
|
18,232,000
|
Claude
Mongeau
|
14.67
|
278,000
|
658,000
|
2,261,000
|
156,000
|
(80,000)
|
(279,000)
|
2,058,000
|
James M. Foote(6)
|
12.67
|
425,000
|
636,000
|
3,956,000
|
163,000
|
(198,000)
|
610,000
|
4,531,000
|
Keith E. Creel(7)
|
9.75
|
104,000
|
155,000
|
881,000
|
0
|
173,000
|
347,000
|
1,401,000
|
Sean Finn
|
15
|
206,000
|
536,000
|
1,825,000
|
131,000
|
76,000
|
(164,000)
|
1,868,000
|
(1)
|
The change in benefit obligation that is attributable
to compensation includes the service cost net of employee contributions
and the increase in earnings in excess or below what was assumed. The
service cost is the estimated value of the benefits accrued during the
calendar year. These amounts exclude the
employee's contributions, if any.
|
(2)
|
The projected pension is based on
current compensation levels and assumes the executive will receive 80% of
the target bonus for the years after 2008.
|
(3)
|
The accrued obligation is
the value of the
benefits accrued for all service to the specified
date.
|
(4)
|
The change in benefit obligation
that is not compensatory includes employee contributions, interest cost,
change in assumptions and gains and losses other than for difference in
earnings. The impact
on the accrued obligation at the end of 2008 relating to the change in
assumptions was mainly due to the fluctuation in the exchange rate which
increased the accrued obligation and the increase in the discount rate
used to value the Canadian Pension Plans which decreased
the accrued obligation.
|
(5)
|
Does not include former ICR
non-registered cash plans described on the Defined Contribution Plans
table. The SERP benefit payable to Mr. Harrison is not based on credited
service. Mr. Harrison
has 8 years of credited service in the registered defined benefit
plan.
|
(6)
|
Mr. Foote has a special pension
arrangement as described on page 48 in the “U.S. Pension Plans”
section.
|
(7)
|
Mr. Creel no longer accrues
service in the Defined Benefit Plan or new SERP since he started
participating in the CN Retirement Contribution Option and DC SERP on
January 1, 2006.
|
PLANS
|
ACCRUED
OBLIGATION AT START OF YEAR
($)
|
ACCRUED
OBLIGATION AT YEAR END
($)
|
SRS, OLD SERP and NEW
SERP
|
178,200,000
|
173,400,000
|
NAME
|
ACCUMULATED
VALUE AT START OF YEAR
($)
|
COMPENSATORY
AMOUNT(1)
($)
|
NON-COMPENSATORY
AMOUNT(2)
($)
|
ACCUMULATED
VALUE AT YEAR END
($)
|
E. Hunter Harrison(3)
|
6,746,731
|
242,129
|
1,257,426
|
8,246,286
|
James M. Foote(4)
|
289,370
|
6,840
|
(62,885)
|
233,325
|
Keith E. Creel(5)
|
299,934
|
21,803
|
25,348
|
347,085
|
(1)
|
Represents employer
contributions.
|
(2)
|
Represents employee contributions
if any, and interest gains and losses.
|
(3)
|
Mr. Harrison participates in the
Savings Plan, Executive Account Balance Plan, Excess Benefit Plan and
Non-Qualified
Supplemental Defined Contribution Plan.
|
(4)
|
Mr. Foote participates in the
Savings Plan.
|
(5)
|
Mr. Creel participates in the
Savings Plan, CN Retirement Contribution Option and DC
SERP.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
49 |
RESIGNATION
|
INVOLUNTARY
TERMINATION
|
RETIREMENT
|
CHANGE OF CONTROL |
TERMINATION
FOR CAUSE
|
||
Annual Incentive Bonus
Plan
|
Forfeits eligibility
to the
plan
|
Entitled to a bonus based on corporate and individual
performance and prorated on active service in plan
year
|
Entitled to a bonus based on corporate and individual
performance and prorated on active service in plan
year
|
No specific provision |
Forfeits eligibility
to the
plan
|
|
Stock
Options
|
Forfeits - all stock options are
cancelled
|
Continued vesting for 3 months - Exercise of vested options
within 3 months
|
Continued vesting for 3 years - Exercise of vested options
within 3 years
|
Grants made prior to March 4,
2008
· Immediate vesting of conventional
options
|
Grants made since March 4, 2008
· If proper substitute is granted,
accelerated vesting would occur only if participant is terminated without
cause or resigns for good reason within 2 years
|
Forfeits - all stock options are cancelled
|
Restricted Shares
Units
|
Forfeits - all RSUs are cancelled
|
Partial payout if meeting performance
criteria and prorated based on service during the plan
period
|
Full payout if meeting performance criteria(continued
vesting)
|
Grants made prior to March 4, 2008
· Immediate vesting of all RSUs prorated based on the
plan period
|
Grants made since March 4, 2008
· If proper substitute granted, accelerated vesting would
occur only if participant is terminated without cause or resigns for good
reason within 2 years
|
Forfeits - all RSUs are cancelled
|
Deferred Share
Units
|
Payment of all vested units,
including the vested “Company-matched” DSUs
|
Payment of all vested units, including
the vested
“Company-matched” DSUs
|
Payment of all vested units,
including the vested “Company-matched” DSUs
|
Accelerated vesting of
unvested
“Company-matched” DSUs
|
Payment of all vested units,
including the vested “Company- matched” DSUs
|
|
Pension
Plan
|
Payment of vested
benefits
|
Payment of vested
benefits
|
Payment of vested
benefits
|
Payment of vested benefits
|
Payment of vested
benefits
|
|
SRS/SERP
|
Payment of vested
benefits
|
Payment of vested
benefits
|
Payment of vested
benefits
|
Payment of vested
benefits
|
Payment of vested benefits for the
SERP/ SRS benefits forfeited
|
•
|
In case of
termination by the Company without cause or resignation
by Mr. Harrison for good reason: a severance equivalent to three times his
annual salary and annual incentive at target as well as the continuation
of his employee benefits for three years and the ownership of the Company
automobile.
|
•
|
In case of
retirement: five years of continued vesting following retirement and
ability to exercise options during the same
period.
|
•
|
Post-retirement
medical benefits and a life insurance coverage equal to US$1
million.
|
•
|
Non-compete and
non-solicitation restrictions upon
termination of employment for any reason, in respect of which he is
entitled to receive US$350,000 per year for a two-year period providing he
complies with the
restrictions.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
50 |
RESTRICTED
SHARE UNITS PLAN(2)
($)
|
STOCK
OPTIONS(3)
($)
|
SEVERANCE
BENEFITS
($)
|
NON-COMPETE/NON-SOLICITATION
($)
|
TOTAL
($)
|
|
E. Hunter Harrison(1)
|
6,030,373
|
576,647
|
14,732,928
|
852,600(5)
|
22,192,548
|
Claude
Mongeau
|
1,134,427
|
184,527
|
(4)
|
–
|
1,318,954
|
James M.
Foote
|
1,134,427
|
184,527
|
(4)
|
–
|
1,318,954
|
Keith E.
Creel
|
940,380
|
83,037
|
(4)
|
–
|
1,023,417
|
Sean Finn
|
564,228
|
73,811
|
(4)
|
–
|
638,039
|
(1)
|
Mr. Harrison would also be
entitled to an increase of US$200,000 in his SERP annual pension benefit
as if retirement had occurred on December 31,
2009.
|
(2)
|
NEOs would be eligible to the
portion of restricted
share units granted in 2007 and 2008 that would have vested upon a
termination on December 31, 2008. Any payout would be conditional upon
meeting the plan's performance vesting conditions. The value shown assumes
that performance targets will be met for each of the awards.
The value has been calculated by multiplying the number of share units
that would have vested by the closing price of the common shares on
December 31, 2008 on the TSX (CAD$44.78).
|
(3)
|
NEOs would be eligible to
continued vesting for
a three-month period following termination for options granted in 2005,
2006, 2007 and 2008. The value shown is equal to the number of options
that would vest during the period multiplied by the difference between the
closing price of the common shares on December 31, 2008 and
the exercise price, converted using the December 31, 2008 (1.2180)
exchange rate for U.S. dollar denominated
options.
|
(4)
|
Any severance amount would be
determined in accordance with applicable legal
requirements.
|
(5)
|
Value of US$350,000 payable for 2 years
converted using an exchange rate of
1.2180.
|
RESTRICTED
SHARE UNITS PLAN(1)
($)
|
STOCK
OPTIONS(2)
($)
|
NON-COMPETE/NON-SOLICITATION
($)
|
TOTAL
($)
|
|
E. Hunter
Harrison
|
11,866,700
|
576,647
|
852,600(3)
|
13,295,947
|
Claude
Mongeau
|
2,373,340
|
184,527
|
–
|
2,557,867
|
James M.
Foote
|
2,373,340
|
184,527
|
–
|
2,557,867
|
Keith E.
Creel
|
2,194,220
|
83,037
|
–
|
2,277,257
|
Sean Finn
|
1,316,532
|
73,811
|
–
|
1,390,343
|
(1)
|
NEOs would be eligible to
continued vesting following retirement for the restricted share units
granted in 2007 and 2008. Any payout would be conditional upon meeting the
plan's performance vesting conditions. The value shown assumes that
performance targets will be met for each of the awards. The value has been
calculated by multiplying the number of
share units that would have vested by the closing price of the common
shares on December 31, 2008 on the TSX
(CAD$44.78).
|
(2)
|
NEOs would be eligible to
continued vesting over three years following retirement for options
granted in 2005,
2006, 2007 and 2008. Mr. Harrison would be eligible to continued vesting
over five years following retirement, as per his employment contract. The
value shown is equal to the number of options that would vest during the
period multiplied by the difference between the closing
price of the common shares on December 31, 2008 and the exercise price,
converted using the December 31, 2008 (1.2180) exchange rate for U.S.
dollar denominated options.
|
(3)
|
Value of US$350,000 payable for 2
years converted using
an exchange rate of 1.2180.
|
RESTRICTED
SHARE
UNITS
PLAN(1)
($)
|
STOCK
OPTIONS(2)
($)
|
DEFERRED
SHARE
UNITS(3)
($)
|
TOTAL
($)
|
|
E. Hunter
Harrison
|
6,030,373
|
576,647
|
–
|
6,607,020
|
Claude
Mongeau
|
1,134,427
|
184,527
|
256,259
|
1,575,213
|
James M.
Foote
|
1,134,427
|
184,527
|
416,462
|
1,735,416
|
Keith E.
Creel
|
1,015,013
|
83,037
|
158,320
|
1,256,370
|
Sean Finn
|
564,228
|
73,811
|
–
|
638,039
|
(1)
|
NEOs would be eligible to
immediate vesting following a change of control for restricted share
units granted in 2007
and 2008. Any payout would be conditional upon meeting the plan's
performance vesting conditions. The value shown assumes that performance
targets will be met for each of the awards. The value has been calculated
by multiplying the number of share units that would have
vested by the closing price of the common shares on December 31, 2008 on
the TSX (CAD$44.78).
|
(2)
|
NEOs would be eligible to
immediate vesting following a change of control for options granted in
2005, 2006, 2007 and 2008. The value shown is equal to the
number of options that would vest multiplied by the difference between the
closing price of the common shares on December 31, 2008 and the exercise
price, converted using the December 31, 2008 (1.2180) exchange rate for
U.S. dollar denominated
options.
|
(3)
|
NEOs would be eligible to
immediate vesting of the “company-matched” deferred share units allocated to an executive
following the deferral of compensation. The value is calculated based on
the number of deferred share units vesting multiplied by the closing price
of the common shares on December 31, 2008 on the TSX
(CAD$44.78).
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
51 |
Exchange rate
used
|
Actual rate 1 USD = X
CAD
|
|
·
Salary
·
All other
compensation
|
Average rate during the
year
|
2008:
1.0660
|
·
Annual incentive
plan
|
When bonus is earned i.e. December
31
|
December 31, 2008:
1.2180
|
·
Pension
value
·
Value of unexercised
in-the-money options
·
Market value of
share-based awards
that have not vested
·
Non-equity incentive
plan compensation - Value earned during the year
·
Termination scenarios
- incremental costs
|
December 31,
2008
|
December 31, 2008:
1.2180
|
·
Option-based awards -
Value vested during the year
|
Actual vesting date of the grants made
on:
·
January 25,
2007
·
June 11,
2007
·
January 27,
2006
· January 28,
2005
|
·
January 25, 2008:
1.0070
·
June 11, 2008:
1.0200
·
January 27, 2008:
1.0070
· January 28, 2008:
1.0044
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
52 |
PLAN
CATEGORY
|
NUMBER
OF SECURITIES TO BE
ISSUED
UPON EXERCISE
OF
OUTSTANDING OPTIONS,
WARRANTS
AND RIGHTS
|
WEIGHTED-AVERAGE
EXERCISE
PRICE
OF OUTSTANDING OPTIONS,
WARRANTS
AND RIGHTS
(CAD$)
|
NUMBER
OF SECURITIES
REMAINING
AVAILABLE FOR
FUTURE
ISSUANCE UNDER
EQUITY
COMPENSATION PLANS
(EXCLUDING
SECURITIES
REFLECTED
IN THE FIRST COLUMN)
|
Equity
compensation plans approved by
securityholders
|
13,052,905
|
29.16
|
13,537,520
|
Equity
compensation plans not approved by
securityholders
|
Nil
|
Nil
|
Nil
|
Total
|
13,052,905
|
29.16
|
13,537,520
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
53 |
A.
|
Approving
CN’s strategy
|
-
|
adopting a strategic planning process,
approving and reviewing, on at least an annual basis, a business plan and
a strategic framework which take into account, among other things, the
opportunities and risks of the business, and monitoring the implementation
of the business plan by
management.
|
B.
|
Assessing and
overseeing the succession planning of executive
management
|
-
|
choosing the President and Chief
Executive Officer (the “President
and CEO”),
appointing executive management and monitoring President and CEO and
executive management
performance taking into consideration Board expectations and fixed
objectives, approving the President and CEO’s corporate goals and objectives
and approving annually President and CEO and executive management
compensation;
|
-
|
ensuring that an appropriate portion of
President and CEO and executive management compensation is tied to both
the short- and longer-term performance of
CN;
|
-
|
taking all reasonable steps to
ensure that processes are in place for the recruitment, training,
development and
retention of executives who exhibit the highest standards of integrity as
well as competence.
|
C.
|
Monitoring
Corporate Governance issues
|
-
|
monitoring the size and
composition of the Board to favour effective
decision-making;
|
-
|
taking all reasonable
measures to satisfy
itself as to the integrity of management and that management creates a
culture of integrity throughout
CN;
|
-
|
monitoring
and reviewing, as appropriate, CN’s approach
to governance issues and monitoring and reviewing, as appropriate,
CN’s Corporate
Governance Manual and policies and measures for receiving shareholder
feedback;
|
-
|
taking
all reasonable steps to ensure the highest quality of ethical standards,
including reviewing, on a regular basis, the Code of Business Conduct
applicable to CN’s directors,
its President and CEO, senior financial officers, other executives and
employees, monitoring compliance with such code, approving any waiver from
compliance with the code for directors and executive officers and ensuring
appropriate disclosure of
any such
waiver;
|
-
|
ensuring the regular performance
assessment of the Board, Board committees, Board and committee chairs and
individual directors and determining their
remuneration;
|
-
|
approving the list of Board
nominees for election by shareholders and filling Board
vacancies;
|
-
|
adopting and reviewing orientation
and continuing education programs for
directors;
|
-
|
overseeing the disclosure of a
method for interested parties to communicate directly with the Board Chair
or with the non-management directors as a
group.
|
D.
|
Monitoring
financial matters and internal
controls
|
-
|
monitoring
the quality and integrity of CN’s accounting
and financial reporting systems, disclosure controls and procedures,
internal controls and management information systems, including by
overseeing:
|
|
(i)
|
the integrity and quality of
CN’s financial statements and other
financial information and the appropriateness of their
disclosure;
|
|
(ii)
|
the
review of the Audit Committee on external auditors’ independence
and
qualifications;
|
|
(iii)
|
the performance of CN’s internal audit function and of
CN’s external auditors;
and
|
|
(iv)
|
CN’s compliance with applicable legal
and regulatory
requirements (including those related to environment, safety and
security);
|
-
|
ensuring that an appropriate risk
assessment process is in place to identify, assess and manage the
principal risks of CN’s
business;
|
-
|
adopting communications and
disclosure policies
and monitoring CN’s investor relations
programs.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
54 |
E.
|
Monitoring
Pension Fund matters
|
-
|
monitoring and reviewing, as
appropriate, CN’s pension fund policies and practices, including the
investment policies of the Canadian National Railway Pension Trust Funds
or any other pension trust fund established in connection with a new
pension plan or any other pension plan offered or administered by CN (the
“ CN’s Pension Trust
Funds”);
|
-
|
approving the annual budget of the
Investment Division of CN’s Pension Trust
Funds.
|
F.
|
Monitoring
environmental, safety and security
matters
|
-
|
monitoring and reviewing, as
appropriate, CN’s environmental, safety and
security policies and
practices.
|
CN
MANAGEMENT INFORMATION CIRCULAR
|
55 |
|
Mixed
Sources
Product group from well-managed
forests, controlled sources and
recycled wood or fiber
|
Cert no.
SGS-COC-005437
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 21, 2009 |
1.
|
Every
shareholder has the right to appoint some other person of their choice,
who need not be a shareholder, to attend and act on their behalf at the
meeting. If you wish to appoint a person other than the persons whose
names are printed herein, please insert the name of your chosen
proxyholder in the space provided (see
reverse).
|
2.
|
If the
securities are registered in the name of more than one owner (for example,
joint ownership, trustees, executors, etc.), then all those registered
should sign this proxy. If you are voting on behalf of a corporation or
another individual you may be required to provide documentation evidencing
your power to sign this proxy with signing capacity
stated.
|
3.
|
This form of
proxy should be signed in the exact manner as the name appears on the
proxy.
|
4.
|
This form of
proxy should be read in conjunction with the accompanying Notice of Annual
Meeting of Shareholders and Management Information
Circular.
|
5.
|
If this form
of proxy is not dated, it will be deemed to bear the date on which it is
mailed by Management to the holder.
|
6.
|
The
shares represented by this proxy will be voted as directed by the holder,
however, if such a direction is not made in respect of any matter, this
proxy will be voted "FOR" items 1 and 2 and in favour of Management’s
proposals generally.
|
• Go to the following web
site:
www.investorvote.com
|
• You can enroll to receive
future securityholder
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
|
|
|
|
05. E. Hunter
Harrison
|
|
|
|
09. The Hon.
Edward C.
Lumley
|
|
|
--- | |
Fold
|
||||||||||||
02. A. Charles
Baillie
|
|
|
|
06. Edith E. Holiday |
|
|
|
10. David G.A.
McLean
|
|
|
||
03. Hugh J.
Bolton
|
|
|
|
07. V. Maureen
Kempston
Darkes
|
|
|
|
11. Robert
Pace
|
|
|
||
04.
Ambassador Gordon
D.
Giffin
|
|
|
|
08. The Hon. Denis Losier |
|
|
|
|
|
|||
For | Withhold | |||||||||||
2.
Appointment of Auditors
|
||||||||||||
Appointment of
KPMG LLP as Auditors
|
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 financial 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 financial 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.
|
024203
|
AR2
|
CNRQ
|
+
|
Item
4
|
|
2008 Annual Report The Bottom Line |
Contents 2 Financial and operational highlights 3 A message from the Chairman 4 A message from E. Hunter Harrison 7 The fundamentals 8 Our franchise 12 Our model 16 Our people 21 Growth 24 Responsibility 26 Glossary of terms 27 Financial Section (U.S. GAAP) 89 Non-GAAP Measures - unaudited 90 Corporate Governance 91 2008 President's Awards for Excellence 92 Board of Directors 94 Chairman of the Board and Select Senior Officers of the Company 95 Shareholder and investor information 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 risks, uncertainties and assumptions. Implicit in these statements, particularly in respect of long-term growth opportunities, is the Company's assumption that such growth opportunities are less affected by the current situation in the North American and global economies. The assumptions used by the Company to prepare its forward-looking statements may not materialize, and 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 state- ments 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 any future results or performance implied by such statements. Such factors include the specific risks set forth in Management's Discussion and Analysis contained in this Annual Report as well as other risks detailed from time to time in reports filed by the Company with securities regulators in Canada and in the United States. Moreover, the current situation in the financial markets is adding a substantial amount of risk to the North American economy, which is already in a recession, and to the global economy, which is significantly slowing down. As used herein, the word "Company" or "CN" means, as the context requires, Canadian National Railway Company and its subsidiaries. |
Plan. Execute. Improve. Continuously. This is the bottom line at CN. Take nothing for granted, focus on the fundamentals, look to get better and better in everything we do, every one of us, every day. It's the same focus through sunshine and snowstorms, booms and busts, recessions and rebounds. That's the power of the CN story. The consistency that shows up every year, right where our investors look for it: The bottom line. |
In millions, except per share
data, or unless
otherwise indicated
|
2008
|
2007
|
2006
|
|||||||||
Financial
results
|
||||||||||||
Revenues
|
$ | 8,482 | $ | 7,897 | $ | 7,929 | ||||||
Operating
income
|
$ | 2,894 | $ | 2,876 | $ | 3,030 | ||||||
Net income
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | ||||||
Diluted earnings per
share
|
$ | 3.95 | $ | 4.25 | $ | 3.91 | ||||||
Dividend per
share
|
$ | 0.92 | $ | 0.84 | $ | 0.65 | ||||||
Net capital
expenditures
|
$ | 1,424 | $ | 1,387 | $ | 1,298 | ||||||
Financial
position
|
||||||||||||
Total
assets
|
$ | 26,720 | $ | 23,460 | $ | 24,004 | ||||||
Long-term debt, including current
portion
|
$ | 7,911 | $ | 5,617 | $ | 5,604 | ||||||
Shareholders’ equity
|
$ | 10,559 | $ | 10,177 | $ | 9,824 | ||||||
Financial ratios
|
||||||||||||
Operating
ratio
|
65.9% | 63.6% | 61.8% | |||||||||
Debt-to-total
capitalization
|
42.8% | 35.6% | 36.3% |
(1)
|
The
Company’s
financial results for 2008, 2007 and 2006 include items affecting the
comparability of the results of operations as discussed on page 31 of this
report.
|
(2)
|
2008,
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 89 of this
report.
|
Canadian
National Railway Company
|
2 |
Canadian
National Railway Company
|
3 |
Canadian
National Railway Company
|
4 |
Canadian
National Railway Company
|
5 |
Canadian
National Railway Company
|
6 |
The fundamentals Focusing on the fundamentals and building upon them is key to our success. Our strong and balanced franchise, our precision operating model, our people and culture - our work every day is to take these strengths and make them better in ways that benefit our customers and investors. Page 7 |
Canadian
National Railway Company
|
7 |
Our franchise
The CN franchise is a highly
efficient, 21,000-route- mile transportation network that serves customers
shipping a broad array of products and commodities. This diverse commodity
mix acts as a buffer from the down cycles of any one industry, and our network
is a key competitive asset in which we are continuously investing to
improve.
|
Canadian
National Railway Company
|
8 |
Canadian
National Railway Company
|
9 |
Canadian
National Railway Company
|
10 |
Canadian
National Railway Company
|
11 |
Our model
CN's unique business model centres
on delivering precision and predictability in an imprecise and
unpredictable world. Our success in precision-scheduled railroading has
created a highly competitive transportation offering that provides durable
value to shippers and investors alike. A critical long-term contributor to
that value is our passion to improve continuously in our execution of the
CN model.
|
Canadian
National Railway Company
|
12 |
Canadian
National Railway Company
|
13 |
Canadian
National Railway Company
|
14 |
CN’s
SmartYard, now in operation in three of four of its hump yards, provides
advanced, user-friendly tools that aid train forecasting, track assignment
and motive power planning, activities critical to network
performance.
|
Optimizing
power, enhancing the network, focusing on execution – there is a wealth of
opportunities to continue to improve upon North America’s most efficient
railroad.
|
Enhancing asset efficiency with
distributed power
Operating longer trains increases
asset efficiency and productivity. To run longer trains, you need longer
sidings, which we’ve built across the network.
We’re now increasing our deployment
of distributed power (DP) technology, the use of automated
locomotives in the middle of trains, to
optimize power.
Precision railroading: always room
for improvement
Complexity, once used in the case against precision railroading, is actually at the heart of what’s most exciting about it – because of all the interrelated elements that affect performance, there is an almost endless potential to improve. We can and will get better and better at executing the model. |
Canadian
National Railway Company
|
15 |
Our people
It's a mantra here: CN people make
it all work. A powerful franchise, a unique operating model – neither of
these is an advantage if our people don't execute properly and
consistently. This is why it's a top long-term priority at CN to attract,
develop and retain the best and brightest people in the
industry.
|
Canadian
National Railway Company
|
16 |
Canadian
National Railway Company
|
17 |
Canadian
National Railway Company
|
18 |
CN continues
to emphasize the right leadership behaviours to support our goal: engaged,
committed employees who give their best every day to help the company
achieve sustained, long-term success.
|
Attracting the best and brightest
to CN
Another important element of
linking CN potential with human potential is recruiting new talent to the
organization. This will continue to be a priority as many of our current
people approach retirement age.
We have found that nothing
attracts top people like success – more and more are seeking to join
CN, eager to take part in building the brightest
future in railroading and transportation. There’s reason for optimism that our
recruitment efforts will be successful: We received more than 50,000
online applications to work at CN, across all trades in Canada and the
United States, in 2008 alone.
|
Canadian
National Railway Company
|
19 |
Canadian
National Railway Company
|
20 |
Canadian
National Railway Company
|
21 |
Canadian
National Railway Company
|
22 |
Canadian
National Railway Company
|
23 |
Canadian
National Railway Company
|
24 |
Canadian
National Railway Company
|
25 |
Canadian National
Railway Company
|
26 |
28
|
Selected
Railroad Statistics
|
29
|
Management’s
Discussion and Analysis
|
60
|
Management’s
Report on Internal Control over Financial Reporting
|
60
|
Report
of Independent Registered Public Accounting Firm
|
61
|
Report
of Independent
Registered Public Accounting Firm
|
62
|
Consolidated
Statement of Income
|
63
|
Consolidated
Statement of Comprehensive Income
|
64
|
Consolidated
Balance Sheet
|
65
|
Consolidated
Statement of Changes in Shareholders’ Equity
|
66
|
Consolidated
Statement of Cash Flows
|
67
|
1
|
Summary
of significant accounting policies
|
69
|
2
|
Accounting
changes
|
70
|
3
|
Acquisitions
|
70
|
4
|
Accounts
receivable
|
71
|
5
|
Properties
|
72
|
6
|
Intangible
and other assets
|
72
|
7
|
Accounts
payable and other
|
72
|
8
|
Other
liabilities and deferred credits
|
73
|
9
|
Long-term
debt
|
74
|
10
|
Capital
stock
|
75
|
11
|
Stock
plans
|
78
|
12
|
Pensions
and other postretirement benefits
|
81
|
13
|
Other
income
|
81
|
14
|
Income
taxes
|
82
|
15
|
Segmented
information
|
83
|
16
|
Earnings
per share
|
83
|
17
|
Major
commitments and contingencies
|
86
|
18
|
Financial
instruments
|
88
|
19
|
Accumulated
other comprehensive loss
|
88
|
20
|
Comparative
figures
|
Canadian
National Railway Company
|
27 |
Selected
Railroad Statistics (1)
|
Year ended December
31,
|
2008
|
2007
|
2006
|
|
Statistical operating
data
|
||||
|
Rail freight revenues ($
millions)
|
7,641
|
7,186
|
7,254
|
|
Gross ton miles (GTM) (millions)
|
339,854
|
347,898
|
352,972
|
|
Revenue ton miles
(RTM) (millions)
|
177,951
|
184,148
|
185,610
|
|
Carloads
(thousands)
|
4,615
|
4,744
|
4,824
|
Route miles
(includes
Canada and the U.S.)
|
20,961
|
20,421
|
20,264
|
|
|
Employees
(end of
year)
|
22,227
|
22,696
|
22,250
|
|
Employees
(average for
the year)
|
22,695
|
22,389
|
22,092
|
Productivity
|
||||
|
Operating ratio (%)
|
65.9
|
63.6
|
61.8
|
|
Rail freight revenue per RTM
(cents)
|
4.29
|
3.90
|
3.91
|
|
Rail freight revenue per carload
($)
|
1,656
|
1,515
|
1,504
|
|
Operating expenses per GTM
(cents)
|
1.64
|
1.44
|
1.39
|
|
Labor and fringe benefits expense
per GTM (cents)
|
0.49
|
0.49
|
0.52
|
|
GTMs per average number of
employees (thousands)
|
14,975
|
15,539
|
15,977
|
Diesel fuel
consumed (U.S. gallons
in millions)
|
380
|
392
|
401
|
|
|
Average fuel
price ($/U.S.
gallon) (2)
|
3.39
|
2.40
|
2.13
|
|
GTMs per U.S. gallon of fuel
consumed
|
894
|
887
|
880
|
Safety
indicators
|
||||
|
Injury frequency
rate per 200,000 person hours (3)
|
1.8
|
1.9
|
2.1
|
|
Accident rate per
million train miles (3)
|
2.6
|
2.7
|
2.4
|
(1)
|
Includes
data relating to companies acquired as of the date of
acquisition.
|
(2)
|
Includes
the impact of the Company’s
fuel hedging program that expired in September
2006.
|
(3)
|
Based
on Federal Railroad Administration (FRA) reporting criteria. For
2006, the
Injury frequency rate per 200,000 person hours and the Accident rate per
million train miles, prepared on a proforma basis to include the
acquisitions of Mackenzie Northern Railway and Savage Alberta Railway,
Inc., as of January 1, 2006, would have been
2.1 and 2.5, respectively, for the year ended December 31,
2006.
|
U.S. GAAP |
Canadian National
Railway Company
|
28 |
U.S. GAAP |
Canadian National
Railway Company
|
29 |
U.S. GAAP |
Canadian National
Railway Company
|
30 |
Financial and statistical
highlights
|
||||||||||||
$ in millions, except per share data, or unless
otherwise indicated
|
2008
|
2007
|
2006
|
|||||||||
Financial
results
|
||||||||||||
Revenues
|
$ | 8,482 | $ | 7,897 | $ | 7,929 | ||||||
Operating
income
|
$ | 2,894 | $ | 2,876 | $ | 3,030 | ||||||
Net income
(a)(b)(c)
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | ||||||
Operating
ratio
|
65.9% | 63.6% | 61.8% | |||||||||
Basic earnings
per share (a)(b)(c)
|
$ | 3.99 | $ | 4.31 | $ | 3.97 | ||||||
Diluted earnings
per share (a)(b)(c)
|
$ | 3.95 | $ | 4.25 | $ | 3.91 | ||||||
Dividend declared per
share
|
$ | 0.92 | $ | 0.84 | $ | 0.65 | ||||||
Financial
position
|
||||||||||||
Total
assets
|
$ | 26,720 | $ | 23,460 | $ | 24,004 | ||||||
Total long-term financial
liabilities
|
$ | 14,269 | $ | 11,693 | $ | 12,066 | ||||||
Statistical
operating data and productivity measures (d)
|
||||||||||||
Employees (average for
the year)
|
22,695 | 22,389 | 22,092 | |||||||||
Gross ton miles (GTM) per average
number of employees (thousands)
|
14,975 | 15,539 | 15,977 | |||||||||
GTMs per U.S. gallon of fuel
consumed
|
894 | 887 | 880 | |||||||||
(a)
|
The
2008 figures include a deferred income tax recovery of $117 million ($0.24
per basic or diluted share), of which $83 million was due to the
resolution of various income tax matters and adjustments related to tax
filings of prior years, $23 million resulted
from the enactment of corporate income tax rate changes in Canada and $11
million was due to net capital losses arising from the reorganization of a
subsidiary.
|
(b)
|
The
2007 figures include 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 of $61 million, or $41
million after-tax ($0.08 per basic or diluted
share).
|
(c)
|
The
2006 figures include 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.
|
(d)
|
Based
on estimated data available at such time and subject to change as more
complete information becomes
available.
|
U.S. GAAP |
Canadian National
Railway Company
|
31 |
U.S. GAAP |
Canadian National
Railway Company
|
32 |
In
millions, unless otherwise
indicated
Year ended December
31,
|
2008
|
2007
|
%
Change
|
|||||||||
Rail
freight revenues
|
$ | 7,641 | $ | 7,186 | 6% | |||||||
Other revenues | 841 | 711 | 18% | |||||||||
Total revenues | $ | 8,482 | $ | 7,897 | 7% | |||||||
Rail freight revenues: | ||||||||||||
Petroleum and chemicals | $ | 1,346 | $ | 1,226 | 10% | |||||||
Metals and minerals | 950 | 826 | 15% | |||||||||
Forest products | 1,436 | 1,552 | (7% | ) | ||||||||
Coal | 478 | 385 | 24% | |||||||||
Grain and fertilizers | 1,382 | 1,311 | 5% | |||||||||
Intermodal | 1,580 | 1,382 | 14% | |||||||||
Automotive | 469 | 504 | (7% | ) | ||||||||
Total rail freight revenues | $ | 7,641 | $ | 7,186 | 6% | |||||||
Revenue ton miles (RTM) (millions) | 177,951 | 184,148 | (3% | ) | ||||||||
Rail freight revenue/RTM (cents) | 4.29 | 3.90 | 10% | |||||||||
Carloads
(thousands)
|
4,615 | 4,744 | (3% | ) | ||||||||
Rail
freight revenue/carload (dollars)
|
1,656 | 1,515 | 9% |
Year ended December
31,
|
2008
|
2007
|
% Change
|
|||||||||
Revenues (millions)
|
$ | 1,346 | $ | 1,226 | 10 | % | ||||||
RTMs (millions)
|
32,346 | 32,761 | (1 | %) | ||||||||
Revenue/RTM (cents)
|
4.16 | 3.74 | 11 | % |
U.S. GAAP |
Canadian National
Railway Company
|
33 |
Year ended December
31,
|
2008
|
2007
|
% Change
|
|||||||||
Revenues (millions)
|
$ | 950 | $ | 826 | 15 | % | ||||||
RTMs (millions)
|
17,953 | 16,719 | 7 | % | ||||||||
Revenue/RTM (cents)
|
5.29 | 4.94 | 7 | % |
Year ended December
31,
|
2008
|
2007
|
% Change
|
|||||||||
Revenues (millions)
|
$ | 1,436 | $ | 1,552 | (7 | %) | ||||||
RTMs (millions)
|
33,847 | 39,808 | (15 | %) | ||||||||
Revenue/RTM (cents)
|
4.24 | 3.90 | 9 | % |
U.S. GAAP |
Canadian National
Railway Company
|
34 |
Coal
|
Year
ended December 31,
|
2008
|
2007
|
%
Change
|
|||||||||
Revenues
(millions)
|
$ | 478 | $ | 385 | 24 | % | ||||||
RTMs (millions)
|
14,886 | 13,776 | 8 | % | ||||||||
Revenue/RTM (cents)
|
3.21 | 2.79 | 15 | % |
Grain
and fertilizers
|
Year
ended December 31,
|
2008
|
2007
|
%
Change
|
|||||||||
Revenues
(millions)
|
$ | 1,382 | $ | 1,311 | 5 | % | ||||||
RTMs
(millions)
|
42,507 | 45,359 | (6 | %) | ||||||||
Revenue/RTM
(cents)
|
3.25 | 2.89 | 12 | % |
U.S. GAAP |
Canadian National
Railway Company
|
35 |
Intermodal
|
Year
ended December 31,
|
2008
|
2007
|
%
Change
|
|||||||||
Revenues
(millions)
|
$ | 1,580 | $ | 1,382 | 14 | % | ||||||
RTMs
(millions)
|
33,822 | 32,607 | 4 | % | ||||||||
Revenue/RTM
(cents)
|
4.67 | 4.24 | 10 | % |
Automotive
|
Year
ended December 31,
|
2008
|
2007
|
%
Change
|
|||||||||
Revenues
(millions)
|
$ | 469 | $ | 504 | (7 | %) | ||||||
RTMs
(millions)
|
2,590 | 3,118 | (17 | %) | ||||||||
Revenue/RTM
(cents)
|
18.11 | 16.16 | 12 | % |
U.S. GAAP |
Canadian National
Railway Company
|
36 |
Percentage of
revenues
|
|||||||||||||||||||||
In millions
|
Year ended December 31,
|
2008
|
2007
|
% Change
|
2008
|
2007
|
|||||||||||||||
Labor and fringe
benefits
|
$ | 1,674 | $ | 1,701 | 2 | % | 19.7 | % | 21.5 | % | |||||||||||
Purchased services and
material
|
1,137 | 1,045 | (9 | %) | 13.4 | % | 13.2 | % | |||||||||||||
Fuel
|
1,403 | 1,026 | (37 | %) | 16.5 | % | 13.0 | % | |||||||||||||
Depreciation and
amortization
|
725 | 677 | (7 | %) | 8.6 | % | 8.6 | % | |||||||||||||
Equipment
rents
|
262 | 247 | (6 | %) | 3.1 | % | 3.1 | % | |||||||||||||
Casualty and
other
|
387 | 325 | (19 | %) | 4.6 | % | 4.2 | % | |||||||||||||
Total operating expenses | $ | 5,588 | $ | 5,021 | (11 | %) | 65.9 | % | 63.6 | % |
U.S. GAAP |
Canadian National
Railway Company
|
37 |
Revenues
|
|||||||||||||
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 | % |
U.S. GAAP |
Canadian National
Railway Company
|
38 |
Petroleum and
chemicals
|
||||||||||||
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 | % |
Metals and
minerals
|
||||||||||||
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 | % |
Forest
products
|
||||||||||||
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 | %) |
Coal
|
||||||||||||
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 | % |
Grain and
fertilizers
|
||||||||||||
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
|
39 |
Intermodal
|
||||||||||||
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 | - |
Automotive
|
||||||||||||
Year ended December
31,
|
2007
|
2006
|
% Change
|
|||||||||
Revenues (millions)
|
$ | 504 | $ | 479 | 5 | % | ||||||
RTMs (millions)
|
3,118 | 3,042 | 2 | % | ||||||||
Revenue/RTM (cents)
|
16.16 | 15.75 | 3 | % |
Percentage of
revenues
|
|||||||||||||||||||||
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
|
40 |
U.S. GAAP |
Canadian National
Railway Company
|
41 |
2008
Quarters
|
2007
Quarters
|
|||||||||||||||||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||||||||||||
Revenues
|
$ | 2,200 | $ | 2,257 | $ | 2,098 | $ | 1,927 | $ | 1,941 | $ | 2,023 | $ | 2,027 | $ | 1,906 | ||||||||||||||||
Operating
income
|
$ | 820 | $ | 844 | $ | 707 | $ | 523 | $ | 736 | $ | 768 | $ | 811 | $ | 561 | ||||||||||||||||
Net income
|
$ | 573 | $ | 552 | $ | 459 | $ | 311 | $ | 833 | $ | 485 | $ | 516 | $ | 324 | ||||||||||||||||
Basic earnings per
share
|
$ | 1.22 | $ | 1.17 | $ | 0.96 | $ | 0.64 | $ | 1.70 | $ | 0.97 | $ | 1.02 | $ | 0.64 | ||||||||||||||||
Diluted earnings per
share
|
$ | 1.21 | $ | 1.16 | $ | 0.95 | $ | 0.64 | $ | 1.68 | $ | 0.96 | $ | 1.01 | $ | 0.63 | ||||||||||||||||
Dividend declared per
share
|
$ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.23 | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.21 |
In millions, except per share data
|
||||||||||||||||||||||||||||||||
2008
Quarters
|
2007
Quarters
|
|||||||||||||||||||||||||||||||
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
|||||||||||||||||||||||||
Deferred income
tax recoveries (a)
|
$ | 42 | $ | 41 | $ | 23 | $ | 11 | $ | 284 | $ | 14 | $ | 30 | $ | – | ||||||||||||||||
Gain on sale of
CSC (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
|
$ | 42 |
$
|
41
|
$ | 23 | $ | 11 | $ | 389 | $ |
14
|
$ | 30 | $ | (35 | ) | |||||||||||||||
Basic earnings per
share
|
$ | 0.09 | $ | 0.09 | $ | 0.05 | $ | 0.02 | $ | 0.79 | $ | 0.03 | $ | 0.06 | $ | (0.07 | ) | |||||||||||||||
Diluted earnings per
share
|
$ | 0.09 | $ | 0.09 | $ | 0.05 | $ | 0.02 | $ | 0.78 | $ | 0.03 | $ | 0.06 | $ | (0.07 | ) |
(a)
|
Deferred
income tax recoveries resulted mainly from the enactment of corporate
income tax rate changes in Canada and the resolution of various income tax
matters and adjustments related to tax filings of prior
years.
|
(b)
|
The
Company sold its CSC 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.
|
(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.
|
(d)
|
A
strike by 2,800 members of the UTU impacted
ifrst-quarter 2007 operating income and net income by approximately $50 million and $35 million, respectively.
|
U.S. GAAP |
Canadian National
Railway Company
|
42 |
In millions
|
Year ended December
31,
|
2008
|
2007
|
||||||
Track and
roadway
|
$ | 1,131 | $ | 1,069 | |||||
Rolling
stock
|
160 | 281 | |||||||
Buildings
|
57 | 172 | |||||||
Information
technology
|
122 | 97 | |||||||
Other
|
71 | 69 | |||||||
Gross property
additions
|
1,541 | 1,688 | |||||||
Less:
capital
leases (a)
|
117 | 301 | |||||||
Property
additions
|
$ | 1,424 | $ | 1,387 |
(a)
|
During
2008, the Company recorded $117 million in assets it acquired through
equipment leases ($301 million in 2007, of which $211 million related to
assets acquired through equipment leases and $90 million to the leaseback
of the CSC), for which $121 million
was recorded in debt.
|
U.S. GAAP |
Canadian National
Railway Company
|
43 |
In
millions
Year ended December
31,
|
2008
|
2007
|
||||||
Cash provided from operating
activities
|
$ | 2,031 | $ | 2,417 | ||||
Cash used by investing
activities
|
(1,400 | ) | (895 | ) | ||||
Cash provided before financing
activities
|
631 | 1,522 | ||||||
Adjustments:
|
||||||||
Change in accounts receivable
securitization
|
568 | (228 | ) | |||||
Dividends
paid
|
(436 | ) | (418 | ) | ||||
Effect
of foreign exchange fluctuations on U.S. dollar-denominated
cash and cash equivalents
|
31 | (48 | ) | |||||
Free cash
flow
|
$ | 794 | $ | 828 |
Adjusted
debt-to-total capitalization ratio
|
||||||||
December
31,
|
2008
|
2007
|
||||||
Debt-to-total
capitalization ratio (a)
|
42.8 | % | 35.6 | % | ||||
Add:
Present
value of operating lease commitments plus securitization
financing (b)
|
2.4 | % | 4.8 | % | ||||
Adjusted debt-to-total
capitalization ratio
|
45.2 | % | 40.4 | % | ||||
Adjusted debt-to-adjusted
EBITDA
|
||||||||
$ in millions, unless otherwise
indicated
Year ended December
31,
|
2008
|
2007
|
||||||
Debt
|
$ | 7,911 | $ | 5,617 | ||||
Add:
Present
value of operating lease commitments plus securitization
financing (b)
|
787 | 1,287 | ||||||
Adjusted
debt
|
8,698 | 6,904 | ||||||
Operating
income
|
2,894 | 2,876 | ||||||
Add:
Depreciation and
amortization
|
725 | 677 | ||||||
EBITDA
|
3,619 | 3,553 | ||||||
Add:
Deemed interest on
operating leases
|
39 | 41 | ||||||
Adjusted
EBITDA
|
$ | 3,658 | $ | 3,594 | ||||
Adjusted debt-to-adjusted
EBITDA
|
2.38 times
|
1.92
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
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
&
thereafter |
|||||||||||||||||||||
Long-term debt
obligations (a)
|
$ | 6,599 | $ | 367 | $ | – | $ | 1,112 | $ | – | $ | 486 | $ | 4,634 | ||||||||||||||
Interest on long-term debt
obligations
|
6,665 | 377 | 361 | 357 | 315 | 304 | 4,951 | |||||||||||||||||||||
Capital lease
obligations (b)
|
1,837 | 207 | 158 | 199 | 96 | 145 | 1,032 | |||||||||||||||||||||
Operating lease
obligations (c)
|
876 | 166 | 134 | 112 | 87 | 65 | 312 | |||||||||||||||||||||
Purchase
obligations (d)
|
1,006 | 457 | 260 | 83 | 61 | 57 | 88 | |||||||||||||||||||||
Other
long-term liabilities reflected on the balance sheet (e)
|
813 | 73 | 62 | 51 | 45 | 43 | 539 | |||||||||||||||||||||
Total
obligations
|
$ | 17,796 | $ | 1,647 | $ | 975 | $ | 1,914 | $ | 604 | $ | 1,100 | $ | 11,556 |
(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 $1,312 million which are
included in “Capital
lease obligations.”
|
(b)
|
Includes
$1,312 million of minimum lease payments and $525 million of imputed
interest at rates ranging from 2.1% 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 |
(i)
|
Chemin de fer de la Matapedia et
du Golfe, a 221-mile short-line
railway;
|
(ii)
|
New Brunswick East Coast Railway,
a 196-mile short-line
railway;
|
(iii)
|
Ottawa
Central Railway, a 123-mile short-line
railway; and
|
(iv)
|
Compagnie
de gestion de Matane Inc., a rail ferry which provides shuttle boat-rail
freight service.
|
U.S. GAAP |
Canadian National
Railway Company
|
46 |
U.S. GAAP |
Canadian National
Railway Company
|
47 |
In millions
|
2008
|
2007
|
2006
|
|||||||||
Balance January
1
|
$ | 196 | $ | 195 | $ | 205 | ||||||
Accruals and
other
|
42 | 41 | 60 | |||||||||
Payments
|
(49 | ) | (40 | ) | (70 | ) | ||||||
Balance December
31
|
$ | 189 | $ | 196 | $ | 195 |
U.S. GAAP |
Canadian National
Railway Company
|
48 |
In millions
|
2008
|
2007
|
2006
|
|||||||||
Balance January
1
|
$ | 250 | $ | 407 | $ | 452 | ||||||
Accruals and
other
|
57 | (111 | ) | (8 | ) | |||||||
Payments
|
(42 | ) | (46 | ) | (37 | ) | ||||||
Balance December
31
|
$ | 265 | $ | 250 | $ | 407 |
In millions
|
2008
|
2007
|
2006
|
|||||||||
Balance January
1
|
$ | 111 | $ | 131 | $ | 124 | ||||||
Accruals and
other
|
29 | (1 | ) | 17 | ||||||||
Payments
|
(15 | ) | (19 | ) | (10 | ) | ||||||
Balance December
31
|
$ | 125 | $ | 111 | $ | 131 |
U.S. GAAP |
Canadian National
Railway Company
|
49 |
(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
|
U.S. GAAP |
Canadian National
Railway Company
|
50 |
In millions
|
December
31,
|
2008
|
2007
|
||||||
Pension benefit
obligation
|
$ | 12,326 | $ | 14,419 | |||||
Accumulated postretirement benefit
obligation
|
$ | 260 | $ | 266 | |||||
Other postretirement benefits
liability
|
$ | 260 | $ | 266 |
U.S. GAAP |
Canadian National
Railway Company
|
51 |
Rates of
return
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
Actual
|
(11.0 | %) | 8.0 | % | 10.7 | % | 20.5 | % | 11.7 | % | ||||||||||
Market-related
value
|
7.8 | % | 12.7 | % | 11.4 | % | 8.6 | % | 6.3 | % | ||||||||||
Expected
|
8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % | 8.0 | % |
U.S. GAAP |
Canadian National
Railway Company
|
52 |
CN
|
BC Rail Ltd
|
U.S. and
|
|||||||||||||||
In millions
|
December 31,
2008
|
Pension
Plan
|
Pension
Plan
|
other plans
|
Total
|
||||||||||||
Plan assets by
category
|
|||||||||||||||||
Equity
securities
|
$ | 5,311 | $ | 189 | $ | 78 | $ | 5,578 | |||||||||
Debt
securities
|
5,051 | 218 | 77 | 5,346 | |||||||||||||
Real estate
|
264 | 10 | 1 | 275 | |||||||||||||
Other
|
2,314 | 84 | 14 | 2,412 | |||||||||||||
Total
|
$ | 12,940 | $ | 501 | $ | 170 | $ | 13,611 | |||||||||
Benefit obligation at end of
year
|
$ | 11,515 | $ | 425 | $ | 386 | $ | 12,326 | |||||||||
Company contributions in
2008
|
$ | 112 | $ | – | $ | 15 | $ | 127 | |||||||||
Employee contributions in
2008
|
$ | 52 | $ | – | $ | – | $ | 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 |
U.S. GAAP |
Canadian National
Railway Company
|
60 |
U.S. GAAP |
Canadian National
Railway Company
|
61 |
In
millions, except per share data
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Revenues
|
$ | 8,482 | $ | 7,897 | $ | 7,929 | |||||||
Operating
expenses
|
|||||||||||||
Labor
and fringe benefits
|
1,674 | 1,701 | 1,823 | ||||||||||
Purchased
services and material
|
1,137 | 1,045 | 1,027 | ||||||||||
Fuel
|
1,403 | 1,026 | 892 | ||||||||||
Depreciation
and amortization
|
725 | 677 | 650 | ||||||||||
Equipment
rents
|
262 | 247 | 198 | ||||||||||
Casualty
and other
|
387 | 325 | 309 | ||||||||||
Total
operating expenses
|
5,588 | 5,021 | 4,899 | ||||||||||
Operating
income
|
2,894 | 2,876 | 3,030 | ||||||||||
Interest
expense
|
(375 | ) | (336 | ) | (312 | ) | |||||||
Other
income (Note
13)
|
26 | 166 | 11 | ||||||||||
Income
before income taxes
|
2,545 | 2,706 | 2,729 | ||||||||||
Income
tax expense (Note
14)
|
(650 | ) | (548 | ) | (642 | ) | |||||||
Net
income
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | |||||||
Earnings
per share (Note 16)
|
|||||||||||||
Basic
|
$ |
3.99
|
$ |
4.31
|
$ |
3.97
|
|||||||
Diluted
|
$ |
3.95
|
$ |
4.25
|
$ |
3.91
|
|||||||
Weighted-average
number of shares
|
|||||||||||||
Basic
|
474.7 | 501.2 | 525.9 | ||||||||||
Diluted
|
480.0 | 508.0 | 534.3 |
U.S. GAAP |
Canadian
National Railway Company
|
62 |
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Net
income
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | |||||||
Other
comprehensive income (loss) (Note
19):
|
|||||||||||||
Unrealized
foreign exchange gain (loss) on:
|
|||||||||||||
Translation
of the net investment in foreign operations
|
1,259 | (1,004 | ) | 32 | |||||||||
Translation
of U.S. dollar-denominated long-term debt designated
as
|
|||||||||||||
a
hedge of the net investment in U.S. subsidiaries
|
(1,266 | ) | 788 | (33 | ) | ||||||||
Pension
and other postretirement
benefit plans (Note
12):
|
|||||||||||||
Net
actuarial gain (loss) arising during the year
|
(452 | ) | 391 | – | |||||||||
Prior
service cost arising during the year
|
(3 | ) | (12 | ) | – | ||||||||
Amortization
of net actuarial loss (gain) included in net periodic benefit cost
(income)
|
(2 | ) | 49 | – | |||||||||
Amortization
of prior service cost included in net periodic benefit cost
(income)
|
21 | 21 | – | ||||||||||
Minimum
pension liability adjustment
|
– | – | 1 | ||||||||||
Derivative
instruments (Note
18)
|
– | (1 | ) | (57 | ) | ||||||||
Other
comprehensive income (loss) before income taxes
|
(443 | ) | 232 | (57 | ) | ||||||||
Income
tax recovery (expense) on Other comprehensive income
(loss)
|
319 | (219 | ) | (179 | ) | ||||||||
Other
comprehensive income (loss)
|
(124 | ) | 13 | (236 | ) | ||||||||
Comprehensive
income
|
$ | 1,771 | $ | 2,171 | $ | 1,851 |
U.S. GAAP |
Canadian
National Railway Company
|
63 |
In
millions
|
December
31,
|
2008
|
2007
|
||||||
Assets
|
|||||||||
Current
assets
|
|||||||||
Cash
and cash equivalents
|
$ | 413 | $ | 310 | |||||
Accounts
receivable (Note
4)
|
913 | 370 | |||||||
Material
and supplies
|
200 | 162 | |||||||
Deferred
income taxes (Note
14)
|
98 | 68 | |||||||
Other
|
132 | 138 | |||||||
1,756 | 1,048 | ||||||||
Properties
(Note
5)
|
23,203 | 20,413 | |||||||
Intangible
and other assets (Note
6)
|
1,761 | 1,999 | |||||||
Total
assets
|
$ | 26,720 | $ | 23,460 | |||||
Liabilities
and shareholders’ equity
|
|||||||||
Current
liabilities
|
|||||||||
Accounts
payable and other (Note
7)
|
$ | 1,386 | $ | 1,336 | |||||
Current
portion of long-term debt (Note
9)
|
506 | 254 | |||||||
1,892 | 1,590 | ||||||||
Deferred
income taxes (Note
14)
|
5,511 | 4,908 | |||||||
Other
liabilities and deferred credits (Note
8)
|
1,353 | 1,422 | |||||||
Long-term
debt (Note
9)
|
7,405 | 5,363 | |||||||
Shareholders’ equity
|
|||||||||
Common
shares (Note
10)
|
4,179 | 4,283 | |||||||
Accumulated
other comprehensive loss (Note
19)
|
(155 | ) | (31 | ) | |||||
Retained
earnings
|
6,535 | 5,925 | |||||||
10,559 | 10,177 | ||||||||
Total
liabilities and shareholders’ equity
|
$ | 26,720 | $ | 23,460 |
On
behalf of the Board:
|
|
David
G.A.McLean
Director
|
E. Hunter
Harrison
Director
|
U.S. GAAP |
Canadian
National Railway Company
|
64 |
Issued
and
|
Accumulated
|
|||||||||||||||||||
outstanding
|
other
|
Total
|
||||||||||||||||||
common
|
Common
|
comprehensive
|
Retained
|
shareholders’
|
||||||||||||||||
In
millions
|
shares
|
shares
|
loss
|
earnings
|
equity
|
|||||||||||||||
Balances
at December 31, 2005
|
536.8 | $ | 4,580 | $ | (222 | ) | $ | 4,891 | $ | 9,249 | ||||||||||
Net
income
|
– | – | – | 2,087 | 2,087 | |||||||||||||||
Stock
options exercised and other (Notes
10, 11)
|
5.1 | 133 | – | – | 133 | |||||||||||||||
Share
repurchase programs (Note
10)
|
(29.5 | ) | (254 | ) | – | (1,229 | ) | (1,483 | ) | |||||||||||
Other
comprehensive loss (Note
19)
|
– | – | (236 | ) | – | (236 | ) | |||||||||||||
Adjustment
to Accumulated other comprehensive loss (Note
2)
|
– | – | 414 | – | 414 | |||||||||||||||
Dividends
($0.65 per share)
|
– | – | – | (340 | ) | (340 | ) | |||||||||||||
Balances
at December 31, 2006
|
512.4 | 4,459 | (44 | ) | 5,409 | 9,824 | ||||||||||||||
Adoption
of accounting pronouncements (Note
2)
|
– | – | – | 95 | 95 | |||||||||||||||
Restated
balances, beginning of year
|
512.4 | 4,459 | (44 | ) | 5,504 | 9,919 | ||||||||||||||
Net
income
|
– | – | – | 2,158 | 2,158 | |||||||||||||||
Stock
options exercised and other (Notes
10, 11)
|
3.0 | 89 | – | – | 89 | |||||||||||||||
Share
repurchase programs (Note
10)
|
(30.2 | ) | (265 | ) | – | (1,319 | ) | (1,584 | ) | |||||||||||
Other
comprehensive income (Note
19)
|
– | – | 13 | – | 13 | |||||||||||||||
Dividends
($0.84 per share)
|
– | – | – | (418 | ) | (418 | ) | |||||||||||||
Balances
at December 31, 2007
|
485.2 | 4,283 | (31 | ) | 5,925 | 10,177 | ||||||||||||||
Net
income
|
– | – | – | 1,895 | 1,895 | |||||||||||||||
Stock
options exercised and other (Notes
10, 11)
|
2.4 | 68 | – | – | 68 | |||||||||||||||
Share
repurchase programs (Note
10)
|
(19.4 | ) | (172 | ) | – | (849 | ) | (1,021 | ) | |||||||||||
Other
comprehensive loss (Note
19)
|
– | – | (124 | ) | – | (124 | ) | |||||||||||||
Dividends
($0.92 per share)
|
– | – | – | (436 | ) | (436 | ) | |||||||||||||
Balances
at December 31, 2008
|
468.2 | $ | 4,179 | $ | (155 | ) |
$
|
6,535
|
$ | 10,559 |
U.S. GAAP |
Canadian
National Railway Company
|
65 |
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Operating
activities
|
|||||||||||||
Net
income
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | |||||||
Adjustments
to reconcile net income to net cash provided from operating
activities:
|
|||||||||||||
Depreciation
and amortization
|
725 | 678 | 653 | ||||||||||
Deferred
income taxes (Note
14)
|
230 | (82 | ) | 3 | |||||||||
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)
|
(432 | ) | 229 | (17 | ) | ||||||||
Material
and supplies
|
(23 | ) | 18 | (36 | ) | ||||||||
Accounts
payable and other
|
(127 | ) | (396 | ) | 194 | ||||||||
Other
current assets
|
37 | 84 | 61 | ||||||||||
Other
|
(274 | ) | (119 | ) | 6 | ||||||||
Cash
provided from operating activities
|
2,031 | 2,417 | 2,951 | ||||||||||
Investing
activities
|
|||||||||||||
Property
additions
|
(1,424 | ) | (1,387 | ) | (1,298 | ) | |||||||
Acquisitions,
net of cash acquired (Note
3)
|
(50 | ) | (25 | ) | (84 | ) | |||||||
Sale
of Central Station Complex (Note
5)
|
– | 351 | – | ||||||||||
Sale
of investment in English Welsh and Scottish Railway (Note
6)
|
– | 114 | – | ||||||||||
Other,
net
|
74 | 52 | 33 | ||||||||||
Cash
used by investing activities
|
(1,400 | ) | (895 | ) | (1,349 | ) | |||||||
Financing
activities
|
|||||||||||||
Issuance
of long-term debt
|
4,433 | 4,171 | 3,308 | ||||||||||
Reduction
of long-term debt
|
(3,589 | ) | (3,589 | ) | (3,089 | ) | |||||||
Issuance
of common shares due to exercise of stock options
and
|
|||||||||||||
related
excess tax benefits realized (Note
11)
|
54 | 77 | 120 | ||||||||||
Repurchase
of common shares (Note
10)
|
(1,021 | ) | (1,584 | ) | (1,483 | ) | |||||||
Dividends
paid
|
(436 | ) | (418 | ) | (340 | ) | |||||||
Cash
used by financing activities
|
(559 | ) | (1,343 | ) | (1,484 | ) | |||||||
Effect
of foreign exchange fluctuations on U.S. dollar-denominated cash and cash
equivalents
|
31 | (48 | ) | (1 | ) | ||||||||
Net
increase in cash and cash equivalents
|
103 | 131 | 117 | ||||||||||
Cash
and cash equivalents, beginning of year
|
310 | 179 | 62 | ||||||||||
Cash
and cash equivalents,end of year
|
$ | 413 | $ | 310 | $ | 179 | |||||||
Supplemental
cash flow information
|
|||||||||||||
Net
cash receipts from customers and other
|
$ | 8,012 | $ | 8,139 | $ | 7,946 | |||||||
Net
cash payments for:
|
|||||||||||||
Employee
services, suppliers and other expenses
|
(4,920 | ) | (4,323 | ) | (4,130 | ) | |||||||
Interest
|
(396 | ) | (340 | ) | (294 | ) | |||||||
Workforce
reductions (Note
8)
|
(22 | ) | (31 | ) | (45 | ) | |||||||
Personal
injury and other claims (Note
17)
|
(91 | ) | (86 | ) | (107 | ) | |||||||
Pensions
(Note
12)
|
(127 | ) | (75 | ) | (112 | ) | |||||||
Income
taxes (Note
14)
|
(425 | ) | (867 | ) | (307 | ) | |||||||
Cash
provided from operating activities
|
$ | 2,031 | $ | 2,417 | $ | 2,951 |
U.S. GAAP |
Canadian
National Railway Company
|
66 |
U.S. GAAP |
Canadian
National Railway Company
|
67 |
Asset class
|
Annual
rate
|
Track and
roadway
|
2%
|
Rolling
stock
|
3%
|
Buildings
|
2%
|
Information
technology
|
15%
|
Other
|
7%
|
(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
|
68 |
U.S. GAAP |
Canadian
National Railway Company
|
69 |
(i)
|
Chemin de fer de la Matapedia et
du Golfe, a 221-mile short-line
railway;
|
(ii)
|
New
Brunswick East Coast Railway, a 196-mile short-line
railway;
|
(iii)
|
Ottawa Central Railway, a 123-mile
short-line railway;
and
|
(iv)
|
Compagnie de gestion de Matane
Inc., a rail ferry
which provides shuttle boat-rail freight
service.
|
(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.
|
In millions
|
December
31,
|
2008
|
2007
|
||||||
Freight
|
$ | 673 | $ | 146 | |||||
Non-freight
|
266 | 251 | |||||||
939 | 397 | ||||||||
Allowance for doubtful
accounts
|
(26 | ) | (27 | ) | |||||
$ | 913 | $ | 370 |
U.S. GAAP |
Canadian
National Railway Company
|
70 |
In millions
|
December 31, 2008
|
December 31, 2007
|
||||||||||||||||||||||
Accumulated
|
Accumulated
|
|||||||||||||||||||||||
Cost
|
depreciation
|
Net
|
Cost
|
depreciation
|
Net
|
|||||||||||||||||||
Track
and roadway (1)
|
$ | 24,724 | $ | 6,643 | $ | 18,081 | $ | 22,020 | $ | 6,433 | $ | 15,587 | ||||||||||||
Rolling
stock
|
4,833 | 1,585 | 3,248 | 4,702 | 1,606 | 3,096 | ||||||||||||||||||
Buildings
|
1,253 | 541 | 712 | 1,105 | 498 | 607 | ||||||||||||||||||
Information
technology
|
739 | 187 | 552 | 667 | 131 | 536 | ||||||||||||||||||
Other
|
957 | 347 | 610 | 829 | 242 | 587 | ||||||||||||||||||
$ | 32,506 | $ | 9,303 | $ | 23,203 | $ | 29,323 | $ | 8,910 | $ | 20,413 | |||||||||||||
Capital
leases included in properties
|
||||||||||||||||||||||||
Track
and roadway (1)
|
$ | 418 | $ | 2 | $ | 416 | $ | 418 | $ | 2 | $ | 416 | ||||||||||||
Rolling
stock
|
1,335 | 287 | 1,048 | 1,287 | 245 | 1,042 | ||||||||||||||||||
Buildings
|
109 | 7 | 102 | 109 | 4 | 105 | ||||||||||||||||||
Information
technology
|
3 | – | 3 | 1 | – | 1 | ||||||||||||||||||
Other
|
122 | 30 | 92 | 121 | 27 | 94 | ||||||||||||||||||
$ | 1,987 | $ | 326 | $ | 1,661 | $ | 1,936 | $ | 278 | $ | 1,658 |
(1)
|
Includes
the cost of land of $1,827 million and $1,530 million as at December 31,
2008 and 2007, respectively, of which $108 million
was for right-of-way
access and was recorded as a capital lease in both
years. Following a review in 2008
of its asset classifications, the Company decreased
the amounts of capital leases included in properties and has presented
them as owned.
|
U.S. GAAP |
Canadian
National Railway Company
|
71 |
In millions
|
December 31,
|
2008
|
2007
|
||||||
Pension
asset (Note 12)
|
$ | 1,522 | $ | 1,768 | |||||
Investments
(A)
|
24 | 24 | |||||||
Other
receivables
|
83 | 106 | |||||||
Intangible
assets (B)
|
65 | 54 | |||||||
Other
|
67 | 47 | |||||||
$ | 1,761 | $ | 1,999 |
In millions
|
December 31,
|
2008
|
2007
|
||||||
Trade
payables
|
$ | 413 | $ | 457 | |||||
Payroll-related
accruals
|
237 | 234 | |||||||
Accrued
charges
|
232 | 146 | |||||||
Accrued
interest
|
123 | 118 | |||||||
Personal
injury and other claims provision
|
118 | 102 | |||||||
Income
and other taxes
|
75 | 123 | |||||||
Environmental
provisions
|
30 | 28 | |||||||
Other
postretirement benefits liability
|
19 | 18 | |||||||
Workforce
reduction provisions
|
17 | 19 | |||||||
Other
|
122 | 91 | |||||||
$ | 1,386 | $ | 1,336 |
In millions
|
December 31,
|
2008
|
2007
|
||||||
Personal
injury and other claims provision,
|
|||||||||
net
of current portion
|
$ | 336 | $ | 344 | |||||
Other
postretirement benefits liability,
|
|||||||||
net
of current portion (Note 12)
|
241 | 248 | |||||||
Pension
liability (Note 12)
|
237 | 187 | |||||||
Environmental
provisions, net of current portion
|
95 | 83 | |||||||
Workforce
reduction provisions, net of current portion (A)
|
39 | 53 | |||||||
Deferred
credits and other
|
405 | 507 | |||||||
$ | 1,353 | $ | 1,422 |
U.S. GAAP |
Canadian
National Railway Company
|
72 |
U.S.
dollar-
|
|||||||||||||
denominated
|
December 31, | ||||||||||||
In millions
|
Maturity
|
amount
|
2008
|
2007
|
|||||||||
Debentures and notes: (A)
|
|||||||||||||
Canadian
National series:
|
|||||||||||||
4.25%
|
5-year
notes (B)
|
Aug.
1, 2009
|
$ |
300
|
$ |
365
|
$ |
297
|
|||||
6.38%
|
10-year
notes (B)
|
Oct.
15, 2011
|
400
|
487
|
397
|
||||||||
4.40%
|
10-year
notes (B)
|
Mar.
15, 2013
|
400
|
487
|
397
|
||||||||
4.95%
|
6-year
notes (B)
|
Jan.
15, 2014
|
325
|
396
|
–
|
||||||||
5.80%
|
10-year
notes (B)
|
June
1, 2016
|
250
|
305
|
248
|
||||||||
5.85%
|
10-year
notes (B)
|
Nov.
15, 2017
|
250
|
305
|
248
|
||||||||
5.55%
|
10-year
notes (B)
|
May
15, 2018
|
325
|
396
|
–
|
||||||||
6.80%
|
20-year
notes (B)
|
July
15, 2018
|
200
|
244
|
198
|
||||||||
7.63%
|
30-year
debentures
|
May
15, 2023
|
150
|
183
|
149
|
||||||||
6.90%
|
30-year
notes (B)
|
July
15, 2028
|
475
|
578
|
471
|
||||||||
7.38%
|
30-year
debentures (B)
|
Oct.
15, 2031
|
200
|
244
|
198
|
||||||||
6.25%
|
30-year
notes (B)
|
Aug.
1, 2034
|
500
|
609
|
496
|
||||||||
6.20%
|
30-year
notes (B)
|
June
1, 2036
|
450
|
548
|
446
|
||||||||
6.71%
|
Puttable
Reset Securities PURSSM (B)
|
July
15, 2036
|
250
|
305
|
248
|
||||||||
6.38%
|
30-year
debentures (B)
|
Nov.
15, 2037
|
300
|
365
|
297
|
||||||||
Illinois
Central series:
|
|||||||||||||
6.63%
|
10-year
notes
|
June
9, 2008
|
20
|
–
|
20
|
||||||||
5.00%
|
99-year
income debentures
|
Dec.
1, 2056
|
7
|
9
|
7
|
||||||||
7.70%
|
100-year
debentures
|
Sept.
15, 2096
|
125
|
152
|
124
|
||||||||
Wisconsin
Central series:
|
|||||||||||||
6.63%
|
10-year
notes
|
April
15, 2008
|
150
|
–
|
149
|
||||||||
5,978
|
4,390
|
||||||||||||
BC
Rail series:
|
|||||||||||||
Non-interest
bearing 90-year subordinated notes (C)
|
July
14, 2094
|
842
|
842
|
||||||||||
Total debentures and notes
|
6,820
|
5,232
|
|||||||||||
Other:
|
|||||||||||||
Commercial
paper (D)(E)
|
626
|
122
|
|||||||||||
Capital
lease obligations and other (F)
|
1,320
|
1,114
|
|||||||||||
Total other
|
1,946
|
1,236
|
|||||||||||
8,766
|
6,468
|
||||||||||||
Less:
|
|||||||||||||
Net
unamortized discount
|
855
|
851
|
|||||||||||
Total debt
|
7,911
|
5,617
|
|||||||||||
Less:
|
|||||||||||||
Current
portion of long-term
debt
|
506
|
254
|
|||||||||||
$ |
7,405
|
$ |
5,363
|
U.S. GAAP |
Canadian
National Railway Company
|
73 |
In millions
|
||||
2009
(1)
|
$ | 506 | ||
2010
|
95 | |||
2011
|
1,248 | |||
2012
|
39 | |||
2013
|
581 | |||
2014
and thereafter
|
5,442 |
•
|
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
|
74 |
|
RSUs
|
Vision
|
VIDP
|
|||||||||||||||||||||
In
millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||||||||||||||||||
Outstanding at December 31, 2007
|
|
|
1.6
|
|
|
|
0.9
|
(1)
|
|
|
0.8
|
|
|
|
–
|
|
|
|
0.2
|
|
1.9 | |||
Granted
|
0.7 | – | – | – | – | |||||||||||||||||||
Forfeited
|
(0.1 | ) | – | – | – | – | – | |||||||||||||||||
Vested
during year
|
(0.9 | ) | 0.9 | – | – | (0.1 | ) | 0.1 | ||||||||||||||||
Payout
|
– | (0.9 | ) | – | – | – | (0.2 | ) | ||||||||||||||||
Cancelled
|
– | – | (0.8 | ) | – | – | – | |||||||||||||||||
Outstanding at
December 31, 2008
|
1.3 | 0.9 |
(1)
|
– | – | 0.1 | 1.8 |
(1)
|
Includes
0.1 million of 2004 time-vested
RSUs.
|
U.S. GAAP |
Canadian
National Railway Company
|
75 |
In millions, unless otherwise indicated
|
RSUs (1)
|
Vision (1)
|
VIDP
(2)
|
Total
|
||||||||||||||||||||||||||||
Year
of grant
|
2008
|
2007
|
2006
|
2005
|
|
2004
|
2005
|
2003
onwards
|
||||||||||||||||||||||||
Stock-based
compensation expense (recovery)
|
||||||||||||||||||||||||||||||||
recognized
over requisite service period
|
||||||||||||||||||||||||||||||||
Year
ended December 31, 2008
|
$ | 8 | $ | (2 | ) | $ | 24 | N/A | $ | 3 | $ | (10 | ) | $ | (10 | ) | $ | 13 | ||||||||||||||
Year
ended December 31, 2007
|
N/A | $ | 11 |
$
|
8
|
$ | 14 | $ | 5 | $ | 2 | $ | 11 | $ | 51 | |||||||||||||||||
Year
ended December 31, 2006
|
N/A | N/A | $ | 21 | $ | 19 | $ | 6 | $ | 8 | $ | 11 | $ | 65 | ||||||||||||||||||
Liability
outstanding
|
||||||||||||||||||||||||||||||||
December
31, 2008
|
$ | 8 | $ | 9 | $ | 53 | N/A | $ | 3 | $ | – | $ | 88 | $ | 161 | |||||||||||||||||
December
31, 2007
|
N/A | $ | 11 | $ | 29 | $ | 48 | $ | 4 | $ | 8 | $ | 95 | $ | 195 | |||||||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||||||||||
December
31, 2008 (3)
|
$ | 20.95 | $ | 16.53 | $ | 44.78 | N/A | $ | 42.47 | $ | – | $ | 44.78 | N/A | ||||||||||||||||||
Fair
value of awards vested during year
|
||||||||||||||||||||||||||||||||
Year
ended December 31, 2008
|
$ | – | $ | – | $ | 53 | N/A | $ | 3 | $ | – | $ | 4 | $ | 60 | |||||||||||||||||
Year
ended December 31, 2007
|
N/A | $ | – | $ | 1 | $ | 48 | $ | 9 | $ | – | $ | 5 | $ | 63 | |||||||||||||||||
Year
ended December 31, 2006
|
N/A | N/A | $ | – | $ | – | $ | 4 | $ | – | $ | 5 | $ | 9 | ||||||||||||||||||
Nonvested
awards at December 31, 2008
|
||||||||||||||||||||||||||||||||
Unrecognized
compensation cost
|
$ | 5 | $ | 2 | $ | – | N/A | $ | – | N/A | $ | 3 | $ | 10 | ||||||||||||||||||
Remaining
recognition period (years)
|
2.0 | 1.0 | N/A | N/A | N/A | N/A | 3.0 | N/A | ||||||||||||||||||||||||
Assumptions
(4)
|
||||||||||||||||||||||||||||||||
Stock
price ($)
|
$ | 44.78 | $ | 44.78 | $ | 44.78 | N/A | $ | 42.47 | N/A | $ | 44.78 | N/A | |||||||||||||||||||
Expected
stock price volatility (5)
|
29% | 33% | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Expected
term (years) (6)
|
2.0 | 1.0 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Risk-free
interest rate (7)
|
1.09% | 0.85% | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Dividend
rate ($) (8)
|
$ | 0.92 |
$
|
0.92
|
N/A | N/A | N/A | N/A | N/A | N/A |
(1)
|
Compensation cost is based on the fair value of the awards at period-end using the lattice-based
valuation model that uses the assumptions as presented herein, except for
time-vested RSUs.
|
(2)
|
Compensation cost is based on intrinsic value.
|
(3)
|
2004 RSUs calculated based on the Company’s average share price during the 20-day period ending on December 31, 2008.
|
(4)
|
Assumptions used to determine fair value are at December 31, 2008.
|
(5)
|
Based on the historical volatility of the Company’s stock over a period commensurate with the expected term of the award.
|
(6)
|
Represents the remaining period of time that awards are expected to be outstanding.
|
(7)
|
Based on the implied yield available on zero-coupon
government issues with an equivalent term commensurate with the expected
term of the awards.
|
(8)
|
Based on the annualized dividend rate.
|
U.S. GAAP |
Canadian
National Railway Company
|
76 |
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, 2007 (1)
|
14.7 | $ | 24.55 | 2.3 | $ | 12.34 | ||||||||||
Granted
|
0.9 | $ | 48.51 | 0.9 | $ | 12.44 | ||||||||||
Exercised
|
(2.4 | ) | $ | 18.59 | N/A | N/A | ||||||||||
Vested
|
N/A | N/A | (0.8 | ) | $ | 11.81 | ||||||||||
Outstanding at December 31, 2008 (1)
|
13.2 | $ | 29.05 | 2.4 | $ | 12.54 | ||||||||||
Exercisable at December 31, 2008 (1)
|
10.8 | $ | 24.08 | N/A | N/A |
(1)
|
Stock options with a U.S. dollar exercise price have been translated to Canadian dollars using the foreign exchange rate in effect at the balance sheet date.
|
Options
outstanding
|
Options
exercisable
|
||||||||||||||||||||||||||
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
|
||||||||||||||||||||||||
$11.42–$13.18 | 0.9 | 1.1 | $ | 11.68 | $ | 29 | 0.9 | $ | 11.68 | $ |
29
|
||||||||||||||||
$13.54–$19.83 | 1.8 | 1.9 | $ | 16.49 | 51 | 1.8 | $ | 16.49 | 51 | ||||||||||||||||||
$20.27–$27.07 | 6.5 | 3.5 | $ | 23.00 | 141 | 6.5 | $ | 23.00 | 141 | ||||||||||||||||||
$35.26–$42.24 | 1.2 | 6.1 | $ | 35.90 | 11 | 0.9 | $ | 35.90 | 8 | ||||||||||||||||||
$45.18–$65.67 | 2.8 | 8.0 | $ | 54.00 | – | 0.7 | $ | 53.55 | – | ||||||||||||||||||
Balance at December 31, 2008 (1)
|
13.2 | 4.3 | $ | 29.05 | $ | 232 | 10.8 | $ | 24.08 | $ | 229 |
(1)
|
Stock
options with a U.S. dollar exercise price have been translated to Canadian
dollars using the foreign exchange rate in effect at the balance sheet
date. As at December 31, 2008, the total number of in-the-money
stock options outstanding was 10.4 million with a weighted-average
exercise price of $22.40. The weighted-average years to expiration of
exercisable stock options is 3.5
years.
|
U.S. GAAP |
Canadian
National Railway Company
|
77 |
In millions, unless otherwise indicated
|
||||||||||||||||||||||||
Year
of grant
|
2008
|
2007
|
2006
|
2005
|
Prior
to 2005
|
Total
|
||||||||||||||||||
Stock-based
compensation
expense
|
||||||||||||||||||||||||
recognized
over requisite service period (1)
|
||||||||||||||||||||||||
Year
ended December 31, 2008
|
$ | 7 | $ | 2 | $ | 2 | $ | 3 | $ | – | $ | 14 | ||||||||||||
Year
ended December 31, 2007
|
N/A | $ | 6 | $ | 2 | $ | 3 | $ | – | $ | 11 | |||||||||||||
Year
ended December 31, 2006
|
N/A | N/A | $ | 8 | $ | 3 | $ | 3 | $ | 14 | ||||||||||||||
Fair
value per unit
|
||||||||||||||||||||||||
At
grant date ($)
|
$ | 12.44 | $ | 13.36 | $ | 13.80 | $ | 9.19 | $ | 8.61 | N/A | |||||||||||||
Fair
value of awards vested during year
|
||||||||||||||||||||||||
Year
ended December 31, 2008
|
$ | – | $ | 3 | $ | 3 | $ | 3 | $ | – | $ | 9 | ||||||||||||
Year
ended December 31, 2007
|
N/A | $ | – | $ | 4 | $ | 3 | $ | – | $ | 7 | |||||||||||||
Year
ended December 31, 2006
|
N/A | N/A | $ | – | $ | 3 | $ | 34 | $ | 37 | ||||||||||||||
Nonvested
awards at December 31, 2008
|
||||||||||||||||||||||||
Unrecognized
compensation cost
|
$ | 4 | $ | 3 | $ | 2 | $ | – | $ | – | $ | 9 | ||||||||||||
Remaining
recognition period (years)
|
3.1 | 2.1 | 1.1 | 0.1 | – | N/A | ||||||||||||||||||
Assumptions
|
||||||||||||||||||||||||
Grant
price ($)
|
$ | 48.51 | $ | 52.79 | $ | 51.51 | $ | 36.33 | $ | 23.59 | N/A | |||||||||||||
Expected
stock price volatility (2)
|
27% | 24% | 25% | 25% | 30% | N/A | ||||||||||||||||||
Expected
term (years) (3)
|
5.3 | 5.2 | 5.2 | 5.2 | 6.2 | N/A | ||||||||||||||||||
Risk-free
interest rate (4)
|
3.58% | 4.12% | 4.04% | 3.50% | 5.13% | N/A | ||||||||||||||||||
Dividend
rate ($) (5)
|
$ | 0.92 | $ | 0.84 | $ | 0.65 | $ | 0.50 | $ | 0.30 | N/A |
(1)
|
Compensation cost
is based on the grant date fair value using the
Black-Scholes
option-pricing model that uses the assumptions at the grant
date.
|
(2)
|
Based
on the historical volatility of
the Company's stock over a period commensurate
with the expected term of the
award.
|
(3)
|
Represents the
period of time that awards are expected to
be outstanding.The
Company uses historical data to
estimate option exercise and employee termination, and
groups of employees that
have similar historical exercise behavior
are considered separately.
|
(4)
|
Based
on the implied yield available on zero-coupon government issues
with an
equivalent term commensurate with the expected term of the
awards.
|
(5)
|
Based
on the annualized dividend
rate.
|
In millions
|
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Total
intrinsic
value
|
$ | 81 | $ | 105 | $ | 156 | |||||||
Cash
received upon exercise of options
|
$ | 44 | $ | 61 | $ | 101 | |||||||
Related
tax benefits realized
|
$ | 10 | $ | 16 |
$
|
19
|
U.S. GAAP |
Canadian
National Railway Company
|
78 |
Target
|
December 31,
|
|||||||||||
Plan
assets
by category
|
allocation
|
2008
|
2007
|
|||||||||
Equity
securities
|
53 | % | 41 | % | 51 | % | ||||||
Debt
securities
|
40 | % | 39 | % | 34 | % | ||||||
Real
estate
|
4 | % | 2 | % | 2 | % | ||||||
Other
|
3 | % | 18 | % | 13 | % | ||||||
100 | % | 100 | % | 100 | % |
Pensions
|
Other
postretirement benefits
|
||||||||||||||||
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Change
in benefit
obligation
|
|||||||||||||||||
Benefit
obligation at beginning of year
|
$ | 14,419 | $ | 14,545 |
$
|
266
|
$ | 286 | |||||||||
Amendments
|
– | – | 6 | 12 | |||||||||||||
Adoption
of SFAS No. 158 measurement date provision (Note
2)
|
– | 3 | – | 2 | |||||||||||||
Interest
cost
|
801 | 742 | 15 | 15 | |||||||||||||
Actuarial
gain
|
(2,274 | ) | (195 | ) | (23 | ) | (7 | ) | |||||||||
Service
cost
|
136 | 150 | 4 | 5 | |||||||||||||
Curtailment
gain
|
– | – | (13 | ) | (9 | ) | |||||||||||
Plan
participants’ contributions
|
52 | 54 | – | – | |||||||||||||
Foreign
currency changes
|
45 | (33 | ) | 23 | (21 | ) | |||||||||||
Benefit
payments and transfers
|
(853 | ) | (847 | ) | (18 | ) | (17 | ) | |||||||||
Benefit
obligation at end of year
|
$ | 12,326 | $ | 14,419 | $ | 260 | $ | 266 | |||||||||
Component
representing future salary increases
|
(397 | ) | (618 | ) | – | – | |||||||||||
Accumulated
benefit obligation at end of year
|
$ | 11,929 | $ | 13,801 | $ | 260 | $ | 266 | |||||||||
Change
in plan assets
|
|||||||||||||||||
Fair
value of plan assets at beginning of year
|
$ | 16,000 | $ | 15,625 | $ | – | $ | – | |||||||||
Employer
contributions
|
127 | 75 | – | – | |||||||||||||
Plan
participants’ contributions
|
52 | 54 | – | – | |||||||||||||
Foreign
currency changes
|
27 | (26 | ) | – | – | ||||||||||||
Actual
return on plan assets
|
(1,742 | ) | 1,119 | – | – | ||||||||||||
Benefit
payments and transfers
|
(853 | ) | (847 | ) | – | – | |||||||||||
Fair
value of plan assets
at end of year
|
$ | 13,611 | $ | 16,000 | $ | – | $ | – | |||||||||
Funded
(unfunded) status (Excess of fair value of plan assets
over
|
|||||||||||||||||
benefit
obligation at end of year)
|
$ | 1,285 | $ | 1,581 | $ | (260 | ) | $ | (266 | ) |
U.S. GAAP |
Canadian
National Railway Company
|
79 |
Pensions
|
Other
postretirement benefits
|
|||||||||||||||||
In
millions
|
December
31,
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Noncurrent
assets (Note
6)
|
$ | 1,522 | $ | 1,768 | $ | – | $ | – | ||||||||||
Current
liabilities (Note
7)
|
– | – | (19 | ) | (18 | ) | ||||||||||||
Noncurrent
liabilities (Note
8)
|
(237 | ) | (187 | ) | (241 | ) | (248 | ) | ||||||||||
Total
amount recognized
|
$ | 1,285 | $ | 1,581 | $ | (260 | ) | $ | (266 | ) |
Pensions
|
Other
postretirement benefits
|
|||||||||||||||||
In
millions
|
December
31,
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Net
actuarial gain
|
$ | 551 | $ | 1,039 | $ | 61 | $ | 27 | ||||||||||
Prior
service cost
|
$ | – | $ | (19 | ) | $ | (9 | ) | $ | (8 | ) |
Pensions |
Other
postretirement benefits
|
|||||||||||||||||
In millions
|
December
31,
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Projected
benefit obligation
|
$ | 365 | $ | 266 | N/A | N/A | ||||||||||||
Accumulated
benefit obligation
|
$ | 327 | $ | 229 | N/A | N/A | ||||||||||||
Fair
value of plan assets
|
$ | 128 | $ | 79 | N/A | N/A |
Pensions |
Other postretirement benefits
|
|||||||||||||||||||||||||
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
|||||||||||||||||||
Service
cost
|
$ | 136 | $ | 150 | $ | 146 | $ | 4 | $ | 5 | $ | 4 | ||||||||||||||
Interest
cost
|
801 | 742 | 713 | 15 | 15 | 16 | ||||||||||||||||||||
Curtailment
gain
|
– | – | – | (7 | ) | (4 | ) | – | ||||||||||||||||||
Expected
return on plan assets
|
(1,004 | ) | (935 | ) | (903 | ) | – | – | – | |||||||||||||||||
Amortization
of prior service cost
|
19 | 19 | 19 | 2 | 2 | 2 | ||||||||||||||||||||
Recognized
net actuarial loss (gain)
|
– | 53 | 91 | (2 | ) | (4 | ) | (5 | ) | |||||||||||||||||
Net
periodic benefit cost (income)
|
$ | (48 | ) | $ | 29 | $ | 66 | $ | 12 | $ | 14 | $ | 17 |
Pensions
|
Other postretirement benefits
|
|||||||||||||||||||||||||
December 31,
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||||
To
determine benefit obligation
|
||||||||||||||||||||||||||
Discount
rate
|
7.42 | % | 5.53 | % | 5.12 | % | 6.84 | % | 5.84 | % | 5.44% | |||||||||||||||
Rate
of compensation increase
|
3.50 | % | 3.50 | % | 3.50 | % | 3.50 | % | 3.50 | % | 3.50% | |||||||||||||||
To
determine net periodic benefit cost
|
||||||||||||||||||||||||||
Discount
rate
|
5.53 | % | 5.12 | % | 5.00 | % | 5.84 | % | 5.44 | % | 5.30% | |||||||||||||||
Rate
of compensation increase
|
3.50 | % | 3.50 | % | 3.75 | % | 3.50 | % | 3.50 | % | 3.75% | |||||||||||||||
Expected
return on plan assets
|
8.00 | % | 8.00 | % | 8.00 | % | N/A | N/A | N/A |
U.S. GAAP |
Canadian
National Railway Company
|
80 |
In millions
|
One-percentage-point
|
|||||||
Increase
|
Decrease
|
|||||||
Effect
on total service and interest costs
|
$ | 1 | $ | (1 | ) | |||
Effect
on benefit obligation
|
$ | 16 | $ | (14 | ) |
In
millions
|
Pensions
|
Other
postretirement
benefits
|
||||||
2009
|
$ | 894 | $ | 20 | ||||
2010
|
922 | 21 | ||||||
2011
|
952 | 21 | ||||||
2012
|
980 | 21 | ||||||
2013
|
1,005 | 22 | ||||||
Years
2014 to 2018
|
5,363 | 123 |
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Gain
on disposal of properties
|
$ | 22 | $ | 14 | $ | 16 | |||||||
Gain
on disposal of CSC (Note
5)
|
– | 92 | – | ||||||||||
Gain
on disposal of investment
in EWS (Note
6)
|
– | 61 | – | ||||||||||
Equity
in earnings of EWS (Note
6)
|
– | 5 | (6 | ) | |||||||||
Net
real estate costs
|
(10 | ) | (6 | ) | (12 | ) | |||||||
Costs
related to the Accounts receivable
|
|||||||||||||
securitization
program (Note
4)
|
(10 | ) | (24 | ) | (12 | ) | |||||||
Foreign
exchange gain (loss)
|
(14 | ) | 24 | 18 | |||||||||
Other
|
38 | – | 7 | ||||||||||
$ | 26 | $ | 166 | $ | 11 |
In
millions
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Federal
tax rate
|
19.5% | 22.1% | 22.1% | ||||||||||
Income
tax expense at the statutory
|
|||||||||||||
Federal
tax rate
|
$ | (496 | ) | $ | (598 | ) | $ | (603 | ) | ||||
Income
tax (expense) recovery resulting from:
|
|||||||||||||
Provincial
and other taxes
|
(304 | ) | (318 | ) | (354 | ) | |||||||
Deferred
income tax adjustments
|
|||||||||||||
due
to rate enactments
|
23 | 317 | 228 | ||||||||||
Other
(1)
|
127 | 51 | 87 | ||||||||||
Income
tax expense
|
$ | (650 | ) | $ | (548 | ) | $ | (642 | ) | ||||
Cash
payments for income taxes
|
$ | 425 | $ | 867 | $ | 307 |
(1)
|
Comprises
adjustments relating to the resolution of matters pertaining to prior
years’ income
taxes, including net recognized tax benefits, and other
items.
|
In
millions
|
Year
ended December
31,
|
2008
|
2007
|
2006
|
|||||||||
Income
before income taxes
|
|||||||||||||
Canada
|
$ | 1,976 | $ | 1,983 | $ | 2,009 | |||||||
U.S.
|
569 | 723 | 720 | ||||||||||
$ | 2,545 | $ | 2,706 | $ | 2,729 |
Current
income tax expense
|
|||||||||||||
Canada
|
$ | (316 | ) | $ | (418 | ) | $ | (440 | ) | ||||
U.S.
|
(104 | ) | (212 | ) | (199 | ) | |||||||
$ | (420 | ) | $ | (630 | ) | $ | (639 | ) |
Deferred
income tax recovery (expense)
|
||||||||||||
Canada
|
$ | (153 | ) | $ | 141 | $ | 102 | |||||
U.S.
|
(77 | ) | (59 | ) | (105 | ) | ||||||
$ | (230 | ) | $ | 82 | $ | (3 | ) |
In
millions
|
December
31,
|
2008
|
2007
|
||||||
Deferred
income tax
assets
|
|||||||||
Workforce
reduction provisions
|
$ | 16 | $ | 22 | |||||
Personal
injury claims and other reserves
|
177 | 146 | |||||||
Other
postretirement benefits liability
|
87 | 85 | |||||||
Losses
and tax credit carryforwards
|
48 | 24 | |||||||
328 | 277 |
Deferred
income tax liabilities
|
||||||||
Net
pension asset
|
352 | 429 | ||||||
Properties
and other
|
5,389 | 4,688 | ||||||
5,741 | 5,117 | |||||||
Total
net deferred income tax liability
|
$ | 5,413 | $ | 4,840 |
Total
net deferred income tax liability
|
||||||||
Canada
|
$ | 2,113 | $ | 2,191 | ||||
U.S.
|
3,300 | 2,649 | ||||||
$ | 5,413 | $ | 4,840 | |||||
Total
net deferred income tax liability
|
$ | 5,413 | $ | 4,840 | ||||
Net
current deferred income tax asset
|
98 | 68 | ||||||
Long-term
deferred income tax liability
|
$ | 5,511 | $ | 4,908 |
U.S. GAAP |
Canadian
National Railway Company
|
81 |
In millions | ||||
Gross
unrecognized tax benefits as at January 1, 2008
|
$ | 158 | ||
Additions:
|
||||
Tax
positions related to the current year
|
2 | |||
Tax
positions related to prior years
|
11 | |||
Interest
accrued on tax positions
|
6 | |||
Deductions:
|
||||
Tax
positions related to prior years
|
(31 | ) | ||
Interest
accrued on tax positions
|
(30 | ) | ||
Settlements
|
(37 | ) | ||
Gross unrecognized tax benefits as at December 31, 2008
|
$ | 79 | ||
Adjustments
to reflect tax treaties and other arrangements
|
(38 | ) | ||
Net unrecognized tax benefits as at December 31, 2008
|
$ | 41 |
(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.
|
U.S. GAAP |
Canadian
National Railway Company
|
82 |
In millions
|
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Revenues
|
|||||||||||||
Canada
|
$ | 5,632 | $ | 5,265 | $ | 5,293 | |||||||
U.S.
|
2,850 | 2,632 | 2,636 | ||||||||||
$ | 8,482 | $ | 7,897 | $ | 7,929 | ||||||||
In millions
|
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Net income
|
|||||||||||||
Canada
|
$ | 1,507 | $ | 1,706 | $ | 1,671 | |||||||
U.S.
|
388 | 452 | 416 | ||||||||||
$ | 1,895 | $ | 2,158 | $ | 2,087 | ||||||||
In millions
|
December 31,
|
2008
|
2007
|
||||||||||
Properties
|
|||||||||||||
Canada
|
$ | 12,377 | $ | 11,777 | |||||||||
U.S.
|
10,826 | 8,636 | |||||||||||
$ | 23,203 | $ | 20,413 |
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Basic
earnings per share
|
$ | 3.99 | $ | 4.31 | $ | 3.97 | ||||||
Diluted
earnings per share
|
$ | 3.95 | $ | 4.25 | $ | 3.91 |
In millions
|
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Net
income
|
$ | 1,895 | $ | 2,158 | $ | 2,087 | |||||||
Weighted-average
shares outstanding
|
474.7 | 501.2 | 525.9 | ||||||||||
Effect
of stock options
|
5.3 | 6.8 | 8.4 | ||||||||||
Weighted-average diluted shares outstanding
|
480.0 | 508.0 | 534.3 |
In millions
|
Operating
|
Capital
|
||||||
2009
|
$ | 166 | $ | 207 | ||||
2010
|
134 | 158 | ||||||
2011
|
112 | 199 | ||||||
2012
|
87 | 96 | ||||||
2013
|
65 | 145 | ||||||
2014
and thereafter
|
312 | 1,032 | ||||||
$ | 876 | 1,837 | ||||||
Less:
imputed
interest on capital leases at rates ranging from
|
||||||||
approximately
2.1% to 7.9%
|
525 | |||||||
Present value of minimum lease payments included in debt
|
$ | 1,312 |
U.S. GAAP |
Canadian
National Railway Company
|
83 |
In millions
|
2008
|
2007
|
2006
|
|||||||||
Balance
January 1
|
$ | 196 | $ | 195 | $ | 205 | ||||||
Accruals
and other
|
42 | 41 | 60 | |||||||||
Payments
|
(49 | ) | (40 | ) | (70 | ) | ||||||
Balance December 31
|
$ | 189 | $ | 196 | $ | 195 |
In millions |
2008
|
2007
|
2006
|
|||||||||
Balance January 1 | $ | 250 | $ |
407
|
$ | 452 | ||||||
Accruals and
other
|
57 | (111 | ) | (8 | ) | |||||||
Payments
|
(42 | ) | (46 | ) | (37 | ) | ||||||
Balance December 31 | $ | 265 | $ |
250
|
$ | 407 |
U.S. GAAP |
Canadian
National Railway Company
|
84 |
In millions
|
2008
|
2007
|
2006
|
|||||||||
Balance
January 1
|
$ | 111 | $ | 131 | $ | 124 | ||||||
Accruals
and other
|
29 | (1 | ) | 17 | ||||||||
Payments
|
(15 | ) | (19 | ) | (10 | ) | ||||||
Balance December 31
|
$ | 125 | $ | 111 | $ | 131 |
(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
|
U.S. GAAP |
Canadian
National Railway Company
|
85 |
(a)
|
contracts
granting the Company the right to use or enter upon property
ownedby third
parties such as leases, easements, trackage rights and sidetrack
agreements;
|
(b)
|
contracts
granting rights to others to use the Company's property, such
asleases,
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
orsimilar
agreements relating to debt or equity securities of the Company and
engagement
agreements with
financial dvisors;
|
(g)
|
transfer
agent and registrar agreements in respect of the Company'ssecurities;
|
(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 derivativetransactions;
and
|
(k)
|
settlement
agreements with insurance companies or other third partieswhereby 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
|
86 |
U.S. GAAP |
Canadian
National Railway Company
|
87 |
In millions
|
December 31, 2008
|
December 31, 2007
|
||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
amount
|
value
|
amount
|
value
|
|||||||||||||
Financial assets
|
||||||||||||||||
Investments
|
$24
|
$127
|
$24
|
$95
|
||||||||||||
Financial liabilities
|
||||||||||||||||
Long-term
debt (including current portion)
|
$ | 7,911 | $ | 8,301 | $ | 5,617 | $ | 5,850 |
In millions
|
December 31,
|
2008
|
2007
|
||||||
Unrealized
foreign exchange loss
|
$ | (575 | ) | $ | (762 | ) | |||
Pension
and other postretirement benefit plans
|
412 | 723 | |||||||
Derivative
instruments
|
8 | 8 | |||||||
Accumulated other comprehensive loss
|
$ | (155 | ) | $ |
(31
|
) |
In millions
|
Year ended December 31,
|
2008
|
2007
|
2006
|
|||||||||
Accumulated
other comprehensive loss – Balance
at January 1
|
$ | (31 | ) | $ | (44 | ) | $ | (222 | ) | ||||
Other
comprehensive income (loss):
|
|||||||||||||
Unrealized
foreign exchange income (loss) (net of income tax (expense) recovery of
$194, $(91) and $(197),
|
|||||||||||||
for
2008, 2007 and 2006, respectively)
|
187 | (307 | ) | (198 | ) | ||||||||
Pension
and other postretirement benefit plans (net
of income tax (expense) recovery of $125, $(129) and
nil,
|
|||||||||||||
for
2008, 2007 and 2006, respectively) (Note 12)
|
(311 | ) | 320 | 1 | |||||||||
Derivative
instruments (net of income tax recovery of nil, $1 and $18, for 2008, 2007
and 2006, respectively) (Note 18)
|
– | – | (39 | ) | |||||||||
Other comprehensive income (loss)
|
(124 | ) | 13 | (236 | ) | ||||||||
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
|
$ | (155 | ) | $ | (31 | ) | $ | (44 | ) |
U.S. GAAP |
Canadian
National Railway Company
|
88 |
In millions, except per share
data, or unless otherwise indicated
|
||||||||||||||||||||||||||||||||||||
Year
ended
December 31,
|
2008
|
2007
|
2006
|
|||||||||||||||||||||||||||||||||
Reported
|
Adjustments(1)
|
Adjusted
|
Reported
|
Adjustments(2)
|
Adjusted
|
Reported
|
Adjustments(3)
|
Adjusted
|
||||||||||||||||||||||||||||
Revenues
|
$ | 8,482 | $ | – | $ | 8,482 | $ | 7,897 | $ | – | $ | 7,897 | $ | 7,929 | $ | – | $ | 7,929 | ||||||||||||||||||
Operating
expenses
|
5,588 | – | 5,588 | 5,021 | – | 5,021 | 4,899 | – | 4,899 | |||||||||||||||||||||||||||
Operating
income
|
2,894 | – | 2,894 | 2,876 | – | 2,876 | 3,030 | – | 3,030 | |||||||||||||||||||||||||||
Interest expense | (375 | ) | – | (375 | ) | (336 | ) | – | (336 | ) | (312 | ) | – | (312 | ) | |||||||||||||||||||||
Other
income
|
26 | – | 26 | 166 | (153 | ) | 13 | 11 | – | 11 | ||||||||||||||||||||||||||
Income
before income taxes
|
2,545 | – | 2,545 | 2,706 | (153 | ) | 2,553 | 2,729 | – | 2,729 | ||||||||||||||||||||||||||
Income
tax expense
|
(650 | ) | (117 | ) | (767 | ) | (548 | ) | (280 | ) | (828 | ) | (642 | ) | (277 | ) | (919 | ) | ||||||||||||||||||
Net
income
|
$ | 1,895 | $ | (117 | ) | $ | 1,778 | $ | 2,158 | $ | (433 | ) | $ | 1,725 | $ | 2,087 | $ | (277 | ) | $ | 1,810 | |||||||||||||||
Operating
ratio
|
65.9% | 65.9% | 63.6% | 63.6% | 61.8% | 61.8% | ||||||||||||||||||||||||||||||
Diluted
earnings per share
|
$ | 3.95 | $ | (0.24 | ) | $ | 3.71 | $ | 4.25 | $ | (0.85 | ) | $ | 3.40 | $ | 3.91 | $ | (0.51 | ) | $ | 3.40 |
(1)
|
Adjusted
to exclude a deferred income tax recovery of $117 million ($0.24 per
diluted share), of which $83 million was due to the resolution of
various
income tax matters and adjustments related to tax filings of prior years,
$23 million resulted from the enactment of corporate income tax rate
changes in Canada and $11 million was due to net capital losses arising
from the reorganization of a subsidiary.
|
(2)
|
Adjusted
to exclude a deferred income tax recovery of $328 million ($0.64 per
diluted share) that resulted mainly from the enactment of corporate income
tax rate changes in Canada, as well as the gains on sale of the Central
Station Complex of $92
million, or $64 million after-tax ($0.13 per diluted share) and the
Company’s
investment in English Welsh and Scottish Railway of $61 million, or $41
million after-tax ($0.08 per diluted
share).
|
(3)
|
Adjusted
to exclude a deferred income tax recovery of $277
million ($0.51 per diluted share) that resulted primarily from the
enactment of lower corporate income tax rates in Canada and
the resolution of matters pertaining to prior years’ income
taxes.
|
In
millions
|
Year
ended
December 31,
|
2008
|
2007
|
|||||||
Cash
provided from operating activities
|
$ |
2,031
|
$ | 2,417 | ||||||
Cash
used by investing activities
|
(1,400 | ) | (895 | ) | ||||||
Cash
provided before financing activities
|
631 | 1,522 | ||||||||
Adjustments:
|
||||||||||
Change
in accounts receivable securitization
|
568 | (228 | ) | |||||||
Dividends
paid
|
(436 | ) | (418 | ) | ||||||
Effect
of foreign exchange fluctuations on U.S. dollar-denominated cash and cash
equivalents
|
31 | (48 | ) | |||||||
Free
cash flow
|
$ | 794 | $ | 828 |
Canadian
National Railway Company
|
89 |
Canadian
National Railway Company
|
90 |
Employees from across the company
were recognized for outstanding achievement in 2008, 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
|
91 |
David G.A. McLean, O.B.C.,
LL.D.
|
E. Hunter Harrison, LL.D.
|
Michael R. Armellino, CFA
|
|
Chairman of the
Board
|
President
and
|
Retired
Partner
|
|
Canadian National Railway
Company
|
Chief Executive
Officer
|
The Goldman Sachs Group,
LP
|
|
Chairman of the Board
and
|
Canadian National Railway
Company
|
Committees: 1, 2, 7*,
8
|
|
Chief Executive
Officer
|
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
|
V. Maureen Kempston
Darkes,
|
Robert H. Lee, C.M.,
O.B.C., LL.D.
|
Corporate Director |
Corporate Director and
Trustee
|
O.C.,
D.Comm., LL.D.
|
Chairman
|
Former Chairman and |
Former General
Counsel
|
Group
Vice-President
|
Prospero Group of
Companies
|
Chief Executive Officer |
United States Treasury
Department
|
General Motors
Corporation
|
Committees: 1, 2, 7,
8
|
Canadian Hunter Exploration Ltd. |
Secretary of the
Cabinet
|
President
|
|
Committees: 3, 5, 6, 7,
8
|
The White
House
|
GM Latin America, Africa
|
|
Committees: 3, 5, 6, 7,
8
|
and Middle
East
|
||
Committees: 2, 5, 7,
8
|
Canadian
National Railway Company
|
92 |
A. Charles Baillie, O.C.,
LL.D.
|
Hugh J. Bolton, FCA
|
J.V. Raymond Cyr, O.C., LL.D. | Ambassador Gordon D. Giffin |
Former Chairman and | Chairman of the Board | Chairman of the Board | Senior Partner |
Chief Executive Officer | EPCOR Utilities Inc. | PolyValor Inc. | McKenna Long & Aldridge |
The Toronto-Dominion Bank | Committees: 1, 3, 6, 7 | Committees: 3, 5*, 7, 8 |
Committees:
2, 5, 6, 7
|
Committees: 1, 2*, 6, 7 | (Retired January 2009) | ||
Directors
Emeritus
Purdy
Crawford
Cedric
Ritchie
|
|||
The
Honourable
|
The
Honourable
|
Robert Pace
|
Committees:
|
Denis Losier, P.C.,
LL.D.
|
Edward C. Lumley, P.C.,
LL.D.
|
President
and
|
1 Audit |
President
and
|
Vice-Chairman
|
Chief Executive
Officer
|
2 Finance |
Chief Executive
Officer
|
BMO Capital
Markets
|
The Pace
Group
|
3 Corporate governance and nominating |
Assumption
Life
|
Committees: 2, 5, 6, 7,
8*
|
Committees: 1, 3, 6*, 7,
8
|
4 Donations |
Committees: 1*, 3, 7,
8
|
5 Environment, safety and security | ||
6 Human resources and compensation | |||
7 Strategic planning | |||
8 Investment | |||
* denotes chairman of the
committee
|
Canadian
National Railway Company
|
93 |
David G.A.
McLean
|
Russell
Hiscock
|
Sean Finn
|
Claude
Mongeau
|
Chairman of the
Board
|
President
and
|
Executive
Vice-President
|
Executive Vice-President
and
|
Chief Executive
Officer
|
Corporate Services
and
|
Chief Financial
Officer
|
|
CN Investment
Division
|
Chief Legal
Officer
|
|
|
E. Hunter
Harrison
|
|||
President
and
|
Robert E.
Noorigian
|
||
Chief Executive
Officer
|
Mike Cory
|
James M.
Foote
|
Vice-President
|
Senior
Vice-President
|
Executive
Vice-President
|
Investor
Relations
|
|
Eastern Region
|
Sales and
Marketing
|
|
|
|
Jean-Jacques
Ruest
|
||
Keith E.
Creel
|
Fred R.
Grigsby*
|
Senior
Vice-President
|
|
Executive
Vice-President
|
Senior Vice-President
and
|
Marketing
|
|
Operations
|
Chief Information
Officer
|
||
Gordon T.
Trafton
|
|||
Sameh Fahmy
|
Stan Jablonski
|
Senior
Vice-President
|
|
Senior
Vice-President
|
Senior
Vice-President
|
Southern
Region
|
|
Engineering, Mechanical
and
|
Sales
|
||
Supply
Management
|
|||
Jim Vena
|
|||
Senior
Vice-President
|
|||
Western
Region
|
|||
*Mr. Grigsby retired in February
2009.
|
Canadian
National Railway Company
|
94 |
Annual
meeting
|
Stock
exchanges
|
||
The
annual meeting of shareholders will be held
|
CN
common shares are listed on the Toronto and
|
||
at
9:00 am (Mountain time) on April 21, 2009 at:
|
New
York stock exchanges.
|
||
The
Fairmont Palliser
|
Ticker
symbols:
|
||
Crystal
Ballroom, Lobby Level
|
CNR
(Toronto Stock Exchange)
|
||
133
9th
Avenue
SW
|
CNI
(New York Stock Exchange)
|
||
Calgary,
Alberta, Canada
|
|||
Investor
relations
|
|||
Annual
information form
|
Robert
Noorigian
|
||
Vice-President,
Investor Relations
|
|||
The
annual information form may be obtained by writing
to:
|
Telephone:
(514) 399-0052
|
||
The
Corporate Secretary
|
Shareholder
services
|
||
Canadian
National Railway Company
|
|
||
935
de La Gauchetière
Street West
|
Shareholders
having inquiries concerning their
shares
|
||
Montreal,
Quebec H3B 2M9
|
or
wishing to obtain information about CN should
contact:
|
||
|
|||
Computershare
Trust Company of Canada
|
|||
Transfer
agent and registrar
|
Shareholder
Services
|
||
Computershare
Trust
|
Computershare
Trust
|
100
University Avenue, 9th
Floor
|
|
Company
of Canada
|
Company,
N.A.
|
Toronto,
Ontario M5J 2Y1
|
|
Offices
in:
|
|
Telephone:
1-800-564-6253
|
|
Montreal,
QC; Toronto, ON;
|
Offices
in:
|
|
|
Calgary,
AB; Vancouver, BC
|
Golden,
CO
|
||
Head
office
|
|||
Telephone:
1-800-564-6253
|
|
||
www.computershare.com
|
Canadian
National Railway Company
|
||
935
de La Gauchetière
Street West
|
|||
Montreal,
Quebec H3B 2M9
|
|||
Dividend
payment options
|
P.O.
Box 8100
|
||
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
|
This
report has been printed on FSC paper.
|