Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F | Form 40-F X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes | No X |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes | No X |
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes | No X |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
1. |
Press release dated October
26, 2009, “CN’s 2009 Investor Fact
Book available today”.
|
Canadian National Railway Company | |||||
Date: October 26, 2009 | By: | /s/ Cristina Circelli | |||
Name: |
Cristina
Circelli
|
||||
Title: |
Deputy
Corporate Secretary and
General
Counsel
|
Media
|
Investors
|
Mark
Hallman
|
Robert
Noorigian
|
Director,
Communications & Public Affairs
|
Vice-President,
Investor Relations
|
(905)
669-3384
|
(514)
399-0052
|
Cautionary
Statement for Purposes of the “Safe Harbor” Provisions of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities
laws.
|
Canadian
National Railway Company, together with its wholly-owned subsidiaries, is
sometimes referred to as “the Company”, “Canadian National”, or
“CN”.
Except
where otherwise indicated, all financial information reflected in this
document is expressed in Canadian dollars and determined on the basis of
United States generally accepted accounting principles (U.S. GAAP). The
financial information contained in this Fact book should be read in
conjunction with the Company’s annual and interim Consolidated Financial
Statements, Notes thereto and Management’s Discussion and
Analysis.
This
document contains forward-looking statements. The Company cautions that,
by their nature, forward-looking statements involve risk, 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 Company cautions that its
assumptions may not materialize and that the current economic conditions
render such assumptions, although reasonable at the time they were made,
subject to greater uncertainty. The Company cautions that its results
could differ materially from those expressed or implied in such
forward-looking statements. Important factors that could cause such
differences include, but are not limited to, the effects of adverse
general economic and business conditions, including the recession in the
North American economy and the global economic contraction in 2009,
industry competition, inflation, currency and interest rate fluctuations,
changes in fuel prices, legislative and/or regulatory developments,
compliance with environmental laws and regulations, actions by regulators,
various events which could disrupt operations, including natural events
such as severe weather, droughts, floods and earthquakes, labour
negotiations and disruptions, environmental claims, uncertainties of
investigations, proceedings or other types of claims and litigation, risks
and liabilities arising from derailments, and other risks detailed from
time to time in reports filed by the Company with securities regulators in
Canada and the United States. Reference should be made to “Management’s
Discussion and Analysis” in the Company’s annual and interim reports,
Annual Information Form and Form 40-F filed with Canadian and U.S.
securities regulators, available on the Company’s Web site, for a summary
of major risks.
The
Company assumes no obligation to update or revise forward-looking
statements to reflect future events, changes in circumstances, or changes
in beliefs, unless required by applicable laws. In the event the Company
does update any forward-looking statement, no inference should be made
that the Company will make additional updates with respect to that
statement, related matters, or any other forward-looking
statement.
The
Company’s objective is to provide meaningful and relevant information
reflecting its financial condition, results of operations and operational
performance. The Company makes reference to non-GAAP measures in this
document that do not have any standardized meaning prescribed by U.S. GAAP
and are, therefore, not necessarily comparable to similar measures
presented by other companies and, as such, should not be considered in
isolation. Management believes that non-GAAP measures such as adjusted net
income and the resulting adjusted performance measures for such items as
operating income, operating ratio and per share data are useful measures
of performance that can facilitate period-to-period comparisons as they
exclude items that do not arise as part of the normal day-to-day
operations or that could potentially distort the analysis of trends in
business performance. The exclusion of the specified items in the adjusted
measures does not, however, imply that such items are necessarily
non-recurring. The Company also believes that free cash flow is a useful
measure of performance as it demonstrates the Company’s ability to
generate cash after the payment of capital expenditures and dividends.
Free cash flow does not have any standardized meaning prescribed by GAAP
and therefore may not be comparable to similar measures presented by other
companies. The Company defines free cash flow as cash provided from
operating activities, adjusted for changes in the accounts receivable
securitization program and in cash and cash equivalents resulting from
foreign exchange fluctuations, less cash used by investing activities,
adjusted for the impact of major acquisitions, and the payment of
dividends. In addition, the Company believes that adjusted debt-to-total
capitalization is a useful credit measure that aims to show the true
leverage of the Company. Similarly, adjusted debt-to-adjusted earnings
before interest, income taxes, depreciation and amortization (EBITDA) is
another useful credit measure because it reflects the Company’s ability to
service its debt. The Company excludes Other income in the calculation of
EBITDA. A reconciliation of this document’s various non-GAAP measures to
their comparable U.S. GAAP measures is provided in Appendix
B.
In
addition, certain statistical data are based on estimated data available
at such time and are subject to change as more complete information
becomes available.
|
Ticker
symbols
|
||
CNR
|
Toronto Stock Exchange | |
CNI | New York Stock Exchange | |
Web
site information
For the most
up-to-date information on CN, we invite you to regularly visit www.cn.ca. In the Investors section, you
will find a variety of informative documents, including annual
reports,
proxy
statements, quarterly earnings, press releases, company presentations and
weekly metrics.
|
2
|
Overview
|
49
|
Investor focus | ||||
3 | Letter from the President |
50
|
|
Managing energy costs | |||
4
|
Financial
&
|
52
|
|
Capital
expenditures
|
|||
statistical
highlights
|
54
|
|
Technology
initiatives
|
||||
6
|
Company
profile
|
58
|
The right
people
|
||||
7
|
CN system
map
|
61
|
Regulation
|
||||
8
|
Timeline
since privatization
|
64
|
|
Safety
|
|||
9
|
Precision
Railroading
|
66
|
|
Environment
|
|||
12
|
EJ&E – a
critical link
|
68
|
|
Corporate
governance
|
|||
14
|
Density
map
|
70
|
Financial
management
|
||||
72
|
Rewarding
shareholders
|
||||||
16
|
Markets
|
|
|||||
17
|
CN’s ports
–
|
|
Appendices
|
||||
oceans of
opportunity
|
73
|
Financial
&
|
|||||
19
|
Alberta oil
& gas
|
|
statistical
data
|
||||
development
|
81
|
Executive
profiles
|
|||||
22
|
CN
WorldWide
|
86
|
|
Glossary
|
|||
North
America
|
88
|
Shareholder
& investor
|
|||||
24
|
Intermodal
|
|
|
contact
information
|
|||
28
|
Grain &
fertilizers
|
||||||
32
|
Coal
|
||||||
36
|
Forest
products
|
||||||
41
|
Automotive
|
||||||
44
|
Petroleum
& chemicals
|
||||||
46
|
Metals &
minerals
|
2006
|
2007
|
2008
|
||||||||||
Financial
results
|
||||||||||||
Revenues
|
$ | 7,929 | $ | 7,897 | $ | 8,482 | ||||||
Operating
income
|
$ | 3,030 | $ | 2,876 | $ | 2,894 | ||||||
Net
income
|
$ | 2,087 | $ | 2,158 | $ | 1,895 | ||||||
Adjusted net income (1,5)
|
$ | 1,810 | $ | 1,725 | $ | 1,778 | ||||||
Diluted
earnings per share
|
$ | 3.91 | $ | 4.25 | $ | 3.95 | ||||||
Adjusted diluted earnings per
share (1,5)
|
$ | 3.40 | $ | 3.40 | $ | 3.71 | ||||||
Weighted-average
number of shares diluted (millions)
|
534.3 | 508.0 | 480.0 | |||||||||
Financial
ratios
|
||||||||||||
Operating
ratio
|
61.8% | 63.6% | 65.9% | |||||||||
Debt-to-total capitalization
(2)
|
36.3% | 35.6% | 42.8% | |||||||||
Adjusted debt-to-total
capitalization (2,3,5)
|
40.4% | 40.4% | 45.2% | |||||||||
Adjusted debt-to-adjusted EBITDA
(2,3,4,5)
|
1.8
times
|
1.9
times
|
2.4
times
|
|||||||||
Other
information
|
||||||||||||
Dividend
per share
|
$ | 0.65 | $ | 0.84 | $ | 0.92 | ||||||
Net capital
expenditures
|
$ | 1,298 | $ | 1,387 | $ | 1,424 | ||||||
Free cash flow (5)
|
$ | 1,343 | $ | 828 | $ | 794 |
(1)
|
Adjusted
to exclude items affecting the comparability of
results.
|
(2)
|
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.
|
(3)
|
Debt
adjusted to include the present value of operating lease commitments plus
securitization financing.
|
(4)
|
Earnings
before interest, income taxes, depreciation and amoritization (EBITDA),
and adjusted to exclude Other income and the deemed interest on operating
leases.
|
(5)
|
See
Appendix B for a reconciliation of non-GAAP
measures.
|
unaudited | ||||||||||||
2006
|
2007
|
2008
|
||||||||||
Route miles
(includes Canada and the
U.S.)
|
20,264 | 20,421 | 20,961 | |||||||||
Carloads
(thousands)
|
4,824 | 4,744 | 4,615 | |||||||||
Gross ton
miles (millions)
|
352,972 | 347,898 | 339,854 | |||||||||
Revenue ton
miles (millions)
|
185,610 | 184,148 | 177,951 | |||||||||
Employees
(average for the
year)
|
22,092 | 22,389 | 22,695 | |||||||||
Employees
(end of
year)
|
22,250 | 22,696 | 22,227 | |||||||||
Diesel fuel
consumed (U.S. gallons
in millions)
|
401 | 392 | 380 | |||||||||
Average fuel price ($ per U.S.
gallon) (1)
|
2.13 | 2.40 | 3.39 | |||||||||
1
|
In September
2009, CN’s Johnston Yard was renamed Harrison Yard in honour of retiring
President and Chief Executive Officer, E. Hunter
Harrison.
|
Key operating
metrics
Car velocity
measures the average miles
per day traveled by loaded and empty active cars on line, including
system, foreign and private cars, providing a gauge of network fluidity
and efficiency.
Cars per yard
switching hour measures the number of cars that enter a terminal
divided by the total crew hours worked at the terminal, providing an
assessment of yard efficiency.
Gross ton-miles
per train mile is used to monitor train efficiency and
productivity, and is calculated as the average trailing tons per through
train.
Main line gross
ton-miles per available horsepower reflects the
number of trailing gross ton-miles handled on through trains per available
horsepower, where available horsepower is the total horsepower of the
active road locomotives available for service. It is an important measure
of the utilization of high-horsepower locomotives.
Terminal dwell
or average through dwell time is a measure of
yard throughput, calculated as the average time in hours between arrival
and departure at a major terminal. It includes cars departing a major
terminal that are preceded by a train arrival; transfer or local received
at interchange; as well as cars on through trains.
Average train
speed (miles per hour) is a measure of network fluidity and
productivity, reflecting the average speed of through trains (based on the
total number of train miles) divided by the total train hours. It includes
system trains running on Company lines and system trains operating on
non-system lines under trackage/running rights or as a
detour.
Trip plan
compliance measures the
percent of cars completing their trip within the predetermined trip plan
hours. It is a measure of customer service performance.
Items affecting
comparability of results: Severe winter weather conditions
and a major work stoppage in the first quarter of 2007.
|
Customers of
CN and the former EJ&E, the City of Chicago, over a million residents,
and the rail network will all benefit from the streamlined rail
operations and reduced congestion in the Chicago region overall, as a
result of the EJ&E acquisition.
|
spotlight
|
|||
CN’s ports |
Prince
Rupert update
|
||
The Port of
Prince Rupert Container Terminal, which officially opened in
October 2007, is strategically located to handle growing long-term demand
in one of the world’s busiest shipping corridors.
The facility is equipped with three super post-Panamax cranes and
has a Phase I nameplate capacity of 500,000 TEUs (20-foot
equivalent units). A potential Phase II is projected to have a two
million-TEU capacity.
Although
growth at the terminal has been affected by global economic
contraction and the deep North American recession, the Prince
Rupert Container Terminal has experienced impressive growth. A
second weekly vessel call was added in July 2008.
Railroad
service from the terminal is exceeding shippers’ expectations.
Since the opening of the terminal, container transit times between Prince
Rupert and Chicago have been consistently on target,
averaging 106 hours. Memphis is being served in 133 hours, Toronto in
117 hours and Detroit in 137 hours.
The new flow
of imports through Prince Rupert is also providing an
excellent opportunity for exporters to attain the shipping capacity they
require for their Asian markets. CN’s North American franchise
provides excellent access to Canada’s natural resource base,
including grain and grain products and forest products. Additionally,
CN has access to large U.S. supplies of recycled paper,
cotton, hardwood lumber, and grain products.
The Prince
Rupert gateway is developing an international reputation
for delivering on its promise of reliability, efficiency and
speed.
|
CN’s tri-coastal gateway network | |
includes
10 key ports
|
|
Pacific
|
|
Vancouver,
B.C.
|
|
Prince
Rupert, B.C.
|
|
Kitimat,
B.C.
|
|
Atlantic
|
|
Halifax,
N.S.
|
|
Saint John,
N.B.
|
|
Quebec City,
Que.
|
|
Montreal,
Que.
|
|
Gulf of
Mexico
|
|
Mobile,
Ala.
|
|
Gulfport,
Miss.
|
|
New Orleans,
La.
|
|
||
CN
took a closer look at various pipeline initiatives, and in conjunction
with the pipeline companies themselves, identified those projects with the
greatest potential. The result is a five-year
view of the pipeline market, reinforced by a multifunctional CN commitment
to make the Company the preferred logistics partner for this market. CN is
well placed to grow the Company’s oil and gas pipe-related business –
whether from local North American suppliers or Asian imports.
Condensate
- keeping it flowing
The heavy
crude, or bitumen, found in Alberta’s oil sands does not flow at normal
temperatures and pressures. So transportation of this heavy crude through
pipelines requires mixing with lighter condensate. Often referred to as
diluent, condensate is simply any mixture of relatively light hydrocarbons
which remain liquid at normal temperatures and pressures.
With the
significant increase in oil sands production, diluent is in short supply in
Alberta. CN’s access to West Coast ports means the Company is an important
link in importing offshore condensate via the CN-served Kitimat terminal
in northwestern British Columbia. CN also transports condensate via rail
from as far away as Louisiana and Texas. Condensate will continue to be a
key part of existing and future oil sands development, and CN is well
positioned to capitalize on those
opportunities.
|
•
|
Productivity and
efficiency:
|
•
|
Innovation: CNWWNA
recognizes the need for flexibility when it comes to adapting to
customers’ changing needs as markets become increasingly competitive.
CNWWNA develops innovative logistical solutions so its customers can
capitalize on market opportunities.
|
•
|
Market reach extension:
CNWWNA
has made significant investments to position itself for the long term. It
is one of the most efficient North American operators, with logistics and
distribution capabilities that combine the economy of long-haul rail
transportation with the flexibility of short-haul truck delivery. CNWWNA
offers customers a full range of transportation services – everything from
rail shipping, to intermodal and trucking throughout North America, to
shipping containers
overseas.
|
The
Intermodal commodity group consists of two main market segments: domestic
and international.
The domestic
segment, which represented 48 per cent of the commodity group’s revenues
in 2008, transports consumer products and manufactured goods. This segment
is made up of domestic Canada, domestic U.S., Mexico and transborder
traffic, and includes two main service offerings: retail and wholesale.
For the retail offering, CN provides complete door-to-door transportation
with rail and trucking service. For the wholesale offering, CN provides
terminal-to-terminal train service to motor carriers, intermodal marketing
companies, third-party logistics companies, and other transportation
intermediaries.
Consumer
markets drive the domestic segment, with market growth generally
tied to consumer spending in the economy. This market-driven offering
focuses on truck-competitive, cost-effective service. CN intermodal
service offers an approximate 24-hour advantage over its rail competition
from Central to Western Canada. At the same time, CN Intermodal is
competitive with single truck driver service to the Winnipeg,
Calgary, Edmonton and Vancouver markets. Additionally, CN is the only rail
service option from Montreal to Halifax. As a result of these service
advantages, CN handles the majority of the Canadian wholesale customer
base.
The
international segment, which represented 52 per cent of Intermodal
revenues in 2008, transports import and export container traffic on behalf
of ocean-carrier companies. CN handles international freight through the
ports of Vancouver; Prince Rupert; Montreal; Saint John, N.B.; Halifax and
New Orleans to and from major inland markets in Central and Western Canada
as well as the U.S. Midwest, Memphis, and Ohio Valley regions via
steel-wheel connection with the Norfolk Southern Railway at
Chicago.
The
international segment is driven mainly by North American economic and
trade conditions. Imports generally flow to high-population centres such
as Toronto, Montreal, Chicago and Memphis; whereas exports tend to
originate from resource-rich regions such as the Canadian and U.S.
prairies. CN and its ocean carrier customers work closely to ensure a
healthy balance of imports and
exports.
|
Brampton
(Toronto), Ont.
|
Memphis,
Tenn.
|
Calgary,
Alta.
|
New Orleans,
La.
|
Chicago,
Ill.
|
Prince
George, B.C.
|
Detroit,
Mich.
|
Prince
Rupert, B.C.
|
Edmonton,
Alta.
|
Saskatoon,
Sask.
|
Halifax,
N.S.
|
Vancouver,
B.C.
|
Jackson,
Miss.
|
Winnipeg,
Man.
|
Moncton,
N.B.
|
|
Montreal,
Que.
|
Grain
The Grain and
fertilizers commodity group is involved with the movement of grain,
fertilizers, and other agricultural products, primarily in Western Canada
and the U.S. Midwest. In 2008, about 59 per cent of grain traffic moved by
CN originated in Canada, while 41 per cent originated in the United
States.
Revenues from
grain and processed grain products, which accounted for about 80 per cent
of the total for this commodity group in 2008, are well balanced among
three main segments: food grains (mainly wheat, oats and malting barley),
feed grains (including feed barley, feed wheat, and corn) and oilseeds and
oilseed products (primarily canola seed, oil and meal, and
soybeans).
In Canada, a
large agricultural land base devoted to cultivation of grain, oilseeds and
specialty crops in Western Canada, and a relatively small domestic market,
mean that the majority of grain production is exported, predominantly by
rail. Crop production varies year to year, depending on seeded and
harvested acreage, the mix of grains produced, and crop yields. Grain
exports also vary, affected by the size and quality of the crop produced,
crop yields, and export markets. Key offshore markets for western Canadian
grain include the Pacific Rim and the Middle East. Most western Canadian
grain exported offshore is moved from a well-positioned system of
high-throughput elevators on CN’s lines in the grain growing areas of
British Columbia, Alberta, Saskatchewan, and Manitoba to port terminal
elevators that load vessels at Vancouver and
Prince Rupert, B.C.; or Thunder Bay, Ont. CN also moves western Canadian
grain and grain products to eastern Canadian and U.S. Gulf ports for
export, and to a variety of domestic receivers in Canada, the U.S., and
Mexico.
In the U.S.,
the CN rail system is well positioned in the heart of an important
grain-producing territory. Four states where CN originates grain traffic –
Illinois, Iowa, Michigan, and Wisconsin – normally produce, on average, 40
per cent of the corn and soybeans grown in the U.S. CN’s domestic grain
movements include corn and soybeans from these states to large grain
processors in Illinois, Iowa, Tennessee, and Mississippi. Other domestic
grain movements are to the poultry-feeder markets in the Southeastern
U.S., which rely on corn for feed. CN also moves grain and grain products
to major export facilities on the Mississippi River and the Gulf of
Mexico.
Some of the
leading global agribusiness entities have grain and oilseed processing
plants located on the CN system in Canada and the U.S. As a result, CN
also participates in the movement of semi-processed grain products shipped
to other receiver markets. Soybean and canola meal, corn gluten feed,
barley malt, vegetable oils, corn syrups, and starches are some of the
other products moved by CN.
CN also
accesses major ethanol production facilities in Iowa and southern Ontario
and provides efficient access to key consumers in the
U.S.
|
entitlement
for grain transportation, as well as the Agency’s determination that the
Company exceeded the revenue cap for the 2007-08 crop year, reduced
revenues by $26 million in the fourth quarter.
Outlook
Annual grain
volumes are directly correlated to the size and quality of the crop
produced. However, CN believes that the strength of its franchise, in
combination with a strong commitment to service and efficiency, positions
the Company as an important player in the grain distribution network. In
the U.S., the key CN-served states of Illinois, Iowa and Wisconsin will
continue to play a major role in supplying the demand for corn and
oilseeds. In Canada, CN’s extensive grain export connections, including
unique access to two West Coast ports, are a competitive
advantage.
CN is also an
important participant in the export of Canadian canola seeds and in the
delivery of canola oil and meal produced by the Canadian canola crushing
industry, which is currently expanding to serve growing markets for low
trans-fat edible oils and bio-diesel fuels.
Although the
current market for potash and fertilizers has significantly weakened, CN
is optimistic about future growth. Global population growth means that
improving crop yields will play a critical role in meeting the increasing
demand for food. Saskatchewan has the world’s largest reserves of
recoverable potash. With its access to those mines, in combination with
its North America franchise and access to key ports, the Company is well
positioned to benefit from the expected increase in global
demand.
|
Overview
Of the
traffic moved by the Coal commodity group in 2008, 51 per cent originated
in Canada and 49 per cent originated in the United States. Coal provided
84 per cent of revenues for this commodity group, and petroleum coke
provided 16 per cent.
CN’s Coal
business consists primarily of thermal grades of bituminous coal. Canadian
thermal coal is delivered to power utilities – primarily in Eastern Canada
– and to West Coast ports for export. In the United States, shipments of
thermal coal are transported from mines served in southern Illinois, or
from Western U.S. mines through interchange with other railroads, to major
utilities in the Midwest and the Southeast United States.
The Coal
business also includes Canadian metallurgical coal, which is generally
exported to steel makers in Japan and other Asian markets through two coal
terminals in the Vancouver area and one terminal at Prince
Rupert.
Review
In 2008, Coal
revenues increased by 24 per cent or $93 million, compared to 2007. The
increase was mainly due to freight rate increases, increased shipments of
U.S. coal due to the start-up of a new mine operation; strong volumes of
coal received from Western U.S. mines to destinations located on CN lines;
and increased supply of petroleum coke from Alberta. These gains were
partly offset by production challenges experienced by Canadian and U.S.
mines.
Outlook
As a result
of economic conditions, demand for metallurgical coal – driven by steel
production; and demand for thermal coal – driven by power generation
requirements, have both deteriorated. In connection with an eventual
economic recovery, increasing steel consumption in China and Japan is
expected to stimulate the metallurgical coal market. Additionally, over
the mid- to long-term, CN’s outlook for thermal coal remains positive as
demand from power utilities and export markets is expected to increase. In
Canada, an additional thermal coal mine is expected to start production in
the third quarter of 2009. The Obed Mine, owned by Coal Valley Resources
Incorporated, is targeting output of 1.2 million tonnes
annually.
CN’s focus in
servicing its coal customers is driven by optimal asset utilization, which
creates car capacity in a cost-effective manner. The result is
cost-effective, reliable service for customers. This, together with
sufficient capacity, positions CN to handle the increasing demand for coal
that is expected once the economy
recovers.
|
Coal mines
|
Coal type
|
Operator
|
Location
|
Destination
(terminal)
|
Estimated
annual
|
|||||||
production
|
||||||||||||
1.
|
Bienfait
|
Thermal
|
Prairie
Royalty and Mines Limited
|
Estevan,
Sask.
|
Aitikokan and
Thunder Bay, Ont.
|
0.5 million
tonnes
|
||||||
2.
|
Burnt
River
|
Metallurgical
|
Western
Canadian Coal Corp.
|
Tumbler
Ridge, B.C.
|
Ridley,
B.C.
|
0.7 million
tonnes
|
||||||
3.
|
Cheviot
|
Metallurgical
|
Elk Valley
Coal Corporation
|
near Cadomin,
Alta.
|
Vancouver,
B.C.
|
2.0 million
tonnes
|
||||||
4.
|
Coal
Valley
|
Thermal
|
Coal Valley
Resources Incorporated
|
near Robb,
Alta.
|
Vancouver and
Ridley, B.C.,
|
4.0 million
tonnes
|
||||||
Winniandy,
Alta.
|
|
|||||||||||
5.
|
Grande
Cache
|
Metallurgical
|
Grande Cache
Coal Corp.
|
Grande Cache,
Alta.
|
Vancouver,
B.C.
|
1.0 million
tonnes
|
||||||
6.
|
Obed
|
Thermal
|
Coal Valley
Resources Incorporated
|
Dalehurst,
Alta.
|
Vancouver and
Ridley, B.C.
|
1.2 million
tonnes
|
||||||
7.
|
Trend
|
Metallurgical
|
Peace River
Coal Inc.
|
Tumbler
Ridge, B.C.
|
Ridley,
B.C.
|
0.9 million
tonnes
|
||||||
8.
|
Wolverine
|
Metallurgical
|
Western
Canadian Coal Corp.
|
Tumbler
Ridge, B.C.
|
Ridley,
B.C.
|
2.4 million
tonnes
|
||||||
Terminals
|
Operator
|
Location
|
Estimated
annual
|
|||||||||
capacity
|
||||||||||||
1.
|
Neptune
|
Neptune Bulk
Terminals
|
North
Vancouver, B.C.
|
8.0 million
tonnes
|
||||||||
2.
|
Ridley
|
Ridley
Terminals, Inc.
|
Prince
Rupert, B.C.
|
12.0-24.0
million tonnes
|
||||||||
3.
|
Thunder
Bay
|
Thunder Bay
Terminals, Ltd.
|
Thunder Bay,
Ont.
|
11.0 million
tonnes
|
||||||||
4.
|
Westshore
|
Westshore
Terminals
|
Greater
Vancouver (Delta), B.C.
|
26.0 million
tonnes
|
||||||||
CN
provides service to and from the following coal mines and terminals in the
Central U.S.
|
||||||||||||
U.S. facilities
|
||||||||||||
Coal mines
|
Coal type
|
Operator
|
Location
|
Destination
(terminal)
|
Estimated
annual
|
|||||||
production
|
||||||||||||
9.
|
Creak
Paum
|
Thermal
|
Knight Hawk
Coal
|
Ava,
Ill.
|
Various power
plants and
|
0.6 million
tons
|
||||||
|
river
terminals
|
|||||||||||
10.
|
Crown
III
|
Thermal
|
Springfield
Coal
|
Farmersville,
Ill.
|
Industrial
accounts
|
3.0 million
tons
|
||||||
11.
|
Galatia
|
Thermal
|
American Coal
Company
|
Galatia,
Ill.
|
Various power
plants and
|
7.2 million
tons
|
||||||
|
river
terminals
|
|||||||||||
12.
|
Pond
Creek
|
Thermal
|
Williamson
Energy
|
Dial,
Ill.
|
Various power
plants and
|
6.5 million
tons
|
||||||
river
terminals
|
||||||||||||
13.
|
Sugar
Camp
|
Thermal
|
Williamson
Energy
|
Akin
Junction, Ill.
|
Opening
January 2010
|
7.0 million
tons
|
||||||
Terminals
|
Operator
|
Location
|
Estimated
annual
|
|||||||||
capacity
|
||||||||||||
5.
|
Cahokia
|
Cahokia
Marine Service
|
Sauget, Ill.
(via GWWR)
|
5.0 million
tons
|
||||||||
6.
|
Calvert
City
|
Southern Coal
Handling
|
Madisonville,
Ky. (via PAL)
|
6.0 million
tons
|
||||||||
7.
|
CG&B
|
Consolidated
Grain & Barge
|
Mound City,
Ill.
|
3.0 million
tons
|
||||||||
8.
|
Cook
|
Cook Coal
Terminal
|
Metropolis,
Ill.
|
20.0 million
tons
|
||||||||
9.
|
Duquesne
Wharf
|
Union
Railroad
|
S.E.
Pittsburgh, Pa.
|
8.5 million
net tons
|
||||||||
10.
|
GRT
1
|
Kinder Morgan
Energy
|
Grand Rivers,
Ky. (via PAL)
|
12.0 million
tons
|
||||||||
11.
|
GRT
2
|
Kinder Morgan
Energy
|
Grand Rivers,
Ky. (via PAL)
|
8.0 million
tons
|
||||||||
12.
|
IC
RailMarine
|
IC Terminal
Holdings
|
Convent,
La.
|
3.0 million
tons
|
||||||||
13.
|
IEI
|
IEI Barge
Services
|
East Dubuque,
Ill.
|
1.7 million
tons
|
||||||||
14.
|
KCBX
|
KCBX
|
Chicago,
Ill.
|
4.5 million
tons
|
||||||||
15.
|
McDuffie
|
Alabama State
Docks
|
Mobile,
Ala.
|
10.0 million
tons
|
||||||||
16.
|
P&C
Dock
|
GLT
|
Conneaut,
Ohio
|
11.0 milllion
tons
|
||||||||
17.
|
Williams
Bulk
|
Alliant
Energy
|
Williams,
Iowa
|
0.6 million
tons
|
||||||||
Ramp
|
Operator
|
Location
|
Loading
capacity
|
|||||||||
14.
|
Carbondale
|
Knight Hawk
Coal
|
Carbondale,
Ill.
|
1,000 tons
per hour
|
Overview
Among North
America’s railroads, CN is the largest carrier of forest products. These
commodities include lumber, panels, paper, and other fibers such as logs,
recycled paper and wood chips. In 2008, CN’s Forest products revenues were
distributed as follows – fibers 34 per cent; lumber 32 per cent; paper 25
per cent; and panels nine per cent.
CN provides
superior rail access to the western and eastern Canadian fiber-producing
regions – among the largest fiber source areas in North America. In the
U.S., the Company is strategically located to serve both the Midwest and
Southern U.S. corridors with interline connections to other Class I railroads. CN is the
only North American railroad with access to the West, East and Gulf
coasts. CN’s unique tri-coastal network provides a number of import/export
gateways to customers with interests outside North America. This strategic
network, combined with CN’s transload capabilities, allows all CN
customers to take full advantage of the Company’s rail offering and extend
their reach to new markets in Asia, South America and Europe.
Overall
demand for forest products is highly correlated with the general economic
business cycle. Housing starts and renovation activities in the U.S. are
the main drivers for the lumber and panels traffic.
North
American demand for most paper grades is shrinking, with the newsprint
sector being the hardest hit. The decline
in newsprint consumption is driven largely by increased competition
from alternate media sources.
A rise in
global trade of forest products is also changing supply and demand flows.
Growing worldwide consumption of pulpboard and tissue products has led to
an increase in overseas production capacity. Manufacturers in developing
markets, notably India and China, have been forced to import a significant
amount of raw materials, primarily wood pulp and recycled paper, from
Russia, North America and other fiber-rich regions because of scarce
domestic wood fiber supply.
Despite the
cyclical fluctuations in demand for forest products, CN believes that its
geographical advantages, product diversity, and international customer
base help to mitigate the impact of market fluctuations. Furthermore, CN’s
continued drive to improve service enhances the Company’s competitive
position with respect to trucks. This can enable market share gains even
during cyclical downturns.
|
CN’s transload facilities: an
extension of the rail network
CN’s
Forest Products distribution centre network includes strategically
positioned transfer, warehousing and reload facilities that provide a
number of services to rail- and non-rail-served shippers and receivers.
This allows the Company to extend existing rail shippers’ market reach and
enable non-rail-served shippers and receivers to benefit from rail
transportation’s cost and environmental advantages.
This
network provides value-added services to CN customers:
•
Provides
state-of-the-art transfer and transportation
services;
•
Positions
products for just-in-time deliveries to markets outside their existing
service areas;
•
Provides
seamless integration to CN’s
rail network for non-rail-served customers;
•
Reduces
or eliminates customers’ need for on-site
storage;
•
Reduces
or eliminates customers’ capital expenditures and corporate
risk.
Mountain pine beetle infestation
spreads to Alberta
Mild
winters, hot dry summers and a large quantity of mature lodgepole pine
trees, have led to the most extensive mountain pine beetle infestation in
British Columbia’s recorded history. This has posed a significant threat
to lodgepole pine stocks, with infestation covering an estimated eight
million hectares (20 million acres) of B.C.’s 60 million hectares (150
million acres) of forests. In 2006, the pine beetle infestation spread
into northwestern Alberta primarily north of Jasper National Park to Peace
River between the B.C. border and Fox Creek – land generally used by
forest companies to harvest timber.
Affected
wood remains marketable for five to 15 years, depending on the severity of
the infestation, after the tree has been killed. In order to salvage
economic value from the damaged trees, the provincial governments have
streamlined regulations to increase harvesting of infested
timber.
With
its track network in the heart of the pine beetle-affected area, CN has
direct access to the abundant supply of beetle-kill wood which, along with
CN’s continued capacity improvements, place the Company in a strong
position to move additional lumber, wood chips, oriented strand board
(OSB), logs and wood
pellets.
|
CN’s Guaranteed Car Order
Program
Right car, right place, right
time
Under this
program, CN guarantees car delivery to the customer according to an
agreed-upon date and schedule. The customer agrees to load and prepare the
cars for shipping by specified dates. The program allows CN to better
forecast demand and car cycles. Guaranteed delivery of empty cars benefits
shippers, receivers and CN.
The Clean Car
Program
CN developed
its Clean Car Program to improve railcar quality and availability for
shippers, and to enhance railcar-asset utilization for the Company and its
customers. Defect-free empty cars released from Certified Unloaders are
distributed directly to the next customers for loading. Railcar unloaders
undertake to release railcars in clean condition for direct distribution,
and to report any damages to a central CN location for repairs. CN then
repairs any damaged railcars before they are sent to customers for the
next loads.
|
Overview
CN is a
leading carrier of automotive products originating in the U.S. and Canada,
as well as those imported from other countries through the ports of
Halifax and Vancouver. The Company moves finished vehicles and parts in
North America, providing access to vehicle assembly plants in Canada,
Michigan and Mississippi. CN also serves vehicle-distribution facilities
in Canada and the U.S., as well as parts production facilities in Michigan
and Ontario.
CN’s
north-south positioning – with rail connections to all major carriers at
various locations – offers automotive customers a
number of routing alternatives between points in Canada, the U.S. and
Mexico. CN’s broad coverage enables it to deliver automotive traffic to
connecting railroads at key hubs including Chicago, Ill.; Detroit, Mich.;
and Buffalo, N.Y. CN also offers service beyond the Chicago gateway,
extending its automotive reach to a variety of interchange locations
including Salem, Ill.; Baton Rouge, La.; and Memphis,
Tenn.
In 2008,
finished vehicles totalled 87 per cent of the commodity group’s revenues,
while automotive parts made up the remaining 13 per cent.
Automobile
distribution centres accessible by CN
|
||
Allied Systems | Delta, B.C. | |
Annacis Auto Terminals | Delta, B.C. | |
Calgary | Calgary, Alta. | |
Charny | Charny, Que. | |
Corner Brook | Corner Brook, N.L. | |
Edmonton | Edmonton, Alta. | |
Flat Rock | Flat Rock, Mich. | |
Fraser Wharves | Richmond, B.C. | |
Halifax | Eastern Passage, N.S. | |
Jackson | Jackson, Miss. | |
King Road | Woodhaven, Mich. | |
Lansing | Charlotte, Mich. | |
Moncton | Moncton, N.B. | |
Montreal | St. Laurent, Que. | |
Regina | Regina, Sask. | |
Saskatoon | Saskatoon, Sask. | |
St. John’s | St. John’s, N.L. | |
Toronto | Concord, Ont. | |
Windsor | Windsor, Ont. | |
Winnipeg | Winnipeg, Man. | |
Woodhaven | Woodhaven, Mich. | |
Car and truck models at CN-accessed assembly plants |
CN-accessed assembly
plants
|
||
Location | Manufacturer |
Model
|
|
Canada
|
|||
Ontario
|
|||
Oshawa
|
GM
|
Chevrolet
Impala
|
|
Chevrolet
Camaro
|
|||
Ingersoll
|
CAMI
|
Chevrolet
Equinox
|
|
GMC
Terrain
|
|||
Pontiac
Torrent
|
|||
Suzuki
XL7
|
|||
Oakville
|
Ford
|
Ford
Edge
|
|
Ford
Flex
|
|||
Lincoln
MKX
|
|||
Lincoln
MKT
|
|||
St.
Thomas
|
Ford
|
Ford Crown
Victoria
|
|
Mercury Grand
Marquis
|
|||
Lincoln Town
Car
|
|||
Alliston
|
Honda
|
Acura CSX /
MDX / ZDX
|
|
Honda
Civic
|
|||
Cambridge
|
Toyota
|
Toyota
Corolla
|
|
Toyota
Matrix
|
|||
Lexus
RX350
|
|||
Woodstock
|
Toyota
|
RAV4
|
|
United
States
|
|||
Michigan
|
|||
Flint
|
GM
|
Chevrolet
Silverado
|
|
GMC
Sierra
|
|||
Detroit
|
GM
|
Cadillac
DTS
|
|
(Hamtramck)
|
Buick
Lucerne
|
||
Orion
|
GM
|
Chevrolet
Malibu
|
|
Pontiac
G6
|
|||
Pontiac
|
GM
|
Chevrolet
Silverado
|
|
GMC
Sierra
|
|||
Lansing (Grand River plant) | GM |
Cadillac CTS
/ SRX / STS
|
|
Lansing
(Delta plant)
|
GM
|
Buick
Enclave
|
|
GMC
Acadia
|
|||
Chevrolet
Traverse
|
|||
Rouge
(Dearborn)
|
Ford
|
Ford
F-150
|
|
Flat Rock | Auto Alliance Int. |
Ford
Mustang
|
|
Mazda6
|
|||
Mississippi
|
|||
Canton
|
Nissan
|
Nissan
Altima
|
|
Nissan
Armada
|
|||
Nissan
Quest
|
|||
Nissan
Titan
|
|||
Infiniti
QX56
|
Overview
CN’s
Petroleum and chemicals commodity group includes a wide range of
commodities, such as: petroleum products (gasoline, condensate, ultra low
sulfur diesel, jet fuel, asphalt), liquefied petroleum gas (LPG), sulfur,
plastics, and chemicals (including methanol, ethylene glycol, caustic
soda, and sulfuric acid).
Plastics,
LPGs, petroleum products, and sulfur represented 63 per cent of the
commodity group’s revenues in 2008, while chemicals made up the remaining
37 per cent. The primary markets for these commodities are within North
America, although offshore markets have been growing. The performance of
this commodity group
is closely correlated with the North American economy. Most of the
Company’s Petroleum and chemicals shipments originate from one of three
key areas: northern Alberta, Eastern Canada (primarily Quebec and
Ontario), and the Gulf of Mexico. Northern Alberta is Canada’s major
centre for natural gas, feedstock and world-scale petrochemicals and
plastics. It is also home to the oil sands development, which represents
exciting opportunities for inbound (condensate/diluent) and outbound
(ultra low
sulfur diesel, sulfur, bitumen) products as oil companies continue to
increase development and production. From Eastern Canada, CN transports
products from various regional plants to customers in Canada and the U.S.,
and to overseas markets. Finally, in the Gulf of Mexico region, CN
benefits from access to the low-cost Louisiana petrochemical corridor
between New Orleans and Baton Rouge.
An extensive
network of CargoFlo distribution facilities complements CN’s direct rail
franchise and extends the Company’s reach for dry and liquid products.
This network offers customers the economic and environmental benefits of
long-distance rail transportation with the flexibility of short-haul truck
delivery.
|
||||
Overview
CN’s Metals
and minerals commodity group is involved in the transportation of a
diversified mix of products which includes non-ferrous base metals,
concentrates, steel, iron ore, construction materials, machinery and
dimensional (large) loads.
In 2008,
steel represented 32 per cent of the commodity group’s revenues;
non-ferrous metals and concentrates, 22 per cent; construction materials,
20 per cent; iron ore, 19 per cent; and machinery and dimensional loads,
seven per cent.
CN serves
customers that are leaders in all areas of the metals and minerals sector.
The Company provides unique rail access to aluminum, mining, steel and
iron ore producing regions, which are among the most important in North
America. This access, coupled with CN transload and port facilities, has
made the Company a leader in the transportation of copper, lead, zinc,
concentrates, iron ore, refined metals and aluminum.
CN’s
available capacity and its ability to provide consistent and reliable
service put the Company in an enviable position for the conversion of
metals and minerals truck traffic to rail. Mining, oil-and-gas development
and non-residential construction are the key drivers for Metals and
minerals. Mining activities drive shipments of concentrates, metals and
machinery. Oil-and-gas development drives shipments of pipes, structural
steel, frac sand and dimensional loads. Finally, construction-sector
growth drives shipments of aggregates, sand, cement, roofing granules,
machinery, gypsum, aluminum, copper, and steel.
Review
Revenues for
this commodity group increased 15 per cent, or $124 million, in 2008
compared to 2007. The increase was mainly due to freight rate increases,
strength in commodities related to oil and gas development, empty
movements of private railcars, and strong
demand
|
for
flat-rolled products. Partly offsetting these
gains were the impact of fourth-quarter
weakness in the steel industry,
which reduced shipments of iron ore,
flat-rolled products, and scrap iron;
and reduced shipments of non-ferrous
ore.
Outlook
CN’s Metals
and minerals commodity group is well placed to deliver good long-term
performance. The construction materials segment is likely to benefit from
increasing government infrastructure spending. Energy-related development
including oil and gas pipeline projects, particularly in Western Canada;
and wind farm developments,
particularly in Eastern Canada, are
expected to continue. Finally, a
new iron nugget plant located on CN
track is scheduled to open in late
2009.
CN’s
newly expanded network of
rail-to-truck transload facilities, a recent expansion of its fleet of
gondolas and coil railcars, plus its ability to provide consistent and
reliable service, position the Company to meet customer requirements and
to capitalize on new opportunities.
Mesabi
Nugget
Steel
Dynamics, Inc. (SDI) has partnered with Kobe Steel to construct and
operate the world’s first full-scale iron nugget plant
near Hoyt Lakes, Minn. The plant will be the first of its kind,
using an iron-nugget production
technology pioneered by
Kobe Steel. The project involves the construction of a
$235 million iron-nugget manufacturing
facility utilizing
iron-ore concentrate, coal, and natural gas. Annual iron-nugget
production capacity is expected to be 500,000 metric tons.
The output from the plant will be consumed at SDI’s
mini-mills. Operations at the new Mesabi Nugget plant are scheduled
to commence in the fourth quarter of 2009. CN is pleased
that SDI and Kobe Steel selected a site on the Company’s
rail network to build this revolutionary iron-making
facility.
|
||||
Nuggets
of 97 per cent pure
iron are produced at
a new Mesabi Nugget plant
on the Iron Range
of northeastern Minnesota.
The project is
operated by Steel Dynamics,
Inc. of Fort
Wayne,
Indiana,
and
is jointly owned by
Japan’s
Kobe Steel.
This
photo shows nuggets
as produced in 2004
at a pilot plant.
|
||||
Photo courtesy of Steel
Dynamics, Inc.
|
Fuel
surcharges
Fuel makes up
a significant component of CN’s total operating expenses. In order to
reduce the Company’s exposure to fuel-price volatility, CN relies on its
cost-recovery fuel surcharge program. CN applies the fuel surcharge
universally across its customer base and has one of the highest levels of
coverage in the industry.
CN first
implemented its fuel surcharge program in 2001 with the introduction of
tariff CN 7400. As the price of oil escalated, the Company introduced the
new, more comprehensive fuel surcharge tariff CN 7401 in 2005. CN
proactively reduced the 7401 surcharge twice over the following
years.
In January
2007, the U.S. Surface Transportation Board (STB) concluded its review of
railroad fuel surcharge practices and issued a final ruling. The STB
directed rail carriers to adjust their fuel
surcharge programs on a basis more closely related to the amount of fuel
consumed on individual shipments. As a result of the STB decision, CN
introduced the new mileage-based fuel surcharge tariff CN 7402. Effective
April 26, 2007, CN 7402 was applied on traffic moving under tariffs (with
the general exception of containers, trailers, and finished vehicles,
which continue to be subject to CN 7401) and on traffic moving under
contract at the time of individual contract renewal.
Effective
April 1, 2008, CN began offering customers a new fuel surcharge option, CN
7403. Both CN 7402 and CN 7403 are based on the average price of the
Energy Information Administration (EIA) U.S. No. 2 Diesel Retail Sales by
all Sellers (cents per U.S. gallon) On-Highway Diesel (HDF). CN 7403
rebased the effective strike price to a more
current
|
•
|
Bulk
commodities: coal, fertilizer, and
grain;
|
•
|
All other
carload commodities.
|
CN’s
fuel surcharge program
For the most
up-to-date information on CN’s fuel surcharge program, please consult the
CN Web site:
www.cn.ca/fuelsurcharge
|
In 2008, CN’s
capital expenditures, including capital leases, amounted to $1.54 billion.
Of that, approximately $1 billion was focused on track
infrastructure, including the replacement of rail, ties and other track
materials, as well as bridge improvements, to preserve the quality and
integrity of the plant and to provide safe and reliable service to
customers across Canada and the U.S.
In CN’s
Western Region, the Company spent roughly $400 million on rail
infrastructure projects, including extended sidings and terminal
improvements as well as upgrades to its recently acquired Athabasca
Northern Railway (“ANY”). CN also continued to upgrade other former
northern Alberta short lines purchased in 2006 as part of a strategy to
maintain a strong position in energy-related markets.
In each of
the Eastern and Southern Regions, CN spent close to $300 million on rail
infrastructure. Included in the Southern Region was the completion of the
Company’s multi-year US$100-million upgrade of Harrison Yard in Memphis
which will allow CN to serve this important rail hub with high-quality and
efficient service.
CN’s
investment in equipment reached approximately $200 million in 2008,
including close to $90 million for car fleets. The Company continued its
locomotive fleet-modernization program with the acquisition of 20 new
high-horsepower fuel-efficient units, and through ongoing locomotive
overhauls.
CN spent over
$120 million on information and communications technology in 2008 to
improve the efficiency and reliability of operations. The Company also
invested in transloads, distribution centres and buildings to grow the
business, and on various projects to increase the productivity of its
operations.
For 2009, CN
plans to invest approximately $1.5 billion. While this is a reduction
compared to 2008 in the midst of a severe recession, it still reflects
CN’s confidence in growth prospects and the Company’s commitment to the
quality and competitiveness of its service offering.
Close to $1
billion, of the $1.5 billion, is targeted towards track
infrastructure in 2009. This includes rail-line improvements to the
EJ&E that will allow CN to operate more effectively and fluidly in the
all-important Chicago hub. Also included are funds for strategic
initiatives such as siding extensions and track infrastructure
enhancements in Western Canada. CN will spend more than $800 million on
basic capital in 2009, for the replacement of rail, ties and other track
materials and further bridge improvements.
CN’s
equipment expenditures are targeted at approximately $200 million in 2009,
allowing the Company to tap growth opportunities and improve the quality
and flexibility of the fleet. This will include about $40 million
for
|
1
|
A
siding is a section of track, separate from, but connecting to, the main
line. Sidings enable
trains travelling in opposite directions to pass. Sidings are a critical
driver of capacity and efficiency, particularly on single-track main
lines.
|
CN’s
strategic investments in information technology over the past decade have
been instrumental in supporting Precision Railroading.
Access to timely and accurate information provides a critical foundation
for the Company’s ongoing efforts to drive innovation and efficiency in
customer service, cost control, asset utilization, and
safety.
Looking
ahead, GPS, wireless communication, and the next generation of business
intelligence solutions are creating new opportunities to advance railroad
operations. Improving mobile access to information and better visibility
to real-time data will enable an increasingly proactive approach to
operational decision making – boosting the Company’s efficiency and
enhancing the consistency and reliability of service to CN’s
customers.
|
SmartYard
Anyone
familiar with railroading knows that managing a rail yard is a complex
task. Coordinating the activities of multiple departments while assembling
and clearing trains on time is key to efficient asset utilization. CN
developed SmartYard for easier,
more effective decision making.
SmartYard takes
information from different
existing CN systems including SRS, combines the data, and then provides
the best sequence for processing cars. It continuously adjusts to the
constantly changing conditions of yard inventory and the main line network
using preset parameters and then predicts when processes associated with
classification and train make-up will start and end. When the start or end
time of a process conflicts with, or does not support the yard’s overall
plan, alerts are displayed. Coupled with users’ practical knowledge, SmartYard is assisting
CN’s yard employees in making better decisions by helping them to
anticipate and react to changing yard conditions.
SmartYard also provides
yard personnel with
powerful planning capabilities and an integrated view across all functions
including: mechanical, transportation, motive power and crew. With
increased efficiencies, more predictability and better communication,
SmartYard lowers
dwell time and increases the speed at which cars are processed. It also
allows CN to handle increasing volumes of traffic through its yards
without additional capital investment in the physical plant.
SmartYard deployment
continues across the CN
network, and new capabilities are being added as employees continuously
improve the processes.
Precision
Engineering
CN is a
leader among North American railways in leveraging software vendor SAP’s
enterprise resource planning solution to manage all aspects of back-office
operations and asset management, including the Company’s engineering
assets.
Precision Engineering
takes the enormous volume
and complexity of asset and inspection information as well as regulatory
compliance rules, and presents track inspectors, supervisors and foremen
with an intuitive, GPS-enabled interface for planning and reporting all
defects, inspections and maintenance work performed.
Since many
engineering employees work in remote trackside locations without
connectivity to the Company’s network, Precision Engineering
is specifically designed to function in disconnected mode, with
capabilities to synchronize with the network once connectivity is
possible.
This
state-of-the-art solution sets new standards for the timeliness, accuracy
and efficiency of regulatory compliance, provides important support to the
Company’s safety performance, and gives better visibility to the millions
of dollars spent each year on engineering maintenance.
Precision Engineering
is helping CN to manage
engineering processes more efficiently, reduce engineering-related delays
to trains, improve labour efficiency as a result of better information
availability, and increase material and machine
utilization.
|
Two separate products – a locomotive digital video
recorder from Wabtec and wireless technology from Wi-Tronix – combine to supply CN with
cutting-edge technology. Video cameras on
locomotives with wireless capabilites can transmit data thousands of miles
away, allowing for real-time monitoring. This critical information allows
for increased efficiency and safety.
|
||||
Transportation Renewal
program
CN continues
to make strategic investments in core operational systems through the
Transportation Renewal program. In early 2009, CN replaced its 30-year-old
legacy motive power assignment system with a new Locomotive Management
System (LMS), leveraging Web/Java technologies and previous investments in
SAP.
The Company
is in the process of deploying an automated system for inbound and
outbound calling of crews, through a voice-recognition system that
increases efficiency and improves the flow of information with
employees.
In parallel,
CN is designing and building iCrew, a replacement for the Company’s
20-year-old mainframe crew assignment and timekeeping system (CATS). iCrew
will also leverage SAP technologies and skills, and provide CN operations
with the ability to better manage crews and increase the utilization of
its most valuable asset – its people.
Positive train control
(PTC)
Positive
train control (PTC) is a term used to describe the integration of various
technologies designed to help prevent collisions between trains, to
enforce speed limits, and to protect employees engaged in track
maintenance.
|
||||
|
The Railway
Safety Improvement Act of 2008 requires that all Class I railroads operating
in the United States implement a PTC system by December 31, 2015 on
all main line track where intercity passenger railroads and commuter
railroads operate, as well as on lines carrying toxic-by-inhalation
hazardous materials.
CN is taking
the appropriate steps to ensure compliance with the new law’s
provisions.
|
Developing a culture of
railroaders
For CN, 2008
was another year of industry-leading innovation in its continuing drive to
develop the best railroaders in the business. From a people perspective,
everything CN does is focused on finding and developing great railroaders.
These initiatives include an internal “Railroad MBA” – a tailored program
where CN managers take a leave of absence from their regular positions to
gain hands-on experience in every aspect of the Company’s operations. CN
also leads the rail industry with its online pre-employment testing, as
well as its management assessment centres.
In 2008, CN
enhanced its level of dialogue through the continuation of its Employee
Performance Scorecard (EPS) process with all unionized employees. Through
EPS, unionized employees meet one-on-one with their supervisors for
individualized, formal, verbal and written feedback based on their
performance measured against CN’s five core principles. Those principles
are: providing good service, controlling costs, focusing on asset
utilization, developing
people, and accomplishing the first four principles without getting anyone
hurt.
The extension
of the EPS to all railroaders is part of a long-term strategy, leading
towards a more engaged workforce. Through EPS, CN’s five core principles
become real, relevant and personal to unionized employees. EPS clarifies
performance expectations, provides an opportunity for positive and
objective feedback, and recognizes individual contributions. The scorecard
includes a rating based on five levels: Outstanding, Superior,
Skilled, New Railroader, or Needs Improvement. In 2008, 95
per cent of CN’s unionized employees participated in EPS discussion
meetings.
With the EPS
in place to develop and engage its workforce, CN faces another challenge.
Over the next five years, including attrition and retirements, CN expects
an average annual turnover of approximately nine per cent of its current
workforce. CN has been focusing on this demographic issue for some time.
Investments in on-line pre-employment testing are now paying dividends as
one of the cornerstones of CN’s efficient selection process. Other
companies in the railway industry are also adopting CN-developed tests. In
2008, CN hired 2,078 individuals from a pool of over 55,700
applications.
This level of
attrition has however helped CN to avoid layoffs on a larger scale during
the current recession. Nonetheless, economic conditions necessitated some
layoffs in 2009, but the Company will be selectively hiring to fill key
strategic positions and to prepare for the recovery. In addition, more
than 700 employees joined CN from its EJ&E and Quebec Railway
Corporation (QRC) acquisitions.
Labour Relations
Canada
As of June
30, 2009, CN employed a total of 14,993 employees in Canada, including
11,480 unionized employees.
In September
2008, the Company began negotiations with two unions whose agreements were
expiring on December 31, 2008: namely the Teamsters Canada Rail Conference
(TCRC), which represents approximately 1,500 locomotive
engineers; and the Rail Canada Traffic Coordinators – Teamsters
Canada Rail Conference (TCRC-RCTC), which represents approximately 200
rail traffic controllers. Negotiations to renew these collective
agreements are ongoing. The agreements remain in effect until the
bargaining process has been exhausted.
At CN’s
request, the Minister of Labour appointed two conciliation officers to
assist the parties in their negotiations for the renewal of the locomotive
engineers’ agreements. No agreement was reached during the 60-day
conciliation process, nor during the 21-day cooling-off period. Although
the conciliator’s mandate was concluded, the Minister re-appointed them as
mediators in order to continue to assist the parties in their
negotiations.
On September
3, 2009 the Canada Industrial Relations Board commenced an inquiry under
Section 87.4 of the Canada Labour Code in order to determine whether
parties have agreed to maintain certain services or, whether in the
absence of such agreement, they must continue to supply such services to
prevent an immediate and serious danger to
the
|
|
||
U.S. hourly work agreements | ||
For a number of years,
CN maintained that traditional railroad operating craft agreements, dating
from the steam-engine era, needed to be modernized to reflect current
operating procedures. The traditional work rules stood in the way of
improvements to operations and customer service, since they made difficult
costly to adjust to changing customer needs. Furthermore, with the
traditional mileage-based rate of there little incentive for profitable
companies to invest in their infrastructure to increase train speed and
car velocity. Finally, the complicated layers of agreements dating from
the 1920s and 30s sometimes led to misunderstandings with unions and
employees. The agreements were also complicated to administer when rates
of pay varied by employee seniority type, operated, locomotive type,
cars switched and myriad other factors.
After a
number of attempts, CN reached its first prototype breakthrough agreement
with one of its U.S. operating unions in 2002. CN now has this hourly rate
agreement on the majority of its U.S. properties. Those agreements were
founded on the principles
of replacing work rules, traditionally seen as a form of job
protection, with the concept that those employees who gave up those
unproductive work rules would simply have a job with CN, period. CN
committed to those employees – if they worked with the Company, they
needn’t worry about job loss stemming from productivity improvements. The
Company also shared its
productivity gains with employees by setting wage rates above industry
standards. As a result, customer service was no longer impeded by
collective bargaining agreement restrictions. In addition, by
paying employees on an hourly basis, instead of by distance
operated, the Company could translate increased train speed into labou
cost savings and improved customer service offerings. All of this led to
reduced capital spending requirements, as increased train speed allowed CN
to decrease the use of locomotives, rail cars, and storage tracks. Just as importantly, employees
benefited from more predictable work schedules and increased income. At a
time when the rail industry is experiencing high retirement-related
attrition over the upcoming years, this initiative enhances CN’s ability
to attract qualified applicants.
Most of the
initial hourly agreements contained clauses allowing employees to revert
to the old-style agreements should they choose. No employees have chosen
to exercise this option. These agreements are mutually beneficial to both
labour and management. They also benefit customers and shareholders by
providing a competitive advantage.
|
||
At CN, safety
is a core value that is integrated into all railroad activities. CN’s
commitment is to safeguard employees and assets, customers, the community
and the environment at all times. The Company is devoted to the provision
of proper training, procedures and tools to ensure a safe and secure
working environment that minimizes the risk of injury or accident, and
delivers customers’ shipments damage-free.
2009 Safety Management System
(SMS)
CN’s Safety
Management System (SMS) is the framework for incorporating safety into the
Company’s day-to-day operations. It is a proactive, comprehensive program
designed to minimize risk, and to drive continuous improvement in the
reduction of injuries and accidents. It includes proactive initiatives
structured in the following key areas: People, Process, Technology and
Investments. CN’s SMS is fully supported by the executive and management,
and involves employees at all levels of the organization. Key groups at
CN, such as mechanical, engineering and transportation, review the SMS on
a continuous basis for lessons learned, study the root causes of accidents
and injuries, and update the SMS with additional safety
improvements.
CN
strengthens the People component of its SMS through the ongoing
development of the Company’s safety culture with training, involvement,
communication, coaching and recognition. At CN, there is zero tolerance
for unsafe work practices. Safety is viewed as every employee’s
responsibility.
Process
initiatives aim to make safety a systematic part of all railroad
activities and to focus on the leading root causes of accidents and
injuries.
CN’s
proactive approach includes taking full advantage of available technology
to minimize risks.
For
2009, CN plans to invest approximately $1.5 billion in capital programs,
of which approximately $1 billion is targeted towards track
infrastructure to improve the safety and fluidity of the network.
Additionally, the Company will:
•
Continue to
address top injury causes at a local level;
•
Provide
focused support to enhance CN’s safety culture and improve the
effectiveness of its Health and Safety committees;
•
Focus on safe
work procedures and employee involvement;
•
Continue to
roll out the Precision Engineering initiative
across the system with the
launch of the Track Inspection System;
•
Augment rail
testing and track geometry testing;
•
Address
main-track accident causes by continuing to enhance CN’s industry-leading
wayside inspection network as well as its track inspection
systems;
•
Focus on
non-main track accidents by addressing human factors through safety
walkabouts, safety blitzes and audits;
•
Implement
detailed Safety Integration Plans (SIP) to facilitate alignment of
recently acquired railroads’ (EJ&E’s and QRC’s) safety policies and
procedures with those of CN.
|
||
Responsible Care®
CN is a leader in Responsible
Care®, a chemical industry initiative
designed to promote continuous improvement in the areas of health and
safety, security, environment, and community outreach along transportation
corridors. CN’s programs in these key disciplines fully support
Responsible Care®.
In 2008, CN was successfully
recertified as a Responsible Care® Partner, further to audits by
the American Chemistry Council (ACC) and the Canadian Chemical Producers’
Association (CCPA).
|
As a leader in the North American
rail industry, CN recognizes its responsibilities with respect to
greenhouse gas emissions and their impact on global warming. As part of
that responsibility, the Company has made emissions reduction an integral
part of its day-to-day activities. CN’s entire operating philosophy,
Precision
Railroading, is
centred on service and efficiency improvements and waste
minimization.
CN aims to integrate
environmental priorities into each of its operating units, and to
continuously strive to
improve the Company’s environmental performance
Carbon
Disclosure Project
CN
participates in the Carbon
Disclosure Project. Please see www.cn.ca/environment for CN’s latest response.
.
|
Rail
– the greenest choice
Rail is the
most energy-efficient method of moving freight. No land transportation
mode can outperform rail for the hauling of large volumes of high-density
freight over long distances. In fact, rail moves one tonne of freight 197
kilometres on just one litre of fuel (roughly one gallon of fuel moves a
ton of freight by rail an average of 436 miles).
If just 10
per cent of long-haul freight now moving by truck moved by rail instead,
annual greenhouse gas emissions would fall by more than 12 million tons.
That’s the equivalent to taking two million cars off the road or planting
280 million trees. (Source: Association of
American
Railroads)
Efficient use
of fuel means a reduction in greenhouse gas
emissions.
|
•
|
Precision
Railroading – a tight, effective
and efficient operation translates into greater reliability for customers
and less impact on the environment as fewer locomotives are needed to move
the same amount of freight.
|
•
|
A greener fleet
– new locomotives produce roughly 40 per cent less nitrogen oxides
and consume between 15 and 20 per cent less fuel. In 2008, CN continued
its fleet-renewal program with the acquisition of 20 new fuel-efficient
locomotives. In December 2008, the Company also announced plans to acquire
an additional 40 of these locomotives. Other green fleet initiatives
include: the use of automatic stop/start devices that conserve fuel and
reduce emissions by automatically shutting down locomotives when not in
use; low idling, which enables locomotives to idle at reduced speed when
coasting downhill or awaiting assignment; dynamic brakes which use less
fuel to control train speed; and rail lubrication devices for locomotives
that reduce surface friction between the rail and freight cars, lowering
fuel consumption and greenhouse gas
emissions.
|
•
|
Employing
better practices in CN’s rail yards
– including enhanced crew training on fuel-conservation practices,
and reduced car handling through more efficient switching
operations.
|
CN is committed to
adherence to the highest standards in its governance practices. These
practices are designed to assist the Company in the achievement of its
principal corporate objective, which is the enhancement of shareholder
value on a long-term basis. Each year, CN’s Board of Directors (Board)
reviews its Corporate Governance Manual in order to continuously
improve the Company’s practices.
CN believes
that its rigorous, vigilant approach to corporate governance
contributes to the Company’s ongoing success in an important way. For that
reason, CN has adopted numerous governance structure and process
innovations, which include:
•
Acomprehensive
Corporate Governance Manual, available on the Company’s Web site,
describing mandates of the Board and its committees, as well as many
corporate policies;
•
Nine
independent Board members on an 11-member Board;
•
An
independent Chairman, who is also Chair of the Corporate Governance and
Nominating Committee, and whose key responsibilities and mandate are
set out in the Corporate Governance Manual;
•
Voluntary
compliance with many requirements of the U.S. Sarbanes-Oxley Act of 2002,
several years before the
Company was required to do so;
•
The
institution of a director-majority voting policy for the election of the
Company’s directors;
•
The
establishment of thorough-going procedures for the evaluation of the
performance of the Board chair, Board committees and committee
chairs, individual Board members and the Chief Executive Officer,
including the development of a competency matrix that also serves as an
effective tool in the selection of candidates for Board
membership;
•
The adoption
of a policy whereby a director wishing to join the board on which another
CN director currently sits must obtain the approval of the Corporate
Governance and Nominating Committee and a policy to the effect that
no more than two CN directors should generally serve on the same outside
board;
•
The adoption
of guidelines limiting the number of boards of directors on which the
Company’s directors should sit;
•
The increase
of directors’ share-ownership guidelines to three times their annual Board
retainer, to better align their interests with those of the Company’s
shareholders;
•
The
maintenance of an evergreen list of potential Board
candidates;
•
The provision
of direct access to the Board Chairman through the Company’s Web site to
any interested parties, including members of the
public;
•
The
establishment of channels for employees and other parties to
confidentially report any concerns relating to accounting, auditing or
corporate ethics;
•
The
adoption of an updated comprehensive Code of Business Conduct,
applicable to directors and all employees of CN, to promote a culture
of integrity and ethical business conduct;
•
The
division of the Board’s audit and financial oversight responsibilities
between two separate Board committees.
CN’s focus is
to create a corporate governance framework that is cohesive and integrated
while encouraging an innovative spirit among its employees and management.
CN is very proud of its record of good corporate governance over the past
decade, as well as the awards and recognition it has received in this
field.
|
Board of
Directors
|
Ambassador
Gordon D. Giffin
|
Denis Losier,
P.C.,
LL.D.
|
||
Senior
Partner
|
President and
Chief Executive Officer
|
|||
David G.A.
McLean, O.B.C.,
LL.D.
|
McKenna Long
& Aldridge
|
Assumption
Life
|
||
Chairman of
the Board
|
Atlanta, Ga.,
U.S.A.
|
Moncton,
N.B.
|
||
Canadian
National Railway Company
|
Director
since: May 1, 2001
|
Director
since: October 25, 1994
|
||
Chairman and
Chief Executive Officer
|
Independent
|
Independent
|
||
The McLean
Group
|
Committees:
1, 2, 4, 6, 7
|
Committees:
1(C), 3, 7, 8
|
||
Vancouver,
B.C.
|
||||
Director
since: August 31, 1994
|
Edith E.
Holiday
|
The
Honourable Edward C. Lumley, P.C.,
LL.D.
|
||
Independent
|
Corporate
Director and Trustee
|
Vice-Chairman
|
||
Committees:
3(C), 4, 5, 6, 7, 8
|
Former
General Counsel
|
BMO Capital
Markets
|
||
United States
Treasury Department
|
South
Lancaster, Ont.
|
|||
E. Hunter
Harrison,
LL.D.
|
and Secretary
of the Cabinet
|
Director
since: July 4, 1996
|
||
President and
Chief Executive Officer
|
The White
House
|
Independent
|
||
Canadian
National Railway Company
|
Washington,
D.C., U.S.A.
|
Committees:
2, 5, 6, 7, 8(C)
|
||
Wellington,
Fla., U.S.A.
|
Director
since: June 1, 2001
|
|||
Director
since: December 7, 1999
|
Independent
|
Robert
Pace
|
||
Not
independent
|
Committees:
3, 5, 6, 7, 8
|
President and
Chief Executive Officer
|
||
Committees:
4(C), 7
|
The Pace
Group
|
|||
V. Maureen
Kempston Darkes,
|
Halifax,
N.S.
|
|||
Michael R.
Armellino, CFA
|
O.C., D.
Comm.,
LL.D.
|
Director
since: October 25, 1994
|
||
Retired
Partner
|
Group
Vice-President
|
Independent
|
||
The Goldman
Sachs Group, LP
|
General
Motors Corporation and
|
Committees:
1, 3, 6(C), 7, 8
|
||
Fort Lee,
N.J., U.S.A.
|
President GM
Latin America,
|
|||
Director
since: May 7, 1996
|
Africa, and
Middle East
|
Committees
|
||
Independent
|
Miramar,
Fla., U.S.A.
|
1.
Audit
|
||
Committees:
1, 2, 7(C), 8
|
Director
since: March 29, 1995
|
2.
Finance
|
||
Not
Independent
|
3.
Corporate governance and nominating
|
|||
A. Charles
Baillie, O.C.,
LL.D.
|
Committees:
2, 5(C), 7, 8
|
4.
Donations
|
||
Former
Chairman and CEO
|
5.
Environment, safety and security
|
|||
The
Toronto-Dominion Bank
|
6.
Human resources and compensation
|
|||
Toronto,
Ont.
|
7.
Strategic planning
|
|||
Director
since: April 15, 2003
|
8.
Investment committee of
|
|||
Independent
|
CN’s
Pension Trust Funds
|
Committees:
2(C), 5, 6, 7, 8
|
||||
(C)
Denotes chairman of the committee
|
||||
Hugh J.
Bolton, FCA
|
||||
Chairman
|
||||
EPCOR
Utilities Inc.
|
||||
Edmonton,
Alta.
|
||||
Director
since: April 15, 2003
|
||||
Independent
|
||||
Committees:
1, 3, 6, 7
|
Maintaining financial
flexibility
CN adopts a
prudent approach in the management of its financial affairs. The result is
one of the strongest balance sheets in the industry.
Credit rating
agencies have concretely acknowledged CN’s financial strength with ratings
amongst the highest of its Class I
peers. These higher ratings have enabled CN to obtain financing at lower
borrowing costs.
In addition
to its cash-generation capacity, the Company maintains financial
flexibility with access to various sources of funds.
Revolving credit
facility
The Company
has a US$1 billion revolving credit facility, expiring in October 2011.
The credit facility is available for general corporate purposes, including
back-stopping the Company’s commercial paper program, and provides for
borrowings at various interest rates including the Canadian prime rate,
bankers’ acceptance rates, the U.S. federal funds effective rate and the
London Interbank Offer Rate, plus applicable margins. The credit facility
agreement has one financial covenant, which limits debt as a percentage of
total capitalization, and with which the Company is in
compliance.
Commercial
paper
The Company
has a commercial paper program, which is backed by a portion of its
revolving credit facility, enabling it to issue commercial paper up to a
maximum aggregate principal amount of $800 million, or the U.S. dollar
equivalent. Commercial paper debt is due within one year but is classified
as long-term debt, reflecting the Company’s intent and contractual ability
to refinance
the short-term borrowings through subsequent issuances of commercial paper
or through drawing down on the long-term revolving credit
facility.
Shelf prospectus and registration
statement
The Company
has US$1.3 billion registered under its currently effective shelf
prospectus and registration statement, expiring in January 2010, providing
for the issuance of debt securities in one or more offerings.
Accounts receivable securitization
program
The accounts
receivable securitization program provides the Company with readily
available short-term financing for general corporate use. The Company’s
five-year agreement, expiring in May 2011, allows it to sell an undivided
co-ownership interest for maximum cash proceeds of $600 million in a
revolving pool of freight receivables to an unrelated trust. The trust is
a multi-seller trust and the Company is not the primary beneficiary.
Pursuant to the agreement, the Company sells an interest in its
receivables and receives proceeds net of the required reserve stipulated
in the agreement. The required reserve represents an amount set aside to
allow for possible credit losses and is recognized by the Company as a
retained interest and recorded in Other current assets on its Consolidated
Balance Sheet. The Company retains the responsibility for servicing,
administering and collecting the receivables sold and receives no fee for
such ongoing servicing responsibilities. The Company accounts for the
accounts receivable securitization program as a sale, because control over
the trans-
|
||
1.
See Appendix B for a reconciliation of non-GAAP measures.
2. Adjusted
to exclude items affecting the comparability of the results. See Appendix
B for a reconciliation of non-GAAP measures.
3. 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.
4. Debt
adjusted to include the present value of operating lease commitments plus
securitization financing.
5. Earnings
before interest, income taxes, depreciation and amortization (EBITDA), and
adjusted to exclude Other income and the deemed interest on operating
leases.
|
|
Share
repurchases
In the past, CN has implemented
various share buy-back programs pursuant to a normal course issuer bid, at
prevailing market prices or such other prices as may be permitted by the
Toronto Stock Exchange.
The Company’s
most recent share buyback program, approved by the Board of Directors on
July 21, 2008, allowed for the repurchase of up to 25.0 million common
shares between July 28, 2008 and July 20, 2009. Under that program, CN
repurchased, almost entirely in the third quarter of 2008, a total of 6.1
million common shares for $331 million, at a weighted-average price of
$54.42 per share. In the fourth quarter of 2008, in light of the global
financial crisis and the rapidly deteriorating North American economy, CN
halted purchases under its share buyback program.
Since the first program began
in January 2000, CN has
repurchased 201.1 million shares through
normal course issuer bids at an average
per share price of $35.65 for a total
cost of $7,169
million.
Dividends1
The Company has consistently
declared dividends in line with its overall financial performance and cash
flow generation. Decisions on dividend payout are made on an annual and
quarterly basis by the Company’s Board of Directors.
CN’s current dividend policy pays
a quarterly dividend of 25.25 cents ($0.2525) per common share. Since the
Company’s initial public offering in 1995, there have been 13 consecutive
increases in CN’s cash dividend, a compounded annual increase of over 16
per cent.
Stock
splits
In order to
ensure greater accessibility of CN shares to individual investors, and to
increase the liquidity of shares, CN has split its stock on three
occasions since its November 1995 initial public
offering.
|
||
CN
Stock Splits
|
|||||
Record Date
|
Pay Date
|
Split
Ratio
|
|||
February 22,
2006
|
February 28,
2006
|
2 for
1
|
|||
February 23,
2004
|
February 27,
2004
|
3 for
2
|
|||
September 23,
1999
|
September
27,1999
|
2 for
1
|
|||
1 For Canadian and U.S. tax information regarding CN dividends, please consult www.cn.ca/investors. |
2007
|
2008
|
|||||||||||||||||||||||||||||||||||||||
Q1
|
Q2
|
Q3
|
Q4 |
Year
|
Q1 | Q2 | Q3 | Q4 |
Year
|
|||||||||||||||||||||||||||||||
Revenues
|
$ | 1,906 | $ | 2,027 | $ | 2,023 | $ | 1,941 | $ | 7,897 | $ | 1,927 | $ | 2,098 | $ | 2,257 | $ | 2,200 | $ | 8,482 | ||||||||||||||||||||
Operating
expenses
|
||||||||||||||||||||||||||||||||||||||||
Labor and
fringe benefits
|
485 | 430 | 446 | 340 | 1,701 | 461 | 392 | 424 | 397 | 1,674 | ||||||||||||||||||||||||||||||
Purchased
services and material
|
276 | 263 | 247 | 259 | 1,045 | 285 | 283 | 268 | 301 | 1,137 | ||||||||||||||||||||||||||||||
Fuel
|
219 | 249 | 251 | 307 | 1,026 | 310 | 399 | 390 | 304 | 1,403 | ||||||||||||||||||||||||||||||
Depreciation
and amortization
|
171 | 168 | 165 | 173 | 677 | 175 | 176 | 177 | 197 | 725 | ||||||||||||||||||||||||||||||
Equipment
rents
|
66 | 62 | 59 | 60 | 247 | 64 | 60 | 59 | 79 | 262 | ||||||||||||||||||||||||||||||
Casualty and
other
|
128 | 44 | 87 | 66 | 325 | 109 | 81 | 95 | 102 | 387 | ||||||||||||||||||||||||||||||
Total
operating expenses
|
1,345 | 1,216 | 1,255 | 1,205 | 5,021 | 1,404 | 1,391 | 1,413 | 1,380 | 5,588 | ||||||||||||||||||||||||||||||
Operating
income
|
561 | 811 | 768 | 736 | 2,876 | 523 | 707 | 844 | 820 | 2,894 | ||||||||||||||||||||||||||||||
Interest
expense
|
(88 | ) | (85 | ) | (78 | ) | (85 | ) | (336 | ) | (86 | ) | (87 | ) | (92 | ) | (110 | ) | (375 | ) | ||||||||||||||||||||
Other income
(loss)
|
4 | 1 | 2 | 159 | 166 | (6 | ) | 9 | 4 | 19 | 26 | |||||||||||||||||||||||||||||
Income before
income taxes
|
477 | 727 | 692 | 810 | 2,706 | 431 | 629 | 756 | 729 | 2,545 | ||||||||||||||||||||||||||||||
Income tax
(expense) recovery
|
(153 | ) | (211 | ) | (207 | ) | 23 | (548 | ) | (120 | ) | (170 | ) | (204 | ) | (156 | ) | (650 | ) | |||||||||||||||||||||
Net
income
|
$ | 324 | $ | 516 | $ | 485 | $ | 833 | $ | 2,158 | $ | 311 | $ | 459 | $ | 552 | $ | 573 | $ | 1,895 | ||||||||||||||||||||
Earnings per
share
|
||||||||||||||||||||||||||||||||||||||||
Basic
|
$ | 0.64 | $ | 1.02 | $ | 0.97 | $ | 1.70 |
$
|
4.31
|
$ | 0.64 | $ | 0.96 | $ | 1.17 | $ | 1.22 | $ |
3.99
|
||||||||||||||||||||
Diluted
|
$ | 0.63 | $ | 1.01 | $ | 0.96 | $ | 1.68 | $ |
4.25
|
$ | 0.64 | $ | 0.95 | $ | 1.16 | $ | 1.21 | $ |
3.95
|
||||||||||||||||||||
Weighted-average number of
shares
|
||||||||||||||||||||||||||||||||||||||||
Basic
|
510.2 | 505.2 | 499.7 | 489.8 | 501.2 | 482.8 | 476.4 | 471.7 | 468.1 | 474.7 | ||||||||||||||||||||||||||||||
Diluted
|
517.8 | 512.3 | 506.4 | 495.9 | 508.0 | 488.6 | 482.0 | 477.1 | 472.5 | 480.0 |
2007
|
2008
|
|||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||
Current
assets:
|
||||||||||||||||||||||||||||||||
Cash and cash
equivalents
|
$ | 106 | $ | 241 | $ | 214 | $ | 310 | $ | 334 | $ | 161 | $ | 288 | $ | 413 | ||||||||||||||||
Accounts
receivable
|
508 | 425 | 641 | 370 | 621 | 843 | 657 | 913 | ||||||||||||||||||||||||
Material and
supplies
|
208 | 204 | 206 | 162 | 212 | 217 | 213 | 200 | ||||||||||||||||||||||||
Deferred
income taxes
|
83 | 73 | 69 | 68 | 67 | 67 | 69 | 98 | ||||||||||||||||||||||||
Other
|
184 | 159 | 316 | 138 | 111 | 88 | 131 | 132 | ||||||||||||||||||||||||
1,089 | 1,102 | 1,446 | 1,048 | 1,345 | 1,376 | 1,358 | 1,756 | |||||||||||||||||||||||||
Properties
|
20,988 | 20,401 | 19,883 | 20,413 | 20,754 | 20,864 | 21,472 | 23,203 | ||||||||||||||||||||||||
Intangible
and other assets
|
1,646 | 1,664 | 1,576 | 1,999 | 2,065 | 2,113 | 2,134 | 1,761 | ||||||||||||||||||||||||
Total
assets
|
$ | 23,723 | $ | 23,167 | $ | 22,905 | $ | 23,460 | $ | 24,164 | $ | 24,353 | $ | 24,964 | $ | 26,720 | ||||||||||||||||
Liabilities and
shareholders’ equity
|
||||||||||||||||||||||||||||||||
Current
liabilities:
|
||||||||||||||||||||||||||||||||
Accounts
payable and other
|
$ | 1,510 | $ | 1,489 | $ | 1,261 | $ | 1,336 | $ | 1,333 | $ | 1,289 | $ | 1,329 | $ | 1,386 | ||||||||||||||||
Current
portion of long-term debt
|
244 | 366 | 293 | 254 | 269 | 85 | 449 | 506 | ||||||||||||||||||||||||
1,754 | 1,855 | 1,554 | 1,590 | 1,602 | 1,374 | 1,778 | 1,892 | |||||||||||||||||||||||||
Deferred
income taxes
|
5,025 | 4,885 | 4,940 | 4,908 | 5,021 | 5,100 | 5,246 | 5,511 | ||||||||||||||||||||||||
Other
liabilities and deferred credits
|
1,532 | 1,443 | 1,410 | 1,422 | 1,404 | 1,381 | 1,378 | 1,353 | ||||||||||||||||||||||||
Long-term
debt
|
5,602 | 5,193 | 5,342 | 5,363 | 6,064 | 6,389 | 6,264 | 7,405 | ||||||||||||||||||||||||
Shareholders’
equity:
|
||||||||||||||||||||||||||||||||
Common
shares
|
4,426 | 4,417 | 4,359 | 4,283 | 4,241 | 4,208 | 4,171 | 4,179 | ||||||||||||||||||||||||
Accumulated
other comprehensive income (loss)
|
(50 | ) | (180 | ) | (257 | ) | (31 | ) | 9 | (1 | ) | 54 | (155 | ) | ||||||||||||||||||
Retained
earnings
|
5,434 | 5,554 | 5,557 | 5,925 | 5,823 | 5,902 | 6,073 | 6,535 | ||||||||||||||||||||||||
9,810 | 9,791 | 9,659 | 10,177 | 10,073 | 10,109 | 10,298 | 10,559 | |||||||||||||||||||||||||
Total
liabilities and shareholders’ equity
|
$ | 23,723 | $ | 23,167 | $ | 22,905 | $ | 23,460 | $ | 24,164 | $ | 24,353 | $ | 24,964 | $ | 26,720 |
2007
|
2008
|
|||||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 |
Year
|
Q1 | Q2 | Q3 | Q4 |
Year
|
|||||||||||||||||||||||||||||||
Operating activities
|
||||||||||||||||||||||||||||||||||||||||
Net
income
|
$ | 324 | $ | 516 | $ | 485 | $ | 833 | $ | 2,158 | $ | 311 | $ | 459 | $ | 552 | $ | 573 | $ | 1,895 | ||||||||||||||||||||
Adjustments
to reconcile net income to net cash provided from operating
activities:
|
||||||||||||||||||||||||||||||||||||||||
Depreciation
and amortization
|
172 | 169 | 165 | 172 | 678 | 175 | 176 | 177 | 197 | 725 | ||||||||||||||||||||||||||||||
Deferred
income taxes
|
7 | 43 | 75 | (207 | ) | (82 | ) | 25 | 89 | 73 | 43 | 230 | ||||||||||||||||||||||||||||
Gain on sale
of Central Station Complex
|
- | - | - | (92 | ) | (92 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||
Gain on sale
of investment in English Welsh and Scottish
Railway
|
- | - | - | (61 | ) | (61 | ) | - | - | - | - | - | ||||||||||||||||||||||||||||
Other changes
in:
|
||||||||||||||||||||||||||||||||||||||||
Accounts
receivable
|
176 | 38 | (252 | ) | 267 | 229 | (235 | ) | (233 | ) | 209 | (173 | ) | (432 | ) | |||||||||||||||||||||||||
Material and
supplies
|
(19 | ) | (1 | ) | (6 | ) | 44 | 18 | (48 | ) | (6 | ) | 6 | 25 | (23 | ) | ||||||||||||||||||||||||
Accounts
payable and other
|
(428 | ) | 2 | (69 | ) | 99 | (396 | ) | (59 | ) | (39 | ) | (1 | ) | (28 | ) | (127 | ) | ||||||||||||||||||||||
Other current
assets
|
8 | 21 | 46 | (9 | ) | 84 | 29 | 22 | (16 | ) | 2 | 37 | ||||||||||||||||||||||||||||
Other
|
23 | (22 | ) | 2 | (122 | ) | (119 | ) | (33 | ) | (59 | ) | (43 | ) | (139 | ) | (274 | ) | ||||||||||||||||||||||
Cash provided
from operating activities
|
263 | 766 | 446 | 942 | 2,417 | 165 | 409 | 957 | 500 | 2,031 | ||||||||||||||||||||||||||||||
Investing
activities
|
||||||||||||||||||||||||||||||||||||||||
Properties
additions
|
(203 | ) | (344 | ) | (350 | ) | (490 | ) | (1,387 | ) | (177 | ) | (352 | ) | (415 | ) | (480 | ) | (1,424 | ) | ||||||||||||||||||||
Acquisitions,
net of cash acquired
|
- | - | - | (25 | ) | (25 | ) | - | - | - | (50 | ) | (50 | ) | ||||||||||||||||||||||||||
Sale of
Central Station Complex
|
- | - | - | 351 | 351 | - | - | - | - | - | ||||||||||||||||||||||||||||||
Sale of
investment in English Welsh and Scottish
Railway
|
- | - | - | 114 | 114 | - | - | - | - | - | ||||||||||||||||||||||||||||||
Other,
net
|
10 | 2 | 14 | 26 | 52 | 11 | 9 | 22 | 32 | 74 | ||||||||||||||||||||||||||||||
Cash used by
investing activities
|
(193 | ) | (342 | ) | (336 | ) | (24 | ) | (895 | ) | (166 | ) | (343 | ) | (393 | ) | (498 | ) | (1,400 | ) | ||||||||||||||||||||
Financing
activities
|
||||||||||||||||||||||||||||||||||||||||
Issuance of
long-term debt
|
434 | 1,050 | 1,841 | 846 | 4,171 | 1,055 | 1,597 | 778 | 1,003 | 4,433 | ||||||||||||||||||||||||||||||
Reduction of
long-term debt
|
(145 | ) | (904 | ) | (1,420 | ) | (1,120 | ) | (3,589 | ) | (580 | ) | (1,418 | ) | (798 | ) | (793 | ) | (3,589 | ) | ||||||||||||||||||||
Issuance of
common shares due to exercise of stock options and related excess
tax benefits realized
|
18 | 41 | 14 | 4 | 77 | 18 | 16 | 14 | 6 | 54 | ||||||||||||||||||||||||||||||
Repurchase of
common shares
|
(343 | ) | (344 | ) | (452 | ) | (445 | ) | (1,584 | ) | (367 | ) | (323 | ) | (327 | ) | (4 | ) | (1,021 | ) | ||||||||||||||||||||
Dividends
paid
|
(107 | ) | (105 | ) | (104 | ) | (102 | ) | (418 | ) | (111 | ) | (109 | ) | (108 | ) | (108 | ) | (436 | ) | ||||||||||||||||||||
Cash provided
from (used by) financing activities
|
(143 | ) | (262 | ) | (121 | ) | (817 | ) | (1,343 | ) | 15 | (237 | ) | (441 | ) | 104 | (559 | ) | ||||||||||||||||||||||
Effect of
foreign exchange fluctuations on U.S. dollar-denominated cash and
cash equivalents
|
- | (27 | ) | (16 | ) | (5 | ) | (48 | ) | 10 | (2 | ) | 4 | 19 | 31 | |||||||||||||||||||||||||
Net
increase (decrease) in cash and cash equivalents
|
(73 | ) | 135 | (27 | ) | 96 | 131 | 24 | (173 | ) | 127 | 125 | 103 | |||||||||||||||||||||||||||
Cash and cash
equivalents, beginning of period
|
179 | 106 | 241 | 214 | 179 | 310 | 334 | 161 | 288 | 310 | ||||||||||||||||||||||||||||||
Cash
and cash equivalents, end of period
|
$ | 106 | $ | 241 | $ | 214 | $ | 310 | $ | 310 | $ | 334 | $ | 161 | $ | 288 | $ | 413 | $ | 413 | ||||||||||||||||||||
Supplemental
cash flow information
|
||||||||||||||||||||||||||||||||||||||||
Net cash
receipts from customers and other
|
$ | 2,074 | $ | 2,086 | $ | 1,770 | $ | 2,209 | $ | 8,139 | $ | 1,748 | $ | 1,886 | $ | 2,391 | $ | 1,987 | $ | 8,012 | ||||||||||||||||||||
Net cash
payments for:
|
||||||||||||||||||||||||||||||||||||||||
Employee
services, suppliers and other expenses
|
(1,237 | ) | (1,017 | ) | (1,090 | ) | (979 | ) | (4,323 | ) | (1,339 | ) | (1,215 | ) | (1,195 | ) | (1,171 | ) | (4,920 | ) | ||||||||||||||||||||
Interest
|
(114 | ) | (73 | ) | (86 | ) | (67 | ) | (340 | ) | (100 | ) | (90 | ) | (82 | ) | (124 | ) | (396 | ) | ||||||||||||||||||||
Workforce
reductions
|
(9 | ) | (7 | ) | (8 | ) | (7 | ) | (31 | ) | (6 | ) | (6 | ) | (5 | ) | (5 | ) | (22 | ) | ||||||||||||||||||||
Personal
injury and other claims
|
(20 | ) | (26 | ) | (12 | ) | (28 | ) | (86 | ) | (26 | ) | (18 | ) | (18 | ) | (29 | ) | (91 | ) | ||||||||||||||||||||
Pensions
|
(1 | ) | (22 | ) | (27 | ) | (25 | ) | (75 | ) | (22 | ) | (31 | ) | (24 | ) | (50 | ) | (127 | ) | ||||||||||||||||||||
Income
taxes
|
(430 | ) | (175 | ) | (101 | ) | (161 | ) | (867 | ) | (90 | ) | (117 | ) | (110 | ) | (108 | ) | (425 | ) | ||||||||||||||||||||
Cash
provided from operating activities
|
$ | 263 | $ | 766 | $ | 446 | $ | 942 | $ | 2,417 | $ | 165 | $ | 409 | $ | 957 | $ | 500 | $ | 2,031 |
2007
|
2008
|
|||||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 |
Year
|
Q1 | Q2 | Q3 | Q4 |
Year
|
|||||||||||||||||||||||||||||||
Revenues
(millions of
dollars)
|
||||||||||||||||||||||||||||||||||||||||
Petroleum and
chemicals
|
303 | 300 | 317 | 306 | 1,226 | 319 | 322 | 346 | 359 | 1,346 | ||||||||||||||||||||||||||||||
Metals and
minerals
|
198 | 225 | 208 | 195 | 826 | 205 | 239 | 269 | 237 | 950 | ||||||||||||||||||||||||||||||
Forest
products
|
410 | 414 | 392 | 336 | 1,552 | 330 | 357 | 383 | 366 | 1,436 | ||||||||||||||||||||||||||||||
Coal
|
89 | 99 | 99 | 98 | 385 | 99 | 107 | 140 | 132 | 478 | ||||||||||||||||||||||||||||||
Grain and
fertilizers
|
309 | 322 | 330 | 350 | 1,311 | 340 | 334 | 327 | 381 | 1,382 | ||||||||||||||||||||||||||||||
Intermodal
|
313 | 346 | 361 | 362 | 1,382 | 351 | 393 | 446 | 390 | 1,580 | ||||||||||||||||||||||||||||||
Automotive
|
132 | 142 | 114 | 116 | 504 | 116 | 124 | 117 | 112 | 469 | ||||||||||||||||||||||||||||||
Total rail
freight revenues
|
1,754 | 1,848 | 1,821 | 1,763 | 7,186 | 1,760 | 1,876 | 2,028 | 1,977 | 7,641 | ||||||||||||||||||||||||||||||
Other
revenues
|
152 | 179 | 202 | 178 | 711 | 167 | 222 | 229 | 223 | 841 | ||||||||||||||||||||||||||||||
Total
revenues
|
1,906 | 2,027 | 2,023 | 1,941 | 7,897 | 1,927 | 2,098 | 2,257 | 2,200 | 8,482 | ||||||||||||||||||||||||||||||
Statistical operating
data
|
||||||||||||||||||||||||||||||||||||||||
Gross ton
miles (GTM) (millions)
|
81,741 | 88,344 | 88,498 | 89,315 | 347,898 | 84,327 | 87,287 | 86,369 | 81,871 | 339,854 | ||||||||||||||||||||||||||||||
Revenue ton
miles (RTM) (millions)
|
44,093 | 46,423 | 46,481 | 47,151 | 184,148 | 44,959 | 45,264 | 45,346 | 42,382 | 177,951 | ||||||||||||||||||||||||||||||
Carloads
(thousands)
|
1,131 | 1,204 | 1,204 | 1,205 | 4,744 | 1,132 | 1,188 | 1,217 | 1,078 | 4,615 | ||||||||||||||||||||||||||||||
Route miles
(includes Canada and the
U.S.)
|
20,263 | 20,219 | 20,219 | 20,421 | 20,421 | 20,421 | 20,421 | 20,421 | 20,961 | 20,961 | ||||||||||||||||||||||||||||||
Employees
(end of
period)
|
22,139 | 22,757 | 22,834 | 22,696 | 22,696 | 22,703 | 23,147 | 22,569 | 22,227 | 22,227 | ||||||||||||||||||||||||||||||
Employees
(average for the
period)
|
21,478 | 22,494 | 22,789 | 22,796 | 22,389 | 22,636 | 22,953 | 22,730 | 22,461 | 22,695 | ||||||||||||||||||||||||||||||
Productivity
|
||||||||||||||||||||||||||||||||||||||||
Operating
ratio (%)
|
70.6 | 60.0 | 62.0 | 62.1 | 63.6 | 72.9 | 66.3 | 62.6 | 62.7 | 65.9 | ||||||||||||||||||||||||||||||
Rail freight
revenue per RTM (cents)
|
3.98 | 3.98 | 3.92 | 3.74 | 3.90 | 3.91 | 4.14 | 4.47 | 4.66 | 4.29 | ||||||||||||||||||||||||||||||
Rail freight
revenue per carload ($)
|
1,551 | 1,535 | 1,512 | 1,463 | 1,515 | 1,555 | 1,579 | 1,666 | 1,834 | 1,656 | ||||||||||||||||||||||||||||||
Operating
expenses per GTM (cents)
|
1.65 | 1.38 | 1.42 | 1.35 | 1.44 | 1.66 | 1.59 | 1.64 | 1.69 | 1.64 | ||||||||||||||||||||||||||||||
Labor and
fringe benefits expense per GTM (cents)
|
0.59 | 0.49 | 0.50 | 0.38 | 0.49 | 0.55 | 0.45 | 0.49 | 0.48 | 0.49 | ||||||||||||||||||||||||||||||
GTMs per
average number of employees (thousands)
|
3,806 | 3,927 | 3,883 | 3,918 | 15,539 | 3,725 | 3,803 | 3,800 | 3,645 | 14,975 | ||||||||||||||||||||||||||||||
Diesel fuel
consumed (U.S. gallons
in millions)
|
96 | 98 | 96 | 102 | 392 | 99 | 96 | 92 | 93 | 380 | ||||||||||||||||||||||||||||||
Average fuel
price ($/U.S.
gallon)
|
2.18 | 2.30 | 2.39 | 2.70 | 2.40 | 3.02 | 3.82 | 3.84 | 2.88 | 3.39 | ||||||||||||||||||||||||||||||
GTMs per U.S.
gallon of fuel consumed
|
851 | 901 | 922 | 876 | 887 | 852 | 909 | 939 | 880 | 894 | ||||||||||||||||||||||||||||||
Safety
indicators
|
||||||||||||||||||||||||||||||||||||||||
Injury frequency rate per 200,000
person hours (1)
|
1.6 | 1.6 | 2.2 | 2.1 | 1.9 | 2.1 | 1.2 | 2.1 | 1.7 | 1.8 | ||||||||||||||||||||||||||||||
Accident rate per million train
miles (1)
|
2.7 | 1.7 | 3.0 | 3.6 | 2.7 | 2.7 | 2.7 | 2.2 | 2.8 | 2.6 |
2006
|
2007 |
2008
|
||||||||||||||||||||||||||||||||||
Reported
|
Adjustments(1)
|
Adjusted
|
Reported
|
Adjustments(2)
|
Adjusted
|
Reported
|
Adjustments(3)
|
Adjusted
|
||||||||||||||||||||||||||||
Revenues
|
$ | 7,929 | $ | – | $ | 7,929 | $ | 7,897 | $ | – | $ | 7,897 | $ | 8,482 | $ | – | $ | 8,482 | ||||||||||||||||||
Operating
expenses
|
4,899 | – | 4,899 | 5,021 | – | 5,021 | 5,588 | – | 5,588 | |||||||||||||||||||||||||||
Operating
income
|
3,030 | – | 3,030 | 2,876 | – | 2,876 | 2,894 | – | 2,894 | |||||||||||||||||||||||||||
Interest
expense
|
(312 | ) | – | (312 | ) | (336 | ) | – | (336 | ) | (375 | ) | – | (375 | ) | |||||||||||||||||||||
Other
income
|
11 | – | 11 | 166 | (153 | ) | 13 | 26 | – | 26 | ||||||||||||||||||||||||||
Income before
income taxes
|
2,729 | – | 2,729 | 2,706 | (153 | ) | 2,553 | 2,545 | – | 2,545 | ||||||||||||||||||||||||||
Income tax
expense
|
(642 | ) | (277 | ) | (919 | ) | (548 | ) | (280 | ) | (828 | ) | (650 | ) | (117 | ) | (767 | ) | ||||||||||||||||||
Net
income
|
$ | 2,087 | $ | (277 | ) | $ | 1,810 | $ | 2,158 |
$
|
(433)
|
$ |
1,725
|
$ | 1,895 | $ | (117 | ) | $ | 1,778 | ||||||||||||||||
Operating
ratio
|
61.8 | % | 61.8% | 63.6% | 63.6% | 65.9% | 65.9% | |||||||||||||||||||||||||||||
Diluted
earnings per share
|
$ | 3.91 | $ | (0.51 | ) | $ | 3.40 | $ | 4.25 | $ | (0.85 | ) | $ | 3.40 | $ | 3.95 | $ | (0.24 | ) | $ | 3.71 |
(1)
|
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.
|
(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 $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.
|
Free cash
flow
|
||||||||||||
Year
ended December 31,
|
2006
|
2007
|
2008
|
|||||||||
Cash provided
from operating activities
|
$ | 2,951 | $ | 2,417 | $ | 2,031 | ||||||
Cash used by
investing activities
|
(1,349 | ) | (895 | ) | (1,400 | ) | ||||||
Cash
provided before financing activities
|
1,602 | 1,522 | 631 | |||||||||
Adjustments:
|
||||||||||||
Change in
accounts receivable securitization
|
82 | (228 | ) | 568 | ||||||||
Dividends
paid
|
(340 | ) | (418 | ) | (436 | ) | ||||||
Effect of
foreign exchange fluctuations on U.S. dollar-denominated cash and cash
equivalents
|
(1 | ) | (48 | ) | 31 | |||||||
Free
cash flow
|
$ | 1,343 | $ | 828 | $ | 794 | ||||||
Adjusted debt-to-total
capitalization ratio
|
||||||||||||
December
31,
|
2006
|
2007
|
2008
|
|||||||||
Debt-to-total capitalization
ratio (1)
|
36.3% | 35.6% | 42.8% | |||||||||
Add:
Present value of
operating lease commitments plus securitization financing (2)
|
4.1% | 4.8% | 2.4% | |||||||||
Adjusted
debt-to-total capitalization ratio
|
40.4% | 40.4% | 45.2% | |||||||||
Adjusted debt-to-adjusted
EBITDA
|
||||||||||||
Year
ended December 31,
|
2006
|
2007
|
2008
|
|||||||||
Debt
|
$ | 5,604 | $ | 5,617 | $ | 7,911 | ||||||
Add:
Present value of
operating lease commitments plus securitization financing (2)
|
1,044 | 1,287 | 787 | |||||||||
Adjusted
debt
|
$ | 6,648 | $ | 6,904 | $ | 8,698 | ||||||
Operating
income
|
$ | 3,030 | $ | 2,876 | $ | 2,894 | ||||||
Add: Depreciation and
amortization
|
650 | 677 | 725 | |||||||||
EBITDA
|
3,680 | 3,553 | 3,619 | |||||||||
Add: Deemed interest on
operating leases
|
38 | 41 | 39 | |||||||||
Adjusted
EBITDA
|
$ | 3,718 | $ | 3,594 | $ | 3,658 | ||||||
Adjusted
debt-to-adjusted EBITDA
|
1.8
times
|
1.9
times
|
2.4
times
|
(1)
|
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.
|
(2)
|
The
operating lease commitments have been discounted using the Company’s
implicit interest rate for each of the periods
presented.
|
E.
Hunter Harrison
President and Chief Executive
Officer
E. Hunter
Harrison became President and Chief Executive Officer of CN on January 1,
2003. Before assuming that position, he served as CN’s Executive
Vice-President and Chief Operating Officer for five years. He was
appointed to the Company’s Board of Directors on December 7,
1999.
Prior to
joining CN, Mr. Harrison was President and Chief Executive Officer of the
Illinois Central Corporation (IC) and the Illinois Central Railroad
Company (ICRR), as well as a director of IC and ICRR, from 1993 to
1998.
Mr.
Harrison’s railroad career began in 1963 when he joined the Frisco (St.
Louis-San Francisco) Railroad as a carman-oiler in Memphis, Tenn., while
attending school. He held a succession of increasingly responsible
positions in rail operations, first with the Frisco, and then with
Burlington Northern (BN) after BN acquired the Frisco in 1980. Before
moving to IC and ICRR in 1989, Mr. Harrison served as BN’s Vice-President
– Transportation and Vice-President – Service Design.
At IC and
ICRR, Mr. Harrison first held the position of Vice-President and Chief
Operating Officer, becoming Senior Vice-President – Transportation in
1991, Senior Vice-President – Operations in 1992, and President and Chief
Executive Officer the following year. During his career with Illinois
Central, he initiated the concept of scheduled service for freight
shipments, and maintained a sharp focus on operational efficiency and
asset utilization. By 1996, he had succeeded in improving IC’s operating
ratio by some 30 points to the low 60s – the best in the North American
rail industry.
As CN’s
Executive Vice-President and Chief Operating Officer, he applied the same
philosophy and methods, implementing an aggressive operating plan and
refining the railroad’s scheduled service to produce industry-leading
operating ratio and on-time performance results.
As President
and Chief Executive Officer, Mr. Harrison manages the Company based on
five guiding principles which are the pillars of CN’s business philosophy:
Service, Cost Control, Asset Utilization, Safety and People. In 2005, Mr.
Harrison authored the book, How We Work and Why,
which chronicles how CN railroaders think and operate and speaks to the
real life stories of the people who have made it all possible,
implementing the vision of what it takes to run a great railroad by using
the five principles. In 2008, he penned a sequel on rail management, Change, Leadership, Mud and
Why, about the necessity and challenges involved in changing
corporate culture.
Mr. Harrison
has been a seminal figure in the railroad business; his accomplishments
have won him numerous awards, including Railroader of the Year from Railway Age magazine
and Canada’s CEO of the Year from Report on Business Magazine. His
ground-breaking
Precision Railroading operating model is renowned for
driving efficiency gains and shareholder value at CN.
Mr. Harrison,
following a long and distinguished career, will retire from CN on December
31, 2009.
|
Claude
Mongeau
Executive
Vice-President
In April
2009, Claude Mongeau was selected to succeed E. Hunter Harrison as
President and Chief Executive Officer, effective January 1, 2010. Mr.
Mongeau is currently Executive Vice-President of CN.
Mr. Mongeau
joined CN in May 1994 and has held the positions of Vice-President,
Strategic and Financial Planning, and Assistant Vice-President Corporate
Development. He was appointed Executive Vice-President and Chief Financial
Officer in October 2000.
Prior to
joining CN, Mr. Mongeau was a partner with Groupe SECOR, a Montreal-based
management-consulting firm providing strategic advice to large Canadian
corporations such as Bombardier and Bell Canada. He also worked in the
business development unit of Imasco Inc., a diversified holding company
with subsidiaries operating in the manufacturing, retail, and financial
services sectors. His career started in Europe with Bain & Company, a
leading American consulting firm.
In 1997,
Claude Mongeau was named one of Canada’s top 40 executives under 40 years
of age by the Financial
Post Magazine. In 2005, he was selected Canada’s CFO of the Year by
an independent committee of prominent Canadian business
leaders.
Mr. Mongeau
is a director of SNC-Lavalin, one of the world’s leading engineering,
procurement, construction and related technical services
organizations.
Mr. Mongeau
is a graduate of McGill University, Institut Supérieur des affaires
(France), and Université du Québec à
Montréal.
|
Keith
E. Creel
Executive Vice-President,
Operations
Keith E.
Creel was appointed Executive Vice-President, Operations, in May 2007. In
this role, Mr. Creel is responsible for the Company’s rail operations in
Canada and the United States. Between 2002 and 2007, he held a series of
increasingly responsible positions at CN: Senior Vice-President – Eastern
Region, Senior Vice-President – Western Canada Region; and Vice-President
– Prairie Division.
Mr. Creel
began his railroad career at Burlington Northern Railway in 1992 as an
intermodal ramp manager in Birmingham, Ala. He entered the operations
department in 1993 as a corporate management trainee in Lincoln, Neb., and
held positions as trainmaster in Tulsa, Okla. and Wichita Falls,
Tex.
Mr. Creel
joined the Illinois Central Railroad in 1996 as a trainmaster in Memphis,
Tenn., and was transferred to Jackson, Miss., as Director of Corridor
Operations in 1997.
In
preparation for the CN/IC merger, Mr. Creel was transferred to Battle
Creek, Mich., as District Superintendent in early 1999, and was appointed
General Manager – Michigan Zone, Midwest Division, in June
2000.
Mr. Creel
obtained a Bachelor of Science degree in marketing/management from
Jacksonville State University. He has a military background and served as
a commissioned officer in the U.S. Army, during which time he served in
the Persian Gulf War in Saudi Arabia.
|
|
Sean
Finn
Executive Vice-President,
Corporate Services and Chief Legal Officer
Sean Finn was
appointed Executive Vice-President, Corporate Services and Chief Legal
Officer on December 1, 2008. He is responsible for a wide array of legal,
government, regulatory and human resources matters.
Mr. Finn
joined CN in January 1994. He was appointed Treasurer and Principal Tax
Counsel in August 1996; Vice-President, Treasurer and Principal Tax
Counsel in January 2000; Senior Vice-President, Chief Legal Officer and
Corporate Secretary in December 2000; and Senior Vice-President Public
Affairs, Chief Legal Officer and Corporate Secretary in February
2003.
Mr. Finn was
named Tax Lawyer of the Year 2000 by his peers. He is currently Chairman
of the Board of Directors of the Quebec Chamber of Commerce.
Prior to
joining CN, Mr. Finn was a Tax Partner with a major Montreal law firm. He
also carried out the duties of a Senior Rulings Officer in the leasing and
financing section and the corporate reorganization section at Revenue
Canada,Taxation from 1989 to 1990.
Mr. Finn
graduated from the Faculty of Law of Université de Montréal in 1981 and
completed a Masters degree in tax law at the University of Toronto in
1983. He was admitted to the Quebec Bar in 1983. He is a lecturer in tax
legislation and policy at the Masters in Taxation program at Université de
Sherbrooke.
|
James
M. Foote
Executive Vice-President
Sales and Marketing
James M.
Foote was appointed Executive Vice-President, Sales and Marketing in
October 2000. He is responsible for the strategic direction and leadership
for the Company’s sales and marketing groups. Under Mr. Foote’s
leadership, the Company is focused on consistently delivering sustainable,
profitable growth and leads the industry in value pricing.
Mr. Foote
joined CN in August 1995 as Vice-President, Investor Relations, to assist
with the Company’s privatization that year. He also served as CN’s
Vice-President of Merchandise and Senior Vice-President, Sales and
Marketing. Prior to joining CN he was Vice-President, Corporate
Development, Investor Relations and Tax with the Chicago and North Western
Railroads, where he held successively senior management positions in
finance, law, labour relations, corporate communications, and
operations.
Mr. Foote is
a graduate of the University of Wisconsin – Superior, and the John
Marshall Law School in Chicago.
|
|
Luc
Jobin
Executive Vice-President and Chief
Financial
Officer
Luc Jobin was
appointed Executive Vice-President and Chief Financial Officer in June
2009. His responsibilities include financial management and strategic
planning.
Mr. Jobin has
an extensive background as a business leader and senior executive within
the consumer goods, manufacturing and investment industries. Prior to
joining CN, he was an Executive Vice-President of Power Corporation of
Canada (PCC), an international management and holding company, where he
was responsible for PCC’s portfolio of diversified investments. Before
joining PCC in 2005, Mr. Jobin spent 22 years in a variety of financial
and executive management positions with Imasco Limited and its Canadian
tobacco subsidiary, Imperial Tobacco. Imasco, a major Canadian consumer
products and services corporation, became a British American Tobacco Plc
subsidiary in 2000. Mr. Jobin was president and chief executive officer of
Imperial Tobacco when he joined PCC in 2005.
Mr. Jobin has
been a Director of Reynolds American Inc., the parent company of the R.J.
Reynolds Tobacco Company, since 2008.
Mr. Jobin
obtained his Chartered Accountant accreditation from the Canadian
Institute of Chartered Accountants in 1983. He earned his Diploma In
Public Accountancy from McGill University In
1982.
|
Transfer
agent and registrar
Computershare
Trust Company of
Canada
Offices
in:
Montreal,
Que.; Toronto, Ont.;
Calgary,
Alta.; Vancouver, B.C.
Telephone:
1-800-564-6253
www.computershare.com
|
Investor
relations
Robert
Noorigian
Vice-President,
Investor Relations
Telephone:
514-399-0052
Fax:
514-399-5985
Email:
investor.relations@cn.ca
Mailing
address:
CN Investor
Relations
935 de La
Gauchetière St. W.
Floor
16
Montreal,
Que., H3B 2M
|
||
Co-transfer
agent and co-registrar
Computershare
Trust Company, N.A.
Att: Stock
Transfer Department
350 Indiana
Street
Suite 800
Golden, Colo.
80401
Telephone:
303-262-0600 or
1-800-962-4284
|
|||
|
Shareholder
services
Shareholders
with questions
concerning
their shares
should
contact:
|
||
Computershare
Trust
Company
of Canada
Shareholder
Services
100
University Avenue
9th Floor
Toronto, Ont.
M5J 2Y1
Telephone:
1-800-564-6253
www.computershare.com
|
|||
|
|
The 2009
CN Investor Fact Book is printed on recycled paper with 10 per cent
post-consumer fibres.
Printed in
Canada
|