CANADIAN NATIONAL RAILWAY COMPANY
|
PRESS RELEASE
|
|
·
|
Net income was C$664 million, or C$1.52 per diluted share, compared with year-earlier net income of C$659 million, or C$1.46 per diluted share.
|
·
|
Q3-2012 diluted earnings per share (EPS) increased 10 per cent over year-earlier adjusted diluted EPS of C$1.38 that excluded an after-tax gain of C$0.08 per diluted share on the sale of substantially all of the assets of IC RailMarine Terminal Company during Q3-2011. (1)
|
·
|
Revenues for the most recent quarter increased eight per cent to C$2,497 million, while revenue ton-miles rose seven per cent and carloadings increased three per cent.
|
·
|
Operating income increased five per cent to C$985 million.
|
·
|
The operating ratio increased by 1.3 points to 60.6 per cent.
|
·
|
Free cash flow for the first nine months of 2012 was C$1,036 million, including the impact of Q1-2012 voluntary pension plan contributions totalling C$450 million, compared with free cash flow of C$1,328 million for the same period of 2011. (1)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
PRESS RELEASE
|
|
CANADIAN NATIONAL RAILWAY COMPANY
|
PRESS RELEASE
|
|
1)
|
See discussion and reconciliation of non-GAAP adjusted performance-measures in the attached supplementary schedule, Non-GAAP Measures.
|
Media
|
Investment Community
|
Mark Hallman
|
Robert Noorigian
|
Director
|
Vice-President
|
Communications and Public Affairs
|
Investor Relations
|
(905) 669-3384
|
(514) 399-0052
|
CANADIAN NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP) - unaudited
|
(In millions, except per share data)
|
Three months ended
|
Nine months ended
|
|||||||||||
September 30
|
September 30
|
|||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||
Revenues
|
$
|
2,497
|
$
|
2,307
|
$
|
7,386
|
$
|
6,651
|
||||
Operating expenses
|
||||||||||||
Labor and fringe benefits
|
476
|
396
|
1,489
|
1,301
|
||||||||
Purchased services and material
|
304
|
271
|
908
|
825
|
||||||||
Fuel
|
369
|
350
|
1,124
|
1,030
|
||||||||
Depreciation and amortization
|
227
|
218
|
687
|
653
|
||||||||
Equipment rents
|
64
|
60
|
185
|
165
|
||||||||
Casualty and other
|
72
|
74
|
230
|
220
|
||||||||
Total operating expenses
|
1,512
|
1,369
|
4,623
|
4,194
|
||||||||
Operating income
|
985
|
938
|
2,763
|
2,457
|
||||||||
Interest expense
|
(84)
|
(85)
|
(256)
|
(256)
|
||||||||
Other income (Note 3)
|
18
|
70
|
320
|
380
|
||||||||
Income before income taxes
|
919
|
923
|
2,827
|
2,581
|
||||||||
Income tax expense (Note 7)
|
(255)
|
(264)
|
(757)
|
(716)
|
||||||||
Net income
|
$
|
664
|
$
|
659
|
$
|
2,070
|
$
|
1,865
|
||||
Earnings per share (Note 10)
|
||||||||||||
Basic
|
$
|
1.53
|
$
|
1.47
|
$
|
4.73
|
$
|
4.11
|
||||
Diluted
|
$
|
1.52
|
$
|
1.46
|
$
|
4.71
|
$
|
4.08
|
||||
Weighted-average number of shares
|
||||||||||||
Basic
|
433.9
|
448.3
|
437.3
|
453.4
|
||||||||
Diluted
|
435.9
|
451.4
|
439.6
|
456.9
|
||||||||
See accompanying notes to unaudited consolidated financial statements.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (U.S. GAAP) - unaudited
|
(In millions)
|
Three months ended September 30
|
Nine months ended September 30
|
|||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||
Net income
|
$
|
664
|
$
|
659
|
$
|
2,070
|
$
|
1,865
|
||||
Other comprehensive income (loss)
|
||||||||||||
Foreign exchange gain (loss) on:
|
||||||||||||
Translation of the net investment in foreign operations
|
(210)
|
495
|
(199)
|
315
|
||||||||
Translation of US dollar-denominated long-term debt designated
|
||||||||||||
as a hedge of the net investment in U.S. subsidiaries
|
202
|
(471)
|
189
|
(302)
|
||||||||
Pension and other postretirement benefit plans (Note 6)
|
||||||||||||
Amortization of net actuarial loss included in net periodic
|
||||||||||||
benefit cost (income)
|
30
|
2
|
92
|
6
|
||||||||
Amortization of prior service cost included in net periodic
|
||||||||||||
benefit cost (income)
|
1
|
1
|
5
|
2
|
||||||||
Derivative instruments
|
-
|
-
|
-
|
(1)
|
||||||||
Other comprehensive income before income taxes
|
23
|
27
|
87
|
20
|
||||||||
Income tax recovery (expense)
|
(37)
|
67
|
(51)
|
42
|
||||||||
Other comprehensive income (loss)
|
(14)
|
94
|
36
|
62
|
||||||||
Comprehensive income
|
$
|
650
|
$
|
753
|
$
|
2,106
|
$
|
1,927
|
||||
See accompanying notes to unaudited consolidated financial statements.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
CONSOLIDATED BALANCE SHEET (U.S. GAAP) - unaudited
|
(In millions)
|
September 30
|
December 31
|
September 30
|
||||||
2012
|
2011
|
2011
|
||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
175
|
$
|
101
|
$
|
192
|
||
Restricted cash and cash equivalents (Note 4)
|
518
|
499
|
489
|
|||||
Accounts receivable
|
845
|
820
|
801
|
|||||
Material and supplies
|
272
|
201
|
272
|
|||||
Deferred and receivable income taxes
|
37
|
122
|
52
|
|||||
Other
|
78
|
105
|
62
|
|||||
Total current assets
|
1,925
|
1,848
|
1,868
|
|||||
Properties
|
24,004
|
23,917
|
23,800
|
|||||
Intangible and other assets
|
349
|
261
|
899
|
|||||
Total assets
|
$
|
26,278
|
$
|
26,026
|
$
|
26,567
|
||
Liabilities and shareholders' equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and other
|
$
|
1,631
|
$
|
1,580
|
$
|
1,565
|
||
Current portion of long-term debt (Note 4)
|
678
|
135
|
525
|
|||||
Total current liabilities
|
2,309
|
1,715
|
2,090
|
|||||
Deferred income taxes
|
5,603
|
5,333
|
5,613
|
|||||
Pension and other postretirement benefits, net of current portion
|
553
|
1,095
|
530
|
|||||
Other liabilities and deferred credits
|
738
|
762
|
800
|
|||||
Long-term debt
|
5,770
|
6,441
|
5,878
|
|||||
Shareholders' equity:
|
||||||||
Common shares
|
4,120
|
4,141
|
4,149
|
|||||
Accumulated other comprehensive loss
|
(2,803)
|
(2,839)
|
(1,647)
|
|||||
Retained earnings
|
9,988
|
9,378
|
9,154
|
|||||
Total shareholders' equity
|
11,305
|
10,680
|
11,656
|
|||||
Total liabilities and shareholders' equity
|
$
|
26,278
|
$
|
26,026
|
$
|
26,567
|
||
See accompanying notes to unaudited consolidated financial statements.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (U.S. GAAP) - unaudited
|
(In millions)
|
|
||||||||||||
|
Three months ended
|
Nine months ended
|
||||||||||
|
September 30
|
September 30
|
||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||
|
||||||||||||
Common shares (1)
|
||||||||||||
Balance, beginning of period
|
$
|
4,132
|
$
|
4,211
|
$
|
4,141
|
$
|
4,252
|
||||
Stock options exercised and other
|
27
|
(6)
|
105
|
50
|
||||||||
Share repurchase programs (Note 4)
|
(39)
|
(56)
|
(126)
|
(153)
|
||||||||
Balance, end of period
|
$
|
4,120
|
$
|
4,149
|
$
|
4,120
|
$
|
4,149
|
||||
|
||||||||||||
Accumulated other comprehensive loss
|
||||||||||||
Balance, beginning of period
|
$
|
(2,789)
|
$
|
(1,741)
|
$
|
(2,839)
|
$
|
(1,709)
|
||||
Other comprehensive income (loss)
|
(14)
|
94
|
36
|
62
|
||||||||
Balance, end of period
|
$
|
(2,803)
|
$
|
(1,647)
|
$
|
(2,803)
|
$
|
(1,647)
|
||||
|
||||||||||||
Retained earnings
|
||||||||||||
Balance, beginning of period
|
$
|
9,821
|
$
|
9,001
|
$
|
9,378
|
$
|
8,741
|
||||
Net income
|
664
|
659
|
2,070
|
1,865
|
||||||||
Share repurchase programs (Note 4)
|
(334)
|
(361)
|
(969)
|
(1,011)
|
||||||||
Dividends
|
(163)
|
(145)
|
(491)
|
(441)
|
||||||||
Balance, end of period
|
$
|
9,988
|
$
|
9,154
|
$
|
9,988
|
$
|
9,154
|
||||
See accompanying notes to unaudited consolidated financial statements.
|
(1)
|
During the three and nine months ended September 30, 2012, the Company issued 0.8 million and 2.7 million common shares, respectively, as a result of stock options exercised and repurchased 4.1 million and 13.3 million common shares, respectively, under its share repurchase program. At September 30, 2012, the Company had 431.5 million common shares outstanding.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP) - unaudited
|
(In millions)
|
Three months ended
|
Nine months ended
|
||||||||||
September 30
|
September 30
|
||||||||||
2012
|
2011
|
2012
|
2011
|
||||||||
|
|||||||||||
Operating activities
|
|||||||||||
Net income
|
$
|
664
|
$
|
659
|
$
|
2,070
|
$
|
1,865
|
|||
Adjustments to reconcile net income to net cash
|
|||||||||||
provided by operating activities:
|
|||||||||||
Depreciation and amortization
|
227
|
218
|
687
|
653
|
|||||||
Deferred income taxes
|
59
|
104
|
331
|
327
|
|||||||
Gain on disposal of property (Note 3)
|
-
|
(60)
|
(281)
|
(348)
|
|||||||
Changes in operating assets and liabilities:
|
|||||||||||
Accounts receivable
|
(25)
|
55
|
(37)
|
(17)
|
|||||||
Material and supplies
|
3
|
(27)
|
(73)
|
(59)
|
|||||||
Accounts payable and other
|
50
|
60
|
140
|
102
|
|||||||
Other current assets
|
5
|
16
|
(6)
|
9
|
|||||||
Pensions and other, net
|
17
|
(38)
|
(495)
|
(147)
|
|||||||
Net cash provided by operating activities
|
1,000
|
987
|
2,336
|
2,385
|
|||||||
Investing activities
|
|||||||||||
Property additions
|
(508)
|
(415)
|
(1,121)
|
(1,012)
|
|||||||
Disposal of property (Note 3)
|
-
|
70
|
311
|
369
|
|||||||
Change in restricted cash and cash equivalents (Note 4)
|
(46)
|
(22)
|
(19)
|
(489)
|
|||||||
Other, net
|
7
|
5
|
5
|
22
|
|||||||
Net cash used in investing activities
|
(547)
|
(362)
|
(824)
|
(1,110)
|
|||||||
Financing activities
|
|||||||||||
Issuance of debt (Note 4)
|
230
|
132
|
1,861
|
196
|
|||||||
Repayment of debt
|
(338)
|
(186)
|
(1,806)
|
(225)
|
|||||||
Issuance of common shares due to exercise of stock
|
|||||||||||
options and related excess tax benefits realized
|
24
|
5
|
97
|
56
|
|||||||
Repurchase of common shares (Note 4)
|
(373)
|
(417)
|
(1,095)
|
(1,164)
|
|||||||
Dividends paid
|
(163)
|
(145)
|
(491)
|
(441)
|
|||||||
Net cash used in financing activities
|
(620)
|
(611)
|
(1,434)
|
(1,578)
|
|||||||
Effect of foreign exchange fluctuations on US
|
|||||||||||
dollar-denominated cash and cash equivalents
|
(3)
|
3
|
(4)
|
5
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
(170)
|
17
|
74
|
(298)
|
|||||||
Cash and cash equivalents, beginning of period
|
345
|
175
|
101
|
490
|
|||||||
Cash and cash equivalents, end of period
|
$
|
175
|
$
|
192
|
$
|
175
|
$
|
192
|
|||
Supplemental cash flow information
|
|||||||||||
Net cash receipts from customers and other
|
$
|
2,476
|
$
|
2,326
|
$
|
7,396
|
$
|
6,659
|
|||
Net cash payments for:
|
|||||||||||
Employee services, suppliers and other expenses
|
(1,235)
|
(1,124)
|
(4,002)
|
(3,551)
|
|||||||
Interest
|
(89)
|
(87)
|
(275)
|
(249)
|
|||||||
Personal injury and other claims
|
(13)
|
(15)
|
(57)
|
(48)
|
|||||||
Pensions (Note 6)
|
(29)
|
(5)
|
(587)
|
(103)
|
|||||||
Income taxes
|
(110)
|
(108)
|
(139)
|
(323)
|
|||||||
Net cash provided by operating activities
|
$
|
1,000
|
$
|
987
|
$
|
2,336
|
$
|
2,385
|
|||
See accompanying notes to unaudited consolidated financial statements.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
Three months ended September 30
|
Nine months ended September 30
|
||||||||||||
In millions, except per share data
|
2012
|
2011
|
2012
|
2011
|
|||||||||
Number of common shares repurchased (1)
|
4.1
|
6.0
|
13.3
|
16.5
|
|||||||||
Weighted-average price per share (2)
|
$
|
89.82
|
$
|
69.48
|
$
|
82.32
|
$
|
70.56
|
|||||
Amount of repurchase
|
$
|
373
|
$
|
417
|
$
|
1,095
|
$
|
1,164
|
|||||
(1)
|
Includes common shares purchased in the first quarters of 2012 and 2011 pursuant to private agreements between the Company and arm's length third-party sellers.
|
||||||||||||
(2)
|
Includes brokerage fees.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
Three months ended September 30
|
Nine months ended September 30
|
||||||||
In millions
|
2012
|
2011
|
2012
|
2011
|
|||||
Cash settled awards | |||||||||
Restricted share unit plan
|
$
|
17
|
$
|
(8)
|
$
|
47
|
$
|
39
|
|
Voluntary Incentive Deferral Plan (VIDP)
|
4
|
(13)
|
14
|
5
|
|||||
21
|
(21)
|
61
|
44
|
||||||
Stock option awards
|
3
|
2
|
8
|
7
|
|||||
Total stock-based compensation expense (benefit)
|
$
|
24
|
$
|
(19)
|
$
|
69
|
$
|
51
|
|
Tax benefit (expense) recognized in income
|
$
|
7
|
$
|
(6)
|
$
|
16
|
$
|
12
|
The following table provides the 2012 activity for all cash settled awards:
|
||||||||
RSUs
|
VIDP
|
|||||||
In millions
|
Nonvested
|
Vested
|
Nonvested
|
Vested
|
||||
Outstanding at December 31, 2011
|
0.9
|
0.9
|
-
|
1.4
|
||||
Granted (Payout)
|
0.5
|
(0.7)
|
-
|
-
|
||||
Outstanding at September 30, 2012
|
1.4
|
0.2
|
(1)
|
-
|
1.4
|
|||
(1)
|
Consists of the units of the RSU payout currently in dispute. See Note 8 - Major commitments and contingencies to the Company's unaudited Interim Consolidated Financial Statements.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
The following table provides valuation and expense information for all cash settled awards:
|
|||||||||||||||||
|
|||||||||||||||||
In millions, unless otherwise indicated
|
RSUs (1)
|
VIDP (2)
|
Total
|
||||||||||||||
|
|||||||||||||||||
Year of grant
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||
|
|||||||||||||||||
Stock-based compensation expense
|
|||||||||||||||||
recognized over requisite service period
|
|||||||||||||||||
Nine months ended September 30, 2012
|
$
|
10
|
$
|
18
|
$
|
19
|
$
|
-
|
$
|
14
|
$
|
61
|
|||||
Nine months ended September 30, 2011
|
N/A
|
$
|
6
|
$
|
12
|
$
|
21
|
$
|
5
|
$
|
44
|
||||||
|
|||||||||||||||||
Liability outstanding
|
|||||||||||||||||
September 30, 2012
|
$
|
10
|
$
|
38
|
$
|
63
|
$
|
18
|
(3)
|
$
|
128
|
$
|
257
|
||||
December 31, 2011
|
N/A
|
$
|
19
|
$
|
44
|
$
|
82
|
$
|
119
|
$
|
264
|
||||||
|
|||||||||||||||||
Fair value per unit
|
|||||||||||||||||
September 30, 2012 ($)
|
$
|
58.67
|
$
|
79.45
|
$
|
86.62
|
N/A
|
$
|
86.99
|
N/A
|
|||||||
|
|||||||||||||||||
Fair value of awards vested during the period
|
|||||||||||||||||
Nine months ended September 30, 2012
|
$
|
-
|
$
|
-
|
$
|
-
|
N/A
|
$
|
1
|
$
|
1
|
||||||
Nine months ended September 30, 2011
|
N/A
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1
|
$
|
1
|
||||||
|
|||||||||||||||||
Nonvested awards at September 30, 2012
|
|||||||||||||||||
Unrecognized compensation cost
|
$
|
16
|
$
|
15
|
$
|
4
|
N/A
|
$
|
1
|
$
|
36
|
||||||
Remaining recognition period (years)
|
2.3
|
1.3
|
0.3
|
N/A
|
N/A
|
(4)
|
N/A
|
||||||||||
|
|||||||||||||||||
Assumptions (5)
|
|||||||||||||||||
Stock price ($)
|
$
|
86.99
|
$
|
86.99
|
$
|
86.99
|
N/A
|
$
|
86.99
|
N/A
|
|||||||
Expected stock price volatility (6)
|
18%
|
16%
|
16%
|
N/A
|
N/A
|
N/A
|
|||||||||||
Expected term (years) (7)
|
2.3
|
1.3
|
0.3
|
N/A
|
N/A
|
N/A
|
|||||||||||
Risk-free interest rate (8)
|
1.12%
|
1.08%
|
0.97%
|
N/A
|
N/A
|
N/A
|
|||||||||||
Dividend rate ($) (9)
|
$
|
1.50
|
$
|
1.50
|
$
|
1.50
|
N/A
|
N/A
|
N/A
|
||||||||
|
|||||||||||||||||
(1)
|
Compensation cost is based on the fair value of the awards at period-end using the lattice-based valuation model that uses the assumptions as presented herein.
|
||||||||||||||||
(2)
|
Compensation cost is based on intrinsic value.
|
||||||||||||||||
(3)
|
Consists of the carrying value of the RSU payout currently in dispute. See Note 8 - Major Commitments and contingencies to the Company's unaudited Interim Consolidated Financial Statements.
|
||||||||||||||||
(4)
|
The remaining recognition period has not been quantified as it relates solely to the 25% Company grant and the dividends earned thereon, representing a minimal number of units.
|
||||||||||||||||
(5)
|
Assumptions used to determine fair value are at September 30, 2012.
|
||||||||||||||||
(6)
|
Based on the historical volatility of the Company's stock over a period commensurate with the expected term of the award.
|
||||||||||||||||
(7)
|
Represents the remaining period of time that awards are expected to be outstanding.
|
||||||||||||||||
(8)
|
Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the awards.
|
||||||||||||||||
(9)
|
Based on the annualized dividend rate.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
Options outstanding
|
|||||||
Number
|
Weighted-average
|
Weighted-average
|
Aggregate
|
||||
of options
|
exercise price
|
years to expiration
|
intrinsic value
|
||||
In millions
|
In millions
|
||||||
Outstanding at December 31, 2011 (1)
|
6.9
|
$
|
40.80
|
||||
Granted
|
0.6
|
$
|
76.70
|
||||
Exercised
|
(2.7)
|
$
|
30.90
|
||||
Outstanding at September 30, 2012 (1)
|
4.8
|
$
|
49.67
|
5.8
|
$
|
178
|
|
Exercisable at September 30, 2012 (1)
|
3.1
|
$
|
42.53
|
4.5
|
$
|
136
|
|
(1) Stock options with a US dollar exercise price have been translated to Canadian dollars using the foreign exchange rate in effect at the balance sheet date.
|
The following table provides valuation and expense information for all stock option awards:
|
||||||||||||||||||||||
|
||||||||||||||||||||||
In millions, unless otherwise indicated
|
||||||||||||||||||||||
Year of grant
|
|
2012
|
2011
|
2010
|
2009
|
2008
|
2007
|
Total
|
||||||||||||||
|
||||||||||||||||||||||
Stock-based compensation expense
|
||||||||||||||||||||||
recognized over requisite service period (1)
|
||||||||||||||||||||||
Nine months ended September 30, 2012
|
$
|
3
|
$
|
2
|
$
|
1
|
$
|
2
|
$
|
-
|
$
|
-
|
$
|
8
|
||||||||
Nine months ended September 30, 2011
|
N/A
|
$
|
3
|
$
|
1
|
$
|
2
|
$
|
1
|
$
|
-
|
$
|
7
|
|||||||||
|
||||||||||||||||||||||
Fair value per unit
|
|
|||||||||||||||||||||
At grant date ($)
|
$
|
15.49
|
$
|
15.66
|
$
|
13.09
|
$
|
12.60
|
$
|
12.44
|
$
|
13.37
|
N/A
|
|||||||||
|
||||||||||||||||||||||
Fair value of awards vested during the period
|
||||||||||||||||||||||
Nine months ended September 30, 2012
|
$
|
-
|
$
|
2
|
$
|
2
|
$
|
4
|
$
|
3
|
$
|
-
|
$
|
11
|
||||||||
Nine months ended September 30, 2011
|
N/A
|
$
|
-
|
$
|
2
|
$
|
4
|
$
|
3
|
$
|
3
|
$
|
12
|
|||||||||
|
||||||||||||||||||||||
Nonvested awards at September 30, 2012
|
||||||||||||||||||||||
Unrecognized compensation cost
|
$
|
5
|
$
|
3
|
$
|
2
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
10
|
||||||||
Remaining recognition period (years)
|
3.3
|
2.3
|
1.3
|
0.3
|
-
|
-
|
N/A
|
|||||||||||||||
|
||||||||||||||||||||||
Assumptions
|
||||||||||||||||||||||
Grant price ($)
|
$
|
76.70
|
$
|
68.94
|
$
|
54.76
|
$
|
42.14
|
$
|
48.51
|
$
|
52.79
|
N/A
|
|||||||||
Expected stock price volatility (2)
|
26%
|
26%
|
28%
|
39%
|
27%
|
24%
|
N/A
|
|||||||||||||||
Expected term (years) (3)
|
5.4
|
5.3
|
5.4
|
5.3
|
5.3
|
5.2
|
N/A
|
|||||||||||||||
Risk-free interest rate (4)
|
1.33%
|
2.53%
|
2.44%
|
1.97%
|
3.58%
|
4.12%
|
N/A
|
|||||||||||||||
Dividend rate ($) (5)
|
$
|
1.50
|
$
|
1.30
|
$
|
1.08
|
$
|
1.01
|
$
|
0.92
|
$
|
0.84
|
N/A
|
|||||||||
|
||||||||||||||||||||||
(1)
|
Compensation cost is based on the grant date fair value using the Black-Scholes option-pricing model that uses the assumptions at the grant date.
|
|||||||||||||||||||||
(2)
|
Based on the average of the historical volatility of the Company's stock over a period commensurate with the expected term of the award and the implied volatility from traded options on the Company's stock.
|
|||||||||||||||||||||
(3)
|
Represents the period of time that awards are expected to be outstanding. The Company uses historical data to estimate option exercise and employee termination, and groups of employees that have similar historical exercise behavior are considered separately.
|
|||||||||||||||||||||
(4)
|
Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the awards.
|
|||||||||||||||||||||
(5)
|
Based on the annualized dividend rate.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
(a) Components of net periodic benefit cost (income) for pensions
|
|||||||||
Three months ended
|
Nine months ended
|
||||||||
September 30
|
September 30
|
||||||||
In millions
|
2012
|
2011
|
2012
|
2011
|
|||||
Service cost
|
$
|
37
|
$
|
31
|
$
|
109
|
$
|
93
|
|
Interest cost
|
186
|
196
|
554
|
589
|
|||||
Expected return on plan assets
|
(249)
|
(251)
|
(745)
|
(753)
|
|||||
Amortization of prior service cost
|
1
|
1
|
3
|
1
|
|||||
Recognized net actuarial loss
|
30
|
2
|
92
|
6
|
|||||
Net periodic benefit cost (income)
|
$
|
5
|
$
|
(21)
|
$
|
13
|
$
|
(64)
|
|
(b) Components of net periodic benefit cost for other postretirement benefits
|
|||||||||
Three months ended
|
Nine months ended
|
||||||||
September 30
|
September 30
|
||||||||
In millions
|
2012
|
2011
|
2012
|
2011
|
|||||
Service cost
|
$
|
1
|
$
|
1
|
$
|
3
|
$
|
3
|
|
Interest cost
|
4
|
4
|
10
|
11
|
|||||
Amortization of prior service cost
|
-
|
-
|
2
|
1
|
|||||
Net periodic benefit cost
|
$
|
5
|
$
|
5
|
$
|
15
|
$
|
15
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
(i)
|
the lack of specific technical information available with respect to many sites;
|
(ii)
|
the absence of any government authority, third-party orders, or claims with respect to particular sites;
|
(iii)
|
the potential for new or changed laws and regulations and for development of new remediation technologies and uncertainty regarding the timing of the work with respect to particular sites; and
|
(iv)
|
the determination of the Company’s liability in proportion to other potentially responsible parties and the ability to recover costs from any third parties with respect to particular sites.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
(a)
|
contracts granting the Company the right to use or enter upon property owned by third parties such as leases, easements, trackage rights and sidetrack agreements;
|
(b)
|
contracts granting rights to others to use the Company’s property, such as leases, licenses and easements;
|
(c)
|
contracts for the sale of assets;
|
(d)
|
contracts for the acquisition of services;
|
(e)
|
financing agreements;
|
(f)
|
trust indentures, fiscal agency agreements, underwriting agreements or similar agreements relating to debt or equity securities of the Company and engagement agreements with financial advisors;
|
(g)
|
transfer agent and registrar agreements in respect of the Company’s securities;
|
(h)
|
trust and other agreements relating to pension plans and other plans, including those establishing trust funds to secure payment to certain officers and senior employees of special retirement compensation arrangements;
|
(i)
|
pension transfer agreements;
|
(j)
|
master agreements with financial institutions governing derivative transactions;
|
(k)
|
settlement agreements with insurance companies or other third parties whereby such insurer or third party has been indemnified for any present or future claims relating to insurance policies, incidents or events covered by the settlement agreements; and
|
(l)
|
acquisition agreements.
|
Level 1: | Quoted prices for identical instruments in active markets. |
Level 2:
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
Level 3: | Significant inputs to the valuation model are unobservable. |
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
In millions
|
September 30, 2012
|
December 31, 2011
|
||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||
amount
|
value
|
amount
|
value
|
|||||||
Financial assets
|
||||||||||
Investments
|
$
|
30
|
$
|
123
|
$
|
31
|
$
|
126
|
||
Financial liabilities
|
||||||||||
Total debt
|
$
|
6,448
|
$
|
8,000
|
$
|
6,576
|
$
|
7,978
|
Three months ended
September 30
|
Nine months ended
September 30
|
||||||||||
In millions, except per share data
|
2012
|
2011
|
2012
|
2011
|
|||||||
Net income
|
$
|
664
|
$
|
659
|
$
|
2,070
|
$
|
1,865
|
|||
Weighted-average shares outstanding
|
433.9
|
448.3
|
437.3
|
453.4
|
|||||||
Effect of stock options
|
2.0
|
3.1
|
2.3
|
3.5
|
|||||||
Weighted-average diluted shares outstanding
|
435.9
|
451.4
|
439.6
|
456.9
|
|||||||
Basic earnings per share
|
$
|
1.53
|
$
|
1.47
|
$
|
4.73
|
$
|
4.11
|
|||
Diluted earnings per share
|
$
|
1.52
|
$
|
1.46
|
$
|
4.71
|
$
|
4.08
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
|
CANADIAN NATIONAL RAILWAY COMPANY
|
SELECTED RAILROAD STATISTICS (U.S. GAAP) - unaudited
|
Three months ended
|
Nine months ended
|
||||
September 30
|
September 30
|
||||
2012
|
2011
|
2012
|
2011
|
||
Statistical operating data
|
|||||
Rail freight revenues ($ millions)
|
2,237
|
2,059
|
6,658
|
5,979
|
|
Gross ton miles (GTM) (millions)
|
96,402
|
89,517
|
285,881
|
265,799
|
|
Revenue ton miles (RTM) (millions)
|
49,999
|
46,761
|
149,372
|
139,597
|
|
Carloads (thousands)
|
1,298
|
1,261
|
3,789
|
3,641
|
|
Route miles (includes Canada and the U.S.) (1)
|
20,000
|
20,500
|
20,000
|
20,500
|
|
Employees (end of period)
|
23,610
|
23,441
|
23,610
|
23,441
|
|
Employees (average for the period)
|
23,573
|
23,318
|
23,444
|
22,961
|
|
Productivity
|
|||||
Operating ratio (%)
|
60.6
|
59.3
|
62.6
|
63.1
|
|
Rail freight revenue per RTM (cents)
|
4.47
|
4.40
|
4.46
|
4.28
|
|
Rail freight revenue per carload ($)
|
1,723
|
1,633
|
1,757
|
1,642
|
|
Operating expenses per GTM (cents)
|
1.57
|
1.53
|
1.62
|
1.58
|
|
Labor and fringe benefits expense per GTM (cents)
|
0.49
|
0.44
|
0.52
|
0.49
|
|
GTMs per average number of employees (thousands)
|
4,090
|
3,839
|
12,194
|
11,576
|
|
Diesel fuel consumed (US gallons in millions)
|
94.5
|
89.2
|
288.8
|
273.4
|
|
Average fuel price ($/US gallon)
|
3.40
|
3.37
|
3.45
|
3.33
|
|
GTMs per US gallon of fuel consumed
|
1,020
|
1,004
|
990
|
972
|
|
Safety indicators
|
|||||
Injury frequency rate per 200,000 person hours (2)
|
1.32
|
1.73
|
1.30
|
1.63
|
|
Accident rate per million train miles (2)
|
2.30
|
2.33
|
2.22
|
2.35
|
|
Financial ratio
|
|||||
Debt-to-total capitalization ratio (% at end of period) (3)
|
36.3
|
35.5
|
36.3
|
35.5
|
|
(1) Rounded to the nearest hundred miles.
|
|||||
(2) Based on Federal Railroad Administration (FRA) reporting criteria.
|
|||||
(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.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
SUPPLEMENTARY INFORMATION (U.S. GAAP) - unaudited
|
Three months ended September 30
|
Nine months ended September 30
|
|||||||||||
2012
|
2011
|
% Change
Fav (Unfav)
|
% Change at constant currency
Fav (Unfav) (1)
|
2012
|
2011
|
% Change
Fav (Unfav)
|
% Change at constant currency
Fav (Unfav) (1)
|
|||||
Revenues (millions of dollars)
|
||||||||||||
Petroleum and chemicals
|
416
|
361
|
15%
|
14%
|
1,213
|
1,043
|
16%
|
14%
|
||||
Metals and minerals
|
293
|
274
|
7%
|
5%
|
859
|
728
|
18%
|
16%
|
||||
Forest products
|
336
|
325
|
3%
|
2%
|
1,008
|
941
|
7%
|
5%
|
||||
Coal
|
187
|
166
|
13%
|
11%
|
541
|
469
|
15%
|
14%
|
||||
Grain and fertilizers
|
368
|
336
|
10%
|
9%
|
1,131
|
1,110
|
2%
|
1%
|
||||
Intermodal
|
510
|
480
|
6%
|
6%
|
1,496
|
1,326
|
13%
|
12%
|
||||
Automotive
|
127
|
117
|
9%
|
7%
|
410
|
362
|
13%
|
11%
|
||||
Total rail freight revenues
|
2,237
|
2,059
|
9%
|
8%
|
6,658
|
5,979
|
11%
|
10%
|
||||
Other revenues
|
260
|
248
|
5%
|
4%
|
728
|
672
|
8%
|
7%
|
||||
Total revenues
|
2,497
|
2,307
|
8%
|
7%
|
7,386
|
6,651
|
11%
|
10%
|
||||
Revenue ton miles (millions)
|
||||||||||||
Petroleum and chemicals
|
9,461
|
8,354
|
13%
|
13%
|
27,295
|
24,430
|
12%
|
12%
|
||||
Metals and minerals
|
5,229
|
5,212
|
-
|
-
|
15,236
|
13,780
|
11%
|
11%
|
||||
Forest products
|
7,545
|
7,558
|
-
|
-
|
22,533
|
21,991
|
2%
|
2%
|
||||
Coal
|
6,216
|
5,346
|
16%
|
16%
|
17,816
|
15,295
|
16%
|
16%
|
||||
Grain and fertilizers
|
10,394
|
9,452
|
10%
|
10%
|
32,591
|
33,568
|
(3%)
|
(3%)
|
||||
Intermodal
|
10,492
|
10,239
|
2%
|
2%
|
31,782
|
28,613
|
11%
|
11%
|
||||
Automotive
|
662
|
600
|
10%
|
10%
|
2,119
|
1,920
|
10%
|
10%
|
||||
49,999
|
46,761
|
7%
|
7%
|
149,372
|
139,597
|
7%
|
7%
|
|||||
Rail freight revenue / RTM (cents)
|
||||||||||||
Total rail freight revenue per RTM
|
4.47
|
4.40
|
2%
|
1%
|
4.46
|
4.28
|
4%
|
3%
|
||||
Commodity groups:
|
||||||||||||
Petroleum and chemicals
|
4.40
|
4.32
|
2%
|
-
|
4.44
|
4.27
|
4%
|
2%
|
||||
Metals and minerals
|
5.60
|
5.26
|
6%
|
5%
|
5.64
|
5.28
|
7%
|
5%
|
||||
Forest products
|
4.45
|
4.30
|
3%
|
2%
|
4.47
|
4.28
|
4%
|
3%
|
||||
Coal
|
3.01
|
3.11
|
(3%)
|
(4%)
|
3.04
|
3.07
|
(1%)
|
(2%)
|
||||
Grain and fertilizers
|
3.54
|
3.55
|
-
|
(1%)
|
3.47
|
3.31
|
5%
|
4%
|
||||
Intermodal
|
4.86
|
4.69
|
4%
|
3%
|
4.71
|
4.63
|
2%
|
1%
|
||||
Automotive
|
19.18
|
19.50
|
(2%)
|
(3%)
|
19.35
|
18.85
|
3%
|
1%
|
||||
Carloads (thousands)
|
||||||||||||
Petroleum and chemicals
|
152
|
143
|
6%
|
6%
|
444
|
421
|
5%
|
5%
|
||||
Metals and minerals
|
265
|
272
|
(3%)
|
(3%)
|
778
|
752
|
3%
|
3%
|
||||
Forest products
|
111
|
113
|
(2%)
|
(2%)
|
336
|
334
|
1%
|
1%
|
||||
Coal
|
117
|
122
|
(4%)
|
(4%)
|
332
|
354
|
(6%)
|
(6%)
|
||||
Grain and fertilizers
|
144
|
135
|
7%
|
7%
|
426
|
440
|
(3%)
|
(3%)
|
||||
Intermodal
|
455
|
424
|
7%
|
7%
|
1,305
|
1,176
|
11%
|
11%
|
||||
Automotive
|
54
|
52
|
4%
|
4%
|
168
|
164
|
2%
|
2%
|
||||
1,298
|
1,261
|
3%
|
3%
|
3,789
|
3,641
|
4%
|
4%
|
|||||
Rail freight revenue / carload (dollars)
|
||||||||||||
Total rail freight revenue per carload
|
1,723
|
1,633
|
6%
|
4%
|
1,757
|
1,642
|
7%
|
6%
|
||||
Commodity groups:
|
||||||||||||
Petroleum and chemicals
|
2,737
|
2,524
|
8%
|
7%
|
2,732
|
2,477
|
10%
|
8%
|
||||
Metals and minerals
|
1,106
|
1,007
|
10%
|
8%
|
1,104
|
968
|
14%
|
12%
|
||||
Forest products
|
3,027
|
2,876
|
5%
|
4%
|
3,000
|
2,817
|
6%
|
5%
|
||||
Coal
|
1,598
|
1,361
|
17%
|
16%
|
1,630
|
1,325
|
23%
|
21%
|
||||
Grain and fertilizers
|
2,556
|
2,489
|
3%
|
2%
|
2,655
|
2,523
|
5%
|
4%
|
||||
Intermodal
|
1,121
|
1,132
|
(1%)
|
(1%)
|
1,146
|
1,128
|
2%
|
1%
|
||||
Automotive
|
2,352
|
2,250
|
5%
|
3%
|
2,440
|
2,207
|
11%
|
8%
|
||||
(1) See supplementary schedule entitled Non-GAAP Measures for an explanation of this Non-GAAP measure.
|
||||||||||||
Such statistical data and related productivity measures are based on estimated data available at such time and are subject to change as more complete information becomes available.
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NON-GAAP MEASURES - unaudited
|
Three months ended
|
Nine months ended
|
||||||||||||
September 30, 2012
|
September 30, 2012
|
||||||||||||
In millions, except per share data
|
Reported
|
Adjustments
|
Adjusted
|
Reported
|
Adjustments
|
Adjusted
|
|||||||
Revenues
|
$
|
2,497
|
$
|
-
|
$
|
2,497
|
$
|
7,386
|
$
|
-
|
$
|
7,386
|
|
Operating expenses
|
1,512
|
-
|
1,512
|
4,623
|
-
|
4,623
|
|||||||
Operating income
|
985
|
-
|
985
|
2,763
|
-
|
2,763
|
|||||||
Interest expense
|
(84)
|
-
|
(84)
|
(256)
|
-
|
(256)
|
|||||||
Other income
|
18
|
-
|
18
|
320
|
(281)
|
39
|
|||||||
Income before income taxes
|
919
|
-
|
919
|
2,827
|
(281)
|
2,546
|
|||||||
Income tax expense
|
(255)
|
-
|
(255)
|
(757)
|
57
|
(700)
|
|||||||
Net income
|
$
|
664
|
$
|
-
|
$
|
664
|
$
|
2,070
|
$
|
(224)
|
$
|
1,846
|
|
Operating ratio
|
60.6%
|
60.6%
|
62.6%
|
62.6%
|
|||||||||
Basic earnings per share
|
$
|
1.53
|
$
|
-
|
$
|
1.53
|
$
|
4.73
|
$
|
(0.51)
|
$
|
4.22
|
|
Diluted earnings per share
|
$
|
1.52
|
$
|
-
|
$
|
1.52
|
$
|
4.71
|
$
|
(0.51)
|
$
|
4.20
|
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NON-GAAP MEASURES - unaudited
|
Three months ended
|
Nine months ended
|
||||||||||||
September 30, 2011
|
September 30, 2011
|
||||||||||||
In millions, except per share data
|
Reported
|
Adjustments
|
Adjusted
|
Reported
|
Adjustments
|
Adjusted
|
|||||||
Revenues
|
$
|
2,307
|
$
|
-
|
$
|
2,307
|
$
|
6,651
|
$
|
-
|
$
|
6,651
|
|
Operating expenses
|
1,369
|
-
|
1,369
|
4,194
|
-
|
4,194
|
|||||||
Operating income
|
938
|
-
|
938
|
2,457
|
-
|
2,457
|
|||||||
Interest expense
|
(85)
|
-
|
(85)
|
(256)
|
-
|
(256)
|
|||||||
Other income
|
70
|
(60)
|
10
|
380
|
(348)
|
32
|
|||||||
Income before income taxes
|
923
|
(60)
|
863
|
2,581
|
(348)
|
2,233
|
|||||||
Income tax expense
|
(264)
|
22
|
(242)
|
(716)
|
96
|
(620)
|
|||||||
Net income
|
$
|
659
|
$
|
(38)
|
$
|
621
|
$
|
1,865
|
$
|
(252)
|
$
|
1,613
|
|
Operating ratio
|
59.3%
|
59.3%
|
63.1%
|
63.1%
|
|||||||||
Basic earnings per share
|
$
|
1.47
|
$
|
(0.08)
|
$
|
1.39
|
$
|
4.11
|
$
|
(0.55)
|
$
|
3.56
|
|
Diluted earnings per share
|
$
|
1.46
|
$
|
(0.08)
|
$
|
1.38
|
$
|
4.08
|
$
|
(0.55)
|
$
|
3.53
|
Three months ended
|
Nine months ended
|
||||
In millions
|
September 30, 2012
|
September 30, 2012
|
|||
Net income, as reported
|
$
|
664
|
$
|
2,070
|
|
Add back:
|
|||||
Positive impact due to the weakening Canadian dollar included in net income
|
(7)
|
(20)
|
|||
Add:
|
|||||
Decrease due to the weakening Canadian dollar on additional year-over-year
US$ net income
|
(1)
|
(5)
|
|||
Impact of foreign exchange using constant currency rates
|
(8)
|
(25)
|
|||
Net income, on a constant currency basis
|
$
|
656
|
$
|
2,045
|
CANADIAN NATIONAL RAILWAY COMPANY
|
NON-GAAP MEASURES - unaudited
|
Three months ended
|
Nine months ended
|
||||||||||
September 30
|
September 30
|
||||||||||
In millions
|
2012
|
2011
|
2012
|
2011
|
|||||||
Net cash provided by operating activities
|
$
|
1,000
|
$
|
987
|
$
|
2,336
|
$
|
2,385
|
|||
Net cash used in investing activities
|
(547)
|
(362)
|
(824)
|
(1,110)
|
|||||||
Net cash provided before financing activities
|
453
|
625
|
1,512
|
1,275
|
|||||||
Adjustments:
|
|||||||||||
Dividends paid
|
(163)
|
(145)
|
(491)
|
(441)
|
|||||||
Change in restricted cash and cash equivalents
|
46
|
22
|
19
|
489
|
|||||||
Effect of foreign exchange fluctuations on US dollar-denominated
|
|||||||||||
cash and cash equivalents
|
(3)
|
3
|
(4)
|
5
|
|||||||
Free cash flow
|
$
|
333
|
$
|
505
|
$
|
1,036
|
$
|
1,328
|
CANADIAN NATIONAL RAILWAY COMPANY
|
MANAGEMENT’S DISCUSSION AND ANALYSIS (U.S. GAAP)
|