CN reports Q4-2007 net income of C$833 million, or C$1.68 per diluted share, including C$0.78 per share in benefits from favorable tax adjustments and major asset sales



    CN sees 2008 opportunities despite tough economic environment

    MONTREAL, Jan. 22 /CNW Telbec/ - CN (TSX:CNR)(NYSE:  CNI) today reported
its financial and operating results for the quarter and year ended Dec. 31,
2007.

    
    Fourth-quarter 2007 highlights

    - Diluted earnings per share were C$1.68, including a C$0.57 per share
      benefit from a deferred income tax recovery, C$0.13 per share from the
      sale of CN's Central Station Complex (CSC) in Montreal, and C$0.08 per
      share from the sale of the Company's investment in English Welsh and
      Scottish Railway (EWS). Excluding these items, CN reported adjusted
      diluted EPS of C$0.90, which was flat compared with adjusted diluted
      EPS for the fourth quarter of 2006.(1)
    - Net income was C$833 million, which included a deferred income tax
      recovery of C$284 million, as well as after-tax gains of C$64 million
      on the CSC sale and C$41 million from the EWS investment sale.
      Excluding these items, adjusted net income was C$444 million.(1)
    - 2006 fourth-quarter net income was C$499 million, including a deferred
      income tax recovery of C$27 million, or five cents per diluted share.
      Excluding the deferred income tax recovery, fourth-quarter 2006
      adjusted net income was C$472 million (adjusted diluted EPS of
      C$0.90).(1)
    - Fourth-quarter 2007 revenues declined three per cent to
      C$1,941 million, with operating expenses declining three per cent to
      C$1,205 million.
    - Operating income for the final quarter of 2007 declined three per cent
      to C$736 million, while CN's operating ratio was essentially flat at
      62.1 per cent.
    - The strengthening Canadian dollar relative to the U.S. dollar, which
      affected the conversion of CN's U.S. dollar-denominated revenues and
      expenses, resulted in a reduction to fourth-quarter 2007 net income of
      approximately C$25 million, or C$0.05 per diluted share.

    E. Hunter Harrison, president and chief executive officer, said: "CN faced
strong headwinds in 2007 but we turned in a solid performance for both the
quarter and the year. The major challenges were weak housing markets in the
U.S., the continuing strength of the Canadian dollar that affected our U.S.
dollar-denominated revenues, a strike in the first quarter, and a number of
weather-related issues, particularly in western Canada.
    "During the final quarter of 2007, four of our commodity groups -
intermodal, petroleum and chemicals, metals and minerals, and coal - generated
increased revenues. However, tough market conditions reduced forest products
revenues by 19 per cent. Operating expenses declined three per cent in the
quarter, allowing the Company to deliver an operating ratio of 62.1 per cent.
    "We are very pleased with the start in the fourth quarter of our new
Prince Rupert intermodal service. Transit times have been consistently on
target. It's this kind of performance that underscores the value of the
product offering and commitment of all the parties involved - CN, the Port of
Prince Rupert and Maher Terminals - to deliver a highly competitive service."
    Harrison said 2008 will be challenging in some areas, but the year ahead
also offers the Company opportunities for growth.
    "We're cautious about the state of the North American economy, continued
weakness in the U.S. housing market, and the strength of the Canadian dollar
vis-a-vis the U.S. dollar. At the same time, we see opportunities for new
traffic, the strongest being intermodal as a result of the new Prince Rupert
gateway for containerized goods moving between Asia and North America. We also
see a number of opportunities in bulk and industrial products, including those
related to the continuing oil boom in western Canada. Our recent acquisitions
have strengthened our freight franchise in that region."

    2008 financial outlook

    For 2008, CN expects the Canadian-U.S. dollar exchange rate to be in the
range of C$0.95-C$1.00, the price for crude oil (West Texas Intermediate) to
be around US$90 per barrel, and North American economic growth to be
approximately 1.7 per cent. With this outlook, CN expects to take advantage of
a number of opportunities and is targeting to deliver revenue growth in the
range of six to eight per cent this year. With continued productivity
improvements, the Company expects 2008 diluted earnings per share growth to be
in the range of mid-to-high single digit, compared with adjusted diluted EPS
of C$3.40 in 2007, and 2008 free cash flow to be in the order of
C$750 million.(1)
    In 2008, CN also plans to invest approximately C$1.5 billion in capital
programs, of which more than C$1 billion will be targeted on track
infrastructure to maintain a safe railway and improve the productivity and
fluidity of the network.
    Please see "Forward-Looking Statements" below for additional information.

    Fourth-quarter 2007 results

    Net income for the fourth quarter of 2007 was C$833 million, including a
deferred income tax recovery of C$284 million (C$0.57 per diluted share)
resulting from the enactment of corporate income tax rate changes in Canada,
and the after-tax gains on the sale of the CSC of C$64 million (C$0.13 per
diluted share) and the Company's investment in EWS of C$41 million (C$0.08 per
diluted share). Excluding the three items, CN reported adjusted diluted EPS of
C$0.90.(1)
    Fourth-quarter 2006 net income was C$499 million (C$0.95 per diluted
share), including a deferred income tax recovery of C$27 million (C$0.05 per
diluted share) attributable to the resolution of matters relating to prior
years' income taxes. Excluding the deferred income tax recovery,
fourth-quarter 2006 adjusted net income was C$472 million (adjusted diluted
EPS of C$0.90).(1)
    Fourth-quarter 2007 revenues declined three per cent to C$1,941 million.
The decrease was mainly due to the translation impact of a stronger Canadian
dollar on U.S. dollar-denominated revenues and weakness in the forest products
market.
    Revenue ton-miles, a measurement of the relative weight and distance of
rail freight transported by the Company, increased by three per cent during
fourth-quarter 2007 versus the comparable period of 2006. Rail freight revenue
per revenue ton-mile, a measurement of yield defined as revenue earned on the
movement of a ton of freight over one mile, declined six per cent over the
same period in 2006.
    Operating expenses for the fourth quarter decreased three per cent to
C$1,205 million, largely as a result of decreased labor and fringe benefits
expense and the translation impact of a stronger Canadian dollar on U.S.
dollar-denominated expenses. These factors were partially offset by
significantly higher fuel expense.
    The operating ratio, defined as operating expenses as a percentage of
revenues, was 62.1 per cent during the quarter, compared with 62.2 per cent
for the fourth quarter of 2006, a 0.1-point decrease.

    Full-year 2007 results

    Net income for 2007 was C$2,158 million, with diluted earnings per share
of C$4.25. The 2007 results included a deferred income tax recovery of
C$328 million (C$0.64 per diluted share) resulting mainly from the enactment
of corporate income tax rate changes in Canada, as well as the gains on the
sale of the CSC of C$64 million (C$0.13 per diluted share) and the Company's
investment in EWS of C$41 million (C$0.08 per diluted share). Year-earlier net
income was C$2,087 million (C$3.91 per diluted share). Included in the 2006
figures was a deferred income tax recovery of C$277 million (C$0.51 per
diluted share), resulting from the enactment of lower corporate income tax
rates in Canada and the resolution of matters pertaining to prior years'
income taxes.
    Excluding benefits from favorable tax adjustments and major asset sales,
adjusted net income for 2007 was C$1,725 million, or C$3.40 per diluted share,
compared with adjusted 2006 net income of C$1,810 million, or C$3.40 per
diluted share.(1)
    Revenues for 2007 totaled C$7,897 million, compared with C$7,929 million
for 2006. The decline in revenues was mainly a result of the translation
impact of the stronger Canadian dollar on U.S. dollar-denominated revenues,
weakness in specific markets, particularly forest products, the United
Transportation Union (UTU) strike, and adverse weather conditions in the first
half of 2007. Largely offsetting these factors were the impact of net freight
rate increases, which included lower fuel surcharge revenues as a result of
applicable fuel prices, and an overall improvement in traffic mix.
    Revenue ton-miles for 2007 declined one per cent from the comparable
period of 2006, while rail freight revenue per ton-mile was essentially flat.
    Operating expenses increased two per cent to C$5,021 million, mainly due
to increased fuel costs and equipment rents, which were partly offset by the
translation impact of a stronger Canadian dollar and decreased labor and
fringe benefits expense.
    Operating income declined five per cent to C$2,876 million. The operating
ratio was 63.6 per cent in 2007, compared with 61.8 per cent in 2006, a
1.8-point increase.
    In addition to the weather conditions and operational challenges in the
first half of 2007, CN's results in 2007 included the impact of the
first-quarter 2007 strike by 2,800 UTU members, for which the Company
estimated the negative impact on first-quarter 2007 operating income and net
income to be approximately C$50 million and C$35 million, respectively,
(C$0.07 per diluted share).
    The strengthening Canadian dollar relative to the U.S. dollar, which
affected the conversion of CN's U.S. dollar-denominated revenues and expenses,
resulted in a reduction to net income of approximately C$35 million, or
C$0.07 per diluted share.
    The financial results in this press release were determined on the basis
of U.S. generally accepted accounting principles (U.S. GAAP).

    (1) Please see discussion and reconciliation of non-GAAP adjusted
        performance measures in the attached supplementary schedule,
        Non-GAAP Measures.

    Forward-Looking Statements

    This news release contains forward-looking statements. CN cautions that,
by their nature, forward-looking statements involve risk, uncertainties and
assumptions. In addition to the other assumptions contained in this release,
the Company assumes that, although there is an increasing risk of recession in
the U.S. economy, growth in North America and globally will continue to slow
down in 2008, but that a recession will not take place. The Company cautions
that this as well as its other assumptions may not materialize. The Company's
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, industry competition, legislative
and/or regulatory developments, compliance with environmental laws and
regulations, various events which could disrupt operations, including natural
events such as severe weather, droughts, floods and earthquakes, the effects
of adverse general economic and business conditions, inflation, currency
fluctuations, changes in fuel prices, labor disruptions, environmental claims,
investigations or proceedings, other types of claims and litigation, and other
risks detailed from time to time in reports filed by CN with securities
regulators in Canada and the United States. Reference should be made to CN's
most recent Form 40-F filed with the United States Securities and Exchange
Commission, its Annual Information Form filed with the Canadian securities
regulators, and its 2006 Annual Consolidated Financial Statements and Notes
thereto and Management's Discussion and Analysis (MD&A), as well as its 2007
unaudited interim consolidated financial statements and MD&A, for a summary of
major risks.
    CN 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 CN does update any forward-looking
statement, no inference should be made that CN will make additional updates
with respect to that statement, related matters, or any other forward-looking
statement.

    CN - Canadian National Railway Company and its operating railway
subsidiaries - spans Canada and mid-America, from the Atlantic and Pacific
oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert,
B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key
metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth,
Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis,
St. Louis, and Jackson, Miss., with connections to all points in North
America. For more information on CN, visit the company's website at www.cn.ca.


    CANADIAN NATIONAL RAILWAY COMPANY
    CONSOLIDATED STATEMENT OF INCOME (U.S. GAAP)
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    (In millions, except per share data)

                                      Three months ended       Year ended
                                          December 31          December 31
                                     --------------------  ------------------
                                         2007      2006      2007      2006
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Revenues                          $ 1,941   $ 2,000   $ 7,897   $ 7,929
    -------------------------------------------------------------------------

    Operating expenses
      Labor and fringe benefits           340       474     1,701     1,823
      Purchased services and material     259       271     1,045     1,027
      Fuel                                307       227     1,026       892
      Depreciation and amortization       173       167       677       650
      Equipment rents                      60        63       247       198
      Casualty and other                   66        42       325       309
    -------------------------------------------------------------------------
    Total operating expenses            1,205     1,244     5,021     4,899
    -------------------------------------------------------------------------

    Operating income                      736       756     2,876     3,030

    Interest expense                      (85)      (80)     (336)     (312)

    Other income                          159        27       166        11
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    Income before income taxes            810       703     2,706     2,729

    Income tax recovery (expense)          23      (204)     (548)     (642)
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    Net income                        $   833   $   499   $ 2,158   $ 2,087
    -------------------------------------------------------------------------
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    Earnings per share

      Basic                           $  1.70   $  0.97   $  4.31   $  3.97

      Diluted                         $  1.68   $  0.95   $  4.25   $  3.91

    Weighted-average number of shares

      Basic                             489.8     515.5     501.2     525.9

      Diluted                           495.9     523.6     508.0     534.3
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    Certain of the comparative figures have been reclassified in order to be
consistent with the 2007 presentation as discussed herein. As a result of the
Company's expansion of its existing non-rail transportation services, in
combination with its rail service, the Company has become primarily
responsible for the fulfillment of the transportation of goods involving
non-rail activities. In order to be consistent with the presentation of other
non-rail transportation services, the Company reclassified certain operating
expenses incurred for non-rail transportation services, which were previously
netted with their related revenues, to reflect the gross reporting of revenues
where appropriate. This change had no impact on the Company's operating income
and net income, as both revenues and operating expenses were increased by
$58 million and $213 million in the three months and year ended December 31,
2006, respectively. In addition, the Company reclassified its non-rail
transportation revenues to Other revenues. Previously, various revenues for
non-rail transportation services were reported in both Rail freight revenues
and Other revenues.
    These unaudited interim consolidated financial statements, expressed in
Canadian dollars, and prepared in accordance with U.S. generally accepted
accounting principles (U.S. GAAP), contain all adjustments (consisting of
normal recurring accruals) necessary to present fairly Canadian National
Railway Company's (the Company) financial position as at December 31, 2007 and
December 31, 2006, and its results of operations, changes in shareholders'
equity and cash flows for the three months and years ended December 31, 2007
and 2006. These consolidated financial statements have been prepared using
accounting policies consistent with those used in preparing the Company's 2007
Annual Consolidated Financial Statements and should be read in conjunction
with such statements, notes thereto and Management's Discussion and Analysis
(MD&A).


    CANADIAN NATIONAL RAILWAY COMPANY
    CONSOLIDATED BALANCE SHEET (U.S. GAAP)
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    (In millions)

                                                   December 31  December 31
                                                          2007         2006
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Assets

    Current assets:
      Cash and cash equivalents                       $    310     $    179
      Accounts receivable                                  370          692
      Material and supplies                                162          189
      Deferred income taxes                                 68           84
      Other                                                138          192
    -------------------------------------------------------------------------
                                                         1,048        1,336

    Properties                                          20,413       21,053
    Intangible and other assets                          1,999        1,615
    -------------------------------------------------------------------------

    Total assets                                      $ 23,460     $ 24,004
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    Liabilities and shareholders' equity

    Current liabilities:
      Accounts payable and accrued charges            $  1,282     $  1,823
      Current portion of long-term debt                    254          218
      Other                                                 54           73
    -------------------------------------------------------------------------
                                                         1,590        2,114

    Deferred income taxes                                4,908        5,215
    Other liabilities and deferred credits               1,422        1,465
    Long-term debt                                       5,363        5,386

    Shareholders' equity:
      Common shares                                      4,283        4,459
      Accumulated other comprehensive loss                 (31)         (44)
      Retained earnings                                  5,925        5,409
    -------------------------------------------------------------------------
                                                        10,177        9,824
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    Total liabilities and shareholders' equity        $ 23,460     $ 24,004
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    -------------------------------------------------------------------------

    These unaudited interim consolidated financial statements, expressed in
Canadian dollars, and prepared in accordance with U.S. GAAP, contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Company's financial position as at December 31, 2007 and
December 31, 2006, and its results of operations, changes in shareholders'
equity and cash flows for the three months and years ended December 31, 2007
and 2006. These consolidated financial statements have been prepared using
accounting policies consistent with those used in preparing the Company's 2007
Annual Consolidated Financial Statements and should be read in conjunction
with such statements, notes thereto and MD&A.


    CANADIAN NATIONAL RAILWAY COMPANY
    CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (U.S. GAAP)
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    (In millions)

                                      Three months ended       Year ended
                                          December 31          December 31
                                     --------------------  ------------------
                                         2007      2006      2007      2006
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Common shares

    Balance, beginning of period      $ 4,359   $ 4,476   $ 4,459   $ 4,580
      Stock options exercised and
       other                                6        43        89       133
      Share repurchase programs           (82)      (60)     (265)     (254)
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    Balance, end of period            $ 4,283   $ 4,459   $ 4,283   $ 4,459
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    Accumulated other comprehensive loss

    Balance, beginning of period      $  (257)  $  (520)  $   (44)  $  (222)

    Other comprehensive income (loss):

    Unrealized foreign exchange
     gain (loss) on:
      Translation of the net
       investment in foreign
       operations                         (90)      246    (1,004)       32
      Translation of U.S. dollar-
       denominated long-term debt
       designated as a hedge of the net
       investment in U.S. subsidiaries     22      (196)      788       (33)

    Pension and other postretirement
     benefit plans:
      Net actuarial gain arising
       during the period                  391         -       391         -
      Prior service cost arising
       during the period                  (12)        -       (12)        -
      Amortization of net actuarial
       loss included in net periodic
       benefit cost                        11         -        49         -
      Amortization of prior service
       cost included in net periodic
       benefit cost                         5         -        21         -
      Minimum pension liability
       adjustment                           -         1         -         1

    Derivative instruments                 (1)        -        (1)      (57)
    -------------------------------------------------------------------------
    Other comprehensive income
     (loss) before income taxes           326        51       232       (57)
    Income tax recovery (expense)        (100)       11      (219)     (179)
    -------------------------------------------------------------------------
    Other comprehensive income (loss)     226        62        13      (236)
    -------------------------------------------------------------------------
    Adjustment to reflect the funded
     status of benefit plans:
      Net actuarial gain (net of income
       tax expense of $(200) for 2006)      -       434         -       434
      Prior service cost (net of income
       tax recovery of $14 for 2006)        -       (31)        -       (31)
      Reversal of minimum pension
       liability adjustment (net of
       income tax expense of $(6) for
       2006)                                -        11         -        11
    -------------------------------------------------------------------------
    Balance, end of period            $   (31)  $   (44)  $   (31)  $   (44)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings

    Balance, beginning of period      $ 5,557   $ 5,306   $ 5,409   $ 4,891
      Adoption of new accounting
       pronouncements(1)                    -         -        95         -
    -------------------------------------------------------------------------
    Restated balance, beginning
     of period                          5,557     5,306     5,504     4,891
      Net income                          833       499     2,158     2,087
      Share repurchase programs          (363)     (313)   (1,319)   (1,229)
      Dividends                          (102)      (83)     (418)     (340)
    -------------------------------------------------------------------------
    Balance, end of period            $ 5,925   $ 5,409   $ 5,925   $ 5,409
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    -------------------------------------------------------------------------

    (1) On January 1, 2007, the Company adopted Financial Accounting
        Standards Board (FASB) Interpretation (FIN) No. 48, "Accounting for
        Uncertainty in Income Taxes," and early adopted the measurement date
        provisions of Statement of Financial Accounting Standards (SFAS)
        No. 158, "Employers' Accounting for Defined Benefit Pension and Other
        Postretirement Plans, an amendment of FASB Statements No. 87, 88,
        106, and 132(R )." The application of FIN No. 48 on January 1, 2007
        had the effect of decreasing the net deferred income tax liability
        and increasing Retained earnings by $98 million. The application of
        SFAS No. 158 on January 1, 2007 had the effect of decreasing Retained
        earnings by $3 million.


    CANADIAN NATIONAL RAILWAY COMPANY
    CONSOLIDATED STATEMENT OF CASH FLOWS (U.S. GAAP)
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    (In millions)

                                      Three months ended       Year ended
                                          December 31          December 31
                                     --------------------  ------------------
                                         2007      2006      2007      2006
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Operating activities

    Net income                        $   833   $   499   $ 2,158   $ 2,087
    Adjustments to reconcile net
     income to net cash provided
     from operating activities:
      Depreciation and amortization       172       167       678       653
      Deferred income taxes              (207)       23       (82)        3
      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               267       403       229       (17)
        Material and supplies              44        18        18       (36)
        Accounts payable and accrued
         charges                          120        48      (351)      197
        Other net current assets and
         liabilities                      (12)      (34)       39        58
      Other                              (122)      (61)     (119)        6
    -------------------------------------------------------------------------
    Cash provided from operating
     activities                           942     1,063     2,417     2,951
    -------------------------------------------------------------------------

    Investing activities

    Property additions                   (490)     (472)   (1,387)   (1,298)
    Acquisitions, net of cash acquired    (25)      (26)      (25)      (84)
    Sale of Central Station Complex       351         -       351         -
    Sale of investment in English
     Welsh and Scottish Railway           114         -       114         -
    Other, net                             26        14        52        33
    -------------------------------------------------------------------------
    Cash used by investing
     activities                           (24)     (484)     (895)   (1,349)
    -------------------------------------------------------------------------

    Financing activities

    Issuance of long-term debt            846       183     4,171     3,308
    Reduction of long-term debt        (1,120)     (234)   (3,589)   (3,089)
    Issuance of common shares due
     to exercise of stock options
     and related excess tax benefits
     realized                               4        42        77       120
    Repurchase of common shares          (445)     (373)   (1,584)   (1,483)
    Dividends paid                       (102)      (83)     (418)     (340)
    -------------------------------------------------------------------------
    Cash used by financing activities    (817)     (465)   (1,343)   (1,484)
    -------------------------------------------------------------------------

    Effect of foreign exchange
     fluctuations on U.S. dollar-
     denominated cash and cash
     equivalents                           (5)        9       (48)       (1)
    -------------------------------------------------------------------------
    Net increase in cash and cash
     equivalents                           96       123       131       117

    Cash and cash equivalents,
     beginning of period                  214        56       179        62
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                    $   310   $   179   $   310   $   179
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information
      Net cash receipts from
       customers and other            $ 2,209   $ 2,425   $ 8,139   $ 7,946
      Net cash payments for:
        Employee services, suppliers
         and other expenses              (979)   (1,043)   (4,323)   (4,130)
        Interest                          (67)      (67)     (340)     (294)
        Workforce reductions               (7)       (8)      (31)      (45)
        Personal injury and
         other claims                     (28)      (47)      (86)     (107)
        Pensions                          (25)      (66)      (75)     (112)
        Income taxes                     (161)     (131)     (867)     (307)
    -------------------------------------------------------------------------
    Cash provided from operating
     activities                       $   942   $ 1,063   $ 2,417   $ 2,951
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain of the 2006 comparative figures have been reclassified in order to
be consistent with the 2007 presentation.


    CANADIAN NATIONAL RAILWAY COMPANY
    SELECTED RAILROAD STATISTICS(1) (U.S. GAAP)
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                                      Three months ended       Year ended
                                          December 31          December 31
                                     --------------------  ------------------
                                         2007      2006      2007      2006
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Statistical operating data

    Rail freight revenues ($ millions)  1,763     1,824     7,186     7,254
    Gross ton miles (GTM)(millions)    89,315    88,407   347,898   352,972
    Revenue ton miles (RTM)(millions)  47,151    45,966   184,148   185,610
    Carloads (thousands)                1,205     1,146     4,744     4,824
    Route miles (includes Canada and
     the U.S.)                         20,421    20,264    20,421    20,264
    Employees (end of period)          22,696    22,250    22,696    22,250
    Employees (average for the
     period)                           22,796    22,196    22,389    22,092
    -------------------------------------------------------------------------

    Productivity

    Operating ratio (%)                  62.1      62.2      63.6      61.8
    Rail freight revenue per RTM
     (cents)                             3.74      3.97      3.90      3.91
    Rail freight revenue per
     carload ($)                        1,463     1,592     1,515     1,504
    Operating expenses per GTM (cents)   1.35      1.41      1.44      1.39
    Labor and fringe benefits expense
     per GTM (cents)                     0.38      0.54      0.49      0.52
    GTMs per average number of
     employees (thousands)              3,918     3,983    15,539    15,977
    Diesel fuel consumed
     (U.S. gallons in millions)           102       101       392       401
    Average fuel price
     ($/U.S. gallon)                     2.70      2.16      2.40      2.13
    GTMs per U.S. gallon of fuel
     consumed                             876       875       887       880
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    Financial ratio

    Debt to total capitalization
     ratio (% at end of period)          35.6      36.3      35.6      36.3
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    Safety indicators

    Injury frequency rate per
     200,000 person hours(2)              2.1       2.0       1.9       2.1
    Accident rate per million
     train miles(2)                       3.6       2.0       2.7       2.4
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    -------------------------------------------------------------------------
    (1) Includes data relating to companies acquired as of the date of
        acquisition.
    (2) Based on Federal Railroad Administration (FRA) reporting criteria.
        For 2006, the Injury frequency rate per 200,000 person hours and the
        Accident rate per million train miles, prepared on a proforma basis
        to include the acquisitions of Mackenzie Northern Railway and Savage
        Alberta Railway, Inc., as of January 1, 2006, would have been 2.1 and
        2.3, respectively, for the three months ended December 31, 2006, and
        2.1 and 2.5, respectively, for the year ended December 31, 2006.

    Certain of the 2006 comparative figures have been reclassified in order to
be consistent with the 2007 presentation as discussed herein. Certain
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
    SUPPLEMENTARY INFORMATION (U.S. GAAP)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           Three months ended              Year ended
                               December 31                 December 31
                       -------------------------- ---------------------------
                                      Variance                     Variance
                                           Fav                          Fav
                          2007    2006  (Unfav)       2007     2006  (Unfav)
    -------------------------------------------------------------------------
                                            (Unaudited)

    Revenues (millions of dollars)
    Petroleum and
     chemicals             306     300       2%      1,226    1,171       5%
    Metals and minerals    195     192       2%        826      835      (1%)
    Forest products        336     414     (19%)     1,552    1,747     (11%)
    Coal                    98      93       5%        385      370       4%
    Grain and fertilizers  350     351       -       1,311    1,258       4%
    Intermodal             362     353       3%      1,382    1,394      (1%)
    Automotive             116     121      (4%)       504      479       5%
    Other revenues         178     176       1%        711      675       5%
    -----------------------------------          -------------------
                         1,941   2,000      (3%)     7,897    7,929       -

    Revenue ton miles (millions)
    Petroleum and
     chemicals           8,473   7,930       7%     32,761   31,868       3%
    Metals and minerals  4,305   4,026       7%     16,719   17,467      (4%)
    Forest products      9,156  10,049      (9%)    39,808   42,488      (6%)
    Coal                 3,432   3,209       7%     13,776   13,727       -
    Grain and
     fertilizers        12,550  11,791       6%     45,359   44,096       3%
    Intermodal           8,493   8,237       3%     32,607   32,922      (1%)
    Automotive             742     724       2%      3,118    3,042       2%
    -----------------------------------          -------------------
                        47,151  45,966       3%    184,148  185,610      (1%)

    Rail freight revenue / RTM (cents)
    Rail freight revenue
     per RTM              3.74    3.97      (6%)      3.90     3.91       -
    Commodity groups:
    Petroleum and
     chemicals            3.61    3.78      (4%)      3.74     3.67       2%
    Metals and minerals   4.53    4.77      (5%)      4.94     4.78       3%
    Forest products       3.67    4.12     (11%)      3.90     4.11      (5%)
    Coal                  2.86    2.90      (1%)      2.79     2.70       3%
    Grain and
     fertilizers          2.79    2.98      (6%)      2.89     2.85       1%
    Intermodal            4.26    4.29      (1%)      4.24     4.23       -
    Automotive           15.63   16.71      (6%)     16.16    15.75       3%
    -----------------------------------          -------------------

    Carloads (thousands)
    Petroleum and
     chemicals             151     145       4%        599      590       2%
    Metals and minerals    261     203      29%      1,010      981       3%
    Forest products        134     154     (13%)       584      667     (12%)
    Coal                    86      94      (9%)       361      411     (12%)
    Grain and fertilizers  162     157       3%        601      594       1%
    Intermodal             346     332       4%      1,324    1,326       -
    Automotive              65      61       7%        265      255       4%
    -----------------------------------          -------------------
                         1,205   1,146       5%      4,744    4,824      (2%)

    Rail freight revenue / carload (dollars)
    Rail freight revenue
     per carload         1,463   1,592      (8%)     1,515    1,504       1%
    Commodity groups:
    Petroleum and
     chemicals           2,026   2,069      (2%)     2,047    1,985       3%
    Metals and minerals    747     946     (21%)       818      851      (4%)
    Forest products      2,507   2,688      (7%)     2,658    2,619       1%
    Coal                 1,140     989      15%      1,066      900      18%
    Grain and
     fertilizers         2,160   2,236      (3%)     2,181    2,118       3%
    Intermodal           1,046   1,063      (2%)     1,044    1,051      (1%)
    Automotive           1,785   1,984     (10%)     1,902    1,878       1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Certain of the 2006 comparative figures have been reclassified in order to
be consistent with the 2007 presentation, as discussed herein. 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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Adjusted performance measures

    During the three months and year ended December 31, 2007, the Company
reported adjusted net income of $444 million, or $0.90 per diluted share, and
$1,725 million, or $3.40 per diluted share, respectively. These adjusted
figures exclude the impact of a net deferred income tax recovery of
$284 million ($0.57 per diluted share) in the fourth quarter and $328 million
($0.64 per diluted share) for the year ended December 31, 2007 that resulted
mainly from the enactment of corporate income tax rate changes in Canada. Also
excluded from adjusted net income for both the three- and twelve-month periods
were 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).
    During the three months and year ended December 31, 2006, the Company
reported adjusted net income of $472 million, or $0.90 per diluted share and
$1,810 million, or $3.40 per diluted share, respectively. These adjusted
figures exclude the impact of a deferred income tax recovery of $27 million
($0.05 per diluted share) in the fourth quarter and $277 million ($0.51 per
diluted share) for the year ended December 31, 2006 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.
    Management believes that adjusted net income and adjusted earnings per
share are useful measures of performance that can facilitate period-to-period
comparisons, as they exclude items that do not necessarily arise as part of
the normal day-to-day operations of the Company and could distort the analysis
of trends in business performance. The exclusion of such items in adjusted net
income and adjusted earnings per share does not, however, imply that such
items are necessarily non-recurring. These adjusted measures do not have any
standardized meaning prescribed by GAAP and may, therefore, not be comparable
to similar measures presented by other companies. The reader is advised to
read all information provided in the Company's 2007 Annual Consolidated
Financial Statements, Notes thereto and Management's Discussion and Analysis
(MD&A). The following tables provide a reconciliation of net income and
earnings per share, as reported for the three months and years ended
December 31, 2007 and 2006, to the adjusted performance measures presented
herein.

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                       Three months ended                Year ended
                        December 31, 2007             December 31, 2007
                  ----------------------------  -----------------------------
    In millions,
     except per               Adjust-                      Adjust-
     share data    Reported    ments  Adjusted  Reported    ments  Adjusted
    -------------------------------------------------------------------------
    Revenues        $ 1,941  $     -   $ 1,941   $ 7,897  $     -   $ 7,897
    Operating
     expenses         1,205        -     1,205     5,021        -     5,021
    -------------------------------------------------------------------------
    Operating income    736        -       736     2,876        -     2,876
    -------------------------------------------------------------------------
    Interest
     expense            (85)       -       (85)     (336)       -      (336)
    Other income        159     (153)        6       166     (153)       13
    -------------------------------------------------------------------------
    Income before
     income taxes       810     (153)      657     2,706     (153)    2,553
    Income tax
     recovery
     (expense)           23     (236)     (213)     (548)    (280)     (828)
    -------------------------------------------------------------------------
    Net income      $   833   $ (389)  $   444   $ 2,158  $  (433)  $ 1,725
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings
     per share      $  1.70  $ (0.79)  $  0.91   $  4.31  $ (0.87)  $  3.44
    Diluted earnings
     per share      $  1.68  $ (0.78)  $  0.90   $  4.25  $ (0.85)  $  3.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                       Three months ended                Year ended
                        December 31, 2006             December 31, 2006
                  ----------------------------  -----------------------------
    In millions,
     except per               Adjust-                      Adjust-
     share data    Reported    ments  Adjusted  Reported    ments  Adjusted
    -------------------------------------------------------------------------
    Revenues        $ 2,000  $     -   $ 2,000   $ 7,929  $     -   $ 7,929
    Operating
     expenses         1,244        -     1,244     4,899        -     4,899
    -------------------------------------------------------------------------
    Operating income    756        -       756     3,030        -     3,030
    -------------------------------------------------------------------------
    Interest expense    (80)       -       (80)     (312)       -      (312)
    Other income         27        -        27        11        -        11
    -------------------------------------------------------------------------
    Income before
     income taxes       703        -       703     2,729        -     2,729
    Income tax
     expense           (204)     (27)     (231)     (642)    (277)     (919)
    -------------------------------------------------------------------------
    Net income      $   499  $   (27)  $   472   $ 2,087  $  (277)  $ 1,810
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings
     per share      $  0.97  $ (0.05)  $  0.92   $  3.97  $ (0.53)  $  3.44
    Diluted earnings
     per share      $  0.95  $ (0.05)  $  0.90   $  3.91  $ (0.51)  $  3.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Free cash flow

    The Company generated $635 million and $828 million of free cash flow for
the three months and year ended December 31, 2007, compared to $212 million
and $1,343 million for the same periods in 2006. 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
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. The Company defines free cash flow as cash
provided from operating activities, excluding changes in the accounts
receivable securitization program and changes in cash and cash equivalents
resulting from foreign exchange fluctuations, less cash used by investing
activities and the payment of dividends, calculated as follows:

    -------------------------------------------------------------------------
                                      Three months ended       Year ended
                                          December 31          December 31
                                     --------------------  ------------------
    In millions                          2007      2006      2007      2006
    -------------------------------------------------------------------------

    Cash provided from operating
     activities                       $   942   $ 1,063   $ 2,417   $ 2,951
    Cash used by investing
     activities                           (24)     (484)     (895)   (1,349)

    -------------------------------------------------------------------------
    Cash provided before financing
     activities                           918       579     1,522     1,602
    -------------------------------------------------------------------------

    Adjustments:
      Change in accounts receivable
       securitization                    (176)     (293)     (228)       82
      Dividends paid                     (102)      (83)     (418)     (340)
      Effect of foreign exchange
       fluctuations on U.S. dollar-
       denominated cash and cash
       equivalents                         (5)        9       (48)       (1)

    -------------------------------------------------------------------------
    Free cash flow                    $   635   $   212   $   828   $ 1,343
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Mark Hallman (Media), Director, Communications,
Media, CN, (905) 669-3384; Robert Noorigian (Investment Community),
Vice-President, Investor Relations, CN, (514) 399-0052


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