CN reports Q4-2010 net income of C$503 million, or C$1.08 per diluted share

Comparable adjusted Q4-2009 net income was C$424 million or C$0.90 per diluted share, excluding rail line-sale and deferred income tax recovery(1)

MONTREAL, Jan. 25 /CNW Telbec/ - CN (TSX: CNR)(NYSE: CNI) today reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2010.

Fourth-quarter and full-year 2010 highlights

    <<
    - Net income for the final quarter of 2010 was C$503 million, or C$1.08
      per diluted share, versus fourth-quarter 2009 net income of
      C$582 million or C$1.23 per diluted share.
    - Q4-2010 net income increased by 19 per cent over comparable adjusted
      2009 net income of C$424 million, with Q4-2010 diluted earnings per
      share (EPS) up 20 per cent over adjusted diluted EPS of C$0.90 for the
      final quarter of 2009.(1)
    - Operating income for the fourth quarter of 2010 increased 19 per cent
      to C$774 million.
    - Fourth-quarter revenues increased 12 per cent to C$2,117 million on
      strong volume growth.
    - Fourth-quarter operating ratio improved to 63.4 per cent from 65.3 per
      cent for the 2009 final quarter, based on solid operating efficiencies.
    - Full-year 2010 free cash flow increased to C$1,122 million from
      C$790 million for 2009.(1)
    >>

Net income for full-year 2010 was C$2,104 million, or C$4.48 per diluted share, compared with 2009 net income of C$1,854 million, or C$3.92 per diluted share. The financial results for both years included a number of items that affect the comparability of the results, including, in 2010, an after-tax gain on the sale of CN's Oakville Subdivision of C$131 million, or C$0.28 per diluted share.

Excluding these items in both years, adjusted 2010 net income was C$1,973 million, or C$4.20 per diluted share, compared with 2009 adjusted net income of C$1,533 million, or C$3.24 per diluted share. Adjusted diluted EPS for 2010 increased by 30 per cent.(1)

Claude Mongeau, president and chief executive officer, said: "CN's strong fourth-quarter performance capped an impressive year. Operational and service excellence throughout 2010 allowed us to post solid operating metrics while handling a sharp rise in workload with improved reliability for our customers. Innovation, productivity, and supply chain collaboration are clearly paying dividends. These core thrusts are at the heart of our agenda to create value for our customers and shareholders."

Fourth-quarter carloadings and revenue ton-miles grew by more than 10 per cent, while full-year carloadings were up 18 per cent over 2009 and revenue ton-miles increased by 12 per cent.

Foreign currency impact on results

Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars. As such, the Company's results are affected by exchange-rate fluctuations. On a constant currency basis that excludes the impact of fluctuations in foreign currency exchange rates, CN's 2010 fourth-quarter and twelve-month net income would have been higher by C$12 million, or C$0.03 per diluted share, and C$103 million, or C$0.22 per diluted share, respectively.(1)

Positive 2011 outlook, increased dividend, and new share buy-back program(2)

Mongeau said: "We believe the North American economy will continue to recover in 2011, but at a slower pace than in 2010, and that global economic conditions will continue to improve. While we expect to face some headwinds from increased depreciation expenses and a higher Canadian dollar, CN is aiming for double-digit growth in 2011 diluted earnings per share (EPS) over adjusted diluted EPS of C$4.20 for 2010. We also expect 2011 free cash flow to be in the order of C$850 million despite higher cash taxes."(1)

In support of top-line growth for 2011, CN expects to take advantage of continued strong growth in overseas container traffic, metal products and iron ore in domestics markets, and wood pulp and lumber offshore. Other growth opportunities include Canadian metallurgical coal and U.S. thermal coal, increased shipments of petroleum and chemicals, and share gains against truck in domestic intermodal.

CN will also pursue a range of service and productivity initiatives. Focus on network velocity, train efficiency, first-mile/last-mile reliability, and safety are expected to help the Company accommodate volume growth at low incremental cost and with a high level of service quality.

Mongeau added: "With a strong balance sheet and solid prospects for earnings and free cash flow generation, I'm pleased that our Board of Directors has approved a 20 per cent increase in CN's quarterly common-share dividend and a new share repurchase program to buy back up to 16.5 million CN common shares."

Fourth-quarter 2010 revenues and expenses

Revenues for the fourth quarter of 2010 increased by 12 per cent to C$2,117 million. All commodity groups experienced increased revenues: coal (22 per cent), intermodal (17 per cent), grain and fertilizers (13 per cent), metals and minerals (13 per cent), petroleum and chemicals (10 per cent), automotive (10 per cent), and forest products (eight per cent). Revenue ton-miles increased 11 per cent over the fourth quarter of 2009, while rail freight revenue per revenue ton-mile increased by one per cent.

Total operating expenses for the fourth quarter increased by nine per cent to C$1,343 million, with fuel expense up 24 per cent, while labor and fringe benefits expense increased by only two per cent, equipment rents declined six per cent, and casualty and other expense increased by three per cent.

Full-year 2010 revenues and expenses

Revenues for the year increased by 13 per cent to C$8,297 million, mainly due to significantly higher freight volumes as a result of improving economic conditions in North America and globally; the impact of a higher fuel surcharge as a result of year-over-year increases in applicable fuel prices and higher volumes; and freight rate increases. These factors were partly offset by the negative translation impact of the stronger Canadian dollar on U.S.-dollar-denominated revenues.

All commodity groups saw revenue increases for 2010: coal (29 per cent), automotive (29 per cent), intermodal (18 per cent), metals and minerals (18 per cent), grain and fertilizers (six per cent), petroleum and chemicals (five per cent), and forest products (three per cent). Revenue ton-miles for the year increased by 12 per cent from 2009, while rail freight revenue per revenue ton-mile was flat.

Operating expenses for 2010 increased by six per cent to C$5,273 million, mainly due to higher fuel costs, increased labor and fringe benefits expense and higher depreciation and amortization expense. These factors were partly offset by the positive translation impact of the stronger Canadian dollar on U.S.-dollar-denominated expenses, the impact of Elgin, Joliet and Eastern Railway Company (EJ&E) acquisition-related costs recorded in 2009, and lower equipment rents.

CN's operating ratio for 2010 was 63.6 per cent, compared with an adjusted operating ratio -- excluding the EJ&E acquisition-related costs -- of 66.7 per cent in 2009, a 3.1-point improvement.(1)

    <<
    (1) Please see discussion and reconciliation of non-GAAP adjusted
        performance measures in the attached supplementary schedule, Non-GAAP
        Measures.
    (2) See Forward-Looking Statements for a summary of the key assumptions
        and risks regarding CN's 2011 outlook.
    >>

Forward-Looking Statements

Certain information included in this news release are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. To the extent that CN has provided guidance that are non-GAAP financial measures, the Company may not be able to provide a reconciliation to the GAAP measures, due to unknown variables and uncertainty related to future results. Key assumptions used in determining forward-looking information are set forth below.

Key assumptions

CN made a number of economic and market assumptions in preparing its 2011 outlook. The Company is forecasting that North American industrial production for the year will increase by about four per cent. CN also expects U.S. housing starts to be about 675,000 units and U.S. motor vehicles sales to be approximately 13 million units for the year. In addition, CN is assuming a weaker 2010/2011 Canadian grain crop, partly offset by a higher carry-over stock. With these assumptions, CN is targeting carload growth in the mid-single digit range, along with continued pricing improvement above inflation. CN assumes the Canadian-U.S. exchange rate to be around par for 2011, and that the price of crude oil (West Texas Intermediate) for the year to be in the range of US$90-95 per barrel. In 2011, CN plans to invest approximately C$1.7 billion in capital programs, of which more than C$1 billion will be targeted on track infrastructure to maintain a safe and fluid railway network. In addition, the Company will invest in projects to support a number of productivity and growth initiatives.

Important risk factors that could affect the forward-looking statements include, but are not limited to, the effects of general economic and business conditions, 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, labor 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 CN with securities regulators in Canada and the United States. Reference should be made to "Management's Discussion and Analysis" in CN's annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN's website, 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 Canadian securities 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, 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)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (In millions, except per share data)

                                 Three months ended          Year ended
                                    December 31             December 31
                              ----------------------- -----------------------
                                   2010        2009        2010        2009
    -------------------------------------------------------------------------
                                                 (Unaudited)
    Revenues                   $  2,117    $  1,882    $  8,297    $  7,367
    -------------------------------------------------------------------------

    Operating expenses
      Labor and fringe
       benefits                     423         413       1,744       1,696
      Purchased services and
       material                     282         256       1,036       1,027
      Fuel                          291         234       1,048         820
      Depreciation and
       amortization                 220         197         834         790
      Equipment rents                62          66         243         284
      Casualty and other             65          63         368         344
    -------------------------------------------------------------------------
    Total operating expenses      1,343       1,229       5,273       4,961
    -------------------------------------------------------------------------

    Operating income                774         653       3,024       2,406

    Interest expense                (87)        (95)       (360)       (412)

    Other income                     12          76         212         267
    -------------------------------------------------------------------------

    Income before income taxes      699         634       2,876       2,261

    Income tax expense             (196)        (52)       (772)       (407)
    -------------------------------------------------------------------------

    Net income                 $    503    $    582    $  2,104    $  1,854
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
      Basic                    $   1.09    $   1.24    $   4.51    $   3.95

      Diluted                  $   1.08    $   1.23    $   4.48    $   3.92

    Weighted-average number of
     shares
      Basic                       461.1       470.5       466.3       469.2

      Diluted                     464.8       474.8       470.1       473.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Certain of the 2009 figures have been restated to conform to the 2010 presentation.

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, 2010 and December 31, 2009, and its results of operations, changes in shareholders' equity and cash flows for the three months and years ended December 31, 2010 and 2009. These consolidated financial statements have been prepared using accounting policies consistent with those used in preparing the Company's 2010 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)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (In millions)

                                                  December 31   December 31
                                                         2010          2009
    -------------------------------------------------------------------------
                                                         (Unaudited)
    Assets

    Current assets:
      Cash and cash equivalents                     $     490     $     352
      Accounts receivable                                 775           797
      Material and supplies                               210           170
      Deferred income taxes                                53           105
      Other                                                62            66
    -------------------------------------------------------------------------
    Total current assets                                1,590         1,490

    Properties                                         22,917        22,630
    Intangible and other assets                           699         1,056
    -------------------------------------------------------------------------

    Total assets                                    $  25,206     $  25,176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity

    Current liabilities:
      Accounts payable and other                    $   1,366     $   1,167
      Current portion of long-term debt                   540            70
    -------------------------------------------------------------------------
    Total current liabilities                           1,906         1,237

    Deferred income taxes                               5,152         5,119
    Other liabilities and deferred credits              1,333         1,196
    Long-term debt                                      5,531         6,391

    Shareholders' equity:
      Common shares                                     4,252         4,266
      Accumulated other comprehensive loss             (1,709)         (948)
      Retained earnings                                 8,741         7,915
    -------------------------------------------------------------------------
    Total shareholder's equity                         11,284        11,233
    -------------------------------------------------------------------------

    Total liabilities and shareholders' equity      $  25,206     $  25,176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

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, 2010 and December 31, 2009, and its results of operations, changes in shareholders' equity and cash flows for the three months and years ended December 31, 2010 and 2009. These consolidated financial statements have been prepared using accounting policies consistent with those used in preparing the Company's 2010 Annual Consolidated Financial Statements and should be read in conjunction with such statements, notes thereto and MD&A.

Subsequent event

On January 24, 2011, the Board of Directors of the Company approved a new share repurchase program which allows for the repurchase of up to 16.5 million common shares between January 28, 2011 and December 31, 2011 pursuant to a normal course issuer bid, at prevailing market prices or such other prices as may be permitted by the Toronto Stock Exchange.

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

                                 Three months ended          Year ended
                                    December 31             December 31
                              ----------------------- -----------------------
                                   2010        2009        2010        2009
    -------------------------------------------------------------------------
                                                 (Unaudited)
    Common shares(1)
    Balance, beginning of
     period                    $  4,270    $  4,239    $  4,266    $  4,179
      Stock options exercised
       and other                     15          27         124          87
      Share repurchase
       program                      (33)          -        (138)          -
    -------------------------------------------------------------------------
    Balance, end of period     $  4,252    $  4,266    $  4,252    $  4,266
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive loss
    Balance, beginning of
     period                    $   (973)   $   (288)   $   (948)   $   (155)
    Other comprehensive
     income (loss):
    Unrealized foreign
     exchange gain (loss) on:
      Translation of the net
       investment in foreign
       operations                  (201)       (114)       (330)       (998)
      Translation of US
       dollar-denominated
       long-term debt
       designated as a hedge
       of the net investment
       in U.S. subsidiaries         193         113         315         976
    Pension and other
     postretirement benefit
     plans:
      Net actuarial loss
       arising during the
       period                      (931)       (868)       (931)       (868)
      Prior service cost
       arising during the
       period                        (5)         (2)         (5)         (2)
      Amortization of prior
       service cost included
       in net periodic
       benefit cost                   -           3           2           5
      Amortization of net
       actuarial loss
       included in net
       periodic benefit cost
       (income)                      (1)          1           1           2
    Derivative instruments            -           -          (1)          -
    -------------------------------------------------------------------------
    Other comprehensive loss
     before income taxes           (945)       (867)       (949)       (885)
    Income tax recovery             209         207         188          92
    -------------------------------------------------------------------------
    Other comprehensive loss       (736)       (660)       (761)       (793)
    -------------------------------------------------------------------------
    Balance, end of period     $ (1,709)   $   (948)   $ (1,709)   $   (948)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
    Balance, beginning of
     period                    $  8,560    $  7,452    $  7,915    $  6,535
      Net income                    503         582       2,104       1,854
      Share repurchase
       program                     (197)          -        (775)          -
      Dividends                    (125)       (119)       (503)       (474)
    -------------------------------------------------------------------------
    Balance, end of period     $  8,741    $  7,915    $  8,741    $  7,915
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) During the three months and year ended December 31, 2010, the Company
        issued 0.5 million and 3.4 million common shares, respectively, as a
        result of stock options exercised and repurchased 3.5 million and
        15.0 million common shares, respectively, under its 2010 share
        repurchase program. At December 31, 2010, the Company had
        459.4 million common shares outstanding.


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

                                 Three months ended          Year ended
                                    December 31             December 31
                              ----------------------- -----------------------
                                   2010        2009        2010        2009
    -------------------------------------------------------------------------
                                                 (Unaudited)
    Operating activities
    Net income                 $    503    $    582    $  2,104    $  1,854
    Adjustments to reconcile
     net income to net cash
     provided by operating
     activities:
      Depreciation and
       amortization                 220         197         834         790
      Deferred income taxes          74          (8)        418         138
      Gain on disposal of
       property                       -         (69)       (152)       (226)
    Changes in operating
     assets and liabilities:
      Accounts receivable            19          41          (3)         39
      Material and supplies          59          65         (43)         32
      Accounts payable and
       other                        273         (12)        285        (204)
      Other current assets          (12)         (9)         13          77
    Other, net                      (81)       (108)       (457)       (221)
    -------------------------------------------------------------------------
    Net cash provided by
     operating activities         1,055         679       2,999       2,279
    -------------------------------------------------------------------------

    Investing activities
    Property additions             (762)       (564)     (1,586)     (1,402)
    Acquisitions, net of cash
     acquired                         -           -           -        (373)
    Disposal of property              1          74         168         231
    Other, net                       14          57          35         107
    -------------------------------------------------------------------------
    Net cash used in
     investing activities          (747)       (433)     (1,383)     (1,437)
    -------------------------------------------------------------------------

    Financing activities
    Issuance of long-term
     debt                             -           1           -       1,626
    Repayment of long-term
     debt                           (26)        (39)       (184)     (2,109)
    Issuance of common shares
     due to exercise of stock
     options and related
     excess tax benefits
     realized                        14          24         115          73
    Repurchase of common
     shares                        (230)          -        (913)          -
    Dividends paid                 (125)       (119)       (503)       (474)
    -------------------------------------------------------------------------
    Net cash used in
     financing activities          (367)       (133)     (1,485)       (884)
    -------------------------------------------------------------------------
    Effect of foreign
     exchange fluctuations on
     US dollar-denominated
     cash and cash equivalents        1           6           7         (19)
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents                    (58)        119         138         (61)
    Cash and cash equivalents,
     beginning of period            548         233         352         413
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $    490    $    352    $    490    $    352
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information
    Net cash receipts from
     customers and other       $  2,201    $  1,965    $  8,404    $  7,505
    Net cash payments for:
      Employee services,
       suppliers and other
       expenses                    (985)     (1,059)     (4,334)     (4,323)
      Interest                     (102)       (101)       (366)       (407)
      Personal injury and
       other claims                 (17)        (26)        (64)       (112)
      Pensions                      (14)        (48)       (427)       (139)
      Income taxes                  (28)        (52)       (214)       (245)
    -------------------------------------------------------------------------
    Net cash provided by
     operating activities      $  1,055    $    679    $  2,999    $  2,279
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Certain of the 2009 figures have been restated to conform to the 2010
presentation.
    CANADIAN NATIONAL RAILWAY COMPANY
    SELECTED RAILROAD STATISTICS(1) (U.S. GAAP)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                 Three months ended          Year ended
                                    December 31             December 31
                              ----------------------- -----------------------
                                   2010        2009        2010        2009
    -------------------------------------------------------------------------
                                                 (Unaudited)
    Statistical operating data

    Rail freight revenues
     ($ millions)                 1,896       1,679       7,417       6,632
    Gross ton miles (GTM)
     (millions)                  87,813      78,760     341,219     304,690
    Revenue ton miles (RTM)
     (millions)                  46,586      41,819     179,232     159,862
    Carloads (thousands)          1,190       1,077       4,696       3,991
    Route miles (includes
     Canada and the U.S.)        20,560      21,094      20,560      21,094
    Employees (end of period)    22,279      21,501      22,279      21,501
    Employees (average for
     the period)                 22,229      21,478      21,967      21,793
    -------------------------------------------------------------------------

    Productivity

    Operating ratio (%)            63.4        65.3        63.6        67.3
    Rail freight revenue per
     RTM (cents)                   4.07        4.01        4.14        4.15
    Rail freight revenue per
     carload ($)                  1,593       1,559       1,579       1,662
    Operating expenses per
     GTM (cents)                   1.53        1.56        1.55        1.63
    Labor and fringe benefits
     expense per GTM (cents)       0.48        0.52        0.51        0.56
    GTMs per average number
     of employees (thousands)     3,950       3,667      15,533      13,981
    Diesel fuel consumed
     (US gallons in millions)      91.2        83.5       355.7       327.3
    Average fuel price
     ($/US gallon)                 2.83        2.49        2.64        2.28
    GTMs per US gallon of
     fuel consumed                  963         943         959         931
    -------------------------------------------------------------------------

    Safety indicators

    Injury frequency rate per
     200,000 person hours(2)       1.74        2.09        1.71        1.78
    Accident rate per million
     train miles(2)                2.29        3.30        2.03        2.27
    -------------------------------------------------------------------------

    Financial ratio

    Debt-to-total
     capitalization ratio (%
     at end of period)             35.0        36.5        35.0        36.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes data relating to companies acquired as of the date of
        acquisition.
    (2) Based on Federal Railroad Administration (FRA) reporting criteria.
    >>

Certain of the 2009 comparative figures have been restated in order to be consistent with the 2010 presentation. 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
    SUPPLEMENTARY INFORMATION (U.S. GAAP)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                    Three months ended                  Year ended
                       December 31                     December 31
             ------------------------------- --------------------------------
                                         %                                %
                                    Change                           Change
                                        at                               at
                                      cons-                            cons-
                                      tant                             tant
                                    curren-                          curren-
                                  %     cy                         %     cy
                             Change    Fav                    Change    Fav
                                Fav (Unfav)                      Fav (Unfav)
                2010    2009 (Unfav)    (1)     2010     2009 (Unfav)    (1)
    -------------------------------------------------------------------------
                                        (Unaudited)
    Revenues
     (millions
     of
     dollars)
    Petroleum
     and
     chemi-
     cals        331     302     10%    13%    1,322    1,260      5%    12%
    Metals
     and
     minerals    214     189     13%    16%      861      728     18%    27%
    Forest
     products    293     271      8%    11%    1,183    1,147      3%    11%
    Coal         149     122     22%    25%      600      464     29%    35%
    Grain and
     ferti-
     lizers      401     356     13%    15%    1,418    1,341      6%    11%
    Inter-
     modal       400     341     17%    18%    1,576    1,337     18%    20%
    Automo-
     tive        108      98     10%    13%      457      355     29%    39%
    -------------------------                -----------------
    Total rail
     freight
     revenues  1,896   1,679     13%    15%    7,417    6,632     12%    18%
    Other
     revenues    221     203      9%    11%      880      735     20%    26%
    -------------------------                -----------------
    Total
     revenues  2,117   1,882     12%    15%    8,297    7,367     13%    19%
    -------------------------------------------------------------------------

    Revenue
     ton miles
     (millions)
    Petroleum
     and
     chemi-
     cals      7,950   7,270      9%     9%   31,190   29,381      6%     6%
    Metals
     and
     minerals  4,154   3,507     18%    18%   16,443   12,994     27%    27%
    Forest
     products  7,055   6,910      2%     2%   28,936   27,594      5%     5%
    Coal       5,118   4,176     23%    23%   19,766   14,805     34%    34%

    Grain and
     ferti-
     lizers   12,700  11,281     13%    13%   44,549   40,859      9%     9%
    Inter-
     modal     9,011   8,095     11%    11%   35,803   32,159     11%    11%
    Automo-
     tive        598     580      3%     3%    2,545    2,070     23%    23%
    -------------------------                -----------------

              46,586  41,819     11%    11%  179,232  159,862     12%    12%
    Rail
     freight
     reve-
     nue /
     RTM
     (cents)
    Total rail
     freight
     revenue
     per RTM    4.07    4.01      1%     4%     4.14     4.15      -      5%
    Commodity
     groups:
    Petroleum
     and
     chemi-
     cals       4.16    4.15      -      3%     4.24     4.29     (1%)    6%
    Metals
     and
     minerals   5.15    5.39     (4%)   (2%)    5.24     5.60     (6%)    1%
    Forest
     products   4.15    3.92      6%     9%     4.09     4.16     (2%)    6%
    Coal        2.91    2.92      -      2%     3.04     3.13     (3%)    1%
    Grain and
     ferti-
     lizers     3.16    3.16      -      2%     3.18     3.28     (3%)    2%
    Inter-
     modal      4.44    4.21      5%     6%     4.40     4.16      6%     8%
    Automo-
     tive      18.06   16.90      7%    10%    17.96    17.15      5%    13%
    -------------------------                -----------------

    Carloads
     (thou-
     sands)
    Petroleum
     and
     chemi-
     cals        136     126      8%     8%      549      511      7%     7%
    Metals
     and
     minerals    244     224      9%     9%      990      721     37%    37%
    Forest
     products    106     100      6%     6%      423      403      5%     5%
    Coal         123     113      9%     9%      499      426     17%    17%
    Grain and
     ferti-
     lizers      164     147     12%    12%      579      530      9%     9%
    Inter-
     modal       369     321     15%    15%    1,455    1,246     17%    17%
    Automo-
     tive         48      46      4%     4%      201      154     31%    31%
    -------------------------                -----------------
               1,190   1,077     10%    10%    4,696    3,991     18%    18%
    Rail
     freight
     reve-
     nue /
     carload
     (dollars)
    Total rail
     freight
     revenue
     per
     carload   1,593   1,559      2%     4%    1,579    1,662     (5%)    -
    Commodity
     groups:
    Petroleum
     and
     chemi-
     cals      2,434   2,397      2%     4%    2,408    2,466     (2%)    4%
    Metals
     and
     minerals    877     844      4%     7%      870    1,010    (14%)   (7%)
    Forest
     products  2,764   2,710      2%     5%    2,797    2,846     (2%)    6%
    Coal       1,211   1,080     12%    14%    1,202    1,089     10%    15%
    Grain and
     ferti-
     lizers    2,445   2,422      1%     3%    2,449    2,530     (3%)    2%
    Inter-
     modal     1,084   1,062      2%     3%    1,083    1,073      1%     3%
    Automo-
     tive      2,250   2,130      6%     9%    2,274    2,305     (1%)    6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Adjusted performance measures

For the three months and year ended December 31, 2010, the Company reported adjusted net income of $503 million, or $1.08 per diluted share and $1,973 million, or $4.20 per diluted share, respectively. The adjusted figures for the year ended December 31, 2010 exclude the gain on sale of the Company's Oakville subdivision of $152 million, or $131 million after-tax ($0.28 per diluted share).

For the three months and year ended December 31, 2009, the Company reported adjusted net income of $424 million, or $0.90 per diluted share and $1,533 million, or $3.24 per diluted share, respectively. The adjusted figures for the three months ended December 31, 2009 exclude the gain on sale of the Lower Newmarket subdivision of $69 million or $59 million after-tax ($0.12 per diluted share) and a deferred income tax recovery of $99 million ($0.21 per diluted share), resulting from the enactment of a lower provincial corporate income tax rate. The adjusted figures for the year ended December 31, 2009 exclude the gain on sale of the Lower Newmarket subdivision of $69 million or $59 million after-tax ($0.12 per diluted share); the gain on sale of the Weston subdivision of $157 million or $135 million after-tax ($0.29 per diluted share); EJ&E acquisition-related costs of $49 million or $30 million after-tax ($0.06 per diluted share); and a deferred income tax recovery of $157 million ($0.33 per diluted share), of which $126 million ($0.27 per diluted share) resulted from the enactment of lower provincial corporate income tax rates, $16 million ($0.03 per diluted share) resulted from the recapitalization of a foreign investment and $15 million ($0.03 per diluted share) resulted from the resolution of various income tax matters and adjustments related to tax filings of prior years.

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 2010 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 year ended December 31, 2010 and 2009, to the adjusted performance measures presented herein.

    <<
    -------------------------------------------------------------------------
                      Three months ended                 Year ended
                       December 31, 2010             December 31, 2010
                ------------------------------ ------------------------------
    In millions,
     except per              Adjust-                       Adjust-
     share data  Reported     ments  Adjusted  Reported     ments  Adjusted
    -------------------------------------------------------------------------

    Revenues      $ 2,117   $     -   $ 2,117   $ 8,297   $     -   $ 8,297
    Operating
     expenses       1,343         -     1,343     5,273         -     5,273
    -------------------------------------------------------------------------
    Operating
     income           774         -       774     3,024         -     3,024
    Interest
     expense          (87)        -       (87)     (360)        -      (360)
    Other income       12         -        12       212      (152)       60
    -------------------------------------------------------------------------
    Income
     before
     income
     taxes            699         -       699     2,876      (152)    2,724
    Income tax
     expense         (196)        -      (196)     (772)       21      (751)
    -------------------------------------------------------------------------
    Net income    $   503   $     -   $   503   $ 2,104   $  (131)  $ 1,973
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating
     ratio           63.4%               63.4%     63.6%               63.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic
     earnings
     per share    $  1.09   $     -   $  1.09   $  4.51   $ (0.28)  $  4.23
    Diluted
     earnings
     per share    $  1.08   $     -   $  1.08   $  4.48   $ (0.28)  $  4.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                      Three months ended                 Year ended
                       December 31, 2009             December 31, 2009
                ------------------------------ ------------------------------
    In millions,
     except per              Adjust-                       Adjust-
     share data  Reported     ments  Adjusted  Reported     ments  Adjusted
    -------------------------------------------------------------------------

    Revenues      $ 1,882   $     -   $ 1,882   $ 7,367   $     -   $ 7,367
    Operating
     expenses       1,229         -     1,229     4,961       (49)    4,912
    -------------------------------------------------------------------------
    Operating
     income           653         -       653     2,406        49     2,455
    Interest
     expense          (95)        -       (95)     (412)        -      (412)
    Other income       76       (69)        7       267      (226)       41
    -------------------------------------------------------------------------
    Income
     before
     income
     taxes            634       (69)      565     2,261      (177)    2,084
    Income tax
     expense          (52)      (89)     (141)     (407)     (144)     (551)
    -------------------------------------------------------------------------
    Net income    $   582   $  (158)  $   424   $ 1,854   $  (321)  $ 1,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating
     ratio           65.3%               65.3%     67.3%               66.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic
     earnings
     per share    $  1.24   $ (0.33)  $  0.91   $  3.95   $ (0.68)  $  3.27
    Diluted
     earnings
     per share    $  1.23   $ (0.33)  $  0.90   $  3.92   $ (0.68)  $  3.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Constant currency

Although CN conducts its business and reports its earnings in Canadian dollars, a large portion of revenues and expenses is denominated in US dollars. As such, the Company's results are affected by exchange-rate fluctuations.

Financial results at "constant currency" allow results to be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons in the analysis of trends in business performance. Measures at constant currency are considered non-GAAP measures and do not have any standardized meaning prescribed by GAAP and may, therefore, not be comparable to similar measures presented by other companies. Financial results at constant currency are obtained by translating the current period results denominated in US dollars at the foreign exchange rate of the comparable period of the prior year. The average foreign exchange rates for the three months and year ended December 31, 2010 were 1.01 and 1.03, respectively, and 1.06 and 1.14, respectively, for 2009.

On a constant currency basis, the Company's 2010 fourth quarter and twelve-month net income would have been higher by $12 million, or $0.03 per diluted share and $103 million, or $0.22 per diluted share, respectively. The following table presents a reconciliation of 2010 net income as reported to net income on a constant currency basis:

    <<
                                           Three months ended    Year ended
                                                  December 31,  December 31,
    In millions                                          2010          2010
    -------------------------------------------------------------------------

    Net income, as reported                         $     503     $   2,104
    -------------------------------------------------------------------------
    Add back:
      Negative impact due to the
       strengthening Canadian dollar
       included in net income                               9            70
    Add:
      Increase due to the strengthening
       Canadian dollar on additional
       year-over-year US$ net income                        3            33
    -------------------------------------------------------------------------
    Impact of foreign exchange using
     constant currency rates                               12           103
    -------------------------------------------------------------------------
    Net income, on a constant currency basis        $     515     $   2,207
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

Free cash flow

The Company generated $184 million and $1,122 million of free cash flow for the three months and year ended December 31, 2010, respectively, compared to $133 million and $790 million for the same periods in 2009, respectively. Free cash flow does not have any standardized meaning prescribed by GAAP and may, therefore, 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, 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, calculated as follows:

    <<
    -------------------------------------------------------------------------
                                 Three months ended          Year ended
                                    December 31             December 31
                              ----------------------- -----------------------
    In millions                    2010        2009        2010        2009
    -------------------------------------------------------------------------

    Net cash provided by
     operating activities      $  1,055    $    679    $  2,999    $  2,279
    Net cash used in
     investing activities          (747)       (433)     (1,383)     (1,437)
    -------------------------------------------------------------------------
    Net cash provided before
     financing activities           308         246       1,616         842
    -------------------------------------------------------------------------

    Adjustments:
     Change in accounts
      receivable
      securitization                  -           -           2          68
     Dividends paid                (125)       (119)       (503)       (474)
     Acquisition of EJ&E              -           -           -         373
     Effect of foreign
      exchange fluctuations on
      US dollar-denominated
      cash and cash equivalents       1           6           7         (19)
    -------------------------------------------------------------------------
    Free cash flow             $    184    $    133    $  1,122    $    790
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    >>

SOURCE CN

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

Organization Profile

CN

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890