CN's 2001 Profit Rises More Than 10 Per Cent on the Strength of Revenue Gains, Tight Cost Control and WC Acquisition.Business Editors MONTREAL--(BUSINESS WIRE)--Jan. 22, 2002 Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. National (NYSE NYSE See: New York Stock Exchange :CNI (1) (Certified NetWare Instructor) See Novell certification. (2) (Coalition for Networked Information, Washington, DC, www.cni.org) A partnership of the Association of Research Libraries, CAUSE and EDUCOM, founded in 1990. ) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :CNR See riser card. CNR - Communication and Network Riser .) announced today profits grew by 25 per cent in fourth-quarter 2001 and by more than 10 per cent for the year 2001. Net income for the quarter ended Dec. 31, 2001, rose to $296 million from $237 million in the year-earlier quarter. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 23 per cent to $1.48. For 2001, adjusted net income(1) increased 11 per cent to $978 million from $879 million for 2000, with adjusted diluted earnings per share(1) for 2001 rising 12 per cent to $4.92. Net income, as reported, for 2001 was $1,040 million, or $5.23 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $937 million, or $4.67 per diluted share, for 2000. CN's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the final quarter of 2001 rose 18 per cent to $521 million, while its operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: improved by 2.2 points to 66.1 per cent. Revenues for the quarter rose 10 per cent to $1,537 million; operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased seven per cent to $1,016 million. The acquisition of Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee Central Transportation Corporation (WC), effective Oct. 9, 2001, contributed revenues of $129 million, operating income of $43 million, other income of $11 million and net income of $17 million, or eight cents per diluted share, to CN's fourth-quarter and full-year 2001 financial results. CN President and Chief Executive Officer Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. M. Tellier said: "The WC acquisition capped another year of outstanding financial performance by CN, a distinct achievement given the difficult and uncertain economic environment we faced. CN led the rail industry again in 2001 with the best operating ratio in the business and we generated a profit increase of more than 10 per cent for the year - clear evidence that our disciplined approach to revenue growth, cost control, service and acquisitions creates real shareholder value. "Our revenues benefited from gains in a number of segments, including metals and minerals traffic - largely because of strong Canadian aluminum exports to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; international and domestic intermodal in·ter·mod·al adj. Relating to transportation by more than one means of conveyance, as by truck and rail: intermodal transport. shipments; forest products panel traffic, and Canadian and U.S. grain markets. This helped to offset weakness in automotive - although this business unit benefited late in the year from auto manufacturers' sales incentives Noun 1. sales incentive - remuneration offered to a salesperson for exceeding some predetermined sales goal bonus, incentive - an additional payment (or other remuneration) to employees as a means of increasing output - and some other industrial segments. "We also had compelling cost and service quality stories. Early in 2001 we anticipated a difficult economy and moved aggressively to control expenditures and to continue maximizing max·i·mize tr.v. max·i·mized, max·i·miz·ing, max·i·miz·es 1. To increase or make as great as possible: utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of our assets. At the same time CN again delivered top-line customer service - on-time delivery of carload carload In commodities trading, a railroad car or truckload of grain that ranges from 1,400 to 2,500 bushels. freight The price or compensation paid for the transportation of goods by a carrier. Freight is also applied to the goods transported by such carriers. The liability of a carrier for freight damaged, lost, or destroyed during shipment is determined by contract, statute, or last year topped 90 per cent. "The purchase of WC, which benefited our forest products and metals and minerals revenues in particular, was accretive to earnings from day one. This didn't did·n't Contraction of did not. didn't did not didn't do just happen - the smooth on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" integration of WC helped to maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. its contribution to CN's results. "Strong results, effective cost control and good service all position CN to pursue new business and market share gains in 2002 - whatever the economic conditions." Six of CN's seven business units registered revenue gains in fourth-quarter 2001: metals and minerals (38 per cent); forest products (24 per cent); coal (10 per cent); petroleum and chemicals (nine per cent); automotive (four per cent); grain and fertilizers (two per cent). Intermodal revenues declined by one per cent. Operating income for full-year 2001 rose eight per cent to $1,780 million, excluding a workforce adjustment charge. Including the charge, operating income increased by two per cent to $1,682 million. CN's operating ratio for the year, excluding the charge, improved by 1.1 points to 68.5 per cent. Revenues for 2001 increased four per cent to $5,652 million, while operating expenses, excluding the workforce adjustment charge, rose two per cent to $3,872 million. Six business units experienced revenue gains for 2001: metals and minerals (17 per cent); forest products (eight per cent); intermodal (five per cent); petroleum and chemicals (three per cent); coal (three per cent); and grain and fertilizers (two per cent). Automotive revenues declined by seven per cent. (1) Adjusted net income and diluted earnings per share for 2001 exclude the Company's gain from the sale of its 50 per cent interest in the Detroit River Detroit River River, southeastern Michigan, U.S. Forming part of the boundary between Michigan and Ontario, Can., it connects Lake St. Clair with Lake Erie. It flows south for 32 mi (51 km) past Detroit and Windsor, Ont., where a bridge and tunnel connect the two cities. Tunnel tunnel, underground passage usually made without removing the overlying rock or soil. Although tunnels are approximately horizontal, they must be built with sufficient gradient for proper drainage. Company; a special charge for a workforce adjustment program; a charge to write down the Company's net investment in 360networks Inc., and a deferred income tax recovery resulting from the enactment of lower corporate tax rates in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . For 2000, adjusted net income and diluted earnings per share exclude a gain related to CN's investment in 360 networks Inc. Note 8 to the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial statements provides for a reconciliation of adjusted net income to the Company's net income reported in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with United States generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). The financial results in this press release are reported in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents and, except as discussed herein, were determined on the basis of U.S. GAAP. Canadian National Railway Company Canadian National Railway Company (NYSE: CNI, TSX: CNR) is a Canadian rail transportation company that operates the Canadian National Railway. It was created in December, 1918 as a Crown corporation of the Government of Canada to nationalize several bankrupt rail systems spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east , serving the ports of Vancouver Vancouver, city, Canada Vancouver, city (1991 pop. 471,844), SW British Columbia, Canada, on Burrard Inlet of the Strait of Georgia, opposite Vancouver Island and just N of the Wash. border. , Prince Rupert Prince Rupert, city (1991 pop. 16,620), W British Columbia, Canada, on Kaien Island, in Chatham Sound near the mouth of the Skeena River, S of the Alaska border. , B.C., Montreal Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. , Halifax Halifax, city, Canada Halifax, city (1991 pop. 114,455), provincial capital, S central N.S., Canada, on the Atlantic Ocean. It is the largest city in the Maritime Provinces and is one of Canada's principal ice-free Atlantic ports. , New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded , and Mobile, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. ., and the key cities of Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing , Buffalo, Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. , Detroit Detroit, city, United States Detroit (dĭtroit`), city (1990 pop. 1,027,974), seat of Wayne co., SE Mich., on the Detroit River and between lakes St. Clair and Erie; inc. as a city 1815. , Duluth Duluth (dəl  th`), city (1990 pop. 85,493), seat of St. Louis co., NE Minn., at the west end of Lake Superior, at the head of lake navigation and opposite Superior, Wis.; inc. 1870. , Minn./Superior, Wis adv. 1. Certainly; really; indeed.v. t. 1. To think; to suppose; to imagine; - used chiefly in the first person sing. present tense, I wis. See the Note under Ywis. ., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis Louis, titular duke of Burgundy Louis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. , Jackson Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. , Miss., with connections to all points in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. .
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
------------------ ----------------
2001(1) 2000 2001(1) 2000
------------------------------------------------------------------
(Unaudited)
Revenues $1,537 $1,393 $5,652 $5,428
------------------------------------------------------------------
Operating expenses
excluding special charge 1,016 952 3,872 3,780
Special charge (Note 3) - - 98 -
------------------------------------------------------------------
Total operating expenses 1,016 952 3,970 3,780
Operating income 521 441 1,682 1,648
Interest expense (96) (78) (327) (311)
Other income (Note 4) 31 11 65 136
------------------------------------------------------------------
Income before income taxes 456 374 1,420 1,473
Income tax expense (Note 7) (160) (137) (380) (536)
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Net income (Note 8) $296 $237 $1,040 $937
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------------------------------------------------------------------
Earnings per share (Note 8)
Basic earnings per share $1.54 $1.24 $5.41 $4.81
Diluted earnings per share $1.48 $1.20 $5.23 $4.67
Weighted-average number
of shares
Basic 192.6 191.2 192.1 195.0
Diluted 201.7 199.1 201.0 202.8
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------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED STATEMENT OF OPERATING INCOME (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(In millions)
Three months ended Year ended
December 31 December 31
------------------------ ----------------------
Variance Variance
2001(1) 2000 Fav 2001(1) 2000 Fav
(Unfav) (Unfav)
---------------------------------------------------------------------
(Unaudited)
Revenues
Petroleum and
chemicals $255 $235 9% $923 $894 3%
Metals and minerals 126 91 38% 458 392 17%
Forest products 314 254 24% 1,088 1,008 8%
Coal 85 77 10% 338 328 3%
Grain and fertilizers 311 305 2% 1,161 1,136 2%
Intermodal 245 247 (1%) 969 919 5%
Automotive 146 140 4% 520 559 (7%)
Other items 55 44 25% 195 192 2%
---------------------------------- -------------
1,537 1,393 10% 5,652 5,428 4%
Operating expenses
Labor and fringe
benefits 440 374 (18%) 1,540 1,482 (4%)
Purchased services 118 137 14% 504 551 9%
Depreciation and
amortization 138 133 (4%) 532 525 (1%)
Fuel 109 128 15% 484 446 (9%)
Equipment rents 88 71 (24%) 309 285 (8%)
Material 31 46 33% 188 195 4%
Operating taxes 43 31 (39%) 158 158 -
Casualty and other 49 32 (53%) 157 138 (14%)
Special charge (Note 3) - - - 98 - (100%)
---------------------------------- -------------
1,016 952 (7%) 3,970 3,780 (5%)
---------------------------------- -------------
Operating income $521 $441 18% $1,682 $1,648 2%
--------------------------------------------------------------------
--------------------------------------------------------------------
Operating ratio
(excluding special
charge) 66.1% 68.3% 2.2 68.5% 69.6% 1.1
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--------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
CONSOLIDATED BALANCE SHEET (U.S. GAAP)
--------------------------------------------------------------------
--------------------------------------------------------------------
(In millions)
December 31 December 31
2001 2000
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Assets
Current assets:
Cash and cash equivalents $53 $15
Accounts receivable (Note 5) 645 726
Material and supplies 133 110
Deferred income taxes (Note 7) 153 114
Other 180 143
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1,164 1,108
Properties 19,145 15,638
Other assets and deferred charges 914 568
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Total assets $21,223 $17,314
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--------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued charges $1,374 $1,389
Current portion of long-term debt 163 434
Other 132 82
--------------------------------------------------------------------
1,669 1,905
Deferred income taxes (Note 7) 4,591 3,375
Other liabilities and deferred credits 1,345 1,205
Long-term debt 5,764 3,886
Convertible preferred securities 366 345
Shareholders' equity:
Common shares (Note 5) 4,442 4,349
Accumulated other comprehensive income 58 151
Retained earnings 2,988 2,098
--------------------------------------------------------------------
7,488 6,598
--------------------------------------------------------------------
Total liabilities and shareholders' equity $21,223 $17,314
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--------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
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
-------------------- ----------------
2001(1) 2000 2001(1) 2000
------------------------------------------------------------------
(Unaudited)
Common shares (2)
Balance, beginning
of period $4,415 $4,371 $4,349 $4,597
Stock options exercised
and employee share plans 27 16 93 47
Share repurchase
program (Note 5) - (38) - (295)
------------------------------------------------------------------
Balance, end of period $4,442 $4,349 $4,442 $4,349
------------------------------------------------------------------
------------------------------------------------------------------
Accumulated other
comprehensive income (loss)
Balance, beginning
of period $68 $196 $151 $(6)
Other comprehensive income (loss):
Unrealized foreign
exchange gain (loss) on
translation of U.S. dollar
denominated long-term debt
designated as a hedge of
the net investment
in U.S. subsidiaries (39) 8 (202) (91)
Unrealized foreign exchange
gain on translation of the
net investment in
foreign operations 60 60 308 191
Unrealized holding gain (loss)
on investment in
360networks Inc. (Note 4) - (121) (129) 129
Unrealized holding loss
on fuel derivative
instruments (Note 6) (20) - (38) -
Minimum pension liability
adjustment (17) - (17) -
------------------------------------------------------------------
Other comprehensive income
(loss) before income taxes (16) (53) (78) 229
Income tax (expense) recovery
on other comprehensive
income (loss)
items (Note 7) 6 8 (15) (72)
------------------------------------------------------------------
Other comprehensive
income (loss) (10) (45) (93) 157
------------------------------------------------------------------
Balance, end of period $58 $151 $58 $151
------------------------------------------------------------------
------------------------------------------------------------------
Retained earnings
Balance, beginning
of period $2,729 $1,933 $2,098 $1,531
Net income 296 237 1,040 937
Share repurchase
program (Note 5) - (39) - (234)
Dividends (37) (33) (150) (136)
------------------------------------------------------------------
Balance, end of period $2,988 $2,098 $2,988 $2,098
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------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
(2) The Company issued 0.2 million and 2.1 million shares for the
three months and year ended December 31, 2001, respectively, as a
result of stock options exercised. At December 31, 2001, the
Company had 192.7 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
------------------- ----------------
2001(1) 2000 2001(1) 2000
------------------------------------------------------------------
(Unaudited)
Operating activities
Net income $296 $237 $1,040 $937
Non-cash items in income:
Depreciation and
amortization 140 136 538 533
Deferred income taxes
(Note 7) 232 (7) 295 312
Gain on sale of
investments (Note 4) - - (101) (84)
Write-down of
investment (Note 4) - - 99 -
Special charge (Note 3) - - 98 -
Changes in:
Accounts receivable
(Note 5) 243 98 199 80
Material and supplies 24 14 11 6
Accounts payable and
accrued charges (115) 102 (216) 32
Other net current assets
and liabilities (12) 12 (27) (36)
Payments for workforce
reductions (41) (44) (169) (189)
Other (53) (95) (146) (85)
------------------------------------------------------------------
Cash provided from
operating activities 714 453 1,621 1,506
------------------------------------------------------------------
Investing activities
Net additions to properties (322) (348) (1,058) (1,036)
Proceeds from disposal
of properties 23 34 51 65
Acquisition of Wisconsin
Central Transportation
Corporation (Note 2) (1,278) - (1,278) -
Other - (10) 112 (10)
------------------------------------------------------------------
Cash used by investing
activities (1,577) (324) (2,173) (981)
------------------------------------------------------------------
Dividends paid (37) (33) (150) (136)
Financing activities
Issuance of long-term debt 1,477 106 4,015 860
Reduction of
long-term debt (1,363) (356) (3,336) (1,038)
Issuance of common shares 9 9 61 28
Repurchase of common
shares (Note 5) - (81) - (529)
------------------------------------------------------------------
Cash provided from (used by)
financing activities 123 (322) 740 (679)
------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (777) (226) 38 (290)
Cash and cash equivalents,
beginning of period 830 241 15 305
------------------------------------------------------------------
Cash and cash equivalents,
end of period $53 $15 $53 $15
------------------------------------------------------------------
------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (U.S. GAAP)
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Note 1 - Basis of presentation
In management's opinion, the accompanying unaudited interim
consolidated financial statements, 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, 2001 and December 31, 2000, its
results of operations, changes in shareholders' equity and cash flows
for the three and twelve months ended December 31, 2001 and 2000.
While management believes that the disclosures presented are
adequate to make the information not misleading, these consolidated
financial statements and notes should be read in conjunction with the
Company's Annual Consolidated Financial Statements.
Note 2 - Acquisition of Wisconsin Central Transportation Corporation
On January 29, 2001, the Company, through an indirect wholly owned
subsidiary, and Wisconsin Central Transportation Corporation (WC)
entered into a merger agreement (the Merger) providing for the
acquisition of all of the shares of WC by the Company for an
acquisition cost of $1,297 million (U.S.$831 million). The Merger was
approved by the shareholders of WC at a special meeting held on April
4, 2001. On September 7, 2001, the U.S. Surface Transportation Board
(STB) rendered a decision, unanimously approving the Company's
acquisition of WC. On October 9, 2001, the Company completed its
acquisition of WC and began a phased integration of the companies'
operations. The acquisition was financed by debt and cash on hand.
The Company accounted for the Merger using the purchase method of
accounting as required by the Financial Accounting Standards Board's
(FASB) Statement of Financial Accounting Standards (SFAS) No.141
"Business Combinations". As such, the accompanying consolidated
financial statements include the assets, liabilities and results of
operations of WC as of October 9, 2001, the date of acquisition. The
following table outlines the estimated fair values of WC's assets and
liabilities acquired at acquisition. The impact of the results of the
final valuation of WC's assets and liabilities and changes in
accounting practices are not expected to have a material impact on the
results of operations.
In millions October 9
2001
---------------------------------------------------------------
Current assets $175
Properties 2,435
Other assets and deferred charges 433
--------------
Total assets acquired 3,043
--------------
Current liabilities 353
Deferred income taxes 743
Other liabilities and deferred credits 178
Long-term debt 472
--------------
Total liabilities assumed 1,746
--------------
Net assets acquired $1,297
---------------------------------------------------------------
---------------------------------------------------------------
The Consolidated statement of income for the year ended December
31, 2001 included $129 million of revenues, $43 million of operating
income and $11 million of other income from WC. The acquisition of WC
contributed $17 million ($0.09 per basic share or $0.08 per diluted
share) to the Company's net income.
If the Company had acquired WC on January 1, 2000, based on the
historical amounts reported by WC, net of the amortization of the
difference between the Company's cost to acquire WC and the net assets
of WC (based on preliminary estimates of the fair values of WC's
properties and equipment, and estimates of their remaining useful
lives, as well as estimates of the fair values of other WC assets and
liabilities), revenues, net income, basic and diluted earnings per
share would have been $6,090 million, $1,090 million, $5.67 per basic
share and $5.48 per diluted share, respectively, for the year ended
December 31, 2001 and $5,961 million, $971 million, $4.98 per basic
share and $4.84 per diluted share, respectively, for 2000. The
proforma figures do not reflect synergies, and accordingly, do not
account for any potential increases in operating income, any estimated
cost savings or facilities consolidation.
Note 3 - Special charge
The Company recorded a charge of $98 million, $62 million after
tax, in the second quarter of 2001 for the reduction of 690 positions
(388 occurred in 2001 with the remainder planned to be completed by
the end of 2002). The charge included severance and other payments to
be made to affected employees.
Note 4 - Other income
In June 2001, the Company recorded a charge of $99 million, $71
million after tax, to write down 100% of its net investment in
360networks Inc. As a result of the write-down, the Company eliminated
all marked-to-market adjustments related to its investment in
360networks Inc., previously recorded in Other comprehensive income.
During the third quarter, the Company sold all of its shares of
360networks Inc. In March 2000, the Company had recorded a gain of $84
million, $58 million after tax, related to the exchange of its
minority equity investments in certain joint venture companies for
11.4 million shares of 360networks Inc.
In the first quarter of 2001, the Company completed the sale of
its 50 percent interest in the Detroit River Tunnel Company (DRT) for
proceeds of $112 million and recorded a gain of $101 million, $73
million after tax. The DRT is a 1.6-mile rail-only tunnel crossing the
Canada-U.S. border between Detroit and Windsor, Ontario.
Note 5 - Financing activities
Share Repurchase Program
On January 23, 2001, the Board of Directors of the Company
approved a share repurchase program which allows for the repurchase of
up to 10 million common shares between January 31, 2001 and January
30, 2002 pursuant to a normal course issuer bid, at prevailing market
prices. At December 31, 2001, the Company had not repurchased any
common shares under the share repurchase program.
Accounts Receivable Securitization
The Company has a five-year revolving agreement, expiring in 2003,
to sell eligible freight trade receivables up to a maximum of $350
million of receivables outstanding at any point in time. At December
31, 2001, pursuant to the agreement, $168 million and U.S.$113 million
(Cdn$179 million) had been sold on a limited recourse basis compared
to $147 million and U.S.$40 million (Cdn$61 million) at December 31,
2000.
Note 6 - Derivative instruments
On January 1, 2001, the Company adopted SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities", as amended by SFAS
No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". At December 31, 2001, a portion of the Company's
fuel requirement is being hedged using derivative instruments that are
being carried at market value on the balance sheet. Pursuant to SFAS
No.133 requirements, these fuel hedges are being accounted for as cash
flow hedges, whereby the effective portion of the cumulative change in
the market value of the derivative instruments has been recorded in
Other comprehensive income. Since the Company's derivative instruments
have been highly effective in hedging the changes in cash flows
associated with forecasted purchases of diesel fuel, these
pronouncements have not had a material impact on the Consolidated
statement of income. At December 31, 2001, Accumulated other
comprehensive income included an unrealized loss of $38 million, of
which $31 million relates to derivative transactions that will mature
within the next year.
Note 7 - Income taxes
In 2001, the Company recorded a reduction of $90 million to its
net deferred income tax liability resulting from the enactment of
lower corporate tax rates in Canada. As a result, for the year ended
December 31, 2001, a deferred income tax recovery of $122 million was
recorded in the Consolidated statement of income and a deferred income
tax expense of $32 million was recorded in Other comprehensive income.
Note 8 - Net income and earnings per share
Net income for 2001 and 2000 include items impacting the
comparability of the results of operations as outlined in the
following table:
Three months ended Year ended
December 31 December 31
------------------ -------------------
2001(1) 2000 2001(1) 2000
---------------------------------------------------------------------
(In millions) (Unaudited)
Income before income
taxes, excluding
undernoted items $456 $374 $1,516 $1,389
Income tax expense (160) (137) (538) (510)
---------------------------------------------------------------------
Adjusted net income 296 237 978 879
Undernoted items,
net of tax:
Special charge for
workforce reductions - - (62) -
Write-down of net
investment in
360networks Inc. - - (71) -
Deferred income tax
recovery - - 122 -
Gain on sale of Detroit
River Tunnel Company - - 73 -
Gain on 360networks
Inc. transaction - - - 58
---------------------------------------------------------------------
- - 62 58
Net income $296 $237 $1,040 $937
---------------------------------------------------------------------
---------------------------------------------------------------------
The following table provides a reconciliation between basic and
diluted earnings per share
Three months ended Year ended
December 31 December 31
------------------ ------------------
2001(1) 2000 2001(1) 2000
---------------------------------------------------------------------
(In millions, except
per share data) (Unaudited)
Net income $296 $237 $1,040 $937
Income impact on
assumed conversion
of preferred securities 3 2 12 11
---------------------------------------------------------------------
$299 $239 $1,052 $948
Weighted-average
shares outstanding 192.6 191.2 192.1 195.0
Effect of dilutive
securities and stock
options 9.1 7.9 8.9 7.8
---------------------------------------------------------------------
Weighted-average diluted
shares outstanding 201.7 199.1 201.0 202.8
Basic earnings per share $1.54 $1.24 $5.41 $4.81
Diluted earnings per share $1.48 $1.20 $5.23 $4.67
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
SELECTED RAILROAD STATISTICS (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
------------------ ------------------
2001(1) 2000 2001(1) 2000
---------------------------------------------------------------------
(Unaudited)
Rail operations
Freight revenues
($ millions) 1,482 1,349 5,457 5,236
Gross ton miles
(millions) 76,994 72,668 293,857 288,150
Revenue ton miles
(RTM) (millions) 39,828 37,385 153,095 149,557
Route miles (includes
Canada and the U.S.) 17,986 15,532 17,986 15,532
Operating expenses
per RTM (cents) (a) 2.55 2.55 2.53 2.53
Freight revenue per
RTM (cents) 3.72 3.61 3.56 3.50
Carloads (thousands) 1,007 949 3,821 3,796
Freight revenue
per carload ($) 1,472 1,421 1,428 1,379
Diesel fuel consumed
(Liters in millions) 341 325 1,328 1,292
Average fuel price
($/Liter) 0.35 0.36 0.36 0.33
Revenue ton miles per
liter of fuel consumed 117 115 115 116
Gross ton miles per liter
of fuel consumed 226 224 221 223
Diesel fuel consumed (U.S.
gallons in millions) 90 86 351 341
Average fuel price
($/U.S. gallon) 1.31 1.38 1.35 1.24
Revenue ton miles per U.S.
gallon of fuel consumed 443 435 436 439
Gross ton miles per U.S.
gallon of fuel consumed 855 845 837 845
Locomotive bad
order ratio (%) 6.3 6.0 6.4 6.0
Freight car bad
order ratio (%) 5.5 4.9 5.7 5.1
---------------------------------------------------------------------
Productivity
Operating ratio (%)(a) 66.1 68.3 68.5 69.6
Freight revenue per
route mile ($ thousands) 82 87 303 337
Revenue ton miles per
route mile (thousands) 2,214 2,407 8,512 9,629
Freight revenue per
average number of
employees ($ thousands) 62 61 241 233
Revenue ton miles per
average number of
employees (thousands) 1,671 1,678 6,754 6,660
---------------------------------------------------------------------
Employees
Number at end of period 22,868 21,378 22,868 21,378
Average number
during period 23,839 22,276 22,668 22,457
Labor and fringe
benefits expense
per RTM (cents) 1.10 1.00 1.01 0.99
Injury frequency rate per
200,000 person hours 4.2 4.8 4.4 5.5
Accident rate per
million train miles 2.5 1.7 2.0 2.1
---------------------------------------------------------------------
Financial
Debt to total
capitalization ratio
(% at end of period) 45.7 41.4 45.7 41.4
Return on assets (% at
end of period) (b) 1.7 1.6 6.3 6.5
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) 2001 figures exclude special charge.
(b) 2001 calculated on a proforma basis.
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Year ended
December 31 December 31
------------------------ -------------------------
Variance Variance
Fav Fav
2001(1) 2000 (Unfav) 2001(1) 2000 (Unfav)
---------------------------------------------------------------------
(Unaudited)
Revenue ton miles
(millions)
Petroleum and
chemicals 6,944 6,320 10% 25,243 24,858 2%
Metals and
minerals 3,065 2,043 50% 10,777 9,207 17%
Forest
products 7,940 6,970 14% 29,639 28,741 3%
Coal 3,777 3,575 6% 15,566 15,734 (1%)
Grain and
fertilizers 10,795 11,048 (2%) 42,728 42,396 1%
Intermodal 6,571 6,649 (1%) 26,257 25,456 3%
Automotive 736 780 (6%) 2,885 3,165 (9%)
---------------------------------------------------------------------
39,828 37,385 7% 153,095 149,557 2%
Freight revenue /
RTM (cents)
Total freight
revenue
per RTM 3.72 3.61 3% 3.56 3.50 2%
Business units:
Petroleum and
chemicals 3.67 3.72 (1%) 3.66 3.60 2%
Metals and
minerals 4.11 4.45 (8%) 4.25 4.26 -
Forest
products 3.95 3.64 9% 3.67 3.51 5%
Coal 2.25 2.15 5% 2.17 2.08 4%
Grain and
fertilizers 2.88 2.76 4% 2.72 2.68 1%
Intermodal 3.73 3.71 1% 3.69 3.61 2%
Automotive 19.84 17.95 11% 18.02 17.66 2%
---------------------------------------------------------------------
Carloads
(thousands)
Petroleum and
chemicals 136 130 5% 519 512 1%
Metals and
minerals 92 56 64% 287 256 12%
Forest
products 142 119 19% 501 486 3%
Coal 126 128 (2%) 517 528 (2%)
Grain and
fertilizers 156 150 4% 590 567 4%
Intermodal 275 286 (4%) 1,103 1,121 (2%)
Automotive 80 80 - 304 326 (7%)
---------------------------------------------------------------------
1,007 949 6% 3,821 3,796 1%
Freight revenue /
carload (dollars)
Total freight
revenue per
carload 1,472 1,421 4% 1,428 1,379 4%
Business units:
Petroleum and
chemicals 1,875 1,808 4% 1,778 1,746 2%
Metals and
minerals 1,370 1,625 (16%) 1,596 1,531 4%
Forest
products 2,211 2,134 4% 2,172 2,074 5%
Coal 675 602 12% 654 621 5%
Grain and
fertilizers 1,994 2,033 (2%) 1,968 2,004 (2%)
Intermodal 891 864 3% 879 820 7%
Automotive 1,825 1,750 4% 1,711 1,715 -
---------------------------------------------------------------------
(1) Includes Wisconsin Central Transportation Corporation from
October 9, 2001.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY INFORMATION
PROFORMA CONSOLIDATED STATEMENT OF INCOME (1) (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
(in millions, except per share data)
Three months ended Year ended
-----------------------------------------
March 31 June 30 September 30 December 31 December 31
2001 2001 2001 2001 2001
----------------------------------------- ----------
(Unaudited) (Unaudited)
Revenues
Petroleum and
chemicals $254 $234 $248 $258 $994
Metals and
minerals 120 144 149 129 542
Forest products 306 329 319 319 1,273
Coal 92 96 87 86 361
Grain and
fertilizers 336 290 267 312 1,205
Intermodal 244 251 252 246 993
Automotive 127 139 108 146 520
Other items 57 50 40 55 202
---------------------------------------------------------------------
1,536 1,533 1,470 1,551 6,090
Operating expenses
Labor and fringe
benefits 425 415 395 446 1,681
Purchased services 146 141 129 119 535
Depreciation and
amortization 142 141 143 139 565
Fuel 155 132 122 110 519
Equipment rents 83 83 77 89 332
Material 73 58 47 32 210
Operating taxes 46 39 36 43 164
Casualty and other 50 36 34 49 169
Special charge - 98 - - 98
---------------------------------------------------------------------
1,120 1,143 983 1,027 4,273
Operating income 416 390 487 524 1,817
Interest expense (107) (104) (99) (97) (407)
Other income (loss) 118 (80) 19 32 89
---------------------------------------------------------------------
Income before
income taxes 427 206 407 459 1,499
Income tax (expense)
recovery (145) 30 (132) (162) (409)
---------------------------------------------------------------------
Net income $282 $236 $275 $297 $1,090
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating ratio
(excluding
special charge) 72.9% 68.2% 66.9% 66.2% 68.6%
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings
per share $1.43 $1.19 $1.38 $1.49 $5.48
Adjusted diluted
earnings per
share (2) $1.07 $1.30 $1.32 $1.49 $5.17
Diluted weighted-
average number
of shares 199.9 200.9 201.4 201.7 201.0
---------------------------------------------------------------------
---------------------------------------------------------------------
(1) The proforma figures reflect the Company's results of operations
as if the Company had acquired Wisconsin Central Transportation
Corporation on January 1, 2001.
(2) Excludes the Company's gain from the sale of its 50 per cent
interest in the Detroit River Tunnel Company; a special charge for
a workforce adjustment program; a charge to write down the
Company's net investment in 360networks Inc., and a deferred
income tax recovery resulting from the enactment of lower
corporate tax rates in Canada.
CANADIAN NATIONAL RAILWAY COMPANY
SUPPLEMENTARY PROFORMA INFORMATION (1) (U.S. GAAP)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Year ended
----------------------------------------
March 31 June 30 September 30 December 31 December 31
2001 2001 2001 2001 2001
---------------------------------------- ----------
(Unaudited) (Unaudited)
Revenue ton miles
(millions)
Petroleum and
chemicals 6,699 6,039 6,484 6,984 26,206
Metals and
minerals 3,214 3,527 3,448 3,141 13,330
Forest products 7,895 8,384 8,052 8,038 32,369
Coal 4,263 4,381 4,153 3,819 16,616
Grain and
fertilizers 12,708 10,736 9,183 10,821 43,448
Intermodal 6,482 6,823 6,535 6,579 26,419
Automotive 712 781 660 737 2,890
---------------------------------------------------------------------
41,973 40,671 38,515 40,119 161,278
Freight revenue /
RTM (cents)
Total freight
revenue per RTM 3.52 3.65 3.71 3.73 3.65
Business units:
Petroleum and
chemicals 3.79 3.87 3.82 3.69 3.79
Metals and
minerals 3.73 4.08 4.32 4.11 4.07
Forest products 3.88 3.92 3.96 3.97 3.93
Coal 2.16 2.19 2.09 2.25 2.17
Grain and
fertilizers 2.64 2.70 2.91 2.88 2.77
Intermodal 3.76 3.68 3.86 3.74 3.76
Automotive 17.84 17.80 16.36 19.81 17.99
---------------------------------------------------------------------
Carloads (thousands)
Petroleum and
chemicals 144 131 135 138 548
Metals and minerals 95 113 120 96 424
Forest products 154 155 147 146 602
Coal 148 137 135 127 547
Grain and
fertilizers 160 152 143 156 611
Intermodal 287 296 288 276 1,147
Automotive 75 79 70 81 305
---------------------------------------------------------------------
1,063 1,063 1,038 1,020 4,184
Freight revenue /
carload (dollars)
Total freight
revenue per
carload 1,391 1,395 1,378 1,467 1,407
Business units:
Petroleum and
chemicals 1,764 1,786 1,837 1,870 1,814
Metals and
minerals 1,263 1,274 1,242 1,344 1,278
Forest products 1,987 2,123 2,170 2,185 2,115
Coal 622 701 644 677 660
Grain and
fertilizers 2,100 1,908 1,867 2,000 1,972
Intermodal 850 848 875 891 866
Automotive 1,693 1,759 1,543 1,802 1,705
---------------------------------------------------------------------
(1) The proforma figures reflect the Company's results of operations
as if the Company had acquired Wisconsin Central Transportation
Corporation on January 1, 2001.
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